##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-33658
 Horsehead Holding Corp.
  
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    20-0447377
(I.R.S. Employer
Identification No.)4955 Steubenville Pike, Suite 405
Pittsburgh, Pennsylvania 15205
(Address of Principal Executive Offices, including Zip Code)
    
    (724) 774-1020
(Registrants Telephone Number, Including Area Code)
 
 þ o
  Large accelerated filer o
Accelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



TABLE OF CONTENTS
 PART I  Financial InformationItem 1.
    
    Financial StatementsConsolidated Balance Sheets as of June 30, 2008 (Unaudited) and December 31, 2007
    
    
    1Consolidated Statements of Income (Unaudited) for the three and six months ended June 30, 2008 and 2007
    
    
    2Consolidated Statement of Stockholders Equity (Unaudited) for the six months ended June 30, 2008
    
    
    3Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2008 and June 30, 2007
    
    
    4Notes to Consolidated Financial Statements (Unaudited) June 30, 2008
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    19PART II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    20Item 1A
    
    Risk Factors
    
    
    20Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3
    
    Defaults Upon Senior Securities
    
    
    20Item 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    20Item 5.
    
    Other Information
    
    
    20Item 6.
    
    Exhibits
    
    
    20
  EX-31.1EX-31.2EX-32.1
 CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
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PART IFINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 CONSOLIDATED BALANCE SHEETS   (Amounts in thousands, except per share amounts)
 June 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    68,981
    
    
    $
    76,169Accounts receivable, net of allowance of $348 and $459, respectively
    
    
    51,221
    
    
    
    51,473Inventories
    
    
    59,313
    
    
    
    69,918Prepaid expenses and other current assets
    
    
    42,320
    
    
    
    12,047Deferred income taxes
    
    
    688
    
    
    
    464Total current assets
    
    
    222,523
    
    
    
    210,071Property, plant and equipment, net
    
    
    110,974
    
    
    
    98,932Other assetsDeferred financing costs, net of amortization of $867 and $534, respectively
    
    
    1,332
    
    
    
    1,665Deferred income taxes
    
    
    3,905
    
    
    
    3,905Deposits and other
    
    
    232
    
    
    
    231Total other assets
    
    
    5,469
    
    
    
    5,801Total assets
    
    $
    338,966
    
    
    $
    314,804LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent maturities of long-term debt
    
    $
    61
    
    
    $
    60Accounts payable
    
    
    34,173
    
    
    
    37,458Accrued expenses
    
    
    23,707
    
    
    
    22,535Total current liabilities
    
    
    57,941
    
    
    
    60,053Long-term debt, less current maturities
    
    
    90
    
    
    
    121Other long-term liabilities
    
    
    11,511
    
    
    
    12,576Commitments and contingenciesStockholders equityCommon stock, par value $.01 per share; 100,000 shares authorized; 35,194 and 34,775
shares issued and outstanding in 2008 and 2007, respectively
    
    
    352
    
    
    
    348Preferred stock, par value $.01 per share; 10,000 shares authorized; no shares
issued or outstanding
    
    
    
    
    
    
    Additional paid-in capital
    
    
    128,311
    
    
    
    124,682Retained earnings
    
    
    140,761
    
    
    
    117,024Total stockholders equity
    
    
    269,424
    
    
    
    242,054Total liabilities and stockholders equity
    
    $
    338,966
    
    
    $
    314,804
 The accompanying notes to financial statements are an integral part of these statements.
 1




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CONSOLIDATED STATEMENTS OF INCOME    (Amounts in thousands except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales of zinc material and other goods
    
    $
    116,676
    
    
    $
    133,404
    
    
    $
    217,545
    
    
    $
    269,953EAF dust service fees
    
    
    13,847
    
    
    
    11,206
    
    
    
    27,426
    
    
    
    22,479Net sales
    
    
    130,523
    
    
    
    144,610
    
    
    
    244,971
    
    
    
    292,432Cost of sales of zinc material and other
goods (excluding depreciation)
    
    
    96,298
    
    
    
    98,820
    
    
    
    185,921
    
    
    
    194,213Cost of EAF dust services
    
    
    3,862
    
    
    
    1,307
    
    
    
    7,009
    
    
    
    2,846Cost of sales (excluding depreciation)
    
    
    100,160
    
    
    
    100,127
    
    
    
    192,930
    
    
    
    197,059Depreciation
    
    
    2,946
    
    
    
    2,381
    
    
    
    5,827
    
    
    
    4,944Selling, general and administrative expenses
    
    
    5,137
    
    
    
    4,644
    
    
    
    8,782
    
    
    
    8,054Total costs and expenses
    
    
    108,243
    
    
    
    107,152
    
    
    
    207,539
    
    
    
    210,057Income from operations
    
    
    22,280
    
    
    
    37,458
    
    
    
    37,432
    
    
    
    82,375Other income (expense)Interest expense
    
    
    (380
    )
    
    
    (3,000
    )
    
    
    (729
    )
    
    
    (5,617
    )Interest and other income
    
    
    491
    
    
    
    734
    
    
    
    1,149
    
    
    
    774111
    
    
    
    (2,266
    )
    
    
    420
    
    
    
    (4,843
    )Income before income taxes
    
    
    22,391
    
    
    
    35,192
    
    
    
    37,852
    
    
    
    77,532Income tax provision
    
    
    8,524
    
    
    
    12,835
    
    
    
    14,115
    
    
    
    28,272NET INCOME
    
    $
    13,867
    
    
    $
    22,357
    
    
    $
    23,737
    
    
    $
    49,260Earnings per common share:Basic
    
    $
    0.40
    
    
    $
    0.84
    
    
    $
    0.68
    
    
    $
    2.03Diluted
    
    $
    0.39
    
    
    $
    0.75
    
    
    $
    0.67
    
    
    $
    1.68Weighted average shares outstanding:Basic
    
    
    35,062
    
    
    
    26,586
    
    
    
    34,941
    
    
    
    24,319Diluted
    
    
    35,280
    
    
    
    29,938
    
    
    
    35,222
    
    
    
    29,399
 The accompanying notes to financial statements are an integral part of these statements.
 2




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CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY    (Amounts in thousands)
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalance at January 1, 2008
    
    
    34,775
    
    
    $
    348
    
    
    $
    124,682
    
    
    $
    117,024
    
    
    $
    242,054Stock option exercise
    
    
    419
    
    
    
    4
    
    
    
    940
    
    
    
    
    
    
    
    944Restricted stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    181Stock option compensation
expense
    
    
    
    
    
    
    
    
    
    
    673
    
    
    
    
    
    
    
    673Tax benefit of stock
option exercise
    
    
    
    
    
    
    
    
    
    
    1,835
    
    
    
    
    
    
    
    1,835Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,737
    
    
    
    23,737Balance at June 30, 2008
    
    
    35,194
    
    
    $
    352
    
    
    $
    128,311
    
    
    $
    140,761
    
    
    $
    269,424
 The accompanying notes to financial statements are an integral part of these statements
 3




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CONSOLIDATED STATEMENTS OF CASH FLOWS    (Amounts in thousands)
 2008
    
    
    2007Cash Flows from Operating Activities:Net income
    
    $
    23,737
    
    
    $
    49,260Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    6,160
    
    
    
    6,258Deferred income tax (benefit)
    
    
    (224
    )
    
    
    (250
    )Deferred interest payable
    
    
    
    
    
    
    258(Gains) losses on derivative financial instruments
    
    
    (15,886
    )
    
    
    1,762Non-cash compensation expense
    
    
    854
    
    
    
    634Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    252
    
    
    
    4,519Decrease (increase) in inventories
    
    
    10,605
    
    
    
    (3,652
    )(Increase) decrease in prepaid expenses and other current assets
    
    
    (14,365
    )
    
    
    914(Increase) in other assets
    
    
    (1
    )
    
    
    (Decrease) in accounts payable
    
    
    (3,285
    )
    
    
    (2,692
    )Increase (decrease) in accrued expenses net of tax benefit of stock option exercise
    
    
    1,150
    
    
    
    (4,642
    )(Decrease) increase in other non-current liabilities
    
    
    (1,065
    )
    
    
    131Net cash provided by operating activities
    
    
    7,932
    
    
    
    52,500Cash Flows from Investing Activities:Purchase of property, plant and equipment
    
    
    (17,869
    )
    
    
    (16,603
    )Net cash (used in) investing activities
    
    
    (17,869
    )
    
    
    (16,603
    )Cash Flows from Financing Activities:Proceeds from exercise of options
    
    
    944
    
    
    
    194Net proceeds from issuance of stock
    
    
    
    
    
    
    174,258Purchase of stock from investors
    
    
    
    
    
    
    (152,558
    )Tax benefit of stock option exercise
    
    
    1,835
    
    
    
    Net (payments on) revolving credit facility
    
    
    
    
    
    
    (14,398
    )Payments on notes payable and long-term debt
    
    
    (30
    )
    
    
    (33,705
    )Net cash provided by (used in) financing activities
    
    
    2,749
    
    
    
    (26,209
    )Net (Decrease) Increase In Cash And Cash Equivalents
    
    
    (7,188
    )
    
    
    9,688Cash and cash equivalents at beginning of period
    
    
    76,169
    
    
    
    958Cash and cash equivalents at end of period
    
    $
    68,981
    
    
    $
    10,646
 The accompanying notes to financial statements are an integral part of these statements.
 4




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NOTE ABASIS OF PRESENTATION
   NOTE BRECENTLY ISSUED ACCOUNTING STANDARDS
 Disclosures about Derivative Instruments and Hedging Activitiesan
amendment of FASB Statement No. 133
 NOTE CINVENTORIES
  June 30,
    
    
    December 31,2008
    
    
    2007Raw materials
    
    $
    20,635
    
    
    $
    28,095Work-in-process
    
    
    4,115
    
    
    
    1,258Finished goods
    
    
    23,644
    
    
    
    30,866Supplies and spare parts
    
    
    10,919
    
    
    
    9,699$
    59,313
    
    
    $
    69,918
  5




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NOTE DPROPERTY, PLANT AND EQUIPMENT
  June 30,
    
    
    December 31,2008
    
    
    2007Land and land improvements
    
    $
    8,179
    
    
    $
    7,598Buildings and building improvements
    
    
    21,821
    
    
    
    21,357Machinery and equipment
    
    
    99,613
    
    
    
    62,326Construction in progress
    
    
    19,442
    
    
    
    39,905149,055
    
    
    
    131,186Less accumulated depreciation
    
    
    (38,081
    )
    
    
    (32,254
    )$
    110,974
    
    
    $
    98,932
 NOTE ENOTES PAYABLE AND LONG-TERM DEBT
    NOTE FACCRUED EXPENSES
  June 30,
    
    
    December 31,2008
    
    
    2007Employee related costs
    
    $
    10,766
    
    
    $
    8,900EAF dust processing reserve
    
    
    3,272
    
    
    
    1,695Insurance claim liabilities
    
    
    2,800
    
    
    
    2,800Other
    
    
    6,869
    
    
    
    9,140$
    23,707
    
    
    $
    22,535
 NOTE GINCOME TAXES
   6




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NOTE HSTOCK-BASED COMPENSATION
        7




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NOTE IACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
        Fair Value Measurements Using Significant Other Observable Inputs (Level 2)
 Description
    
    June 30, 2008
    
    
    December 31, 2007Put options and swaps included in Prepaid expenses and other assets
    
    $
    39,995
    
    
    $
    9,871Swaps included in Accrued expenses
    
    $
    779
    
    
    $
    757
  8




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NOTE JCONTINGENCIES
   NOTE KEARNINGS PER SHARE
   Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Basic earnings per share:Net income
    
    $
    13,867
    
    
    $
    22,357
    
    
    $
    23,737
    
    
    $
    49,260Weighted average shares outstanding  basic
    
    
    35,062
    
    
    
    26,586
    
    
    
    34,941
    
    
    
    24,319Basic earnings per share
    
    $
    0.40
    
    
    $
    0.84
    
    
    $
    0.68
    
    
    $
    2.03Diluted earnings per share:Net income
    
    $
    13,867
    
    
    $
    22,357
    
    
    $
    23,737
    
    
    $
    49,260Weighted average shares outstanding 
diluted
    
    
    35,280
    
    
    
    29,938
    
    
    
    35,222
    
    
    
    29,399Diluted earnings per share
    
    $
    0.39
    
    
    $
    0.75
    
    
    $
    0.67
    
    
    $
    1.68Reconciliation of average shares
outstanding  basic to average shares
outstanding  diluted:Weighted average shares outstanding  basic
    
    
    35,062
    
    
    
    26,586
    
    
    
    34,941
    
    
    
    24,319Effect of dilutive securities:Options
    
    
    208
    
    
    
    874
    
    
    
    276
    
    
    
    884Restricted stock units
    
    
    10
    
    
    
    
    
    
    
    5
    
    
    
    Warrants
    
    
    
    
    
    
    2,478
    
    
    
    
    
    
    
    4,196Weighted average shares outstanding 
diluted
    
    
    35,280
    
    
    
    29,938
    
    
    
    35,222
    
    
    
    29,399
  9




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 General
  Overview
 Our History
   Factors Affecting Our Operating Results
 Market Price for Zinc
 Demand for Zinc-Based Products
 10




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Volumes
    
    U.S. Sales/Unit2007
    
    2006
    
    2005
    
    2007
    
    2006
    
    2005(Tons, in thousands)
    
    (In whole dollars)Product:Zinc Products
    
    
    153
    
    
    
    158
    
    
    
    165
    
    
    $
    3,104
    
    
    $
    2,750
    
    
    $
    1,284EAF Dust
    
    
    458
    
    
    
    504
    
    
    
    498
    
    
    $
    99
    
    
    $
    101
    
    
    $
    94
 Cost of Sales (excluding depreciation)
 Selling, General and Administrative Expenses
 Trends Affecting Our Business
  
    
    LME price of zinc;
    
    changes in cost of energy and fuels;
    
    gain and loss of customers;
    
    pricing pressures from competitors;
    
    new entrants into the EAF dust recycling market;
    
    decline in use of zinc products;
    
    expansions into new products and expansion of our capacity, which requires us to
incur costs prior to generating revenues;
    
    expenditures required to comply with environmental and other operational
regulations; and
    
    our operational efficiency improvement programs.
  11




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Summary of Critical Accounting Policies and Estimates
  Inventories
   Financial Instruments
   12




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Recently Issued Accounting Pronouncements
 Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133
 Results of Operations
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales (excluding depreciation)
    
    
    76.7
    
    
    
    69.2
    
    
    
    78.7
    
    
    
    67.4Depreciation
    
    
    2.3
    
    
    
    1.7
    
    
    
    2.4
    
    
    
    1.7Selling, general and administrative expenses
    
    
    3.9
    
    
    
    3.2
    
    
    
    3.6
    
    
    
    2.7Income from operations
    
    
    17.1
    
    
    
    25.9
    
    
    
    15.3
    
    
    
    28.2Interest expense
    
    
    0.3
    
    
    
    2.1
    
    
    
    0.3
    
    
    
    1.9Interest and other income
    
    
    0.3
    
    
    
    0.5
    
    
    
    0.5
    
    
    
    0.2Income before income taxes
    
    
    17.1
    
    
    
    24.3
    
    
    
    15.5
    
    
    
    26.5Income tax provision
    
    
    6.5
    
    
    
    8.8
    
    
    
    5.8
    
    
    
    9.7Net income
    
    
    10.6
    %
    
    
    15.5
    %
    
    
    9.7
    %
    
    
    16.8
    %
  2006
    
    
    
    
    
    2007
    
    
    
    
    
    2008Fiscal quarter ended
    
    Fiscal quarter ended
    
    Fiscal quarter endedAverage LME zinc price
    
    December 31
    
    March 31
    
    June 30
    
    December 31
    
    March 31
    
    June 30Quarter
    
    $
    1.91
    
    
    $
    1.57
    
    
    $
    1.66
    
    
    $
    1.19
    
    
    $
    1.10
    
    
    $
    0.96Year-to-date
    
    $
    1.49
    
    
    $
    1.57
    
    
    $
    1.61
    
    
    $
    1.47
    
    
    $
    1.10
    
    
    $
    1.03
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Three Months Ended June 30, 2008 Compared with Three Months Ended June 30, 2007
 Net sales.
      Cost of sales (excluding depreciation).
 14




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Depreciation
 Selling, general and administrative expenses.
 Interest expense.
  Income tax provision.
 Net income.
 Six Months Ended June 30, 2008 Compared with Six Months Ended June 30, 2007
 Net sales.
 15




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Cost of sales (excluding depreciation).
   16




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Depreciation
 Selling, general and administrative expenses.
 Interest expense.
  Income tax provision.
 Net income.
 Liquidity and Capital Resources
  Cash Flows from Operating Activities
   Cash Flows from Investing Activities
  17




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Cash Flows from Financing Activities
  Off-Balance Sheet Arrangements
  Available Information
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
   Interest Rate Risk
  Commodity Price Risk
  18




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Item 4 and 4T. Controls and Procedures.
   Changes in Internal Control over Financial Reporting
  19




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PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 Change in Securities.
 a. Recent Sales of Unregistered Securities:
  Use of Proceeds from Registered Securities.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  Name
    
    Number of Votes For
    
    Number of Votes WithheldJohn van Roden
    
    
    27,231,609
    
    
    
    403,519Jack Shilling
    
    
    27,238,724
    
    
    
    396,404
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
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Exhibit No.
    
    Description31.1
    
    Certification by James M. Hensler, Chief Executive Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Robert D. Scherich, Chief Financial Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  HORSEHEAD HOLDING CORP./s/ James M. HenslerBy:
    James M. HenslerIts:
    President and Chief Executive Officer  SIGNATURE
    
    TITLE
    
    DATE/s/ James M. Hensler

James M. Hensler
    
    Principal
Executive Officer
    
    August 14, 2008/s/ Robert D. Scherich

Robert D. Scherich
    
    Principal Financial and
Accounting Officer
    
    August 14, 2008
 22