HANDY & HARMAN LTD. - FORM 8-K - EX-99.2

Attached files

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8-K - HANDY & HARMAN LTD.	form8k06447_11142011.htm
EX-99.3 - HANDY & HARMAN LTD.	ex993to8k06447_11142011.htm
EX-99.4 - HANDY & HARMAN LTD.	ex994to8k06447_11142011.htm
EX-99.1 - HANDY & HARMAN LTD.	ex991to8k06447_11142011.htm
EX-23.1 - HANDY & HARMAN LTD.	ex231to8k06447_11142011.htm

Exhibit 99.2

Item 8.

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm	1
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2010 and 2009	2
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009	3
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009	4
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2010 and 2009	5
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2010 and 2009	5
Notes to Consolidated Financial Statements	6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Handy & Harman Ltd.

We have audited the accompanying consolidated balance sheets of Handy & Harman Ltd. (formerly known as WHX Corporation prior to January 3, 2011) (a Delaware corporation) and Subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, cash flows and changes in stockholders’ deficit and comprehensive income (loss) for each of the two years in the period ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Handy & Harman Ltd. (formerly known as WHX Corporation prior to January 3, 2011) and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

/s/ Grant Thornton LLP

Edison, New Jersey

March 11, 2011 (except for Note 21, as to which the date is November 15, 2011)

HANDY & HARMAN Ltd.

Consolidated Balance Sheets

(Dollars and shares in thousands except per share data)	December 31, 2010			December 31, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	8,762		$	8,796
Trade and other receivables-net of allowance for doubtful
accounts of $2,198 and $2,172 in 2010 and 2009, respectively		68,197			60,294
Inventories		48,675			45,007
Deferred income taxes		1,238			1,023
Other current assets		9,064			8,032
Current assets of discontinued operations		27,044			29,512
Total current assets		162,980			152,664
Property, plant and equipment at cost, less accumulated depreciation and amortization		78,142			83,110
Goodwill		63,917			63,946
Other intangibles, net		31,538			33,931
Other non-current assets		14,712			11,571
Non-current assets of discontinued operations		2,259			8,618
	$	353,548		$	353,840
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Trade payables	$	36,954		$	30,212
Accrued liabilities		32,245			20,219
Accrued environmental liability		6,113			6,692
Accrued interest - related party		411			1,600
Short-term debt		42,890			18,949
Current portion of long-term debt		4,452			5,944
Deferred income taxes		355			300
Current portion of pension liability		14,900			9,700
Current liabilities of discontinued operations		9,341			9,686
Total current liabilities		147,661			103,302

Long-term debt		91,403			95,082
Long-term debt - related party		32,547			54,098
Long-term interest accrual - related party		-			11,797
Accrued pension liability		98,084			92,309
Other employee benefit liabilities		4,429			4,840
Deferred income taxes		3,988			4,258
Other liabilities		4,942			5,255
Long term liabilities of discontinued operations		655			696
		383,709			371,637
Commitments and Contingencies

Stockholders' Deficit:
Preferred stock- $.01 par value; authorized 5,000
shares; issued and outstanding -0- shares		-			-
Common stock - $.01 par value; authorized 180,000 shares;
issued and outstanding 12,179 shares		122			122
Accumulated other comprehensive loss		(135,865	)		(118,402	)
Additional paid-in capital		552,844			552,834
Accumulated deficit		(447,262	)		(452,351	)
Total stockholders' deficit		(30,161	)		(17,797	)
	$	353,548		$	353,840

The accompanying notes are an integral part of these consolidated financial statements.

HANDY & HARMAN Ltd.

Consolidated Statements of Operations

	Year ended December 31,
	2010			2009

	(in thousands except per share data)

Net sales	$	568,212		$	460,702
Cost of goods sold		416,705			345,668
Gross profit		151,507			115,034

Selling, general and administrative expenses		106,006			89,915
Pension expense		4,349			14,097
Asset impairment charges		1,643			3,016
Goodwill impairment charge		-			1,140
Income from proceeds of insurance claims, net		(1,292	)		(4,035	)
Restructuring charges		507			1,082
Other operating expenses		44			132
Income from continuing operations		40,250			9,687
Other:
Interest expense		26,310			25,741
Realized and unrealized loss on derivatives		5,983			777
Other expense (income)		180			(110	)
Income (loss) from continuing operations before tax		7,777			(16,721	)
Tax provision (benefit)		3,276			(497	)
Income (loss) from continuing operations, net of tax		4,501			(16,224	)

Discontinued Operations:
Income (loss) from discontinued operations, net of tax		499			(6,849	)
Gain on disposal of assets, net of tax		90			1,832
Net income (loss) from discontinued operations		589			(5,017	)

Net income (loss)	$	5,090		$	(21,241	)

Basic and diluted per share of common stock

Income (loss) from continuing operations, net of tax	$	0.37		$	(1.33	)
Discontinued operations, net of tax		0.05			(0.41	)
Net income (loss)	$	0.42		$	(1.74	)

Weighted average number of common shares outstanding		12,179			12,179

The accompanying notes are an integral part of these consolidated financial statements.

HANDY & HARMAN Ltd.

Consolidated Statements of Cash Flows

	Year Ended December 31,
(in thousands)	2010			2009
Cash flows from operating activities:
Net income (loss)	$	5,090		$	(21,241	)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization		16,379			17,080
Non-cash stock based compensation		221			186
Amortization of debt related costs		1,606			1,429
Loss on extinguishment of debt		1,210			-
Long-term interest on related party debt		11,045			9,560
Deferred income taxes		(392	)		(955	)
Loss on asset dispositions		44			132
Asset impairment charges		1,643			3,017
Goodwill impairment charge		-			1,140
Unrealized loss (gain) on derivatives		(14	)		409
Reclassification of net cash settlements on derivative instruments		5,585			368
Net cash provided by operating activities of discontinued operations		4,042			10,284
Decrease (increase) in operating assets and liabilities:
Trade and other receivables		(8,139	)		3,410
Inventories		(3,753	)		9,153
Other current assets		(1,390	)		2,141
Other current liabilities		11,207			830
Other items-net		414			2,565
Net cash provided by operating activities		44,798			39,508
Cash flows from investing activities:
Plant additions and improvements		(10,605	)		(7,204	)
Net cash settlements on derivative instruments		(5,585	)		(368	)
Proceeds from sales of assets		384			110
Proceeds from sale of investment		-			3,113
Net cash provided by investing activities of discontinued operations		1,410			2,405
Net cash used in investing activities		(14,396	)		(1,944	)
Cash flows from financing activities:
Proceeds of term loans		46,000			9,577
Net revolver borrowing (repayments)		24,002			(14,164	)
Repayments of term loans - domestic		(89,690	)		(26,623	)
Repayments of term loans - foreign		(2,049	)		-
Repayments of term loans - related party		(6,000	)		-
Deferred finance charges		(3,842	)		(1,191	)
Net change in overdrafts		1,494			(231	)
Net cash used to repay debt of discontinued operations		(135	)		(4,704	)
Other		(92	)		(274	)
Net cash used in financing activities		(30,312	)		(37,610	)
Net change for the period		90			(46	)
Effect of exchange rate changes on net cash		(124	)		186
Cash and cash equivalents at beginning of period		8,796			8,656
Cash and cash equivalents at end of period	$	8,762		$	8,796

Non-cash investing activities:
Sale of property for mortgage note receivable	$	630		$	-

The accompanying notes are an integral part of these consolidated financial statements.

HANDY & HARMAN Ltd.

Consolidated Statements of Changes in Stockholders’ Deficit and Comprehensive Income (Loss)

(Dollars and shares in thousands)
	Common Stock				Accumulated Other Comprehensive			Accumulated			Capital in Excess of		Total Stockholders'
	Shares		Amount		Income (Loss)			Deficit			Par Value		Deficit

Balance, January 1, 2009		12,179	$	122	$	(163,502	)	$	(431,110	)	$	552,583	$	(41,907	)

Current period change		-		-		45,100			-			-		45,100
Net loss		-		-		-			(21,241	)		-		(21,241	)
Total comprehensive income														23,859
Amortization of stock options		-		-		-			-			251		251

Balance, December 31, 2009		12,179	$	122	$	(118,402	)	$	(452,351	)	$	552,834	$	(17,797	)

Current period change		-		-		(17,463	)		-			-		(17,463	)
Net income		-		-		-			5,090			-		5,090
Total comprehensive loss														(12,373	)
Amortization of stock options		-		-		-			-			10		10

Balance, December 31, 2010		12,179	$	122	$	(135,865	)	$	(447,261	)	$	552,844	$	(30,160	)

	Year Ended December 31,
Comprehensive Income (Loss)	2010			2009

Net income (loss)	$	5,090		$	(21,241	)

Changes in pension plan assets and other benefit obligations:
Curtailment/settlement gain/(loss)		(64	)		169
Current year actuarial gain/(loss)		(25,556	)		29,940
Amortization of actuarial loss		8,908			13,215
Amortization prior service (credit)/cost		63			63

Foreign currency translation adjustment		(814	)		1,549
Valuation of marketable equity securities		-			164
Comprehensive income (loss)	$	(12,373	)	$	23,859

The accompanying notes are an integral part of these consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of the Business

Organization

Handy & Harman Ltd. (formerly named WHX Corporation prior to January 3, 2011) (“HNH”), the parent company, manages a group of businesses on a decentralized basis. HNH owns Handy & Harman Group Ltd. (“H&H Group”) which owns Handy & Harman (“H&H”) and Bairnco Corporation (“Bairnco”). HNH is a diversified holding company whose strategic business units encompass the following segments: Precious Metal, Tubing, Engineered Materials, Arlon Electronic Materials (“Arlon EM”), Arlon Coated Materials (“Arlon CM”), and Kasco Blades and Route Repair Services (“Kasco”). The business units of HNH principally operate in North America. All references herein to “we,” “our” or the “Company” shall refer to HNH, together with all of its subsidiaries.

Note 1a – Management’s Plans and Liquidity

Liquidity

The Company recorded net income of $5.1 million in 2010, and generated $44.8 million of positive cash flow from operating activities. This compares with a net loss of $21.2 million and $39.5 million provided by cash flows from operating activities in 2009. As of December 31, 2010, the Company had an accumulated deficit of $447.3 million.

On March 7, 2005, the Company filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code. The Company continued to operate its business and own and manage its assets as a debtor in possession until it emerged from protection under Chapter 11 of the Bankruptcy Code on July 29, 2005.

As of December 31, 2010, the Company’s current assets totaled $163.0 million and its current liabilities totaled $147.7 million, resulting in working capital of $15.3 million, as compared to working capital of $49.4 million as of December 31, 2009.

HNH the parent company

On October 15, 2010, the Company refinanced substantially all of its indebtedness principally with its existing lenders or their affiliates. The refinancing was effected through a newly formed, wholly-owned subsidiary of the Company, H&H Group, which is the direct parent of H&H and Bairnco.

HNH, the parent company’s, sources of cash flow consist of its cash on-hand, distributions from its principal subsidiary, H&H Group, and other discrete transactions. H&H Group’s credit facilities effectively do not permit it to transfer any cash or other assets to HNH with the exception of (i) an unsecured loan for required payments to the WHX Pension Plan, and (ii) an unsecured loan for other uses in the aggregate principal amount not to exceed $3.5 million in any fiscal year. H&H Group’s credit facilities are collateralized by priority liens on all of the assets of its subsidiaries.

HNH’s ongoing operating cash flow requirements consist of arranging for the funding of the minimum requirements of the defined benefit pension plan sponsored by the Company (the “WHX Pension Plan”) and paying HNH’s administrative costs. The significant decline in market value of stocks and other investments starting in 2008 across a cross-section of financial markets contributed to an unfunded pension liability of the WHX Pension Plan which totaled $112.1 million as of December 31, 2010 and $101.1 million as of December 31, 2009. The Company expects to have required minimum contributions to the WHX Pension Plan for 2011 and 2012 of $14.9 million and $15.6 million, respectively. Such required future contributions are determined based upon assumptions regarding such matters as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Actual future pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination.

As of December 31, 2010, HNH and its subsidiaries that are not restricted by loan agreements or otherwise from transferring funds to HNH had cash of approximately $3.0 million and current liabilities of approximately $18.0 million. Such current liabilities include $14.9 million of estimated required contributions to the WHX Pension Plan, which HNH is permitted to borrow from H&H Group pursuant to its credit agreements, in addition to an unsecured loan of up to $3.5 million in any fiscal year for other purposes.

Management expects that HNH will be able to fund its operations in the ordinary course of business over at least the next twelve months.

Handy & Harman Group Ltd.

The ability of H&H Group to draw on its revolving line of credit is limited by its borrowing base of accounts receivable and inventory. As of December 31, 2010, H&H Group’s availability under its U.S. revolving credit facilities was $24.2 million, and as of January 31, 2011, availability was $18.3 million.

There can be no assurances that H&H Group will continue to have access to its lines of credit if financial performance of its subsidiaries do not satisfy the relevant borrowing base criteria and financial covenants set forth in the applicable financing agreements. If H&H Group does not meet certain of its financial covenants or satisfy its borrowing base criteria, and if it is unable to secure necessary waivers or other amendments from the respective lenders on terms acceptable to management, its ability to access available lines of credit could be limited, its debt obligations could be accelerated by the respective lenders, and liquidity could be adversely affected.

The Company believes that recent amendments to its financing arrangements, continuing improvements in its core operations, and stabilization of the global economy as it effects the markets that the Company serves, will permit the Company to generate sufficient working capital to meet its obligations for at least the next twelve months. However, if the Company’s cash needs are greater than anticipated or the Company does not materially satisfy its business plan, the Company may be required to seek additional or alternative financing sources. There can be no assurance that such financing will be available or available on terms acceptable to the Company.

The Company has taken the following actions, which it believes has and in certain instances, will continue to improve liquidity over time and help provide for adequate liquidity to fund the Company’s capital needs:

On October 15, 2010, the Company refinanced its debt, and expects that its effective interest rate will be reduced on a prospective basis. (See Note 13-“Debt” for additional information).

The Company continues to apply the HNH Business System at all of its business units which utilizes lean tools and philosophies to reduce and eliminate waste, coupled with the Six Sigma tools targeted at variation reduction.

The Company is supporting profitable sales growth both internally and potentially through acquisitions. The Company continues to examine all of its options and strategies, including acquisitions, divestitures, and other corporate transactions, to increase cash flow and stockholder value.

In 2010 and 2009, the Company engaged in various restructuring activities that management believes will result in a more efficient infrastructure that can be leveraged in the future. These activities included consolidation of the Bairnco corporate office into the HNH corporate office, the closure of facilities in Atlanta in 2010 and New Hampshire and Dallas in 2009 and relocation of the functions to other existing facilities. In connection with these activities, restructuring charges totaled $0.5 million in 2010 and $1.6 million in 2009.

The Company decided to exit various businesses, including that of the Arlon CM segment in 2010. In 2008 and 2009, the Company exited the welded specialty tubing market in Europe by closing its Indiana Tube Denmark (“ITD”) subsidiary and the precious metal electroplating business of its Sumco Inc. (“Sumco”) subsidiary.

The Company filed a shelf registration statement on Form S-3 with the SEC which was declared effective on June 29, 2009. Pursuant to this statement, the Company may, from time to time, issue up to $25 million of its common stock, preferred stock, debt securities, warrants to purchase common stock, preferred stock, or debt securities, or any combination of the above, separately or as units. The terms of any offerings under the shelf registration statement would be determined at the time of the offering. The Company does not presently have any definitive plans or current commitments to sell securities that may be registered under the shelf registration statement. However, management believes that the shelf registration statement provides the Company with the flexibility to quickly raise capital in the market as conditions permit with a minimum of administrative preparation and expense. The net proceeds of any such issuances under the shelf registration statement could be used for general corporate purposes, which may include working capital and/or capital expenditures.

In view of the matters described in the preceding paragraphs, management believes that the Company has the ability to meet its cash requirements on a continuing basis for at least the next twelve months. However, if the Company’s planned cash flow projections are not met and/or credit is not available in sufficient amounts, management could consider the additional reduction of certain discretionary expenses and sale of certain assets. In the event that these plans are not sufficient and/or the Company’s credit facilities are not adequate, the Company’s ability to operate could be materially adversely affected and could raise substantial doubt that the Company will be able to continue to operate.

Note 2 – Summary of Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of HNH and its subsidiaries. All material intercompany transactions and balances have been eliminated. Discontinued operating entities are reflected as discontinued operations in the Company’s results of operations and statements of financial position.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, inventories, long-lived assets, intangibles, accrued expenses, income taxes, pensions and other post-retirement benefits, and contingencies and litigation. Estimates are based on historical experience, future cash flows and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and on deposit and highly liquid debt instruments with original maturities of three months or less. As of December 31, 2010 and 2009, the Company had cash held in foreign banks of $4.8 million and $4.9 million, respectively. The Company’s credit risk arising from cash deposits held in U.S. banks in excess of insured amounts is not significant given that as a condition of its revolving credit agreements (See Note-13 “Debt”), cash balances in U.S. banks are generally swept on a nightly basis to pay down the Company’s revolving credit loans. At December 31, 2010, HNH, the parent company, held cash and cash equivalents which exceeded federally-insured limits by approximately $2.9 million, all of which was invested in a money market account that invests solely in US government securities.

Revenue Recognition

Revenues are recognized when the title and risk of loss has passed to the customer. This condition is normally met when product has been shipped or the service performed. An allowance is provided for estimated returns and discounts based on experience. Cash received by the Company from customers prior to shipment of goods, or otherwise not yet earned, is recorded as deferred revenue. Rental revenues are derived from the rental of certain equipment to the food industry where customers prepay for the rental period-usually 3 to 6 month periods. For prepaid rental contracts, sales revenue is recognized on a straight-line basis over the term of the contract. Service revenues consist of repair and maintenance work performed on equipment used at mass merchants, supermarkets and restaurants.

The Company experiences a certain degree of sales returns that varies over time, but is able to make a reasonable estimation of expected sales returns based upon history. The Company records all shipping and handling fees billed to customers as revenue, and related costs are charged principally to cost of sales, when incurred. In limited circumstances, the Company is required to collect and remit sales tax on certain of its sales. The Company accounts for sales taxes on a net basis and such sales taxes are not included in net sales on the consolidated statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

The Company extends credit to customers based on its evaluation of the customer’s financial condition. The Company does not require that any collateral be provided by its customers. The Company has established an allowance for accounts that may become uncollectible in the future. This estimated allowance is based primarily on management’s evaluation of the financial condition of the customer and historical experience. The Company monitors its accounts receivable and charges to expense an amount equal to its estimate of potential credit losses. Accounts that are outstanding longer than contractual payment terms are considered past due. The Company considers a number of factors in determining its estimates, including the length of time its trade accounts receivable are past due, the Company’s previous loss history and the customer’s current ability to pay its obligation. Accounts receivable balances are charged off against the allowance when it is determined that the receivable will not be recovered, and payments subsequently received on such receivables are credited to recovery of accounts written off. The Company does not charge interest on past due receivables.

The Company believes that the credit risk with respect to Trade Accounts Receivable is limited due to the Company’s credit evaluation process, the allowance for doubtful accounts that has been established, and the diversified nature of its customer base. There were no customers which accounted for more than 5% of consolidated net sales in 2010 or 2009. In both 2010 and 2009, the 15 largest customers accounted for approximately 28% of consolidated net sales.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (“LIFO”) method for precious metal inventories. Non precious metal inventories are stated at the lower of cost (determined by the first-in, first-out “FIFO” method or average cost method) or market. For precious metal inventories, no segregation among raw materials, work in process and finished goods is practicable.

Non-precious metal inventory is evaluated for estimated excess and obsolescence based upon assumptions about future demand and market conditions and is adjusted accordingly. If actual market conditions are less favorable than those projected, write-downs may be required.

Derivatives and Risks

Precious Metal Risk

H&H enters into commodity futures and forwards contracts on precious metals that are subject to market fluctuations in order to economically hedge its precious metal inventory against price fluctuations. Future and forward contracts to sell or buy precious metal are the derivatives used for this objective.

As of December 31, 2010 and 2009, the Company had contracted for $10.5 million and $7.2 million, respectively, of forward contracts with a counter party rated A by Standard & Poors, and the future contracts are exchange traded contracts through a third party broker. Accordingly, the Company has determined that there is minimal credit risk of default. The Company estimates the fair value of its derivative contracts through use of market quotes or broker valuations when market information is not available.

As these derivatives are not designated as accounting hedges under GAAP, they are accounted for as derivatives with no hedge designation. These derivatives are marked to market and both realized and unrealized gains and losses on these derivatives are recorded in current period earnings as other income (loss). The unrealized gain or loss (open trade equity) on the derivatives is included in other current assets or other current liabilities, respectively.

Foreign Currency Exchange Rate Risk

H&H and Bairnco are subject to the risk of price fluctuations related to anticipated revenues and operating costs, firm commitments for capital expenditures and existing assets or liabilities denominated in currencies other than U.S. dollars. H&H and Bairnco have not generally used derivative instruments to manage this risk.

Property, Plant and Equipment

Property, plant and equipment is recorded at historical cost. Depreciation of property, plant and equipment is provided principally on the straight line method over the estimated useful lives of the assets, which range as follows: machinery & equipment 3 –15 years and buildings and improvements 10 – 30 years. Interest cost is capitalized for qualifying assets during the assets’ acquisition period. Maintenance and repairs are charged to expense and renewals and betterments are capitalized. Profit or loss on dispositions is credited or charged to operating income.

Goodwill, Intangibles and Long-Lived Assets

Goodwill represents the difference between the purchase price and the fair value of net assets acquired in business combinations. Goodwill is reviewed annually for impairment in accordance with GAAP. The Company uses judgment in assessing whether assets may have become impaired between annual impairment tests. Circumstances that could trigger an interim impairment test include but are not limited to: the occurrence of a significant change in circumstances, such as continuing adverse business conditions or legal factors; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed; or results of testing for recoverability of a significant asset group within a reporting unit.

The testing of goodwill for impairment is performed at a level referred to as a reporting unit. Goodwill is allocated to each reporting unit based on actual goodwill valued in connection with each business combination consummated within each reporting unit. Six reporting units of the Company have goodwill assigned to them.

Goodwill impairment testing consists of a two-step process. Step 1 of the impairment test involves comparing the fair values of the applicable reporting units with their carrying values, including goodwill. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, Step 2 of the goodwill impairment test is performed to determine the amount of impairment loss. Step 2 of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill against the carrying value of that goodwill. In performing the first step of the impairment test, the Company also reconciles the aggregate estimated fair value of its reporting units to its enterprise value (which includes a control premium).

To estimate the fair value of our reporting units, we considered an income approach and a market approach. The income approach is based on a discounted cash flow analysis (“DCF”) and calculates the fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the DCF require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on current plans and for years beyond that plan, the estimates are based on assumed growth rates. We believe the assumptions are consistent with the plans and estimates used to manage the underlying businesses. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital (“WACC”) of a market participant. Such estimates are derived from our analysis of peer companies and considered the industry weighted average return on debt and equity from a market participant perspective. The Company believes the assumptions used to determine the fair value of our respective reporting units are reasonable. If different assumptions were used, particularly with respect to forecasted cash flows or WACCs, different estimates of fair value may result and there could be the potential that an impairment charge could result. Actual operating results and the related cash flows of the reporting units could differ from the estimated operating results and related cash flows. The recoverability of goodwill may be impacted if estimated future operating cash flows are not achieved.

A market approach values a business by considering the prices at which shares of capital stock of reasonably comparable companies are trading in the public market, or the transaction price at which similar companies have been acquired. If comparable companies are not available, the market approach is not used.

Relative weights are then given to the results of each of these approaches, based on the facts and circumstances of the business being valued. The use of multiple approaches (e.g. income and market approaches) is considered preferable to a single method. In our case, full weight was given to the income approach because it generally provides a reliable estimate of value for an ongoing business which has a reliable forecast of operations, and suitable comparable public companies were not available to be used under the market approach. The income approach closely parallels investors’ consideration of the future benefits derived from ownership of an asset.

Intangible assets with finite lives are amortized over their estimated useful lives. We also estimate the depreciable lives of property, plant and equipment. Property, plant and equipment, as well as intangible assets with finite lives are reviewed for impairment if events, or changes in circumstances, indicate that we may not recover the carrying amount of an asset. Long-lived assets consisting of land and buildings used in previously operating businesses are carried at the lower of cost or fair value, and are included in Other Non-Current Assets in the consolidated balance sheets. A reduction in the carrying value of such long-lived assets used in previously operating businesses is recorded as an asset impairment charge in the consolidated statement of operations.

Equity Investments

Investments are accounted for using the equity method of accounting if the investment provides the Company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors, are considered in determining whether the equity method of accounting is appropriate. The Company accounted for its investment in CoSine Communications, Inc. (“CoSine”) using the equity method of accounting. The CoSine investment was sold in 2009.

Stock Based Compensation

The Company accounts for stock options granted to employees as compensation expense which is recognized in exchange for the services received. The compensation expense is based on the fair value of the equity instruments on the grant-date.

Environmental Liabilities

The Company accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study.

Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Income Taxes

Income taxes currently payable or tax refunds receivable are recorded on a net basis and included in accrued liabilities on the consolidated balance sheets. Deferred income taxes reflect the tax effect of net operating loss carryforwards (“NOLs”), capital loss or tax credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting (GAAP) and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established if, based on the weight of available evidence, it is more likely than not that some portion or the entire deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment.

Earnings per Share

Basic earnings per share are based on the weighted average number of shares of Common Stock outstanding during each year. Diluted earnings per share gives effect to dilutive potential common shares outstanding during the period.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and related revenues and expenses are translated at average rates of exchange in effect during the year. Resulting cumulative translation adjustments are recorded as a separate component of accumulated other comprehensive income.

Fair Value Measurements

The Company adopted Accounting Standards Codification (“ASC”) No. 820, “Fair Value Measurements” effective January 1, 2009. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e, the “exit price”) in an orderly transaction between market participants at the measurement date.

In determining fair value, the Company uses various valuation approaches. The hierarchy of those valuation approaches is broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The valuation under this approach does not entail a significant degree of judgment.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the asset or liability, (e.g., interest rates and yield curves observable at commonly quoted intervals or current market) and contractual prices for the underlying financial instrument, as well as other relevant economic measures.

Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The fair value of the Company’s financial instruments, such as cash and cash equivalents, accounts receivable, and accounts payable approximate carrying value due to the short-term maturities of these assets and liabilities. Carrying cost fair value approximates for long-term debt which has variable interest rates.

The Company's non-financial assets measured at fair value on a non-recurring basis include goodwill and intangible assets, any assets and liabilities acquired in a business combination, or its long-lived assets written down to fair value. To measure fair value for such assets, the Company uses techniques including discounted expected future cash flows, a market approach, and/or appraisals (Level 3 inputs).

The derivative instruments that the Company purchases, specifically commodity futures and forwards contracts on precious metal, are valued at fair value on a recurring basis. The futures contracts are Level 1 measurements since they are traded on a commodity exchange. The forward contracts are entered into with a counterparty, and are considered Level 2 measurements. The embedded derivative features of the Company’s Subordinated Notes and related warrants are valued at fair value on a recurring abasis and are considered Level 3 measurements.

Legal Contingencies

The Company provides for legal contingencies when the liability is probable and the amount of the associated costs is reasonably determinable. The Company regularly monitors the progress of legal contingencies and revises the amounts recorded in the period in which a change in estimate occurs.

Advertising Costs

Advertising costs consist of sales promotion literature, samples, cost of trade shows, and general advertising costs, and are included in selling, general and administrative expenses on the consolidated statements of operations. Advertising, promotion and trade show costs totaled approximately $2.6 million in 2010 and $2.4 million in 2009.

Reclassification

Certain amounts for prior years have been reclassified to conform to the current year presentation. In particular, the assets, liabilities and income or loss of discontinued operations (see Note 4) have been reclassified into separate lines on the financial statements to segregate them from continuing operations.

Note 3 – Recently Issued Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued new disclosure requirements related to Fair Value Measurements and Disclosures—ASC 820-10, in order to provide a greater level of disaggregated information and more robust disclosures about valuation techniques and inputs to fair value measurements, as well as additional information about transfers between levels and activity during the reporting period. It also includes conforming amendments to the guidance on employers’ disclosures about postretirement benefit plan assets (ASC 715-20); so as to refer to ASC 820-10 to determine the appropriate classes to present fair value disclosures about such plan assets. Most of the new disclosures and clarifications of existing disclosures are effective for the Company’s interim and annual reporting periods of 2010, and the Company adopted them in the first quarter of 2010. Because the new requirements affect disclosures but do not change the accounting for any assets or liabilities, their adoption did not have an effect on the Company’s consolidated financial position and results of operations.

Note 4 – Discontinued Operations

Arlon CM

In 2010, the Company decided to exit the business of manufacturing adhesive films, specialty graphic films and engineered coated products, and in February 2011, the Company entered into two separate asset sale transactions (see Note 21-“Subsequent Events”). These businesses comprised the Arlon CM segment. The Company recorded an asset impairment charge of $1.3 million in 2010 in connection with certain of these assets.

Kasco-France

During the third quarter of 2011, the Company sold the stock of Eurokasco S.A.S. (“Kasco-France”), a part of its Kasco segment, to Kasco-France’s former management team for one Euro plus 25% of any pre-tax earnings over the next three years. Additionally, Kasco-France signed a five year supply agreement to purchase certain products from Kasco. Kasco-France has been included as a discontinued operation on a retroactive basis for the twelve months ending December 31, 2010 and 2009 (see Note 21-“Subsequent Events”).

Indiana Tube Denmark

In 2008, the Company decided to exit the welded specialty tubing market in Europe and close H&H’s Indiana Tube Denmark subsidiary (“ITD”), sell its assets, pay off its debt, and repatriate the remaining cash. The decision to exit this market was made after evaluating economic conditions and ITD’s capabilities, served markets, and competitors. ITD had been part of the Company’s Tubing segment. During 2009, ITD ceased operations and sold or disposed of its inventory and most of its equipment. A gain on the sale of equipment of $1.7 million was recognized. ITD repaid all of its $4.6 million of long-term debt during 2009. ITD’s principal remaining asset is the ITD facility, which has been offered for sale. The facility is included in “Other non-current assets” on the consolidated balance sheet as of December 31, 2010.

Sumco, Inc.

The Company also evaluated its Sumco subsidiary in light of ongoing operating losses and future prospects. Sumco provided electroplating services primarily to the automotive market, and relied on the automotive market for over 90% of its sales. Sumco had been part of the Precious Metal segment. The Company decided to exit this business. In 2009, Sumco entered into a lease of its former manufacturing facility in Indianapolis, Indiana and granted the tenant an option to purchase the facility. On October 13, 2010, Sumco completed the sale of the facility and in addition, sold the rights to the Sumco name. The net proceeds of $1.7 million approximated the carrying value of the Sumco long-term assets and accordingly, no significant gain or loss was recorded on the sale.

The following assets and liabilities of the discontinued operations, ITD, Sumco, Kasco-France, and Arlon CM, have been segregated in the accompanying consolidated balance sheets as of December 31, 2010 and 2009.

(in thousands)
	December 31, 2010		December 31, 2009
Current Assets:
Trade accounts receivable	$	12,351	$	12,943
Inventory		13,624		15,233
Other current assets		1,069		1,336
	$	27,044	$	29,512

Long-term Assets:
Property, plant & equipment, net	$	1,946	$	8,284
Intangibles, net		79	$	104
Other non-current assets		234		230
	$	2,259	$	8,618

Current Liabilities:
Other current liabilities	$	9,341	$	9,686
	$	9,341	$	9,686

Non-current Liabilities:
Deferred income taxes	$	229	$	171
Pension liability		341		346
Other non-current liabilities		85		179
	$	655	$	696

The income (loss) from Discontinued Operations consists of the following:

	Years ended December 31,
(in thousands)	2010			2009

Net sales	$	88,163		$	93,503

Asset impairment charges		(1,347	)		(1,149	)

Restructuring charges		-			(1,270	)

Operating income (loss)		629			(6,251	)

Interest/other income (expense)		9			(702	)

Income tax benefit (expense)		(139	)		104

Income (loss) from discontinued operations, net		499			(6,849	)

Note 5 –Restructuring Charges

In 2010 and 2009, the Company engaged in various cost improvement initiatives in order to positively impact productivity and profitability, including certain activities that management believes will result in a more efficient infrastructure that can be leveraged in the future.

During 2010, the Company commenced a restructuring plan to move Kasco’s Atlanta, Georgia operation to an existing facility in Mexico. In connection with this restructuring project, costs of $0.5 million were incurred in the twelve months ended December 31, 2010, principally for employee compensation and moving costs. This restructuring project was completed in the fourth quarter of 2010.

For the twelve months ended December 31, 2009, restructuring charges totaled $1.1 million. Restructuring costs of $0.6 million were recorded in 2009 relating to the consolidation of the former Bairnco Corporate office into the HNH Corporate office. In addition, in April 2009, the Company announced the closure of a facility in New Hampshire which was part of the Precious Metal segment and the relocation of the functions to its facility in Milwaukee. Restructuring costs of approximately $0.4 million were recorded in connection with this relocation, including an estimate of future net lease costs for the facility.

As of December 31, 2010, approximately $0.1 million of future lease costs for the New Hampshire facility of the Precious Metal segment was accrued and included in accrued liabilities on the balance sheet. This lease terminates in 2014.

The restructuring costs and activity in the restructuring reserve for the year ended December 31, 2010 consisted of:

	December 31, 2009		Expense		Payments			December 31, 2010
(in thousands)
Termination benefits	$	92	$	201	$	(256	)	$	37
Rent expense		166		-		(25	)		141
Other facility closure costs		-		306		(306	)		-
	$	258	$	507	$	(587	)	$	178

Note 6 –Asset Impairment Charges

A non-cash asset impairment charge of $1.6 million was recorded in 2010 as part of income from continuing operations. During the second quarter of 2010, Kasco commenced a restructuring plan to move its Atlanta, Georgia operation to an existing facility in Mexico. As a result, the Company performed a valuation of its land, building and houses located in Atlanta. The impairment charge represents the difference between the assets’ book value and fair market value as a result of the declining real estate market in the area where the properties are located. The Company owns certain real property that is not currently used in operations and is not being depreciated, principally former manufacturing plants. Such real property is included in Other Non-Current Assets on the consolidated balance sheets. In accordance with GAAP, the Company reviews such properties for impairment and in 2009, determined that certain properties should be written down to fair value. In the fourth quarter of 2009, the Company recorded non-cash asset impairment charges of $1.0 million related to these properties.

In addition, in the second quarter of 2009, the Company recorded a $0.9 million non-cash impairment charge related to certain manufacturing equipment located at one of its Tubing facilities. The equipment had been utilized exclusively in connection with a discontinued product line, had no other viable use to the Company, and limited scrap value.

In 2009, the Company also recorded a $1.1 million impairment charge related to an investment accounted for under the equity method. The equity investment was sold by the Company during the third quarter of 2009 for cash proceeds of $3.1 million, and the amount of the impairment represented the difference between the carrying value of the investment and the selling price.

Note 7 – Pensions and Other Postretirement Benefits

The Company maintains several qualified and non-qualified pension plans and other postretirement benefit plans. The Company’s significant pension, health care benefit and defined contribution plans are discussed below. The Company’s other defined contribution plans are not significant individually or in the aggregate.

Qualified Pension Plans

HNH sponsors a defined benefit pension plan, the WHX Pension Plan, covering many of H&H employees and certain employees of H&H’s former subsidiary, Wheeling-Pittsburgh Corporation, or (“WPC”). The WHX Pension Plan was established in May 1998 as a result of the merger of the former H&H plans, which covered substantially all H&H employees, and the WPC plan. The WPC plan, covering most USWA-represented employees of WPC, was created pursuant to a collective bargaining agreement ratified on August 12, 1997. Prior to that date, benefits were provided through a defined contribution plan, the Wheeling-Pittsburgh Steel Corporation Retirement Security Plan (“RSP Plan”). The assets of the RSP Plan were merged into the WPC plan as of December 1, 1997. Under the terms of the WHX Pension Plan, the benefit formula and provisions for the WPC and H&H participants continued as they were designed under each of the respective plans prior to the merger.

The qualified pension benefits under the WHX Pension Plan were frozen as of December 31, 2005 and April 30, 2006 for hourly and salaried non-bargaining participants, respectively, with the exception of a single operating unit.

WPC employees ceased to be active participants in the WHX Pension Plan effective July 31, 2003 and as a result such employees no longer accrue benefits under the WHX Pension Plan.

Bairnco Corporation had several pension plans (“Bairnco Plans”), which covered substantially all of its employees. In 2006, Bairnco froze the Bairnco Corporation Retirement Plan and initiated employer contributions to its 401(k) plan. On June 2, 2008, two Bairnco plans (Salaried and Kasco) were merged into the WHX Pension Plan. The remaining plan that has not been merged with the WHX Pension Plan covers certain employees at a facility located in Bear, Delaware (the “Bear Plan”), and the pension benefits under the Bear Plan have been frozen.

Bairnco’s Canadian subsidiary provides retirement benefits for its employees through a defined contribution plan. In addition, the Company’s European subsidiaries provide retirement benefits for employees consistent with local practices. The foreign plans are not significant in the aggregate and therefore are not included in the following disclosures.

Pension benefits are based on years of service and the amount of compensation earned during the participants’ employment. However, as noted above, the qualified pension benefits were frozen for most participants.

Pension benefits for the WPC bargained participants include both defined benefit and defined contribution features, since the plan includes the account balances from the RSP. The gross benefit, before offsets, is calculated based on years of service and the benefit multiplier under the plan. The net defined benefit pension plan benefit is the gross amount offset for the benefits payable from the RSP and benefits payable by the Pension Benefit Guaranty Corporation (“PBGC”) from previously terminated plans. Individual employee accounts established under the RSP are maintained until retirement. Upon retirement, participants who are eligible for the WHX Pension Plan and maintain RSP account balances will normally receive benefits from the WHX Pension Plan. When these participants become eligible for benefits under the WHX Pension Plan, their vested balances in the RSP Plan becomes assets of the WHX Pension Plan. Aggregate account balances held in trust in individual RSP Plan participants’ accounts totaled $23.0 million at December 31, 2010. These assets cannot be used to fund any of the net benefit that is the basis for determining the defined benefit plan’s net benefit obligation at December 31, 2010.

In 2010, certain current and retired employees of H&H are covered by postretirement medical benefit plans which provide benefits for medical expenses and prescription drugs. Contributions from a majority of the participants are required, and for those retirees and spouses, the Company’s payments are capped. The measurement date for plan obligations is December 31. In 2010, benefits were discontinued under one of these postretirement medical plans. In 2009, the Company also had a postretirement Executive Life Insurance program that provided for life insurance benefits, as defined, for certain Company executives upon their retirement. During 2009, this plan was terminated and all policies were either terminated for cash value or transferred to the participants. In 2010 and 2009, as a result of the discontinuance of these benefits, the Company reduced its postretirement benefits expense by $0.7 million and $1.1 million, respectively.

The components of pension expense and components of other postretirement benefit expense (income) for the Company’s benefit plans included the following:

	Pension Benefits						Other Postretirement Benefits
	2010			2009			2010			2009
	(in thousands)
Service cost	$	190		$	379		$	-		$	41
Interest cost		24,117			25,709			191			248
Expected return on plan assets		(28,877	)		(25,196	)		-			-
Amortization of prior service cost		63			63			-			-
Actuarial loss amortization		8,878			13,215			42			-
Curtailment/Settlement		-			-			(712	)		(1,114	)
Total	$	4,371		$	14,170		$	(479	)	$	(825	)

Actuarial assumptions used to develop the components of defined benefit pension expense and other postretirement benefit expense were as follows:

	Pension Benefits						Other Postretirement Benefits
	2010			2009			2010			2009
Discount rates:
WHX Pension Plan		5.55	%		6.00	%		N/A			N/A
Other postretirement benefit plans		N/A			N/A			5.55	%		6.00	%
Bear Plan		6.05	%		6.15	%		N/A			N/A
Expected return on assets		8.50	%		8.50	%		N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A
Health care cost trend rate - initial		N/A			N/A			8.00	%		8.00	%
Health care cost trend rate - ultimate		N/A			N/A			5.00	%		5.00	%
Year ultimate reached		N/A			N/A			2016			2015

The measurement date for plan obligations is December 31. The discount rate is the rate at which the plans’ obligations could be effectively settled and is based on high quality bond yields as of the measurement date.

Summarized below is a reconciliation of the funded status for the Company’s qualified defined benefit pension plans and postretirement benefit plans:

	Pension Benefits						Other Postretirement Benefits
	2010			2009			2010			2009
	(in thousands)
Change in benefit obligation:
Benefit obligation at January 1	$	454,469		$	447,271		$	3,714		$	4,233
Service cost		190			379			-			41
Interest cost		24,116			25,709			191			248
Settlement		-			-			(648	)		(1,282	)
Actuarial loss		24,754			15,388			380			769
Participant Contributions		-			-			17			52
Benefits paid		(37,744	)		(35,505	)		(200	)		(347	)
Transfers from RSP		6,741			1,227			-			-
Benefit obligation at December 31	$	472,526		$	454,469		$	3,454		$	3,714

Change in plan assets:
Fair value of plan assets at January 1	$	352,460		$	313,522		$	-		$	-
Business Combinations		-			-			-			-
Actual returns on plan assets		25,406			71,265			-			-
Participant Contributions		-			-			17			52
Benefits paid		(37,744	)		(35,505	)		(200	)		(347	)
Company contributions		9,633			1,951			183			295
Transfers from RSP		9,788			1,227			-			-
Fair value of plan assets at December 31	$	359,543		$	352,460		$	-		$	-

Funded status	$	(112,983	)	$	(102,009	)	$	(3,454	)	$	(3,714	)

Accumulated benefit obligation (ABO) for qualified
defined benefit pension plans :
ABO at January 1	$	454,469		$	447,271		$	3,714		$	4,233
ABO at December 31		472,526			454,469		$	3,454		$	3,714

Amounts Recognized in the Statement of
Financial Position
Noncurrent Asset	$	-		$	-		$	-		$	-
Current liability		(14,900	)		(9,700	)		(215	)		(215	)
Noncurrent liability		(98,083	)		(92,309	)		(3,239	)		(3,499	)
Total	$	(112,983	)	$	(102,009	)	$	(3,454	)	$	(3,714	)

The weighted average assumptions used in the valuations at December 31 were as follows:

	Pension Benefits						Other Postretirement Benefits
	2010			2009			2010			2009
Discount rates:
WHX Pension Plan		4.95	%		5.55	%		N/A			N/A
Bear Plan		5.50	%		6.05	%		N/A			N/A
Other postretirement benefit plans		N/A			N/A			5.10	%		5.55	%
Rate of compensation increase		N/A			N/A			N/A			N/A
Health care cost trend rate - initial		N/A			N/A			7.50	%		8.00	%
Health care cost trend rate - ultimate		N/A			N/A			5.00	%		5.00	%
Year ultimate reached		N/A			N/A			2016			2016

Pretax amounts included in “Accumulated other comprehensive loss” at December 31, 2010 and 2009 were as follows:

	Pension Benefits				Other Postretirement Benefits
(in thousands)	2010		2009		2010		2009
Prior service cost	$	138	$	200	$	-	$	-
Net actuarial loss		143,060		126,763		1,180		777
Accumulated other comprehensive loss	$	143,198	$	126,963	$	1,180	$	777

The pretax amount of actuarial losses and prior service cost included in “Accumulated other comprehensive loss” at December 31, 2010 that is expected to be recognized in net periodic benefit cost in 2011 is $9.5 million and -0-, respectively, for defined benefit pension plans and -0- and -0-, respectively, for other postretirement benefit plans.

Other changes in plan assets and benefit obligations recognized in “Comprehensive income” are as follows:

	Pension Benefits					Other Postretirement Benefits
	2010			2009		2010			2009
	(in thousands)
Curtailment/Settlement gain (loss)	$	-		$	169	$	(64	)	$	-
Current year actuarial gain (loss)		(25,176	)		30,539		(380	)		(599	)
Amortization of actuarial loss		8,866			13,215		42			-
Amortization of prior service cost		63			63		-			-
Total recognized in comprehensive income	$	(16,247	)	$	43,986	$	(402	)	$	(599	)

Benefit obligations were in excess of plan assets for all pension plans and other postretirement benefit plans at both December 31, 2010 and 2009. The accumulated benefit obligation for all defined benefit pension plans was $472.5 million and $454.5 million at December 31, 2010 and 2009, respectively. Additional information for plans with accumulated benefit obligations in excess of plan assets:

	Pension Benefits				Other Postretirement Benefits
	2010		2009		2010		2009
	(in thousands)
Projected benefit obligation	$	472,526	$	454,469	$	3,454	$	3,714
Accumulated benefit obligation		472,526		454,469		3,454		3,714
Fair value of plan assets		359,543		352,460		-		-

In determining the expected long-term rate of return on assets, the Company evaluated input from various investment professionals. In addition, the Company considered its historical compound returns as well as the Company’s forward-looking expectations for the plan. The Company determines its actuarial assumptions for its pension and postretirement plans on December 31 of each year to calculate liability information as of that date and pension and postretirement expense for the following year. The discount rate assumption is derived from the rate of return on high-quality bonds as of December 31 of each year.

The Company’s investment policy is to maximize the total rate of return with a view to long-term funding objectives of the pension plan to ensure that funds are available to meet benefit obligations when due. The three to five year objective of the WHX Pension Plan is to achieve a rate of return that exceeds the Company’s expected earnings rate by 150 basis points at prudent levels of risk. Therefore the pension plan assets are diversified to the extent necessary to minimize risk and to achieve an optimal balance between risk and return. There are no target allocations. The WHX Pension Plan’s assets are diversified as to type of assets, investment strategies employed, and number of investment managers used. Investments may include equities, fixed income, cash equivalents, convertible securities, and private investment funds. Derivatives may be used as part of the investment strategy. The Company may direct the transfer of assets between investment managers in order to rebalance the portfolio in accordance with asset allocation guidelines established by the Company.

The fair value of pension investments is defined by reference to one of the three following categories: Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. The valuation under this approach does not entail a significant degree of judgment (“Level 1”).

The WHX/Bear Pension Plan’s assets at December 31, 2010 and 2009, by asset category, are as follows:

		WHX/Bear Pension Assets
		(in thousands)

Fair Value Measurements as of December 31, 2010:
	Assets (Liabilities) at Fair Value as of December 31, 2010
Asset Class	Level 1			Level 2			Level 3		Total
Equity securities:
U.S. large cap	$	20,475		$	257		$	-	$	20,732
U.S. mid-cap growth		37,493			902			-		38,395
U.S. small-cap value		5,657			-			317		5,974
International large cap value		17,602			-			-		17,602
Emerging markets growth		3,831			-			-		3,831
Equity contracts		608			-			-		608
Fixed income securities:
Corporate bonds		7,831			24,927			595		33,353
Bank debt		-			1,464			-		1,464
Other types of investments:
Common trust funds (1)		-			97,258			-		97,258
Fund of funds (2)		-			32,416			31,658		64,074
Insurance contracts (3)		-			753			9,268		10,021
		93,497			157,977			41,838		293,312
Futures contracts, net		(62,655	)		(158	)		-		(62,813	)
Total	$	30,842		$	157,819		$	41,838	$	230,499
Cash & cash equivalents										131,248
Net payables										(2,204	)
Total pension assets									$	359,543

Fair Value Measurements as of December 31, 2009:
	Assets (Liabilities) at Fair Value as of December 31, 2009
Asset Class	Level 1			Level 2			Level 3		Total
Equities	$	27,607		$	950		$	-	$	28,557
Fixed income securities		8,664			26,320			124		35,108
Common trust funds (1)		-			106,616			-		106,616
Fund of funds (2)		-			32,953			27,594		60,547
Insurance contracts (3)					723			9,361		10,084
		36,271			167,562			37,079		240,912
Derivative contracts, net		(836	)		(199	)		-		(1,035	)
Total	$	35,435		$	167,363		$	37,079	$	239,877
Cash & cash equivalents										115,508
Net payables										(2,925	)
Total pension assets									$	352,460

(1) Common Trust Funds- Common trust funds are comprised of shares or units in commingled funds that are not publicly traded. The underlying assets in these funds are primarily publicly traded equity securities, fixed income securities, and commodity-related securities and are valued at their Net Asset Values (“NAVs”) that are calculated by the investment manager or sponsor of the fund and have daily or monthly liquidity.

(2) Fund of funds consist of fund-of-fund LLC or commingled fund structures. The underlying assets in these funds are primarily publicly traded equity securities, fixed income securities, and commodity-related securities. The LLCs are valued based on NAVs calculated by the fund and are not publicly available. In most cases, the liquidity for the LLCs is quarterly with advance notice and is subject to liquidity of the underlying funds. In some cases, there may be extended lock-up periods greater than 90 days or side-pockets for non-liquid assets.

(3) Insurance contracts contain general investments and money market securities. The fair value of insurance contracts is determined based on the cash surrender value which is determined based on such factors as the fair value of the underlying assets and discounted cash flow. These contracts are with a highly-rated insurance company. Insurance contracts are classified within level 3 and the money market component is classified within level 2 of the valuation hierarchy. In 2009, insurance contracts had been classified wholly within level 2 assets, but have been presented above in a manner consistent with 2010 for comparability purposes.

The Company’s policy is to recognize transfers in and transfers out of Level 3 as of the date of the event or change in circumstances that caused the transfer.

The fair value measurements of the WHX/Bear Pension Plan assets using significant unobservable inputs (Level 3) changed during 2010 due to the following:

2010 Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

	Fixed income securities		Fund of funds			Insurance contracts (c)			U.S. Small Cap Value
Beginning balance as of January 1, 2010	$	124	$	27,594		$	9,361		$	-
Transfers into Level 3 (a)		-		-			-			317
Transfers out of Level 3 (b)		-		(229	)		-			-
Gains or losses included in changes in net assets		471		4,293			1,115			-
Purchases, issuances, sales and settlements
Purchases		-		-			9,008			-
Issuances		-		-			-			-
Sales		-		-			-			-
Settlements		-		-			(10,216	)		-
Ending balance as of December 31, 2010	$	595	$	31,658		$	9,268		$	317

Net unrealized gains (losses) included in the changes in net assets, attributable to investments still held at the reporting date	$	471	$	4,293		$	1,115		$	-

a)	Transferred from Level 2 to Level 3 because of lack of observable market data due to decreases in market activity for these securities.

b)	Transfers from Level 3 to Level 2 upon expiration of the restrictions.

c)	Insurance contracts cannot be redeemed or transferred as these investments secure the insurance contracts that retirees of the WHX Pension Plan are due as part of their benefit payments.

2009 Changes in Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

	Fixed income securities			Fund of funds
Beginning balance as of January 1, 2009	$	-		$	1,383
Transfers into Level 3		-			-
Transfers out of Level 3		-			(333	)
Gains or losses included in changes in net assets		(306	)		8,185
Purchases, issuances, sales and settlements		430			18,359
Ending balance as of December 31, 2009	$	124		$	27,594

In accordance with the guidance for fair value measurements in certain entities that calculate NAV per share (or its equivalents), the WHX Pension Plan expanded its disclosures to include the category, fair value, redemption frequency, and redemption notice period for those assets whose fair value is estimated using the NAV per share (or its equivalents) as of December 31, 2010.

2010 Fair Value Estimated using NAV per Share (or its equivalent)

Class Name	Description	Fair Value (in thousands)		Redemption frequency	Redemption Notice Period
Fund of funds	Long Short Equity Fund	$	4,488	Quarterly	45 day notice
Fund of funds	Credit Long short hedge fund		31,087	2 year lock	90 day notice
Fund of funds	Multi-strategy hedge funds		362	Quarterly	45 day notice
Fund of funds	Fund of fund composites-side pocket		571	None	Not determinable
Fund of funds	Fund of fund composites		27,566	Quarterly	45 day notice
Common trust funds	Event driven hedge funds		97,258	Quarterly	45 day notice

The Company’s Pension Plans’ asset allocations at December 31, 2010 and 2009, by asset category, are as follows:

	WHX/Bear Plans
	2010			2009
Asset Category
Cash and cash equivalents		35	%		32	%
Equity securities		7	%		8	%
Fixed income securities		10	%		10	%
Insurance contracts		3	%		3	%
Common trust funds		27	%		30	%
Fund of funds		18	%		17	%
Total		100	%		100	%

Contributions

Employer contributions consist of funds paid from employer assets into a qualified pension trust account. The Company’s funding policy is to contribute annually an amount that satisfies the minimum funding standards of ERISA.

The Company expects to have required minimum contributions for the WHX Pension Plan for 2011 and 2012 of $14.9 million and $15.6 million, respectively. Required future contributions are based upon assumptions such as discount rates on future obligations, assumed rates of return on plan assets and legislative changes. Pension costs and required funding obligations will be affected by changes in the factors and assumptions described in the previous sentence, as well as other changes such as any plan termination.

Benefit Payments

Estimated future benefit payments for the benefit plans over the next ten years are as follows (in thousands):

	Pension		Other Postretirement
Years	Benefits		Benefits
2011	$	35,680	$	198
2012		35,622		211
2013		35,462		218
2014		35,252		228
2015		34,987		242
2016-2020		168,804		1,217

Non-Qualified Pension Plans

In addition to the aforementioned benefit plans, H&H had a non-qualified pension plan for certain current and retired employees. Such plan adopted an amendment effective January 1, 2006, to freeze benefits under the plan. In 2009, H&H decided to cash out any remaining participants in the plan in 2010, and the final payout of participant balances was made in December 2010.

The components of pension (income) expense for the Company’s non-qualified pension plans included the following:

	2010			2009
	(in thousands)
Interest cost	$	11		$	11
Settlement credit		(13	)		-
Total	$	(2	)	$	11

Assumptions used to determine net periodic benefit expense (income) for the period are as follows:

	2010			2009

Discount rate		5.55	%		6.00	%
Rate of compensation increase		N/A			N/A

The measurement date for plan obligations is December 31. The discount rate is the rate at which the plan’s obligations could be effectively settled and is based on high quality bond yields as of the measurement date.

Summarized below is a reconciliation of the funded status for the Company’s non-qualified pension plan:

	2010			2009
	(in thousands)
Change in benefit obligation:
Benefit obligation at January 1	$	220		$	242
Service cost		-			-
Interest cost		11			11
Actuarial gain		-			(27	)
Benefits paid		(231	)		(6	)
Benefit obligation at December 31	$	-		$	220

Plan assets	$	-		$	-
Funded status	$	-		$	(220	)

The pre tax amounts recognized in
accumulated other comprehensive income:
Net actuarial gain	$	-		$	(13	)

Accumulated benefit obligation for
defined benefit pension plans :
Accumulated benefit obligation at January 1	$	220		$	242
Accumulated benefit obligation at December 31		-			220

Assumptions used to determine benefit obligations at December 31 are as follows:

	2010		2009

Discount rate		N/A		5.55	%
Rate of compensation increase		N/A		N/A

Contributions

The non-qualified plan is not funded. Employer contributions are equal to annual benefit payments.

Benefit Payments

The Company does not expect that there will be any future benefit payments for the H&H non-qualified plan.

401(k) Plans

Certain employees participate in a Company sponsored savings plan which qualifies under Section 401(k) of the Internal Revenue Code. This savings plan allows eligible employees to contribute from 1% to 75% of their income on a pretax basis. In January 2009, the Company suspended its employer contributions to the 401(k) savings plan for all employees not covered by a collective bargaining agreement. In January 2010, the matching contribution was reinstated, with a match of 50% of the first 6% of the employee’s contribution, provided that employees had made an election to participate in the 401(k) savings plan on or before January 31, 2010. The charge to expense for the Company’s matching contribution amounted to $1.3 million in 2010 and $-0- in 2009.

Note 8 – Income Taxes

	2010		2009
	(in thousands)
Income (loss) before income taxes:
Domestic	$	890	$	(19,157	)
Foreign		6,884		2,436
Total income (loss) before income taxes	$	7,774	$	(16,721	)

The provision for (benefit from) income taxes for the two years ended December 31 is as follows:

	2010			2009
	(in thousands)
Income Taxes
Current
Domestic	$	2,271		$	190
Foreign		1,379			31
Total income taxes, current	$	3,650		$	221
Deferred
Domestic	$	(279	)	$	(744	)
Foreign		(95	)		26
Total income taxes, deferred	$	(374	)	$	(718	)
Income tax provision (benefit)	$	3,276		$	(497	)

Deferred income taxes result from temporary differences in the financial basis and tax basis of assets and liabilities. The amounts shown on the following table represent the tax effect of temporary differences between the Company’s consolidated tax return basis of assets and liabilities and the corresponding basis for financial reporting, as well as tax credit and operating loss carryforwards.

Deferred Income Tax Sources	2010			2009
	(in thousands)
Current Deferred Tax Items:
Inventory	$	3,805		$	1,954
Environmental Costs		2,301			2,509
Accrued Expenses		3,605			2,306
Miscellaneous Other		868			828
Current deferred income tax asset before valuation allowance		10,579			7,597
Valuation allowance		(9,341	)		(6,574	)
Current deferred tax asset	$	1,238		$	1,023

Foreign	$	(355	)	$	(300	)
Current deferred tax liability	$	(355	)	$	(300	)

Non-Current Deferred Tax Items:
Postretirement and postemployment employee benefits	$	999		$	1,243
Net operating loss carryforwards		69,890			77,530
Capital loss carryforward		2,148			-
Additional minimum pension liability		42,903			39,394
Impairment of long-lived assets		3,092			4,029
California tax credits		344			411
Foreign tax credits		443			443
Minimum tax credit carryforwards		2,163			1,950
Miscellaneous other		327			161
Non current deferred tax asset before valuation allowance		122,309			125,161
Valuation allowance		(107,348	)		(106,719	)
Non current deferred tax asset		14,961			18,442

Property plant and equipment		(10,318	)		(12,177	)
Intangible assets		(6,203	)		(7,908	)
Undistributed foreign earnings		(1,272	)		(1,489	)
Other-net		(1,156	)		(1,126	)
Non current deferred tax liability		(18,949	)		(22,700	)
Net non current deferred tax liability	$	(3,988	)	$	(4,258	)

GAAP requires that a net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. Due to the Company’s recurring tax losses and only recent history of generating limited amounts of taxable income, a valuation allowance of $116.7 million has been established. Included in deferred tax assets at December 31, 2010 are U.S. federal NOLs of $187.0 million ($65.4 million tax-effected), as well as certain foreign and state NOLs. The U.S. federal NOLs expire between 2017 and 2029. Management performs a periodic evaluation of deferred tax assets and will adjust the valuation allowance as circumstances warrant. Also, included in deferred income tax assets are tax credit carryforwards of $3.0 million. The net current deferred tax asset is expected to be realizable from the reversal of offsetting temporary differences.

Net income taxes payable totaled $3.0 million and $1.4 million as of December 31, 2010 and 2009, respectively.

Upon its emergence from bankruptcy on July 29, 2005, the Company experienced an ownership change as defined by Section 382 of the Internal Revenue Code, which imposes annual limitations on the utilization of net operating carryforwards post-ownership change. The Company believes it qualifies for the bankruptcy exception to the general Section 382 limitations. Under this exception, the annual limitation imposed by Section 382 resulting from an ownership change will not apply; instead the NOLs must be reduced by certain interest expense paid to creditors who became stockholders as a result of the bankruptcy reorganization. Thus, the Company’s U.S. federal NOLs of $187.0 million as of December 31, 2010 include a reduction of $31.0 million ($10.8 million tax-effect).

As of December 31, 2010, the Company has a deferred income tax liability relating to $3.5 million of undistributed earnings of foreign subsidiaries. In addition, there were approximately $10.4 million of undistributed earnings of foreign subsidiaries that are deemed to be permanently reinvested, and thus, no deferred income taxes have been provided on these earnings.

Total federal, state and foreign income taxes paid in 2010 and 2009 were $2.7 million and $2.5 million, respectively.

The provision (benefit) for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income (loss) as follows:

		Years Ended December 31,
		2010			2009
(in thousands)
Income (loss) from continuing operations before income tax		$	7,774		$	(16,721	)
Tax provision (benefit) at statutory rate		$	2,664		$	(5,852	)
Increase (decrease) in tax due to:
	Foreign dividend income		381			454
	Incentive stock options granted		2			74
	State income tax, net of federal effect		1,185			192
	Increase (decrease) in valuation allowance		(234	)		4,410
	Increase in liability for uncertain tax positions		233			409
	Change in estimated deferred state tax rate		-			(455	)
	Expiration of net operating loss carryforward		-			1,110
	Net effect of foreign tax rate and tax holidays		(794	)		(2,591	)
	Other, net		(161	)		1,752
Tax provision (benefit)		$	3,276		$	(497	)

GAAP provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not of being sustained on audit, based on the technical merits of the position. At December 31, 2010 and 2009, the Company had $2.3 million and $2.1 million of unrecognized tax benefits, respectively, all of which would affect the Company’s effective tax rate if recognized. The change in the amount of unrecognized tax benefits in 2010 and 2009 was as follows:

	Years Ended December 31,
(in thousands)	2010			2009

Beginning balance	$	2,111		$	2,127
Additions for tax positions related to current year		233			263
Additions due to interest accrued		101			91
Tax positions of prior years:
Increase in liabilities, net		160			539
Payments		(72	)		(425	)
Due to lapsed statutes of limitations		(267	)		(484	)
Ending balance	$	2,266		$	2,111

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of both December 31, 2010 and 2009, approximately $0.3 million of interest related to uncertain tax positions was accrued. No penalties were accrued. It is reasonably possible that the total amount of unrecognized tax benefits will decrease by as much as $0.4 million during the next twelve months as a result of the lapse of the applicable statutes of limitations in certain taxing jurisdictions. For federal income tax purposes, the statute of limitations for audit by the IRS is open for years 2007 through 2010. In addition, NOLs generated in prior years are subject to examination and potential adjustment by the IRS upon their utilization in future years’ tax returns.

Note 9 – Inventories

	December 31,			December 31,
	2010			2009
	(in thousands)
Finished products	$	18,718		$	18,669
In - process		8,110			7,002
Raw materials		16,389			14,486
Fine and fabricated precious metal in various stages of completion		12,151			6,482
		55,368			46,639
LIFO reserve		(6,693	)		(1,632	)
	$	48,675		$	45,007

Fine and Fabricated Precious Metal Inventory

In order to produce certain of its products, H&H purchases, maintains and utilizes precious metal inventory. H&H records its precious metal inventory at LIFO cost, subject to lower of cost or market with any adjustments recorded through cost of goods sold. The market value of the precious metal inventory exceeded LIFO cost by $6.7 million and $1.6 million as of December 31, 2010 and December 31, 2009, respectively. The Company recorded a favorable non-cash LIFO liquidation gain of $0.2 million in the twelve months ended December 31, 2010 compared to a gain of $0.6 during the same period of 2009.

Certain customers and suppliers of H&H choose to do business on a “toll” basis, and furnish precious metal to H&H for return in fabricated form (“customer metal”) or for purchase from or return to the supplier. When the customer metal is returned in fabricated form, the customer is charged a fabrication charge. The value of this customer metal is not included in the Company’s balance sheet. As of December 31, 2010, H&H’s customer metal consisted of 166,637 ounces of silver, 557 ounces of gold, and 1,396 ounces of palladium.

	December 31,		December 31,
Supplemental inventory information:	2010		2009
(in thousands)
Precious metals stated at LIFO cost	$	5,458	$	4,850

Market value per ounce:
Silver	$	30.92	$	16.83
Gold	$	1,421.07	$	1,095.78
Palladium	$	797.00	$	402.00

Note 10 – Derivative Instruments

H&H enters into commodity futures and forwards contracts on precious metal that are subject to market fluctuations in order to economically hedge its precious metal inventory against price fluctuations. As of December 31, 2010 the Company had entered into forward and future contracts for gold with a total value of $1.1 million and for silver with a total value of $7.4 million.

The Company also economically hedges its exposure on variable interest rate debt denominated in foreign currencies at certain of its foreign subsidiaries.

As these derivatives are not designated as accounting hedges under ASC 815, “Accounting for Derivative Instruments and Hedging Activities” (“ASC 815”), they are accounted for as derivatives with no hedge designation. The derivatives are marked to market and both realized and unrealized gains and losses are recorded in current period earnings in the Company's consolidated statement of operations. Such gains and losses are recorded on a separate line of the statement of operations in the case of the precious metal contracts and in interest expense with respect to the interest rate derivative. The Company’s hedging strategy is designed to protect it against normal volatility. However, abnormal price increases in these commodity or foreign exchange markets could negatively impact H&H’s costs. The twelve month periods ended December 2010 and December 2009 include a net loss of $5.6 million and $0.8 million, respectively, on precious metal contracts.

As of December 31, 2010, the Company had the following outstanding forward or future contracts with settlement dates ranging from February 2011 to March 2011.

	Commodity	Amount
	Silver	240,000 ounces
	Gold	800 ounces

In addition, as described in Note 13-“Debt”, the Company’s Subordinated Notes have embedded call premiums and warrants associated with them. The Company has treated the fair value of these features together as both a discount and a derivative liability at inception of the loan agreement, valued at $4.7 million. The discount is being amortized over the life of the notes as an adjustment to interest expense, and the derivative liability is marked to market at each balance sheet date. As of December 31, 2010, a mark to market adjustment of $0.4 million was charged to unrealized losses on derivatives, increasing the fair value of the derivative liability to $5.1 million.

GAAP requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet.

Effect of Derivative Instruments on the Consolidated Statements of Operations
(in thousands)		Years Ended December 31,
		2010			2009
Derivative	Statement of Operations Line	Gain (Loss)

Commodity contracts	Realized and Unrealized Loss on Derivatives	$	(5,571	)	$	(777	)
Derivative features of Subordinated Notes	Realized and Unrealized Loss on Derivatives	$	(412	)	$	-
Interest rate swap	Interest expense		-			(317	)
Total derivatives not designated as hedging instruments		$	(5,983	)	$	(1,094	)

Total derivatives		$	(5,983	)	$	(1,094	)

Fair Value of Derivative Instruments in the Consolidated Balance Sheets
(in thousands)
		December 31,			December 31,
Derivative	Balance Sheet Location	2010			2009

Commodity contracts	Other current liabilities	$	(40	)	$	(54	)
Derivative features of Subordinated Notes	Long-term debt & Long term debt-related party	$	(5,096	)		-
Total derivatives not designated as hedging instruments			(5,136	)		(54	)

Total derivatives		$	(5,136	)	$	(54	)

Note 11 – Property, Plant & Equipment

	December 31,
	2010		2009
	(in thousands)
Land	$	8,053	$	8,949
Buildings, machinery and equipment		159,738		156,608
Construction in progress		3,419		1,721
		171,210		167,278
Accumulated depreciation and amortization		93,068		84,168
	$	78,142	$	83,110

Depreciation expense for the years 2010 and 2009 was $13.5 million and $14.1 million, respectively.

Note 12 – Goodwill and Other Intangibles

The changes in the carrying amount of goodwill by segment for the years ended December 31, 2009 and 2010 were as follows:

(in thousands)
Segment	Balance at January 1, 2009		Acquisitions/Adjustments			Impairment			Balance at December 31, 2009		Accumulated Impairment Losses

Precious Metal	$	1,506	$	15		$	-		$	1,521	$	-
Tubing		1,895		-			-			1,895		-
Engineered Materials		51,232		-			-			51,232		-
Arlon Electronic Materials		10,438		-			(1,140	)		9,298		(1,140	)
Total	$	65,071	$	15		$	(1,140	)	$	63,946	$	(1,140	)

Segment	Balance at January 1, 2010		Acquisitions/Adjustments			Impairment			Balance at December 31, 2010		Accumulated Impairment Losses
Precious Metal	$	1,521	$	(29	)	$	-		$	1,492	$	-
Tubing		1,895		-			-			1,895		-
Engineered Materials		51,232		-			-			51,232		-
Arlon Electronic Materials		9,298		-			-			9,298		(1,140	)
Total	$	63,946	$	(29	)	$	-		$	63,917	$	(1,140	)

The Company conducted the required annual goodwill impairment reviews in 2010 and 2009, and computed updated valuations for each reporting unit using a discounted cash flow approach, as described in Note 2 “Summary of Accounting Policies”. As of June 30, 2009, the Company had conducted an interim goodwill impairment review of its Silicone Technology Division (“STD”) reporting unit principally because of continuing adverse business conditions for STD, which resulted in a decline in the estimated future cash flows of STD. Based on the results of these reviews, the Company recorded a goodwill impairment charge of $1.1, million in the third quarter of 2009. The Silicone Technology Division is part of the Arlon EM segment.

Other intangible assets as of December 31, 2010 and 2009 consisted of:

(in thousands)
	December 31, 2010							December 31, 2009							Weighted Average Amortization Life
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net		Weighted Average Amortization Life
															(in years)
Products and customer relationships	$	34,035	$	(8,204	)	$	25,831	$	34,035	$	(6,032	)	$	28,003		16.3
Trademark/Brand name		3,928		(1,043	)		2,885		3,928		(755	)		3,173		16.5
Patents and patent applications		3,153		(893	)		2,260		2,387		(674	)		1,713		14.9
Non-compete agreements		756		(656	)		100		756		(361	)		395		4.4
Other		1,409		(947	)		462		1,542		(895	)		647		8.0
Total	$	43,281	$	(11,743	)	$	31,538	$	42,648	$	(8,717	)	$	33,931

Amortization expense in both 2010 and 2009 totaled $3.0 million. The estimated amortization expense for each of the five succeeding years and thereafter is as follows:

	Products and				Patents and
	Customer				Patent		Non-Compete
	Relationships		Trademarks		Applications		Agreements		Other		Total
(in thousands)
2011	$	2,168	$	288	$	205	$	100	$	187	$	2,948
2012		2,168		288		216		-		73		2,745
2013		2,168		288		205		-		47		2,708
2014		2,168		288		205		-		48		2,709
2015		2,168		288		222		-		48		2,726
Thereafter		14,991		1,445		1,207		-		59		17,702
	$	25,831	$	2,885	$	2,260	$	100	$	462	$	31,538

As of December 31, 2010, approximately $2.8 million of goodwill related to prior acquisitions made by Bairnco is expected to be amortizable for income tax purposes.

Note 13 – Debt

Debt at December 31, 2010 and 2009 was as follows:

	Years Ended December 31,
(in thousands)	2010		2009

Short term debt
First Lien Revolver	$	42,635	$	18,654
Foreign		255		295
Total short-term debt		42,890		18,949

Long-term debt - non related party:
First Lien Term Loans		20,300		13,875
Second Lien Term Loans		25,000		74,965
10% Subordinated Notes, net of unamortized discount		40,519		-
Other H&H debt-domestic		7,286		7,436
Foreign loan facilities		2,750		4,750
Total debt to non related party		95,855		101,026
Less portion due within one year		4,452		5,944
Long-term debt to non related party		91,403		95,082

Long-term debt - related party:
10% Subordinated Notes, net of unamortized discount		32,547		-
H&H Term B Loan		-		44,098
Bairnco Subordinated Debt Credit Agreement		-		10,000
Long-term debt - related party		32,547		54,098

Total long-term debt		123,950		149,180

Paid in kind interest transferred to 10% subordinated notes in 2010		-		13,397

Total long-term debt including paid in kind ("PIK") interest		123,950		162,577

Total debt and PIK interest	$	171,292	$	187,470

Long term debt as of December 31, 2010 matures in each of the next five years as follows:

Long-term Debt Maturity
(in thousands)	Total		2011		2012		2013		2014		2015		Thereafter
Long-term debt - non-related parties	$	95,855	$	4,452	$	41,352	$	3,002	$	252	$	252	$	46,545
Long term debt - related party		32,547		-		-		-		-		-		32,547
	$	128,402	$	4,452	$	41,352	$	3,002	$	252	$	252	$	79,092

Credit Facilities

On October 15, 2010, HNH refinanced substantially all of its indebtedness principally with its existing lenders or their affiliates. The refinancing was effected through a newly formed, wholly-owned subsidiary of the Company, H&H Group, which is the direct parent of H&H and Bairnco.

Wells Fargo Facility

On October 15, 2010, H&H Group, together with certain of its subsidiaries, entered into an Amended and Restated Loan and Security Agreement (the “Wells Fargo Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”), as administrative agent for the lenders thereunder. The Wells Fargo Facility provides for a $21 million senior term loan to H&H Group and certain of its Subsidiaries (the “First Lien Term Loan”) and established a revolving credit facility with borrowing availability of up to a maximum aggregate principal amount equal to $110 million less the outstanding aggregate principal amount of the First Lien Term Loan (such amount, initially $89 million), dependent on the levels of and collateralized by eligible accounts receivable and inventory (the “First Lien Revolver”).

The First Lien Revolver requires a lockbox arrangement, which provides for all receipts to be swept daily to reduce borrowings outstanding under the credit facility. This arrangement, combined with the existence of a subjective acceleration clause in the revolving credit facility, necessitates the revolving credit facility be classified as a current liability on the balance sheet. The acceleration clause allows the Company’s lenders to forgo additional advances should they determine there has been a material adverse change in the Company’s financial position or prospects reasonably likely to result in a material adverse effect on its business, condition, operations, performance, or properties. Management believes that no such material adverse change has occurred. In addition, at December 31, 2010, the Company’s lenders had not informed the Company that any such event had occurred. The revolving credit facility expires on June 30, 2012. As of December 31, 2010, the revolver balance was $42.6 million.

The amounts outstanding under the Wells Fargo Facility bear interest at LIBOR plus applicable margins of between 2.50% and 3.50% (3.25% for the term loan and 2.75% for the revolver at December 31, 2010), or at the U.S. base rate (the prime rate) plus 0.50% to 1.50% (1.25% for the term loan and 0.75% for the revolver at December 31, 2010). The applicable margins for the First Lien Revolver and the First Lien Term Loan are dependent on H&H Group’s Quarterly Average Excess Availability for the prior quarter, as that term is defined in the agreement. As of December 31, 2010, the First Lien Term Loan bore interest at a weighted average interest rate of 3.56% and the First Lien Revolver bore interest at a weighted average interest rate of 3.25%. Principal payments of the First Lien Term Loan are due in equal monthly installments of approximately $0.35 million, commencing November 1, 2010. All amounts outstanding under the Wells Fargo Facility are due and payable in full on June 30, 2012.

Obligations under the Wells Fargo Facility are collateralized of first priority security interests in and liens upon all present and future assets of H&H Group and substantially all of its subsidiaries.

New Ableco Facility

On October 15, 2010, H&H Group, together with certain its subsidiaries, also entered into a Loan and Security Agreement with Ableco, L.L.C. (“Ableco”), as administrative agent for the lenders thereunder (the “New Ableco Facility”). The New Ableco Facility provides for a $25 million subordinated term loan to H&H Group and certain of its subsidiaries (the “Second Lien Term Loan”). The Second Lien Term Loan bears interest on the principal amount thereof at the U.S. base rate (the prime rate) plus 7.50% or LIBOR (or, if greater, 1.75%) plus 9.00%. As of December 31, 2010, the Second Lien Term Loan bore interest at a rate of 10.75% per annum. All amounts outstanding under the New Ableco Facility are due and payable in full on June 30, 2012.

Obligations under the New Ableco Facility are collateralized by second priority security interests in and liens upon all present and future assets of H&H Group and substantially all of its subsidiaries.

Covenants

The Wells Fargo Facility and the New Ableco Facility each has a cross-default provision. If H&H Group is deemed in default of one agreement, then it is in default of the other.

The Wells Fargo Facility and the New Ableco Facility contain covenants requiring minimum Trailing Twelve Months (“TTM”) Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $40 million and $45 million, respectively. H&H Group is required to maintain TTM EBITDA of $45 million until such time as the New Ableco Facility is paid in full. The covenant will then adjust to $40 million.

The Wells Fargo Facility and the New Ableco Facility each contain a minimum TTM Fixed Charge Coverage Ratio of 1:1 which requires that Fixed Charges, as defined in the agreements, are at least equal to TTM EBITDA at the measurement date.

The New Ableco Facility contains a maximum TTM Senior Leverage Ratio covenant which represents the ratio of senior debt to TTM EBITDA. The ratio declines by 5/100ths each quarter: December 2010, 2.95; March 2011, 2.90; June 2011, 2.85; September 2011, 2.80; December 2011, 2.75 and March 2012, 2.70. H&H Group is required to maintain a maximum TTM Senior Leverage Ratio covenant following the New Ableco Facility schedule until such time as the New Ableco Facility is paid in full.

The Wells Fargo Facility and the New Ableco Facility each contain a maximum amount for capital expenditures over the preceding four quarter period. The December 2010 covenant is $21 million; increasing to $22 million in March 2011 and increasing to $23 million in June 2011. The covenant remains $23 million thereafter.

The Company is in compliance with all of the debt covenants at December 31, 2010.

Subordinated Notes and Warrants

In addition, on October 15, 2010, H&H Group refinanced the prior indebtedness of H&H and Bairnco to the SPII Liquidating Series Trusts (Series A and Series E) (the “Steel Trusts”), each constituting a separate series of the SPII Liquidating Trust as successor-in-interest to SPII. In accordance with the terms of an Exchange Agreement entered into on October 15, 2010 by and among H&H Group, certain of its subsidiaries and the Steel Trusts (the “Exchange Agreement”), H&H Group made an approximately $6 million cash payment in partial satisfaction of prior indebtedness to the Steel Trusts and exchanged the remainder of such prior obligations for units consisting of (a) $72,925,500 aggregate principal amount of 10% subordinated secured notes due 2017 (the “Subordinated Notes”) issued by H&H Group pursuant to an Indenture, dated as of October 15, 2010 (the “Indenture”), by and among H&H Group, the Guarantors party thereto and Wells Fargo, as trustee, and (b) warrants, exercisable beginning October 14, 2013, to purchase an aggregate of 1,500,806 shares of the Company’s common stock, with an exercise price of $11.00 per share (the “Warrants”). The Subordinated Notes and Warrants may not be transferred separately until October 14, 2013.

All obligations outstanding under the Subordinated Notes bear interest at a rate of 10% per annum, 6% of which is payable in cash and 4% of which is payable in-kind. The Subordinated Notes, together with any accrued and unpaid interest thereon, mature on October 15, 2017. All amounts owed under the Subordinated Notes are guaranteed by substantially all of H&H Group’s subsidiaries and are secured by substantially all of their assets. The Subordinated Notes are contractually subordinated in right of payment to the Wells Fargo Facility and the New Ableco Facility. The Subordinated Notes are redeemable until October 14, 2013, at H&H Group’s option, upon payment of 100% of the principal amount of the Notes, plus all accrued and unpaid interest thereon and the applicable premium set forth in the Indenture (the “Applicable Redemption Price”). If H&H Group or its subsidiary guarantors undergo certain types of fundamental changes prior to the maturity date of the Subordinated Notes, holders thereof will, subject to certain exceptions, have the right, at their option, to require H&H Group to purchase for cash any or all of their Subordinated Notes at the Applicable Redemption Price.

The Subordinated Notes have embedded call premiums and warrants associated with them, as described above. The Company has treated the fair value of these features together as both a discount and a derivative liability at inception of the loan agreement, valued at $4.7 million. The discount is being amortized over the life of the notes as an adjustment to interest expense, and the derivative liability is marked to market at each balance sheet date. As of December 31, 2010, a mark to market adjustment of $0.4 million was charged to unrealized losses on derivatives, increasing the fair value of the derivative liability to $5.1 million.

The Subordinated Notes contain customary affirmative and negative covenants, certain of which only apply the event that the Wells Fargo Facility and the New Ableco Facility and any refinancing indebtednesses with respect thereto are repaid in full, and events of default. The Company is in compliance with all of the debt covenants at December 31, 2010.

In connection with the issuance of the Subordinated Notes and Warrants, the Company and H&H Group also entered into a Registration Rights Agreement dated as of October 15, 2010 (the “Registration Rights Agreement”) with the Steel Trusts. Pursuant to the Registration Rights Agreement, the Company agreed to file with the Securities and Exchange Commission (the “SEC”) and use its reasonable best efforts to cause to become effective a registration statement under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the resale of the Warrants and the shares of common stock of the Company issuable upon exercise of the Warrants. H&H Group also agreed, upon receipt of a request by holders of a majority in aggregate principal amount of the Subordinated Notes, to file with the SEC and use its reasonable best efforts to cause to become effective a registration statement under the Securities Act with respect to the resale of the Subordinated Notes.

A loss on debt extinguishment of $1.2 million was recognized in the fourth quarter of 2010 in connection with the October 15, 2010 refinancing of the Company’s credit agreements. The loss on debt extinguishment consists of financing fees paid by the Company in connection with amendments to the extinguished debt.

A subsidiary of H&H has a mortgage agreement on its facility which is collateralized by the real property. The mortgage balance was $7.3 million as of December 31, 2010. The mortgage bore interest at LIBOR plus a margin of 2.7%, or 2.97% at December 31, 2010. The maturity date is October 8, 2015.

The foreign loans reflect borrowings by two of the Company’s Chinese subsidiaries totaling $3.0 million as of December 31, 2010. Such borrowings are collateralized by US dollar denominated letters of credit totaling $2.1 million, and $1.9 million by a mortgage on one facility. Interest rates on amounts borrowed under the foreign loan facilities averaged 4.12% at December 31, 2010.

The Company has approximately $5.9 million of irrevocable standby letters of credit outstanding as of December 31, 2010 which are not reflected in the accompanying consolidated financial statements. $2.9 million of the letters of credit guarantee various insurance activities, $2.1 million serve as collateral for borrowings of two Chinese subsidiaries, and the remaining $0.9 million are for environmental and other matters. These letters of credit mature at various dates and some have automatic renewal provisions subject to prior notice of cancellation.

In 2009 and in 2010 prior to the refinancing of the Company’s debt, H&H and Bairnco had the following credit arrangements:

Handy & Harman

H&H’s financing agreements included its Loan and Security Agreement with Wachovia Bank, National Association (“Wachovia”), as agent (the “Wachovia Facilities”), which provided for revolving credit and term loan facilities, and its Loan and Security Agreement with SPII Liquidating Series Trust (Series E), (the “SP II Series E Trust”), as successor-in-interest to SP II (the “Term B Loan”).

The Wachovia Facilities provided for maximum borrowings of $115 million, consisting of a revolving credit facility of up to $75 million of borrowings dependent on the levels of and collateralized by eligible accounts receivable and inventory. In addition, the Wachovia Facilities also included term loans funded by Ableco. The term loans were collateralized by eligible machinery and equipment and real estate. The revolving credit facility and the term and supplemental loans payable under the Wachovia Facilities bore interest at LIBOR, which shall at no time be less than 1.00%, plus applicable margins of between 2.75% and 3.75%, or the U.S. Base rate (Prime rate, which shall at no time be less than 3.00%) plus 1.00% to 2.00%. The applicable margin for the revolving credit facility and the term loans payable under the Wachovia Facilities was dependent on H&H’s Quarterly Average Excess Availability for the prior quarter, as that term was defined in the agreement. The term loans payable to Ableco bore interest at LIBOR, which shall at no time be less than 3.25%, plus an applicable margin of 11.75%, or the U.S. Base rate (Prime rate, which shall at no time be less than 5.00%) plus 10.00%. The Wachovia Facilities were scheduled to mature on June 30, 2011.

The Term B Loan also was scheduled to mature on June 30, 2011. H&H was indebted to SP II under the Term B Loan until July 15, 2009, when SP II assigned its interest in the Term B Loan to SP II Series E Trust. The Term B Loan provided for annual payments based on 40% of excess cash flow as defined in the agreement (no principal payments were currently payable). Interest accrued monthly at the Prime Rate plus 14%, and at no time shall the Prime Rate (as that term is defined in the agreement) be below 4.0%. The Term B Loan had a second priority security interest in and lien on all assets of H&H, subject to the prior lien of the Wachovia Facilities and H&H’s $17 million guaranty and security interest for the benefit of Ableco as agent of the Bairnco indebtedness.

Bairnco

Bairnco’s financing agreements included its Credit Agreement with Wells Fargo Foothill, Inc. (“Wells Fargo”), as arranger and administrative agent thereunder ( the “Wells Fargo Facility”), which provided for revolving credit and term loan facilities, its Loan and Security Agreement with Ableco (the “Ableco Facility”) and its Loan and Security Agreement with SPII Liquidating Series Trust (Series A), (the “SP II Series A Trust”), as successor-in-interest to SP II (the “Subordinated Debt Credit Agreement”), both of which were also term loan facilities.

The Wells Fargo Facility provided for a revolving credit facility in an aggregate principal amount not to exceed $30.0 million and a term loan facility of $28.0 million. Borrowings under the Wells Fargo Facility bore interest, (A) in the case of base rate advances at 0.75% above the Wells Fargo Prime rate and base rate term loans at 1.25% above the Wells Fargo Prime rate, and (B) in the case of LIBOR rate loans, at rates of 3.00% for advances or 3.50% for term loans, as applicable, above the LIBOR rate. Obligations under the Wells Fargo Facility were guaranteed by certain of Bairnco’s subsidiaries, and secured by a first priority lien on all assets of Bairnco and such subsidiaries. The scheduled maturity date of the indebtedness under the Wells Fargo Facility was July 17, 2012.

The Ableco Facility provided for a term loan facility of $48.0 million. Borrowings under the Ableco Facility bore interest, in the case of base rate loans, at 6.50% above the rate of interest publicly announced by JPMorgan Chase Bank in New York, New York as its reference rate, base rate or prime rate, and, in the case of LIBOR rate loans, at 9.00 % above the LIBOR rate. Obligations under the Ableco Facility were guaranteed by Bairnco and certain of its subsidiaries, and secured by a second priority lien on all of their assets. The Ableco Facility was also collateralized by a limited guaranty by H&H of up to $17 million, secured by a second lien on all of the assets of H&H pursuant to the terms and conditions of the H&H Security Agreement and the H&H Guaranty. The scheduled maturity date of the Ableco Facility was July 17, 2012.

The Subordinated Debt Credit Agreement provided for a term loan facility. Bairnco was indebted to SP II under the Subordinated Debt Credit Agreement until July 15, 2009, when SP II assigned its interest in the Subordinated Debt Credit Agreement to SP II Series A Trust. All borrowings under the Subordinated Debt Credit Agreement bore interest at 9.50% above the rate of interest publicly announced by JPMorgan Chase Bank in New York, New York as its reference rate, base rate or prime rate. Principal, interest and all fees payable under the Subordinated Debt Credit Agreement were due and payable on the scheduled maturity date, January 17, 2013. Obligations under the Subordinated Debt Credit Agreement were guaranteed by Bairnco and certain of its subsidiaries, and collateralized by a subordinated priority lien on their assets.

Interest

Cash interest paid in 2010 was $10.1 million. Cash interest paid in 2009 was $12.6. The Company has not capitalized any interest costs in 2010 or 2009.

As of December 31, 2010, the revolving and term loans under the Wells Fargo Facility bore interest at rates ranging from 3.04% to 4.50%; and the New Ableco Facility bore interest at 10.75%. The Subordinated Notes bore interest at 10.00% as of December 31, 2010. Weighted average interest rates for the years ended December 31, 2010 and 2009 were 11.58% and 10.85%, respectively.

Note 14 – Earnings per Share

The computation of basic earnings or loss per common share is based upon the weighted average number of shares of Common Stock outstanding. Diluted earnings per share gives effect to dilutive potential common shares outstanding during the period. The Company has potentially dilutive common share equivalents including stock options and other stock-based incentive compensation arrangements (See Note 16-“Stock-Based Compensation”).

No common share equivalents were dilutive in 2010 since the exercise price of the Company’s stock options and other stock-based incentive compensation arrangements was in excess of the average market price of the Company’s common stock. No common share equivalents were dilutive in 2009 because the Company reported a net loss and therefore, any outstanding stock options would have had an anti-dilutive effect. As of December 31, 2010, stock options for an aggregate of 57,500 shares of common stock are excluded from the calculation of net income per share.

A reconciliation of the income and shares used in the earnings (loss) per share computations follows:

	Years Ended December 31,
	2010		2009
	(in thousands, except per share)
Basic and Diluted calculations:

Income (loss) from continuing operations, net of tax	$	4,501	$	(16,224	)
Weighted average number of common shares outstanding		12,179		12,179

Income (loss) from continuing operations, net of tax, per common share	$	0.37	$	(1.33	)

Discontinued operations	$	589	$	(5,017	)
Weighted average number of comon shares outstanding		12,179		12,179

Discontinued operations per common share	$	0.05	$	(0.41	)

Net income (loss)	$	5,090	$	(21,241	)
Weighted average number of common shares outstanding		12,179		12,179

Net income (loss) per common share	$	0.42	$	(1.74	)

Note 15 – Stockholders’ (Deficit) Equity

Authorized and Outstanding Shares

On January 31, 2008, HNH’s stockholders approved a proposal to set the Company’s authorized capital stock at a total of 100,000,000 shares, consisting of 95,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. On September 16, 2008, HNH’s stockholders approved a proposal to further increase the Company’s authorized capital stock to a total of 185,000,000 shares, consisting of 180,000,000 shares of common stock and 5,000,000 shares of Preferred Stock.

Of the authorized shares, no shares of Preferred Stock have been issued, and 12,178,565 shares of Common Stock were issued and outstanding as of December 31, 2010 and 2009, respectively.

Although the Board of Directors of HNH is expressly authorized to fix the designations, preferences and rights, limitations or restrictions of the Preferred Stock by adoption of a Preferred Stock Designation resolution, the Board of Directors has not yet done so. The Common Stock of HNH has voting power, is entitled to receive dividends when and if declared by the Board of Directors and subject to any preferential dividend rights of any then-outstanding Preferred Stock, and in liquidation, after distribution of the preferential amount, if any, due to the Preferred Stockholders, are entitled to receive all the remaining assets of the corporation.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) balances, net of tax, as of December 31, 2010 and 2009 were as follows:

	2010			2009
	(in thousands)
Net actuarial losses and prior service costs and credits	$	(139,114	)	$	(122,465	)
Foreign currency translation adjustment		3,249			4,063
	$	(135,865	)	$	(118,402	)

Note 16 – Stock-Based Compensation

The Company measures stock-based compensation cost at the grant date, based on the fair value of the award, and recognizes the expense on a straight-line basis over the employee’s requisite service (vesting) period.

At the Company’s Annual Meeting of Shareholders on December 9, 2010, the Company’s shareholders approved an amendment to the Company’s 2007 Incentive Stock Plan (the “2007 Plan”) to increase the number of shares of common stock reserved from 80,000 shares to 1,200,000 shares of common stock under the 2007 Plan. The 2007 Plan permits options to be granted up to a maximum contractual term of 10 years. The Company’s policy is to use shares of unissued common stock upon exercise of stock options.

The Company estimated the fair value of the stock options granted in accordance with GAAP using a Black-Scholes option-pricing model. The expected average risk-free rate is based on U.S. treasury yield curve. The expected average life represents the period of time that options granted are expected to be outstanding. Expected volatility is based on historical volatilities of HNH’s post-bankruptcy common stock. The expected dividend yield is based on historical information and management’s plan.

The Company has recorded respectively $-0- and $0.3 million of non-cash stock-based compensation expense related to its stock-based incentive arrangements in 2010 and 2009, respectively.

Activity related to the Company’s 2007 Plan was as follows:

Options	Shares (000's)			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (000's)

Outstanding options at December 31, 2009		60		$	90.00		6.30		-
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited or expired		(2	)		90.00		-		-
Outstanding at December 31, 2010		58		$	90.00		5.34		-

Exercisable at December 31, 2010		58		$	90.00		5.34		-

Nonvested Options	Shares (000's)

Nonvested options at December 31, 2009		6
Granted		-
Vested		(4	)
Forfeited		(2	)
Nonvested options at December 31, 2010		-

As of December 31, 2010 there was no unrecognized compensation cost related to non-vested share based compensation arrangements granted under the 2007 Plan. The total fair value of options vested in 2010 and 2009 was $-0- and $0.5 million, respectively.

On July 6, 2007, the Compensation Committee of the Board of Directors of the Company adopted incentive arrangements for two members of the Board of Directors who are related parties to the Company. These arrangements provide, among other things, for each to receive a bonus equal to 10,000 multiplied by the difference of the fair market value of the Company’s stock price and $90.00 per share. The bonus is payable immediately upon the sending of a notice by either board member, respectively. The incentive arrangements terminate July 6, 2015, to the extent not previously received. Under GAAP, the Company is required to adjust its obligation for the fair value of such incentive arrangements from the date of actual grant to the latest balance sheet date and to record such incentive arrangements as liabilities in the consolidated balance sheet. The Company has recorded $.2 million of non-cash expense in 2010 and $.1 million of non-cash income in 2009 related to these incentive arrangements.

Note 17 – Commitments and Contingencies

Operating Lease Commitments:

The Company leases certain facilities under non-cancelable operating lease arrangements. Rent expense for the Company in 2010 and 2009 was $7.9 million and $8.0 million, respectively. Future minimum operating lease and rental commitments under non-cancelable operating leases are as follows (in thousands):

Year	Amount
2011	$	6,144
2012		4,838
2013		2,098
2014		1,388
2015		1,187
2016 and thereafter		5,437
	$	21,092

On June 30, 2008, Arlon Inc., a wholly owned subsidiary of Bairnco and part of its Arlon Electronic Materials segment, (i) sold land and a building located in Rancho Cucamonga, California for $8.5 million and (ii) leased back such property under a 15 year operating lease with two 5-year renewal options. The annual lease payments are $570,000, and are subject to a maximum increase of 5% per annum. The lease expires in 2023. Such amounts are included in the operating lease commitment table above. Bairnco has agreed to guarantee the payment and performance of Arlon Inc. under the lease. To account for the sale leaseback, the property was removed from the books, but the recognition of a $1.8 million gain on the sale of the property was deferred and will be recognized ratably over the 15 year lease term as a reduction of lease expense. Approximately $1.5 million and $1.6 million of such deferred gain was included in Other Long-term Liabilities on the consolidated balance sheets as of December 31, 2010 and 2009, respectively.

Legal Matters:

Paul E. Dixon & Dennis C. Kelly v. Handy & Harman

Paul Dixon and Dennis Kelly, two former officers of H&H (the “Claimants”) filed a Statement of Claim with the American Arbitration Association (the “Arbitration”) on or about January 3, 2006. The Claimants were employees of H&H until September 2005 when their employment was terminated by H&H. Their arbitration claims included seeking payments allegedly due under employment contracts and allegedly arising from their terminations, and seeking recovery of benefits under what they allege was the H&H Supplemental Executive Retirement Plan (“H&H SERP”). In the Arbitration, Claimants sought an award in excess of $4.0 million each, among other things. On March 10, 2006, all of the parties filed a stipulation with the court, discontinuing the court proceeding and agreeing therein, among other things, that all claims asserted by the Claimants in the Arbitration (which was also discontinued at that time) would be asserted in Supreme Court, Westchester County.

In January 2008, Mr. Kelly filed a lawsuit against WHX, H&H and various benefit plans (the “Defendants”) in the United States District Court for the Southern District of New York. Mr. Dixon did not join in this lawsuit, and his counsel has not indicated whether Mr. Dixon intends to file his own lawsuit. Mr. Kelly’s claims in this lawsuit are essentially the same claims that he asserted in the above-described arbitration and request for benefits. Mr. Kelly’s complaint sought approximately $4.0 million in money damages plus unspecified punitive damages. In April 2009, the Defendants filed a motion for summary judgment seeking dismissal of the case. In an Opinion filed in February 2010, the district court granted Defendants’ motion for summary judgment, dismissed with prejudice Mr. Kelly’s claims under the H&H SERP and dismissed without prejudice Mr. Kelly’s state law breach of contract claim. The district court also denied Mr. Kelly’s cross motion for summary judgment. Mr. Kelly subsequently appealed to the United States Circuit Court of Appeals for the Second Circuit (the “Second Circuit”) the dismissal of his claims related to the H&H SERP. By Summary Order & Judgment filed on January 19. 2011, the Second Circuit affirmed the decision dismissing Mr. Kelly’s claims related to the H&H SERP. Mr. Kelly retains the right to file a claim in state court on his breach of contract claim. There can be no assurance that the Defendants will not have any liability on account of Mr. Kelly’s breach of contract claim. Such liability, if any, cannot be reasonably estimated at this time, and accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of the Company.

Arista Development LLC V. Handy & Harman Electronic Materials Corporation (“HHEM”)

In 2004, HHEM, a subsidiary of H&H, entered into an agreement to sell a commercial/industrial property in Massachusetts (the “MA Property”). Disputes between the parties resulted in the purchaser (plaintiff) initiating litigation in Bristol Superior Court in Massachusetts. The plaintiff alleges that HHEM is liable for breach of contract relating to HHEM’s alleged breach of the agreement, unfair and deceptive acts and practices, and certain consequential and treble damages as a result of HHEM’s termination of the agreement in 2005, although HHEM subsequently revoked its notice of termination. HHEM has denied liability and has been vigorously defending the case. The court entered a preliminary injunction enjoining HHEM from conveying the property to anyone other than the plaintiff during the pendency of the case. Discovery on liability and damages has been stayed while the parties are actively engaged in settlement discussions. Since discovery is not completed, it cannot be known at this time whether it is foreseeable or probable that plaintiff would prevail in the litigation or whether HHEM would have any liability to the plaintiff. Accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of HHEM.

Electroplating Technologies, Ltd. v. Sumco, Inc.

Electroplating Technologies, Ltd. (“ETL”) filed a lawsuit against Sumco, a subsidiary of H&H, in Lehigh, Pennsylvania County Court of Common Pleas. ETL contended that Sumco misappropriated trade secrets and breached contractual obligations with respect to certain allegedly proprietary and confidential ETL information. ETL sought damages in excess of $4.55 million. In its pretrial filings, ETL also asserted a claim for $9.0 million in punitive damages. In May 2009, after a ten day trial, the jury found that Sumco had not misappropriated ETL’s trade secrets. However, the jury found that Sumco had breached a contractual obligation owed to ETL and as compensation for that breach of contract, awarded ETL the sum of $0.3 million. Following the jury verdict, the court denied ETL’s equitable requests for an injunction and for an accounting. In May 2009, Sumco filed a motion with the court for judgment notwithstanding the verdict to set aside the damage award. Also in May 2009, ETL filed a motion with the court seeking (i) a new trial and (ii) a modified verdict in the amount of $2.3 million. In an order docketed in September 2009, the court denied ETL’s motion for a new trial and to increase the jury’s verdict. The court then granted Sumco’s motion for a judgment notwithstanding the verdict and overturned the jury’s May 2009 award of $0.3 million against Sumco for breach of contract. ETL appealed to the Pennsylvania Superior Court. In an opinion filed in September 2010, the Pennsylvania Superior Court reinstated the jury verdict against Sumco and denied plaintiff’s request for a new trial and additional damages. On October 7, 2010, pursuant to a Settlement Agreement and Release entered into between Sumco and ETL, the parties agreed to forego any further appeal and bring the lawsuit to final resolution, with no admission of liability by either party. The financial terms and conditions of the settlement agreement, did not have a material impact on the Company’s financial position, results of operations and cash flow.

World Properties, Inc. et. al. v. Arlon, Inc.

In December 2008, World Properties, Inc. and Rogers Corporation (collectively, “Rogers”) filed a lawsuit against Arlon, Inc. (“Arlon”), a subsidiary of Bairnco, in the United States District Court for the District of Connecticut. The lawsuit alleged that Rogers is the exclusive licensee under U.S. Patent No. 5,552,210 and that Arlon’s TC600 circuit board infringed that patent. In the complaint, Rogers demanded that Arlon cease the manufacture, sale and distribution of its TC600 circuit board and that the district court award unspecified damages to compensate Rogers for the alleged infringement. In June 2009, plaintiffs filed a motion to amend its complaint in order to assert that a second Arlon product (AD 1000) infringed a second Rogers patent, U.S. Patent No. 5,384,181. Also in June 2009, Arlon filed a motion for summary judgment seeking to dismiss all of plaintiffs’ patent infringement claims based upon the parties’ January 30, 1996 Asset Purchase Agreement (the “APA”). In an order issued in October 2009, the district court granted Arlon’s motion for summary judgment and dismissed all of Rogers’ affirmative patent infringement claims. In granting Arlon’s motion for summary judgment, the district court agreed with Arlon that Rogers’ claims of patent infringement were barred by a covenant not to sue contained in the APA. Left to be resolved following the district court’s opinion were various counterclaims brought by Arlon against Rogers. Pursuant to a Settlement Agreement and Release entered into between Arlon and Rogers on April 30, 2010, the parties agreed to resolve the remaining counterclaims, forego any appeal, and bring the lawsuit to final resolution, with no admission of liability by either party. The financial terms and conditions of the settlement agreement did not have a material impact on the Company’s financial position, results of operations and cash flow.

Severstal Wheeling, Inc. Retirement Committee et. al. v. WPN Corporation et. al.

On November 15, 2010, the Severstal Wheeling, Inc. Retirement Committee (“Severstal”) filed a second amended complaint that added WHX Corporation as a defendant to litigation that Severstal had commenced in February 2010 in the United States District Court for the Southern District of New York. Severstal’s second amended complaint alleges that WHX breached fiduciary duties under ERISA in connection with (i) the transfer in November 2008 of the pension plan assets of Severstal Wheeling, Inc (“SWI”) from the WHX Pension Plan Trust to SWI’s pension trust and (ii) the subsequent management of SWI’s pension plan assets after their transfer. In its second amended complaint, Severstal sought damages in an amount to be proved at trial as well as declaratory relief. The Company believes that Severstal’s allegations are without merit and intends to defend itself vigorously. The Company filed a Motion to Dismiss on January 14, 2011, which was fully submitted to the District Court on February 14, 2011 and is now awaiting resolution by the District Court. The Company’s liability, if any, cannot be reasonably estimated at this time, and accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of the Company.

Environmental Matters

H&H has been working with the Connecticut Department of Environmental Protection (“CTDEP”) with respect to its obligations under a 1989 consent order that applies to a property in Connecticut that H&H sold in 2003 (“Sold Parcel”) and an adjacent parcel (“Adjacent Parcel”) that together with the Sold Parcel comprises the site of a former H&H manufacturing facility. Remediation of all soil conditions on the Sold Parcel was completed on April 6, 2007, although H&H performed limited additional work on that site, solely in furtherance of now concluded settlement discussions between H&H and the purchaser of the Sold Parcel. Although no groundwater remediation is required, there will be monitoring of the Sold Parcel site for several years. On September 11, 2008, the CTDEP advised H&H that it had approved H&H’s Soil Action Remediation Action Report, dated December 28, 2007 as amended by an addendum letter dated July 15, 2008, thereby concluding the active remediation of the Sold Parcel. Approximately $29.0 million was expended through December 31, 2009, and the remaining remediation and monitoring costs for the Sold Parcel are expected to approximate $0.3 million. H&H previously received reimbursement of $2.0 million from an insurance company under a cost-cap insurance policy and in January 2010, net of attorney’s fees, H&H received $1.034 million as the final settlement of H&H’s claim for additional insurance coverage relating to the Sold Parcel. H&H also has been conducting an environmental investigation of the Adjacent Parcel, and is continuing the process of evaluating various options for its remediation of the Adjacent Parcel. Since the total remediation costs for the Adjacent Parcel cannot be reasonably estimated at this time, accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of H&H.

HHEM entered into an administrative consent order (the “ACO”) in 1986 with the New Jersey Department of Environmental Protection (“NJDEP”) with regard to certain property that it purchased in 1984 in New Jersey. The ACO involves investigation and remediation activities to be performed with regard to soil and groundwater contamination. HHEM and H&H settled a case brought by the local municipality in regard to this site in 1998 and also settled with certain of its insurance carriers. HHEM is actively remediating the property and continuing to investigate effective methods for achieving compliance with the ACO. A remedial investigation report was filed with the NJDEP in December 2007. By letter dated December 12, 2008, NJDEP issued its approval with respect to additional investigation and remediation activities discussed in the December 2007 remedial investigation report. HHEM anticipates entering into discussions with NJDEP to address that agency’s natural resource damage claims, the ultimate scope and cost of which cannot be estimated at this time. Pursuant to a settlement agreement with the former owner/operator of the site, the responsibility for site investigation and remediation costs, as well as any other costs, as defined in the settlement agreement, related to or arising from environmental contamination on the property (collectively, “Costs”) are contractually allocated 75% to the former owner/operator (with separate guaranties by the two joint venture partners of the former owner/operator for 37.5% each) and 25% jointly to HHEM and H&H after the first $1.0 million. The $1.0 million was paid solely by the former owner/operator. As of December 31, 2010, over and above the $1.0 million, total investigation and remediation costs of approximately $1.6 million and $0.5 million have been expended by the former owner/operator and HHEM, respectively, in accordance with the settlement agreement. Additionally, HHEM indirectly is currently being reimbursed through insurance coverage for a portion of the Costs for which HHEM is responsible. HHEM believes that there is additional excess insurance coverage, which it intends to pursue as necessary. HHEM anticipates that there will be additional remediation expenses to be incurred once a remediation plan is agreed upon with NJDEP, and there is no assurance that the former owner/operator or guarantors will continue to timely reimburse HHEM for expenditures and/or will be financially capable of fulfilling their obligations under the settlement agreement and the guaranties. The additional Costs cannot be reasonably estimated at this time, and accordingly, there can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of HHEM.

H&H and Bairnco (and/or one or more of their respective subsidiaries) have also been identified as potentially responsible parties (“PRPs”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) or similar state statutes at several sites and are parties to administrative consent orders in connection with certain other properties. H&H and Bairnco (and/or one or more of their respective subsidiaries) may be subject to joint and several liabilities imposed by CERCLA on PRPs. Due to the technical and regulatory complexity of remedial activities and the difficulties attendant in identifying PRPs and allocating or determining liability among them, H&H and Bairnco are unable to reasonably estimate the ultimate cost of compliance with such laws.

H&H received a notice letter from the United States Environmental Protection Agency (“EPA”) in August 2006 formally naming H&H as a PRP at a superfund site in Massachusetts (the “Superfund site”). H&H is part of a group of thirteen (13) other PRPs (the “PRP Group”) to work cooperatively regarding remediation of the Superfund site. H&H executed a participation agreement, consent decree and settlement trust on June 13, 2008 and all of the other PRP’s have signed as well. In December 2008, the EPA lodged the consent decree with the United States District Court for the District of Massachusetts and the consent decree was entered, after no comments were received during the thirty-day comment period on January 27, 2009. With the entry and filing of the consent decree, H&H was required to make two payments in 2009: one payment of $0.2 million relating to the “true-up” of monies previously expended for remediation and a payment of $0.3 million for H&H’s share of the early action items for the remediation project. In addition, on March 11, 2009, WHX executed a financial guaranty of H&H’s obligations in connection with the Superfund site. The PRP Group has both chemical and radiological PRPs. H&H is a chemical PRP; not a radiological PRP. The remediation of radiological contamination at the site, under the direction of the Department of Energy (“DOE”), has begun but is not expected to be completed until the Fall of 2011 at the earliest, and it may be delayed even further due to inadequate funding in the federal program financing the DOE work. Additional financial contributions will be required by the PRP Group when it starts its work upon completion of the DOE’s radiological remediation work. H&H has recorded a significant liability in connection with this matter. There can be no assurance that the resolution of this matter will not be material to the financial position, results of operations and cash flow of H&H.

HHEM is continuing to comply with a 1987 consent order from the Massachusetts Department of Environmental Protection (“MADEP”) to investigate and remediate the soil and groundwater conditions at the MA Property that is the subject of the Arista Development litigation discussed above. On January 20, 2009, HHEM filed with MADEP a partial Class A-3 Response Action Outcome Statement (“RAO-P”) and an Activity & Use Limitation (“AUL”) for the MA Property. By letter dated March 24, 2009, MADEP advised HHEM that the RAO-P did not require a comprehensive audit. By letter dated April 16, 2009, the MADEP advised HHEM that a MADEP AUL Audit Inspection conducted on March 18, 2009 did not identify any violations of the requirements applicable to the AUL. Together, the March 24 and April 16 MADEP letters, combined with HHEM’s Licensed Site Professional’s partial RAO opinion constitute confirmation of the adequacy of HHEM’s investigation of the MA Property as well as its remediation and post closure monitoring plans. The Massachusetts Attorney General, executed a covenant not to sue (“CNTS”) to cover the MA Property on March 31, 2010. Following the execution of the CNTS, HHEM filed a Remedy Operation Status (“ROS”) on April 1, 2010. On June 30, 2010, HHEM filed a Class A-3 RAO to close the site since HHEM’s Licensed Site Professional concluded that groundwater monitoring demonstrated that the remediation has stabilized the conditions at the site. In addition, HHEM has concluded settlement discussions with abutters of the MA Property and entered into settlement agreements with each of them. Therefore, HHEM does not expect that any claims from any additional abutters will be asserted, but there can be no such assurances.

As discussed above, H&H and Bairnco and/or their subsidiaries have existing and contingent liabilities relating to environmental matters, including capital expenditures, costs of remediation and potential fines and penalties relating to possible violations of national and state environmental laws. H&H and Bairnco and/or their subsidiaries have substantial remediation expenses on an ongoing basis, although such costs are continually being readjusted based upon the emergence of new techniques and alternative methods. The Company had approximately $6.1 million accrued related to estimated environmental remediation costs as of December 31, 2010. In addition, the Company has insurance coverage available for several of these matters and believes that excess insurance coverage may be available as well.

Based upon information currently available, including prior capital expenditures, anticipated capital expenditures, and information available on pending judicial and administrative proceedings, H&H and Bairnco and/or their subsidiaries do not expect their respective environmental costs, including the incurrence of additional fines and penalties, if any, relating to the operation of their respective facilities to have a material adverse effect on them, but there can be no such assurances that the resolution of these matters will not have a material adverse effect on the financial positions, results of operations and cash flows of H&H and Bairnco and/or their subsidiaries. The Company anticipates that H&H and Bairnco and/or their subsidiaries will pay such amounts out of their respective working capital, although there is no assurance that H&H and Bairnco and/or their subsidiaries will have sufficient funds to pay such amounts. In the event that H&H and Bairnco and/or their subsidiaries are unable to fund their liabilities, claims could be made against their respective parent companies, including HNH, for payment of such liabilities.

Other Litigation

Certain of the Company’s subsidiaries are defendants (“Subsidiary Defendants”) in numerous cases pending in a variety of jurisdictions relating to welding emissions. Generally, the factual underpinning of the plaintiffs’ claims is that the use of welding products for their ordinary and intended purposes in the welding process causes emissions of fumes that contain manganese, which is toxic to the human central nervous system. The plaintiffs assert that they were over-exposed to welding fumes emitted by welding products manufactured and supplied by the Subsidiary Defendants and other co-defendants. The Subsidiary Defendants deny any liability and are defending these actions. It is not possible to reasonably estimate the Subsidiary Defendants’ exposure or share, if any, of the liability at this time.

In addition to the foregoing cases, there are a number of other product liability, exposure, accident, casualty and other claims against HNH or certain of its subsidiaries in connection with a variety of products sold by such subsidiaries over several years, as well as litigation related to employment matters, contract matters, sales and purchase transactions and general liability claims, many of which arise in the ordinary course of business. It is not possible to reasonably estimate the Company’s exposure or share, if any, of the liability at this time in any of these matters. On August 20, 2010, the company’s insurance company settled a previously disclosed state court lawsuit arising out of H&H’s sale of a used piece of equipment which allegedly caused a fire resulting in property damage and interruption of a third party’s business operations after the company had exhausted its self insured retention for the lawsuit.

There is insurance coverage available for many of the foregoing actions, which are being litigated in a variety of jurisdictions. To date, HNH and its subsidiaries have not incurred and do not believe they will incur any significant liability with respect to these claims, which they are contesting vigorously in most cases. However, it is possible that the ultimate resolution of such litigation and claims could have a material adverse effect on the Company’s results of operations, financial position and cash flows when they are resolved in future periods.

Pension Plan Contingency

In July 2003, the Company entered into a settlement agreement among the PBGC, HNH and several other parties (“Termination Litigation”), in which the PBGC was seeking to terminate the WHX Pension Plan. Under the settlement, HNH agreed among other things that HNH will not contest a future action by the PBGC to terminate the WHX Pension Plan in connection with a future facility shutdown of a facility of HNH's former Wheeling-Pittsburgh Steel Corporation subsidiary, which subsidiary was wholly owned until August 1, 2003. In the event that such a plan termination occurs, the PBGC has agreed to release HNH from any claims relating to any such shutdown. However, there may be PBGC claims related to unfunded liabilities that may exist as a result of any such termination of the WHX Pension Plan.

Note 18 – Related Party Transactions

Steel Partners Holdings L.P. (“SPH”) is the sole limited partner of SP II, which is the direct owner of 6,325,269 shares of the Company’s common stock, representing approximately 51.94% of the outstanding shares. Steel Partners Holdings GP Inc. (the “General Partner”) is SPH’s General Partner. SPH is the sole stockholder of the General Partner. Steel Partners LLC (“Steel Partners”) is the manager of SPH and SP II. Warren G. Lichtenstein, our Chairman of the Board of Directors, is also the manager of Steel Partners and Chairman of the board of directors of the General Partner.

As more fully described in Note 13-“Debt”, on October 15, 2010, H&H Group refinanced the prior indebtedness of H&H and Bairnco to the Steel Trusts, each constituting a separate series of the SPII Liquidating Trust as successor-in-interest to SPII. In accordance with the terms of an Exchange Agreement entered into on October 15, 2010, H&H Group made an approximately $6 million cash payment in partial satisfaction of prior indebtedness to the Steel Trusts and exchanged the remainder of such prior obligations for units consisting of (a) $72,925,500 aggregate principal amount of 10% subordinated secured notes due 2017 (the “Subordinated Notes”) issued by H&H Group and (b) warrants, exercisable beginning October 14, 2013, to purchase an aggregate of 1,500,806 shares of the Company’s common stock, with an exercise price of $11.00 per share (the “Warrants”). Subordinated Notes approximating 55% of the total face amount issued by H&H Group were transferred to non-related parties by the Steel Trusts and approximately 45% of the total face amount issued are held by SPII. As of December 31, 2010, $0.4 million of accrued interest and $32.5 million of Subordinated Notes were owed to SPII.

On January 24, 2011, a special committee of the Board of Directors of the Company, composed entirely of independent directors, approved a management and services fee to be paid to SP Corporate Services, LLC (“SP”) in the amount of $1,950,000 for services performed in 2010. This fee was the only consideration paid for the services of Mr. Lichtenstein, as Chairman of the Board of Directors, Glen M. Kassan, as Vice Chairman and Chief Executive Officer of the Company, John J. Quicke, as Vice President and as a director through December 2010, and Jack L. Howard and John H. McNamara, Jr., as directors, as well as other assistance from SP and its affiliates. The services provided included management and advisory services with respect to operations, strategic planning, finance and accounting, sale and acquisition activities and other aspects of the businesses of the Company. The Company does not have a written agreement with SP relating to the services described above. In 2009, the Company incurred a management and service fee of $950,000 which was paid to SP.

In 2010 and 2009, the Company provided certain accounting services to SPH, and continues to provide certain accounting services on an ongoing basis. The Company billed SPH $550,000 and $91,000 on account of services provided in 2010 and 2009, respectively.

A subsidiary of HNH, WHX CS Corp. (“CS”) held an investment in CoSine which was accounted for under the equity method and was included in other non-current assets on the consolidated balance sheet. Although CS owned 18.8% of the outstanding common stock of CoSine, the Company accounted for CoSine under the equity method because a related party (SP II) owned an additional percentage of the outstanding common stock and as a result of the combined ownership percentage, indirectly had the ability to exercise control. In the second quarter of 2009, the Company recorded a $1.2 million non-cash impairment charge in connection with its equity investment in CoSine. The amount of the impairment represented the difference between the carrying value of the investment and its fair value. On July 31, 2009, CS sold its equity investment in CoSine to SP II for cash proceeds of $3.1 million.

On July 6, 2007, the Compensation Committee of the Board of Directors of the Company adopted incentive arrangements for Mr. Kassan and Mr. Lichtenstein. These arrangements provide, among other things, for each to receive a bonus equal to 10,000 multiplied by the difference of the fair market value of the Company’s stock price and $90.00. The bonus is payable immediately upon the sending of a notice by either Mr. Kassan or Mr. Lichtenstein, respectively The incentive arrangements terminate July 6, 2015, to the extent not previously received. Under GAAP, the Company is required to adjust its obligation for the fair value of such incentive arrangements from the date of actual grant to the latest balance sheet date and to record such incentive arrangements as liabilities in the consolidated balance sheet. The Company has recorded $.2 million of non-cash expense in 2010 and $.1 million of non-cash income in 2009 related to these incentive arrangements.

Note 19 – Other Income (Expense)

	Years Ended December 31,
	2010			2009
	(in thousands)
Equity loss from affiliated company	$	-		$	(46	)
Foreign currency transaction gain (loss)		(201	)		142
Other, net		21			14
	$	(180	)	$	110

Note 20 –Segments

HNH, the parent company, manages a group of businesses on a decentralized basis. HNH owns H&H Group which owns H&H and Bairnco. HNH is a diversified holding company whose strategic business units encompass the following segments: Precious Metal, Tubing, Engineered Materials, Arlon Electronic Materials, and Kasco Blades and Route Repair Services. The Arlon Coated Materials segment is classified as a discontinued operation (see Note 4) and is not included in the segment information below. The business units principally operate in North America.

(1)

Precious Metal segment activities include the fabrication of precious metal and their alloys into brazing alloys. H&H’s brazing alloys are used to join similar and dissimilar metals as well as specialty metals and some ceramics with strong, hermetic joints. H&H offers these metal joining products in a wide variety of alloys including gold, silver, palladium, copper, nickel, aluminum, and tin. These brazing alloys are fabricated into a variety of engineered forms and are used in many industries including electrical, appliance, transportation, construction, and general industrial, where dissimilar material and metal-joining applications are required. H&H’s operating income from precious metal products is principally derived from the “value added” of processing and fabricating and not from the purchase and resale of precious metal. In accordance with general practice, prices to customers are principally a composite of two factors: (1) the value of the precious metal content of the product and (2) the “fabrication value,” which includes the cost of base metals, labor, overhead, financing and profit.

(2)

Tubing segment manufactures a wide variety of steel tubing products. The Stainless Steel Tubing Group manufactures small-diameter precision-drawn seamless tubing both in straight lengths and coils. The Stainless Steel Tubing Group’s capabilities in long continuous drawing of seamless stainless steel coils allow this Group to serve the petrochemical infrastructure and shipbuilding markets. The Stainless Steel Tubing Group also manufactures products for use in the medical, semiconductor fabrication, aerospace and instrumentation industries. The Specialty Tubing Group manufactures welded carbon steel tubing in coiled and straight lengths with a primary focus on products for the refrigeration, automotive, and heating, ventilation and air conditioning (HVAC) industries. In addition to producing bulk tubing, the Specialty Tubing Group also produces value added products and assemblies for these industries.

(3)

Engineered Materials segment manufactures and supplies products to the construction and building industries. Engineered Materials segment also manufactures fasteners and fastening systems for the U.S. commercial flat roofing industry. Products are sold to building and roofing material wholesalers and are also private labeled to roofing system manufacturers. A line of specialty fasteners is produced for the building products industry for fastening applications in the construction and remodeling of homes, decking and landscaping. Engineered Materials segment also manufactures plastic and steel fittings and connectors for natural gas and water distribution service lines along with exothermic welding products for electrical grounding, cathodic protection, and lightning protection. In addition, Engineered Materials segment manufactures electro-galvanized and painted cold rolled sheet steel products primarily for the construction, entry door, container and appliance industries.

(4)

Arlon Electronic Materials (“Arlon EM”) segment designs, manufactures, markets and sells high performance laminate materials and silicone rubber products utilized in the military/aerospace, wireless communications, transportation, energy generation, oil drilling, general industrial, and semiconductor markets. Among the products included in the Arlon EM segment are high technology laminates and bonding materials used in the manufacture of printed circuit boards and silicone rubber products such as electrically insulating tapes and thermally conductive materials.

(5)

Kasco segment is a provider of meat-room blade products, repair services, and resale products for the meat and deli departments of supermarkets; for restaurants; for meat and fish processing plants; and for distributors of electrical saws and cutting equipment throughout North America, Europe, Asia and South America. Kasco is also a provider of wood cutting blade products for the pallet manufacturing, pallet recycler, and portable saw mill industries in North America. These products and services include band saw blades for cutting meat and fish, band saw blades for cutting wood and metal, grinder plates and knives for grinding and cutting meat, repair and maintenance services for food equipment in retail grocery and restaurant operations, electrical saws and cutting machines, seasoning products, and other related butcher supply products.

Management has determined that certain operating companies should be aggregated and presented within a single segment on the basis that such segments have similar economic characteristics and share other qualitative characteristics. Management reviews sales, gross profit and operating income to evaluate segment performance. Operating income for the segments includes the costs of shared corporate headquarters functions such as finance, auditing, treasury, legal, benefits administration and certain executive functions, but excludes other unallocated general corporate expenses. Other income and expense, interest expense, and income taxes are not presented by segment since they are excluded from the measure of segment profitability reviewed by the Company’s management.

The following table presents information about segments for the years ended December 31, 2010 and 2009.

Statement of operations data:	Twelve Months Ended
	December 31,
	2010			2009
	(in thousands)
Net Sales:
Precious Metal	$	128,360		$	85,972
Tubing		94,558			75,198
Engineered Materials		221,075			191,709
Arlon Electronic Materials		75,398			60,145
Kasco		48,821			47,678
Total net sales	$	568,212		$	460,702

Segment operating income:
Precious Metal (a)		14,455			5,490
Tubing (b)		13,361			4,746
Engineered Materials		20,911			16,903
Arlon Electronic Materials ( c)		8,808			4,338
Kasco (d)		1,349			3,661
Total	$	58,884		$	35,138

Unallocated corporate expenses & non operating units		(14,241	)		(13,547	)
Income from proceeds of insurance claims, net		-			4,035
Unallocated pension expense		(4,349	)		(14,013	)
Corporate restructuring costs		-			(636	)
Asset impairment charge		-			(1,158	)
Loss on disposal of assets		(44	)		(132	)
Income from continuing operations	$	40,250		$	9,687

Interest expense		(26,310	)		(25,741	)
Realized and unrealized loss on derivatives		(5,983	)		(777	)
Other income (expense)		(180	)		110
Income (loss) from continuing operations before income taxes	$	7,777		$	(16,721	)

(a) Segment operating income for the Precious Metal segment for 2009 includes restructuring charges of $0.4 million relating to the closure of a facility in New Hampshire. The results for the Precious Metal segment for 2010 and 2009 include gains of $0.2 million and $0.6 million, respectively, resulting from the liquidation of precious metal inventory valued at LIFO cost.

(b) Segment operating income for the Tubing segment for 2010 includes a gain of $1.3 million related to insurance proceeds from a fire claim settlement. 2009 includes a non-cash asset impairment charge of $0.9 million to write-down to fair value certain equipment formerly used in the manufacture of a discontinued product line.

(c) Segment operating results for the Arlon EM segment for 2009 includes a $1.1 million goodwill impairment charge recorded to adjust the carrying value of one of the Arlon EM segment’s reporting units to its estimated fair value.

(d) Segment operating income for the Kasco segment for both 2010 and 2009 includes $1.6 million and $0.2 million, respectively, of asset impairment charges associated with certain real property located in Atlanta, Georgia. Also, $0.5 million of costs related to restructuring activities was recorded in 2010.

	2010		2009
Capital Expenditures	(in thousands)
Precious Metal	$	687	$	629
Tubing		3,686		2,525
Engineered Materials		2,215		2,083
Arlon Electronic Materials		2,552		819
Kasco		1,336		937
Corporate and other		129		211
	$	10,605	$	7,204

		2010		2009
Depreciation and amortization expense	(in thousands)
Precious Metal	$	1,472	$	1,635
Tubing		2,977		3,056
Engineered Materials		4,808		4,858
Arlon Electronic Materials		4,150		3,971
Kasco		2,588		2,690
Corporate and other		384		870
	$	16,379	$	17,080

	December 31,
		2010		2009
Total Assets	(in thousands)
Precious Metal	$	44,459	$	40,582
Tubing		39,141		36,291
Engineered Materials		126,926		127,105
Arlon Electronic Materials		67,622		65,583
Kasco		24,457		26,484
Corporate and other		21,640		19,666
Discontinued operations		29,303		38,129
	$	353,548	$	353,840

The following table presents revenue and long lived asset information by geographic area as of and for the years ended December 31. Long-lived assets in 2010 and 2009 consist of property, plant and equipment, plus approximately $10.4 million and $7.8 million, respectively, of land and buildings from previously operating businesses, and other non-operating assets that are carried at the lower of cost or fair value and are included in other non-current assets on the consolidated balance sheets.

Geographic Information
	Revenue				Long-Lived Assets
	2010		2009		2010		2009
	(in thousands)				(in thousands)
United States	$	514,992	$	424,047	$	76,483	$	81,107
Foreign		53,220		36,655		16,372		13,574
	$	568,212	$	460,702	$	92,855	$	94,681

Foreign revenue is based on the country in which the legal subsidiary is domiciled. Neither revenue nor long-lived assets from any single foreign country was material to the consolidated revenues of the Company.

There were no customers which accounted for more than 5% of consolidated net sales in 2010 and 2009. In both 2010 and 2009, the 15 largest customers accounted for approximately 28% of consolidated net sales.

Note 21 –Subsequent Events

The Company has updated its historical consolidated financial statements to reflect certain businesses that were sold since the issuance of the original financial statements, and these businesses are presented in the accompanying financial statements as discontinued operations.

On February 4, 2011, Arlon LLC (“Arlon”), an indirect wholly-owned subsidiary of HNH, sold substantially all of its assets and existing operations located primarily in the State of California related to its Adhesive Film Division for an aggregate sale price of $27.0 million. Net proceeds of approximately $24.2 million from this sale were used to repay indebtedness under the Company’s revolving credit facility. A gain on the sale of these assets of $11.5 million was recorded in the first quarter of 2011.

On March 25, 2011, Arlon LLC and its subsidiaries sold substantially all of their assets and existing operations located primarily in the State of Texas related to Arlon’s Engineered Coated Products Division and SignTech subsidiary for an aggregate sale price of $2.5 million. In addition, Arlon LLC sold a coater machine to the same purchaser for a price of $0.5 million. The Company recorded a loss of $5.0 million on the sale of these assets in the first quarter of 2011. The net proceeds from these asset sales were used to repay indebtedness under the Company’s revolving credit facility.

During the third quarter of 2011, the Company sold the stock of Kasco-France, a part of its Kasco segment, to Kasco-France’s former management team for one Euro plus 25% of any pre-tax earnings over the next three years. Additionally, Kasco-France signed a five year supply agreement to purchase certain products from Kasco. As a result of the sale, the Company recorded a loss, net of tax, of $0.6 million in the third quarter of 2011.

Arlon CM and Kasco-France have been included in the accompanying financial statements as discontinued operations on a retroactive basis for the twelve months ending December 31, 2010 and 2009.

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