DALLAS, Aug. 17, 2011 /PRNewswire-FirstCall/ -- The
Hallwood Group Incorporated (NYSE Amex-HWG) today reported results
for the second quarter and six months ended June 30, 2011. For the 2011 second quarter, the
Company had a net loss of $3.5
million, or $(2.31) per share,
compared to net income of $4.8
million, or $3.14 per share,
in 2010 on revenue of $36.7 million
and $47.9 million, respectively. For
the six months ended June 30, 2011, the net loss was
$4.5 million, or $(2.97) per share, compared to net income of
$10.0 million, or $6.59 per share, in 2010 on revenue of
$63.5 million and $95.1 million, respectively.
As previously disclosed on Form 8-K dated July 25, 2011, in the legal matter styled as
Ray Balestri, Trustee of the
Hallwood Energy I Creditors' Trust, as successor in interest to
Hallwood Energy, L.P., Plaintiffs and FEI Shale L.P. and Hall
Phoenix/Inwood Ltd., Plaintiffs in Intervention vs. The Hallwood
Group Incorporated, Defendant; Adversary No. 09-03082-SGJ,
the court issued Proposed Findings of Fact, Conclusions of Law and
Judgment Awarding Various Monetary Damages (the "Proposed
Findings") proposing damages be awarded against the Company
totaling approximately $18.7 million
plus prejudgment and postjudgment interest and attorneys' fees as
may be requested and awarded pursuant to a subsequent motion. The
Proposed Findings (including the awards) are not final. Any of the
parties may object to the Proposed Findings to the United States
District Court, which will then review the portions to which
objections have been raised on a de novo basis. The Company
intends to object to the Proposed Findings and will vigorously
defend against the entry of any final judgment.
As a result of the Proposed Findings, the Company believes that
for accounting purposes it is probable that a liability has been
incurred and that an estimate of the amount of the loss for
accounting purposes may be made. Accordingly, taking into
consideration available objections to the Proposed Findings, the
Company has reserved $7.5 million at
June 30, 2011. This noncash, accrued
reserve of $7.5 million is reported
in the Company's balance sheet under "Hallwood Energy matters -
Litigation reserve", in addition to the $3.2
million that was previously recorded in connection with the
Equity Support Agreement, for a total reserve of $10.7 million at June 30,
2011. This reserve amount has been established in
consultation with the Company's litigation counsel in the Hallwood
Energy litigation, based on their best judgment of the
probabilities of success related to, among other factors, the
potential objections to the Proposed Findings. However, the
actual results of litigation cannot be predicted with any certainty
and the amount of liability to the Company may exceed any estimates
or reserves.
Following is a comparison of results for the 2011 and 2010
periods:
Operating Income (Loss). The operating income (loss) for
the 2011 and 2010 second quarters was ($5.2)
million and $7.6 million,
respectively. For the 2011 and 2010 six month periods ended
June 30, 2011 and 2010, operating income (loss) was
($6.8) million and $15.8 million, respectively.
The decreases in revenue in the 2011 periods were principally
due to a decrease in sales of specialty fabric to U.S. military
contractors as a result of decreases in orders from the military to
Brookwood's customers, partially offset by increased sales in its
other market segments. Sales of specialty fabric to U.S. military
contractors of $20.2 million and
$30.4 million in the 2011 second
quarter and six month periods, respectively, decreased from the
2010 sales of $35.3 million and
$70.0 million, respectively. The
military sales represented 55.1% and 47.9% of total sales for the
2011 second quarter and six month periods, compared to 73.6% and
73.6% for the 2010 periods, respectively. Military sales have
historically been cyclical in nature.
Other Income (Loss). Other income (loss) consists of
interest expense and interest and other income. For the 2011 and
2010 second quarters, other income (loss) was ($10,000) and ($52,000), respectively. For the six months ended
June 30, 2011 and 2010, other income (loss) was ($19,000) and ($112,000), respectively.
Income Tax Expense (Benefit). For the 2011 second
quarter, the income tax benefit was $1.7
million, which included a current federal tax expense of
$780,000, a noncash deferred federal
tax benefit of $2.6 million, and a
state tax expense of $114,000. For
the 2010 second quarter, the income tax expense was $2.7 million, which included a current federal
tax expense of $2.4 million and a
state tax expense of $282,000.
For the six months ended June 30,
2011, the income tax benefit was $2.3
million, which included a current federal tax expense of
$190,000, a noncash deferred federal
tax benefit of $2.6 million and a
state tax expense of $120,000. For
the six months ended June 30, 2010,
income tax expense was $5.6 million,
which included current federal tax expense of $5.0 million and current state tax expense of
$595,000.
For further information on factors that could impact the Company
and statements contained in this press release, reference should be
made to the Company's filings with the Securities and Exchange
Commission, including quarterly reports on Forms 10-Q, current
reports on Form 8-K and annual reports on Form 10-K. You can access
such filings at http://www.sec.gov.
The following table sets forth selected financial information
for the three months and six months ended June 30, 2011 and 2010.
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THE HALLWOOD
GROUP INCORPORATED
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(In
thousands, except per share amounts)
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Three Months
Ended
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Six Months
Ended
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June
30,
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June
30,
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2011
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2010
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2011
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2010
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Revenue
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$36,699
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$47,927
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$63,468
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$95,077
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Operating income
(loss)
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$ (5,248)
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$ 7,577
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$(6,819)
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$15,758
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Other income (loss)
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(10)
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(52)
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(19)
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(112)
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Income (loss) before income
taxes
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(5,258)
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7,525
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(6,838)
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15,646
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Income tax expense
(benefit)
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(1,731)
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2,729
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(2,315)
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5,600
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Net income (loss)
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$
(3,527)
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$
4,796
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$(4,523)
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$10,046
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PER COMMON SHARE:
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BASIC
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Net income
(loss)
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$(2.31)
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$
3.14
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$(2.97)
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$
6.59
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Weighted average shares
outstanding
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1,525
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1,525
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1,525
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1,525
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DILUTED
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Net income
(loss)
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$(2.31)
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$
3.14
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$(2.97)
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$
6.59
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Weighted average shares
outstanding
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1,525
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1,525
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1,525
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1,525
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Certain statements in this press release that are not statements
of historical fact, including but not limited to statements or
underlying assumptions concerning the Hallwood Energy litigation,
may constitute "forward-looking statements" or information within
the meaning of Section 37A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements or information are
subject to known and unknown risks and uncertainties including,
among other things, the outcome of the Hallwood Energy litigation,
certain economic conditions, competition, development factors and
operating costs that may cause the actual results to differ
materially from results implied by such forward-looking statements.
These risks and uncertainties are described in greater detail
in the Company's periodic filings with the Securities and Exchange
Commission.
SOURCE The Hallwood Group Incorporated