UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One):
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þ
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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For the fiscal year ended December 31, 2009
OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
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For
the transition period from
to
Commission File Number 333-68583
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
Hawk Corporation 401(k) Retirement Plan
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
HAWK CORPORATION
200 Public Square, Suite 1500, Cleveland, Ohio 44114
(216) 861-3553
Audited Financial Statements and supplemental schedule
Hawk Corporation 401(k) Retirement Plan
December 31, 2009 and 2008 and Year Ended December 31, 2009
with Report of Independent Registered Public Accounting Firm
Hawk Corporation 401(k) Retirement Plan
Audited Financial Statements and Supplemental Schedule
December 31, 2009 and 2008 and
Year Ended December 31, 2009
Table of Contents
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1
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Audited Financial Statements
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2
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3
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4-14
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Supplemental Schedule
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15
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Exhibit 23.1
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Report of Independent Registered Public Accounting Firm
Plan Administrator
Hawk Corporation 401(k) Retirement Plan
We have audited the accompanying statements of net assets available for benefits of the Hawk
Corporation 401(k) Retirement Plan (the Plan) as of December 31, 2009 and 2008, and the related
statement of changes in net assets available for benefits for the year ended December 31, 2009.
These financial statements are the responsibility of the Plans management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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
Plan 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 Plans 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 financial statements referred to above present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 2009 and 2008, and the
changes in its net assets available for benefits for the year ended December 31, 2009, in
conformity with accounting principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31,
2009 is presented for the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the Department of Labors Rules
and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the Plans management. The supplemental
schedule has been subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Grant Thornton LLP
Cleveland, Ohio
June 18, 2010
1
Hawk Corporation 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
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December 31
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2009
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2008
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Assets
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Investments, at fair value:
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Pooled separate accounts
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$
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11,096,647
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$
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7,911,727
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Mutual funds
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1,214,174
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643,946
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Hawk Corporation stock fund
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1,351,445
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1,368,961
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Guaranteed Income Fund
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5,775,581
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5,882,896
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Participant loans
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335,659
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Total investments
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19,773,506
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15,807,530
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Contributions receivable:
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Employer
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23,447
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840,254
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Employee
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85,181
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136,833
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Total receivables
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108,628
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977,087
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Total assets
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19,882,134
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16,784,617
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Liabilities
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Excess employee contribution payable
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25,185
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Net assets available for benefits
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$
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19,856,949
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$
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16,784,617
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See notes to financial statements.
2
Hawk Corporation 401(k) Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2009
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Additions:
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Investment income:
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Interest and dividend income
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$
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195,874
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Net appreciation in fair value of investments
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2,865,250
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Contributions:
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Company
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352,899
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Employee
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1,299,702
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Employee rollovers
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185,283
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1,837,884
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Total additions
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4,899,008
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Deductions:
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Distributions
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874,743
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Direct rollovers
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944,542
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Participant direct charges
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7,391
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Total deductions
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1,826,676
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Net increase
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3,072,332
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Net assets available for benefits at beginning of year
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16,784,617
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Net assets available for benefits at end of year
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$
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19,856,949
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See notes to financial statements.
3
Hawk Corporation 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2009 and 2008 and
Year Ended December 31, 2009
1. Description of the Plan
General
The following description of the Hawk Corporation 401(k) Retirement Plan (Plan) provides only
general information. Participants should refer to the Plan document for a more complete description
of the Plans provisions.
The Plan was originally established on August 1, 1981 as a defined contribution plan. The Plan was
amended and restated in its entirety effective January 1, 2009 and is intended to qualify as a
profit-sharing plan maintained for the exclusive benefit of eligible employees of Hawk Corporation
or its subsidiaries (the Company).
The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as
amended (ERISA). Recordkeeping for the Plan is performed by Prudential Retirement Insurance and
Annuity Company (Prudential).
Contributions
Each year, participants may elect to contribute 1% to 50% of their regular pre-tax compensation and
up to 100% of any special bonuses/incentive compensation to the Plan subject to maximum limitations
set by the Internal Revenue Code (the Code). Participants may also contribute amounts representing
distributions from other qualified plans, commonly referred to as rollover contributions.
Participants who have attained age 50 by the end of the year may make catch-up deferral
contributions not to exceed the catch-up limitations set by the Code.
In 2009, the Plan was amended to suspend the employer matching contribution until further notice,
effective for eligible contributions made based on wages earned subsequent to July 3, 2009. The
suspension of employer matching contributions remained in effect through February 28, 2010 (see
Note 9, Subsequent Events). Prior to the suspension, the Company matching contribution was equal
to 75% of the participants tax deferred contributions up to 6% of the participants eligible
compensation, as defined.
Employees hired on or after May 1, 2007 are automatically enrolled in the Plan at a participant tax
deferred contribution rate of 3% of the participants eligible compensation unless they elect not
to contribute to the Plan or to contribute at a different contribution rate within a prescribed
period of time (as defined by the Plan). In addition, the tax deferred contribution rate for
participants who become eligible for the Plan on or after May 1, 2007 will automatically increase
by 1% annually commencing March 1, 2008, up to 6% of eligible compensation, unless the participant
elects against the increase as permitted under the Plan.
4
The Plan also allows for discretionary contributions by the Company. The Company made no
discretionary contributions for the 2009 Plan year and $613,861 in March 2009 for the 2008 Plan
year.
Loans
Effective June 15, 2009, the Plan was amended to allow for participant loans. Participants are
permitted to borrow from their fund accounts up to the lesser of $50,000 or 50% of their employee
contributions plus any earnings thereon, not less than $500. Loan terms range from 1 to 5 years or
up to 15 years for the purchase of a primary residence. The $50,000 limit is reduced by the
participants highest outstanding loan balance during the preceding twelve-month period. A
participant may not have more than two loans outstanding at any point in time. Loans outstanding
are secured by the balance in the participants account and bear interest at a fixed rate
commensurate with local prevailing rates at the time of application (4.25% at December 31, 2009).
Principal and interest are paid ratably through payroll deductions. If a participant terminates
employment with the Company, the balance of any loan is immediately due and payable.
Participant Accounts
Each participants account is credited with the participants contributions, matching
contributions, and allocations of (a) the Companys discretionary contributions, if any, (b) the
Companys supplemental contributions, if any, and (c) Plan net earnings (losses).
Allocations are based on participant compensation or account balances, as defined. The benefit to
which a participant is entitled is the benefit that can be provided from the participants account.
Vesting and Distributions
Participants are immediately vested in their contributions plus actual earnings (losses) thereon.
Employees become vested in Company matching and discretionary contributions, plus actual earnings
thereon, based upon years of credited service, becoming 100% vested after five years based on a
graded vesting schedule.
Distributions from a participants account are limited to termination of employment, death,
disability, retirement or proven hardship.
Investment Options
The Plans funds are primarily held in a group annuity contract issued by Prudential. All
investments of the Plan are fully participant-directed. Upon enrollment in the Plan, a participant
may direct Company and employee contributions in any of several investment fund options offered by
the Plan, including Hawk Corporation common stock. If a participant does not specifically choose
an investment option, all Company and employee contributions will be invested in the Lifetime
Growth Fund until re-directed by the
participant. Participants may change their investment options and transfer funds between
investment options daily, subject to limitations agreed upon by the Plan and Prudential.
5
Payment of Benefits
In the case of normal retirement, death, permanent disability or termination prior to retirement, a
participant may elect to receive the payout of their vested account balance in the form of
installments, an annuity or a lump sum.
Forfeited Accounts
Forfeitures are used to reduce future Company contributions or to pay Plan expenses at the
discretion of the Plan Administrator. At December 31, 2009 and 2008, there were $33,725 and
$8,168, respectively, of forfeitures available to reduce future contributions or to pay Plan
expenses. Company contributions for the year ended December 31, 2009 are net of $73,508 in
forfeitures. The Plan Sponsor used $2,900 of forfeitures to pay Plan expenses for the year ended
December 31, 2009.
2. Summary of Accounting Policies
Basis of Accounting
The Plans financial statements are reported on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
New Accounting Standards Adopted
In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2009-01,
Topic 105-Generally Accepted Accounting Principles
and ASU No. 2009-02,
Omnibus Update, Amendments to Various Topics for Technical Corrections
(collectively the Codification). The Codification establishes the sole source of authoritative
accounting principles generally accepted in the United States of America (GAAP) recognized by the
FASB for nongovernmental entities. Rules and interpretive releases issued by the Securities and
Exchange Commission (SEC) under federal securities laws are also sources of authoritative GAAP for
SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting
standards. Upon issuance, all other non-grandfathered non-SEC accounting literature not included
in the Codification became non-authoritative. The FASB also issues Accounting Standards Updates
(ASU). An ASU communicates amendments to the ASC and also provides information to help a user of
GAAP understand how and why GAAP is changing and when the changes will be effective. This
Codification became effective for the Plans December 31, 2009 financial statements, and the
disclosures contained herein are in compliance with the requirements of the Codification.
6
In February 2010, the FASB issued ASU No. 2010-09,
Amendments to Certain Recognition and Disclosure Requirements
(ASU
2010-09), which addresses certain implementation issues related to an entitys requirement to
perform and disclose subsequent events procedures. The ASU (1) exempts entities that file their
financial statements with, or furnish them to, the SEC from disclosing the date through which
subsequent events procedures have been performed and (2) clarifies the circumstances in which an
entitys financial statements would be considered restated and in which the entity would therefore
be required to update its subsequent events evaluation since the originally issued or available to
be issued financial statements. ASU 2010-09 became effective immediately upon issuance, and the
Company has adopted its disclosure requirements within this Form 11-K for the year ended December
31, 2009.
In September 2009, the FASB issued Accounting Standards Codification (ASC) Update No. 2009-12,
Fair
Value Measurements and Disclosures (Topic 820) Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent)
(ASU 2009-12). This update provides guidance on
estimating the fair value of a companys investments in investment companies when the investment
does not have a readily determinable fair value. It permits the use of the investments net asset
value as a practical expedient to determine fair value. This guidance also requires additional
disclosure of the attributes of these investments such as: (1) the nature of any restrictions on
the reporting entitys ability to redeem its investment; (2) unfunded commitments; and (3)
investment strategies of the investees. The Plan has adopted this guidance on a prospective basis
for the year ended December 31, 2009 (See Note 4, Fair Value Measurements). The adoption of this
ASU had no impact on the statements of net assets available for benefits and statements of changes
in net assets available for benefits.
In April 2009, the FASB issued FASB Staff Position No. FAS 157-4,
Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
, which is codified in ASC 820,
Fair Value
Measurements and Disclosures
. This guidance provides additional requirements for estimating fair
value when the volume and level of activity for the asset or liability have significantly
decreased, and also provides additional information on circumstances that may indicate that a
transaction is not orderly. The guidance also expanded disclosures and required that major
categories for debt and equity securities in the fair value hierarchy table be determined on the
basis of the nature and risks of the investments. The Plan adopted this guidance on a prospective
basis for the year ended December 31, 2009. The adoption of this guidance is reflected, where
applicable, within this Form 11-K for the year ended December 31, 2009.
7
New Accounting Standards to Be Adopted
In January 2010, the FASB issued ASU No. 2010-06,
Fair Value Measurements and Disclosures (Topic
820) Improving Disclosures About Fair Value Measurements
(ASU 2010-06), to add new disclosures
about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances and settlements relating to Level 3 measurements. ASU 2010-06 also clarifies existing
fair value disclosures about the level
of disaggregation and about inputs and valuation techniques used to measure fair value. This ASU
is effective for the first reporting period beginning after December 15, 2009, except for the
requirement to provide Level 3 activity of purchases, sales, issuances and settlements on a gross
basis, which will be effective for fiscal years beginning on or after December 15, 2010. The
Company does not expect the adoption of this guidance will have a material impact on the Plans
financial statements and disclosures.
Investment Valuation
Investments are reported at fair value, which is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. See Note 4, Fair Value Measurements, for further information.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded
on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation
(depreciation) includes the Plans gains and losses on investments bought and sold as well as held
during the year.
Payment of Benefits
Benefits are recorded when paid.
Excess Contributions Payable
Amounts payable to participants for contributions in excess of amounts allowed by the IRS are
recorded as a liability with a corresponding reduction to contributions. The Plan distributed the
excess contributions to the applicable participants prior to March 15, 2010.
Expenses
The Plan Sponsor pays substantially all costs of Plan administration. The Plan Sponsor used $2,900
of forfeitures to pay Plan expenses for the year ended December 31, 2009. Brokers fees are
reflected in the net investment return in each participants account.
3. Investments
During 2009, the Plans investments (including investments purchased, sold, as well as held, during
the year) appreciated in fair value as follows:
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Pooled separate accounts
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$
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2,334,386
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Mutual funds
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407,425
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Hawk Corporation common stock
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123,439
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$
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2,865,250
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8
The fair values of individual investments that represent 5% or more of the Plans net assets at
either December 31, 2009 or 2008 are as follows:
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December 31,
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2009
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2008
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Guaranteed Income Fund
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$
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5,775,581
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$
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5,882,896
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Hawk Corporation Common Stock
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1,351,445
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1,368,961
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Dryden S&P 500 Index Fund
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1,521,454
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1,139,531
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Lifetime Growth Fund
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1,593,207
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1,026,565
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Core Bond Enhanced Index Fund
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1,323,576
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882,607
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Large Cap Growth/Waddel and Reed Fund
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851,985
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SA/OFII Global Strategy Fund
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1,252,725
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Oppenheimer Global Fund
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846,528
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Calamos Growth Fund A
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1,147,541
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*
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Does not exceed 5% of Plan net assets
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**
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Fund is not an investment option as of December 31, 2009
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4. Fair Value Measurements
The Plan follows the fair value accounting guidance which establishes a framework for measuring
fair value. That framework provides a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. The three levels of the fair
value hierarchy are described below:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the Plan has the ability to access.
Level 2
Inputs to the valuation methodology that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities; quoted prices for identical or
similar assets or liabilities in inactive markets; or other inputs that are observable or can be
corroborated by observable market data for substantially the full terms of the assets or
liabilities.
Level 3
Inputs to the valuation methodology that are unobservable and supported by little or
no market activity and that are significant to the fair value of the assets or liabilities.
The assets or liabilitys fair value measurement level within the fair value hierarchy is based on
the lowest level of any input that is significant to the fair value measurement. Valuation
techniques used need to maximize the use of observable inputs and minimize the use of unobservable
inputs.
As referenced in Note 2, Summary of Accounting Policies, in accordance with ASU 2009-12, the Plan
expanded its disclosures to include the category, fair value, redemption frequency and redemption
notice period for the pooled separate accounts whose fair value
is permitted, as a practical expedient, to be estimated using the net asset value (NAV) per share.
9
There have been no changes in the methodologies used at December 31, 2009 and 2008. Following is
a description of the valuation methodologies used for assets measured at fair value as
of December 31, 2009:
Pooled separate accounts
: Valued on a net unit value basis as determined by Prudential on the
last business day of the Plan year. All investments in this category can be redeemed daily, have a
daily redemption notice period and have no unfunded commitments.
The fair values of these investments are determined by reference to the respective funds
underlying assets, with Prudential specifying the source(s) to use for underlying investment asset
prices. The investments underlying the Plans pooled separate accounts primarily include domestic
and international equities and domestic fixed income securities. In the event that a fund
accountants initial valuation is not deemed reasonable, Prudential may make adjustments to achieve
a price believed to be more reflective of fair value.
Mutual funds
: Valued at the NAV of shares held by the Plan at year end based on the closing
quoted price reported on the active market on which the individual securities are traded.
Hawk Corporation common stock
: Valued at the closing price reported on the NYSE Amex Stock
Exchange. This investments performance is dependent on the price of Hawk Corporation common stock
on the open market, which is influenced by economic factors affecting overall market conditions and
the business of Hawk Corporation.
Guaranteed income fund:
Valued at contract value which approximates fair value based on
the nature of the fund. This fund is a stable value fund designed to provide safety of principal,
liquidity and a competitive rate of return (see Guaranteed Income Fund below for further
information related to the valuation of this investment).
Participant loans:
Valued at outstanding principal balance which approximates fair value.
Participant loans are not traded on an open market and are valued based on the terms of the loan
agreement. The unpaid principal balances equal their exit values when collected or by deemed
distributions if they are not repaid.
The methods described above may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore,
while the Plan believes its valuation methods are appropriate and consistent with
other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different
fair value measurement result at the reporting date.
10
The following table sets forth by level, within the fair value hierarchy, the Plans assets at fair
value as of December 31, 2009 and 2008:
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December 31, 2009
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Total
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Level 1
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Level 2
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Level 3
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Pooled separate accounts:
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Balanced funds
(a)
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$
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3,411,641
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$
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3,411,641
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Fixed income fund
(b)
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1,323,576
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1,323,576
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Growth funds
(c)
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3,355,327
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3,355,327
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Value funds
(d)
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1,086,994
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|
|
1,086,994
|
|
|
|
|
|
Index fund
(e)
|
|
|
1,521,454
|
|
|
|
|
|
|
|
1,521,454
|
|
|
|
|
|
Foreign fund
(f)
|
|
|
397,655
|
|
|
|
|
|
|
|
397,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pooled separate accounts
|
|
|
11,096,647
|
|
|
|
|
|
|
|
11,096,647
|
|
|
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth fund
|
|
|
1,147,541
|
|
|
$
|
1,147,541
|
|
|
|
|
|
|
|
|
|
Specialty fund natural resources
|
|
|
66,633
|
|
|
|
66,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
1,214,174
|
|
|
|
1,214,174
|
|
|
|
|
|
|
|
|
|
Hawk Corporation common stock
|
|
|
1,351,445
|
|
|
|
1,351,445
|
|
|
|
|
|
|
|
|
|
Guaranteed income fund
|
|
|
5,775,581
|
|
|
|
|
|
|
|
|
|
|
$
|
5,775,581
|
|
Participant loans
|
|
|
335,659
|
|
|
|
|
|
|
|
|
|
|
|
335,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
19,773,506
|
|
|
$
|
2,565,619
|
|
|
$
|
11,096,647
|
|
|
$
|
6,111,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Pooled separate accounts
|
|
$
|
7,911,727
|
|
|
|
|
|
|
$
|
7,911,727
|
|
|
|
|
|
Mutual funds
|
|
|
643,946
|
|
|
$
|
643,946
|
|
|
|
|
|
|
|
|
|
|
|
Hawk Corporation common stock
|
|
|
1,368,961
|
|
|
|
1,368,961
|
|
|
|
|
|
|
|
|
|
Guaranteed income fund
|
|
|
5,882,896
|
|
|
|
|
|
|
|
|
|
|
$
|
5,882,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value
|
|
$
|
15,807,530
|
|
|
$
|
2,012,907
|
|
|
$
|
7,911,727
|
|
|
$
|
5,882,896
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Balanced pooled separate accounts combine fixed income and equity components to
provide a combination of the stability of interest income and the growth potential of
equity investments. These funds invest based on the lifecycle theory
of investing that
different bond/equity mixes are appropriate for individuals in terms of risk throughout
the different stages in their lives. The investment objectives vary in keeping with the
desired risk tolerance and associated asset allocation of the underlying portfolios. The
performance goal for each fund is to consistently outperform its benchmark over full
market cycles.
|
|
(b)
|
|
The fixed income pooled separate account invests primarily in corporate and
government bonds with a variety of durations and interest rate exposures. It is subject
to interest rate risk; its value will decline as interest rates rise.
|
|
(c)
|
|
Growth pooled separate accounts seek long-term capital appreciation from U.S. and
foreign equities, and include investments that in general are expected to grow faster than
the economy. Certain of the accounts seek to outperform various indexes including the
Russell Midcap Growth Index, the Russell Midcap Index and the Russell 1000 Growth Index
over the long-term.
|
|
(d)
|
|
Value pooled separate accounts seek long-term capital appreciation from primarily
U.S. equities. These accounts seek to outperform various indexes including the Russell
2000 Value Index, the Russell 1000 Value Index and the Russell 2500 Value Index, generally
by identifying leading, financially strong companies selling at a discount to fair market
value.
|
11
(e)
|
|
The index pooled separate account includes investments that seek to approximate the
risk and return composition of the S&P 500 Index. It seeks to provide long-term growth of
capital and income.
|
|
(f)
|
|
The foreign pooled separate account seeks to provide long-term capital appreciation
by investing primarily in the common stock of well-established companies located outside
of the U.S. Foreign investing presents certain unique risks not associated with domestic
investments, including currency fluctuation and political and economic changes, which may
result in greater share price volatility.
|
Level 3 Gains and Losses
The table below sets forth a summary of changes in the fair value of the Plans Level 3 assets for
the year ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Guaranteed
|
|
|
Participant
|
|
|
|
Income Fund
|
|
|
Loans
|
|
Balance January 1, 2009
|
|
$
|
5,882,896
|
|
|
$
|
|
|
Realized gains
|
|
|
|
|
|
|
|
|
Unrealized gains / (losses) relating to instruments still held
at reporting date
|
|
|
|
|
|
|
|
|
Purchases, sales, issuances and settlements (net)
|
|
|
(107,315
|
)
|
|
|
335,659
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
$
|
5,775,581
|
|
|
$
|
335,659
|
|
|
|
|
|
|
|
|
Guaranteed Income Fund Investment Contract with Insurance Company
The Plan has entered into an investment contract, the Guaranteed Income Fund (GIF), with
Prudential. Prudential maintains the contributions to the GIF in a general account, which is
credited with earnings on the underlying investments and charged for participant withdrawals and
administrative expenses. The GIF is fully benefit-responsive.
As required by accounting guidance, contracts held by a defined contribution plan are required to
be reported at fair value. However, contract value is the relevant measurement attribute for that
portion of the net assets available for benefits of a defined contribution plan attributable to
fully benefit-responsive investment contracts because contract value is the amount participants
would receive if they were to initiate permitted transactions under the terms of the Plan. The
Statement of Net Assets Available for Benefits presents the GIF at contract value, which
approximates fair value. The
Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
12
Contract value represents contributions made under the contract, plus earnings and transfers in,
less participant withdrawals, administrative expenses and transfers out. Prudential is
contractually obligated to repay the principal and a specified interest rate that is guaranteed to
the Plan. Participants may ordinarily direct the withdrawal or transfer of all or a portion of
their investment at contract value. However, Prudential has the right to defer certain
disbursements (excluding retirement, termination, and death or disability disbursements) or
transfers from the Fund when total amounts disbursed from the pool in a given calendar year exceed
10% of the total assets in that pool on January 1 of that year. The Company does not believe that
any events that would limit the Plans ability to transact at contract value with participants are
probable of occurring.
There are no reserves against contract value for credit risk of the contract issuer or otherwise.
The average yield and crediting interest rates were 2.85% and 3.63% for 2009 and 2008,
respectively. The crediting interest rate is based on a formula agreed upon with the issuer, based
on the yields of the underlying investments and considering factors such as projected investment
earnings, the current interest rate environment, investment expenses, and a profit and risk
component. The rate may never be less than 1.50% nor may it be reduced by more than 2.10% during
any calendar year. Interest rates are declared in advance and guaranteed for six month periods.
5. Plan Termination
Although it has not expressed any intention to do so, the Company has the right under the Plan to
discontinue its contributions at any time and to terminate the Plan subject to the provisions of
ERISA. In the event of Plan termination, each participant will become 100% vested in the value of
employer contributions (including earnings (losses) thereon), and all participant account balances
would be distributed based upon the value of the participants account balance on the termination
date.
6. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities, in general, are exposed
to various risks such as interest rate, credit and overall market volatility risk. Due to the
level of risk associated with certain investment securities, it is at least reasonably possible
that changes in the values of investment securities will occur in the near term and that such
changes could materially affect participants account balances and the amounts reported in the
statement of net assets available for benefits.
7. Income Tax Status
The Plan is a tax-qualified retirement plan under Code Section 401(a), with a qualified cash or
deferred arrangement under Code Section 401(k). The Plan is an adopted form of the PDS Tax
Qualified 401(k) Savings Plan and Trust Agreements Volume Submitter Plan (Volume Submitter Plan).
The Volume Submitter Plan obtained an opinion letter
from the IRS dated February 6, 2002, which stated that the language of the Volume Submitter Plan
was in compliance with the applicable requirements of the Code. The Plan received a determination
letter from the Internal Revenue Service dated January 10, 2006 covering changes in the adopted
Plan document that differ from the text of the Volume Submitter Plan.
13
Subsequent to this determination by the IRS, the Plan adopted various amendments and was also
restated effective January 1, 2009, and has made a request for a new determination letter from the
IRS. Once qualified, the Plan is required to operate in conformity with the Code to maintain its
qualified status. The Company believes that the Plan is currently being administered in compliance
with the applicable requirements of the Code and therefore believes the Plan, as amended and as
restated, is qualified and the related trust is tax exempt. Therefore, no provision for income
taxes has been included in the Plans financial statements.
8
.
Transactions with Parties-in-Interest
Transactions in shares of Hawk Corporation common stock qualify as party-in-interest transactions
under the provisions of ERISA for which a statutory exemption exists. At December 31, 2009 and
2008, the Plan held 76,743 and 82,468 shares of Hawk Corporation common stock, respectively,
representing 6.8% and 8.2%, respectively, of the total net assets of the Plan.
Certain Plan investments are units of pooled separate accounts and the GIF managed by Prudential.
Prudential Bank and Trust, an affiliate of Prudential, is the trustee as defined by the Plan, and
therefore these transactions qualify as party in interest transactions. Such transactions are
exempt from being prohibited transactions.
9. Subsequent Events
Effective February 1, 2010, the Plan was amended to allow eligible employees to irrevocably
designate that a portion or all of his or her future contributions and catch-up contributions be
treated as Roth 401(k) contributions. Roth 401(k) contributions are includable in a participants
taxable gross income for the year in which they are contributed to the Plan.
On March 1, 2010, the Plan reinstated the employer matching contribution at a rate equal to 50% of
the participants tax deferred contributions up to 6% of the participants eligible compensation,
as defined.
14
Hawk Corporation 401(k) Retirement Plan
Employer Identification Number: 34-1608156
Plan Number: 001
Schedule H, Line 4iSchedule of Assets (Held at End of Year)
December 31, 2009
|
|
|
|
|
|
|
Identity of Issue, Borrower, Lessor, or Similar Party/Description of
|
|
|
|
Investment Including Maturity Date, Rate of Interest, Collateral, Par or
|
|
|
|
Maturity Value
|
|
Current Value
|
|
*
|
|
Prudential Insurance Retirement and
Annuity Company Group Annuity
Contract:
|
|
|
|
|
|
|
Guaranteed Income Fund
|
|
$
|
5,775,581
|
|
|
|
Pooled Separate Accounts
|
|
|
|
|
|
|
Dryden
S&P 500 Index Fund
|
|
|
1,521,454
|
|
|
|
International Blend/Munder Capital Fund
|
|
|
397,655
|
|
|
|
Lifetime Aggressive Fund
|
|
|
474,116
|
|
|
|
Lifetime Growth Fund
|
|
|
1,593,207
|
|
|
|
Lifetime Balanced Fund
|
|
|
836,762
|
|
|
|
Lifetime Conservative Fund
|
|
|
455,699
|
|
|
|
Lifetime Income & Equity Fund
|
|
|
51,857
|
|
|
|
Large Cap Growth/Waddel & Reed Fund
|
|
|
922,881
|
|
|
|
Large Cap Value/AJO Fund
|
|
|
378,295
|
|
|
|
Mid Cap Value/Wellington Management Fund
|
|
|
405,612
|
|
|
|
Mid Cap Growth/Artisan Partners Fund
|
|
|
878,725
|
|
|
|
SA/OFII Global Strategy Fund
|
|
|
1,252,725
|
|
|
|
Small Cap Value/American Century Fund
|
|
|
303,087
|
|
|
|
Small Cap Growth/TimesSquare Fund
|
|
|
300,996
|
|
|
|
Core Bond Enhanced Index Fund
|
|
|
1,323,576
|
|
|
|
|
|
|
|
|
|
Total Pooled Separate Accounts
|
|
|
11,096,647
|
|
*
|
|
Hawk Corporation common stock
|
|
|
1,351,445
|
|
|
|
Mutual Funds:
|
|
|
|
|
|
|
Calamos Growth Fund A
|
|
|
1,147,541
|
|
|
|
Jennison Natural Resources Fund
|
|
|
66,633
|
|
|
|
|
|
|
|
|
|
Total Mutual Funds
|
|
|
1,214,174
|
|
*
|
|
Participant Loans (interest rates of 4.25%)
|
|
|
335,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,773,506
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Represents a party-in-interest to the Plan.
|
15
EXHIBIT INDEX
|
|
|
Exhibit 23.1
|
|
Consent of Independent Registered Public Accounting Firm
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons
who administer the employee benefit plan) have duly caused this annual report to be signed on their
behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
Date: June 18, 2010
|
HAWK CORPORATION 401(K) RETIREMENT PLAN
|
|
|
/s/ Thomas A. Gilbride
|
|
|
Thomas A. Gilbride
|
|
|
Plan Administrator
|
|
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