Liquidity
As of June 30, 2012, the Company's current assets totaled $195.6 million, its current liabilities totaled $118.3 million, and its working capital was $77.3 million, as compared to working capital of $70.1 million as of December 31, 2011.
HNH the parent company
The Company's debt is principally held by H&H Group, a wholly-owned subsidiary of HNH.
For HNH, the parent company, 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 restrict H&H Group's ability to transfer any cash or other assets to HNH, subject to the following exceptions:
(i) unsecured loans for required payments to the WHX Corporation Pension Plan, a defined benefit pension plan sponsored by the Company (the "WHX Pension Plan"),
(ii) payments by H&H Group to HNH for the payment of taxes by HNH that are attributable to H&H Group and its subsidiaries, and (iii) unsecured loans, dividends or other payments for other uses in the aggregate principal amount, together with the aggregate amount of all other such loans, dividends and payments, not to exceed $60.0 million in the aggregate (as of June 30, 2012, $56.3 million has been used). These exceptions are subject to the satisfaction of certain conditions, including the maintenance of minimum amounts of excess borrowing availability under the credit facilities. H&H Group's credit facilities are collateralized by first priority liens on substantially all of the assets of H&H Group and its subsidiaries. HNH's ongoing operating cash flow requirements consist of arranging for the funding of the minimum requirements of the WHX Pension Plan and paying HNH's administrative costs. The Company expects to have required minimum contributions to the WHX Pension Plan of $7.8 million for the remainder of 2012, $10.8 million, $17.5 million, $18.0 million, $16.0 million, and $59.7 million in 2013, 2014, 2015, 2016, and thereafter, respectively. Such required 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 June 30, 2012, HNH, the parent company, had cash of approximately $1.1 million and current liabilities of approximately $1.0 million. HNH held an equity investment in common stock of a public company with a cost of $24.3 million and a market value of $17.8 million as of June 30, 2012. Handy & Harman Group Ltd.
The ability of H&H Group to draw on its U.S. revolving line of credit is limited by its borrowing base of accounts receivable and inventory. As of June 30, 2012, H&H Group's availability under its U.S. revolving credit facilities was $64.4 million, and as of July 31, 2012, was approximately $71.7 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.
Management is utilizing the following strategies to continue to enhance liquidity: (1) continuing to implement improvements, using the HNH Business System, throughout all of the Company's operations to increase sales and operating

efficiencies, (2) supporting profitable sales growth both internally and potentially through acquisitions, (3) evaluating from time to time and as appropriate, strategic alternatives with respect to its businesses and/or assets, and (4) seeking financing alternatives that may lower its cost of capital and/or enhance current cash flow. 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. The Company has explored and will continue to explore from time to time refinancing for its existing credit facilities, as well as potential alternative or additional sources of financing. The relative attractiveness of any such financing or refinancing to the Company is subject to prevailing conditions in the credit markets. The Company expects to refinance its senior debt prior to its maturity date of July 1, 2013.
Note 3 - Basis of Presentation

The consolidated balance sheet as of December 31, 2011, which has been derived from audited financial statements, and the unaudited consolidated financial statements included herein have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted in accordance with those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. This quarterly report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements contained in Form 10-K for the year ended December 31, 2011. Certain amounts for the prior year have been reclassified to conform to the current year presentation. In particular, the income of certain discontinued operations (see Note 5-"Discontinued Operations") has been reclassified into separate lines on the Consolidated Statement of Operations to segregate them from continuing operations.

In the opinion of management, the interim financial statements reflect all normal and recurring adjustments necessary to present fairly the consolidated financial position and the results of operations and changes in cash flows for the interim periods. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of the operating results for the full year.

Note 4 - Recently Adopted Accounting Pronouncements

Presentation of Comprehensive Income - In June 2011, the Financial Accounting Standards Board ("FASB") issued guidance on presentation of comprehensive income. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. Instead, an entity will be required to present either a continuous statement of net income and other comprehensive income or in two separate but consecutive statements. The Company adopted this guidance in the first quarter of 2012, which resulted in presentation changes only.

Testing Goodwill for Impairment - In September 2011, the FASB issued guidance relating to testing goodwill for impairment, to allow entities to use a qualitative approach to test goodwill for impairment. The new guidance permits an entity to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test. Otherwise, the two-step goodwill impairment test is not required. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this amendment in the third quarter of 2011. The adoption did not have a material impact on the Company's consolidated financial position and results of operations.

Note 5 - Discontinued Operations

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 pretax 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 retrospective basis and had a loss of $0.1 million and $0.2 million for the three and six months ended June 30, 2011, respectively.

Arlon CM

On February 4, 2011, Arlon LLC, 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 pretax gain on the sale of these assets of $11.5 million was recorded in 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 LLC'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 pretax loss of $5.0 million on the sale of these assets in 2011. The net proceeds from these asset sales were used to repay indebtedness under the Company's revolving credit facility.

Amounts held in escrow in connection with the asset sales, totaling $3.0 million, were recorded in "Trade and other receivables" on the consolidated balance sheet as of December 31, 2011, and were received by the Company in the second quarter of 2012.

The total gain of $6.4 million, net of tax, as a result of the sales of the California and Texas operations of Arlon CM is reported in discontinued operations on the consolidated statement of operations for the six months ended June 30, 2011. The discontinued operations had an aggregate loss of $0.1 million and $0.7 million from their operations for the three and six months ended June 30, 2011, respectively.

The income (loss) from discontinued operations consists of the following:

                                          Three Months Ended June 30,     Six Months Ended June 30,
(in thousands)                                2012            2011           2012           2011
Net sales                                $          -     $    3,769     $         -     $  15,796
Operating loss                           $          -     $     (123 )             -          (672 )
Loss from discontinued operations, net   $          -     $     (127 )             -          (709 )
Gain on sale of assets, net of tax       $          -     $     (154 )             -         6,431

Note 6 - Acquisition

In the first quarter of 2011, a subsidiary of H&H acquired certain assets and assumed certain liabilities of Tiger Claw, Inc., a company that among other businesses, developed and manufactured hidden fastening systems for deck construction. The initial purchase price of $8.8 million was subsequently adjusted by $0.3 million in the fourth quarter of 2011, resulting in a final purchase price of $8.5 million. The purchase price was paid in cash. The assets acquired included, among other things, machinery, equipment, inventories of raw materials, work-in-process and finished products, certain contracts, accounts receivable and intellectual property rights, all as related to the acquired business and as provided in the Asset Purchase Agreement. The results of operations of the acquired business are reported as a product line within the Company's Engineered Materials segment. HNH believes this acquisition enhances its product offerings of fastening systems for deck construction.

If the acquisition had taken place as of January 1, 2010 instead of during the first quarter of 2011, the unaudited proforma statement of operations for the Company would have been as follows:

                                              Three Months Ended     Six Months Ended
(in thousands except per share)                 June 30, 2011         June 30, 2011
Net sales                                               $189,125   $          342,454
Income from continuing operations before tax             $18,494   $           18,321
Income from continuing operations, net of tax            $16,965   $           15,786
Income from continuing operations, net of
tax, per share                                             $1.34   $             1.27

Note 7 - Accumulated Other Comprehensive Income (Loss)


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Changes, net of tax, in accumulated other comprehensive income/(loss) and their
components follow:

                            Unrealized gain (loss)                              Change in net pension
                            on available-for-sale     Cumulative translation      and other benefit
(in thousands)                    securities                adjustment               obligations             Total
Balance at December 31,
2011                       $                4,822     $           2,119         $      (195,330 )        $   (188,389 )
Current period other
comprehensive loss                         (8,548 )                (938 )                     -                (9,486 )
Balance at June 30, 2012   $               (3,726 )   $           1,181         $      (195,330 )        $   (197,875 )

Note 8 - Fair Value Measurements

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. Fair value measurements are 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 approximates fair value for the Company's long term debt which has variable interest rates.

The derivative instruments that the Company purchases, specifically commodity futures and forwards contracts on precious metal, are valued at fair value. 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 (See Note 15 - "Debt") are valued at fair value on a recurring basis and are considered Level 3 measurements.

The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis, the amounts on the consolidated balance sheet as of June 30, 2012, and the activity in those assets and liabilities that are valued using Level 3 measurements.

                                                        Asset (Liability) as of June 30, 2012
(in thousands)                                  Total            Level 1         Level 2        Level 3
Available-for-sale securities               $    17,764       $    17,764      $        -     $        -
Commodity contracts on precious metal       $       (74 )     $       (14 )    $      (60 )   $        -
Derivative features of Subordinated Notes   $       527       $         -      $        -     $      527



              Activity                 Six Months Ended June 30, 2012
(in thousands)
Balance at December 31, 2011          $                     (1,314 )
Total net gains (losses) included in:
Net income                                                   1,758
Other comprehensive income                                       -
Purchases                                                        -
Issuances                                                        -
Sales                                                            -
Settlements                                                     83
Net transfers into/ (out of) Level 3                             -
Balance at June 30, 2012              $                        527

The income of $1.8 million for the six months ended June 30, 2012 noted above is an unrealized gain that is attributable to the fair value of the embedded derivatives associated with the Company's Subordinated Notes.

The valuation of the derivative features of the Subordinated Notes and Warrants utilizes a customized binomial model which values the embedded derivatives in such notes and the associated Warrants in a unified way, using a cash flow approach. Interest rates and the market price of HNH's stock are significant inputs that influence the valuation of the derivative liability.

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 an income approach, a market approach, and/or appraisals (Level 3 inputs). 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 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 analysis of peer companies and consider the industry weighted average return on debt and equity from a market participant perspective. 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.

Long-lived assets consisting of land and buildings used in previously operating businesses and currently unused, which total $7.3 million as of June 30, 2012, 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 is recorded as an asset impairment charge in the consolidated statement of operations. A non-cash asset impairment charge of $0.7 million was recorded for the six months ended ended June 30, 2011, related to unused land owned by the Company's Arlon segment located in Rancho Cucamonga, California. The Company reduced this property's carrying value by $0.7 million to reflect its lower fair market value.

Note 9 - Income (Loss) Per Share

The computation of basic income (loss) per common share is calculated by
dividing the net income or loss by the weighted average number of shares of the
Company's common stock outstanding, as follows:

                                               Three Months Ended            Six Months Ended
                                                    June 30,                     June 30,
                                               2012          2011           2012          2011
(in thousands, except per share)
Income from continuing operations, net
of tax                                     $   10,952     $  17,041     $   16,048     $  15,862
Weighted average number of common shares
outstanding                                    13,144        12,651         12,918        12,468
Income from continuing operations, net
of tax  per common share                   $     0.83     $    1.35     $     1.24     $    1.27
Discontinued operations                    $        -     $    (281 )   $        -     $   5,722
Weighted average number of common
 shares outstanding                            13,144        12,651         12,918        12,468
Discontinued operations per common share   $        -     $   (0.03 )   $        -     $    0.46
Net income                                 $   10,952     $  16,760     $   16,048     $  21,584
Weighted average number of common shares
outstanding                                    13,144        12,651         12,918        12,468
Net income per common share                $     0.83     $    1.32     $     1.24     $    1.73

Diluted earnings per share gives effect to dilutive potential common shares outstanding during the period. The Company had potentially dilutive common share equivalents including stock options and other stock-based incentive compensation arrangements during the three and six month periods ended June 30, 2012 and 2011, although none were dilutive because the $90.00 per share exercise price of such equivalents exceeded the market value of the Company's common stock during those periods. The market value of the Company's common stock averaged $13.62 during the three month period ended June 30, 2012. As of June 30, 2012, stock options for an aggregate of 51,500 shares are excluded from the calculation of net income per share.

Note 10 - Inventories

Inventories at June 30, 2012 and December 31, 2011 were comprised of:


(in thousands)                                           June 30,         December 31,
                                                           2012               2011
Finished products                                    $       19,629     $        20,280
In - process                                                  9,128               8,354
Raw materials                                                17,612              17,304
Fine and fabricated precious metal in various
stages of completion                                         11,836               8,658
                                                             58,205              54,596
LIFO reserve                                                 (4,002 )            (4,211 )
                                                     $       54,203     $        50,385

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 last-in, first-out ("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 $4.0 million as of June 30, 2012 and $4.2 million as of December 31, 2011.

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. To the extent H&H is able to utilize customer precious metal in its production processes, such customer metal replaces the need for H&H to purchase its own inventory. As of June 30, 2012, H&H's customer metal consisted of 250,111 ounces of silver, 567 ounces of gold, and 1,467 ounces of palladium.

Supplemental inventory information:           June 30,             December 31,
                                                2012                   2011
                                           (in thousands, except per ounce)
Precious metals stated at LIFO cost   $         7,834             $        4,447
Market value per ounce:
Silver                                $         27.64             $        27.95
Gold                                  $      1,604.00             $     1,565.80
Palladium                             $        584.55             $       655.40

Note 11 - Derivative Instruments

H&H's precious metal inventory is subject to market price fluctuations. H&H enters into commodity futures and forwards contracts on its precious metal inventory that is not subject to fixed-price contracts with its customers in order to economically hedge against price fluctuations. As of June 30, 2012, the Company had entered into forward and future contracts with a value of $2.2 million for gold and $2.7 million for silver.

The forward contracts, in the amount of $3.1 million, were made with a counter party rated A by Standard & Poors, and the futures 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 the 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. 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. The Company's hedging strategy is designed to protect it against normal volatility; therefore, abnormal price increases in these commodities or markets could negatively impact H&H's costs. The three month periods ended June 30, 2012 and June 30, 2011 include gains of $0.5 million and $1.3 million, respectively, on precious metal contracts. The six month period ended June 30, 2012 includes a gain of $0.8 million and the six month period ended June 30, 2011 includes a loss of $1.4 million on precious metal contracts.

. . .