UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





ANNUAL
REPORT


PURSUANT
TO SECTIONS 13 OR 15(d)


OF
THE SECURITIES EXCHANGE ACT OF 1934






xANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
fiscal year ended December 31, 2007


OR




oTRANSITION REPORT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the
transition period from __________ to __________





Commission
file number 1-2394





WHX
CORPORATION


(Exact
Name of Registrant as Specified in its Charter)





DELAWARE
              
              13-3768097(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)1133
      Westchester Avenue
              
              10604White Plains, New
      York
              
              (Zip
      code)(Address
      of principal executive offices)


Registrant's
telephone number, including area code:  914-461-1350





Securities
registered pursuant to Section 12(b) of the Act:




Name
      of each exchange onTitle of each
      class
              
              which
      registeredCommon
      Stock, $.01 par value




Securities registered pursuant to
Section 12 (g) of the Act: None





o x




o x




x o




o








Large
      accelerated filer  o
              Accelerated
      filer  o
              Non-accelerated
      filer  o
              Smaller
      Reporting Company  x


o x








x o




















TABLE OF CONTENTS
 Item
              
              
              
              PagePART IItem
      1.
              
              Business
              
              1Item
      1A.
              
              Risk Factors
              
              6Item
      2.
              
              Properties
              
              13Item
      3.
              
              Legal Proceedings
              
              13Item
      4.
              
              Submission of Matters to a Vote of Security
      Holders
              
              17PART IIItem
      5.
              
              Market for Registrant’s Common Equity and
      Related Matters
              
              18Item
      7.
              
              Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
              
              18Item
      8.
              
              Financial Statements and Supplementary
      Data
              
              37Item
      9.
              
              Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure
              
              86Item
      9A.
              
              Controls and Procedures
              
              86PART IIIItem
      10.
              
              Directors and Executive Officers of
      the Company
              
              88Item
      11.
              
              Executive Compensation
              
              90Item
      12.
              
              Security Ownership of Certain Beneficial Owners
      and Management
              
              96Item
      13.
              
              Certain Relationships and Related
      Transactions
              
              99Item
      14.
              
              Principal Accountant Fees and
      Services
              
              99PART
      IVItem
      15.
              
              Exhibits and Financial Statement
      Schedules
              
              100
 Table of Contents


Item
1.   Business





The
Company





WHX
Corporation





WHX
Corporation (“WHX”), the parent company, is a holding company that invests in
and manages a group of businesses on a decentralized basis.  WHX owns
Handy & Harman (“H&H”), which is a diversified manufacturing company
whose strategic business units encompass three reportable segments: Precious
Metal, Tubing, and Engineered Materials.  In April 2007, WHX acquired
Bairnco Corporation (“Bairnco”).  Bairnco operates business units in
three reportable segments: Arlon Electronic Materials (“Arlon EM”), Arlon Coated
Materials (“Arlon CM”), and Kasco
Replacement Products and Services (“Kasco”).  H&H
and Bairnco principally operate in North America.WHX, together
with all of its subsidiaries, shall be referred to herein as the
“Company”.





Products
and Product Mix





H&H
Precious Metal Segment




H&H’s
Precious Metal activities include the fabrication of precious metal and their
alloys into brazing alloys and the utilization of precious metal in precision
electroplating. The Company’s brazing alloys are used to join most common metals
as well as specialty metals with strong, hermetic joints.  The Company
offers a wide variety of these metal joining products, including gold, silver,
palladium, copper, nickel, and aluminum based materials.  These
brazing alloys are fabricated into a variety of engineered forms and are used in
many industries including automotive, air conditioning, general industrial and
other metal-joining industries.  H&H is also engaged in precision
electroplating (often using gold, silver, palladium and various base metals) of
electronic and electrical components primarily for use in the automotive
industry. H&H’s profits from precious metal products are principally derived
from the “value added” of processing and fabricating and not from the purchase
and resale of precious metal.  In accordance with general practice in
the industry, prices to customers are principally a composite of two factors:
(1) the value of the precious metal content of the product and (2) the
“fabrication value”, which includes the cost of base metals, labor, overhead,
financing and profit.




H&H
Tubing Segment




H&H
manufactures a wide variety of steel tubing products.  The Stainless
Steel Tubing Group manufactures small-diameter precision-drawn seamless tubing
both in straight lengths and coils.  The Stainless Steel Tubing
Group’s capabilities in long continuous drawing of seamless stainless steel
coils allow the Group to serve the petrochemical infrastructure and shipbuilding
markets.   The Stainless Steel Tubing Group also produces
products for use in the medical, semiconductor fabrication, aerospace and
instrumentation industries.   The Specialty Tubing Group
manufactures welded carbon steel tubing in straight lengths and coils with a
primary focus on products for the refrigeration and automotive
industries.  In addition to producing bulk tubing, the Specialty
Tubing Group also produces value added products for the appliance market by
fabricating tubing into condensers for refrigerators and freezers.





H&H
Engineered Materials Segment




The
H&H Engineered Materials Segment supplies products to the construction and
building industries. H&H manufactures fasteners and fastening systems for
the commercial flat roofing industry.  Products are sold to building
and roofing distributors and as private labels to roofing systems manufacturers.
A line of specialty fasteners is produced for the building products industry for
fastening applications in log homes, landscaping, masonry, and wood
decks.  H&H also manufactures plastic and steel fittings and
connectors for natural gas and water distribution service lines along with
exothermic welding products for electrical grounding, cathodic protection, and
lightning protection.   In addition, H&H manufactures
electro-galvanized steel products primarily for the construction
industry.




Arlon
Electronic Materials Segment




Arlon
EM's principal products include high performance materials for the printed
circuit board industry and silicone rubber-based insulation materials used in a
broad range of industrial, military/aerospace, consumer and commercial
markets.




Arlon
supplies high technology materials to the printed circuit board (“PCB”)
industry.  Arlon products are marketed principally to original
equipment manufacturers (“OEMs”) and PCB manufacturers by a direct technical
sales force, as well as distributors in the United States, and through
distributors and manufacturer’s representatives in Europe, the Middle East, and
Asia-Pacific, supported by direct technical sales
specialists.  Arlon’s conventional laminates product line includes a
wide variety of specialty polyimide and epoxy laminates and bonding films, as
well as other high performance thermoset laminates.  These materials
are used in demanding commercial and military market applications including high
density interconnect, surface mount technology, heat sink bonding, semiconductor
testing, wireless communications and microvia PCBs.  The microwave and
radio frequency product area offers fluoropolymers (i.e. polytetrafluorethylene
(“PTFE”)), ceramic-filled fluoropolymers, and other non-PTFE laminates that
deliver the electrical
performance needed in frequency-dependent circuit applications such as analog,
digital and personal communication systems, high frequency military electronics,
microwave antennas and base stations.  These products are supplied as
copper-clad laminates with bonding plies or prepregs for production of
multi-layer printed circuits. Table of Contents


Arlon
also manufactures a line of silicone rubber materials used in a broad range of
military, consumer, industrial and commercial products.  Typical
applications and products include: silicone bagging materials for producing
composite parts; silicone insulating tapes for electric traction motor coil
windings; insulation materials for industrial and commercial flexible heaters;
silicone materials for high temperature hose and duct markets; insulating tape
for medium and high voltage electrical splices and self-fusing tapes for a
variety of industrial and commercial applications; as well as compliant,
thermally or electrically conductive silicone film adhesives known as
ThermabondTM for heat sink-bonding to printed circuit boards.




Arlon
Coated Materials Segment




Arlon
CM's principal products include adhesive coated cast and calendared vinyl films,
cast vinyl fabric, custom-engineered laminates, and coated and laminated films,
foils, foams and papers used in a broad range of industrial, consumer and
commercial products.




Arlon
specialty graphic films are marketed under the Arlon, Calon® and MIITM brand
names and include cast and calendared vinyl films that are manufactured in a
wide variety of colors, face stocks and adhesive systems.  These vinyl
films are used in commercial and electrical signage, point of purchase displays,
highway signage, fleet markings, and other commercial advertising
applications.  Arlon also manufactures laminated vinyl fabrics for
corporate identity programs.  These products are marketed under the
Signtech® brand name and complement the Calon® specialty graphic
films.




Arlon
manufactures and markets custom-engineered laminates and coated
products.  Typical applications include insulating foam tapes for
thermopane windows, specialty flexible circuit materials, electrical insulation
materials for motors and transformers, thermal insulation panels for appliances
and cars, durable printing stock, transfer adhesives used in industrial
assembly, and single and double-coated foam and film tapes and other custom
engineered laminates for specific industrial applications.




Kasco
Replacement Products and Services Segment




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




Kasco’s
products and services are sold under a number of brand names including Kasco
Corporation and Atlanta Sharptech in the United States and Canada, Atlantic
Service Co. in the United Kingdom and Canada, Bertram & Graf in Germany, and
Biro France and EuroKasco in France.




Recent
Developments




Acquisition
of Bairnco





On April
12, 2007, WHX and Steel Partners II, L.P. (“Steel Partners”), which beneficially
owns approximately 50.3% of WHX’s outstanding common stock, entered into a Stock
Purchase Agreement whereby WHX acquired Steel Partners’ entire interest in BZ
Acquisition Corp. (“BZA”), a wholly owned subsidiary of Steel Partners for
$10.00.  BZA was the acquisition subsidiary in a tender offer to
acquire up to all of the outstanding stock of Bairnco for $13.50 per share in
cash.  WHX also agreed to reimburse all reasonable fees and expenses
incurred by Steel Partners in connection with the Offer and the Merger (each as
defined below).




On
February 23, 2007, Steel Partners, BZA and Bairnco entered into an Agreement and
Plan of Merger (the “Merger Agreement”), pursuant to which BZA amended its
tender offer to acquire all of the outstanding common shares of Bairnco at a
price of $13.50 per share in cash (the “Offer”).  On April 13, 2007,
upon the expiration of the Offer pursuant to the Merger Agreement, BZA acquired
approximately 88.9% of the outstanding common stock of Bairnco.




Pursuant
to the Merger Agreement, on April 24, 2007, BZA merged with and into Bairnco
with Bairnco continuing as the surviving corporation as a wholly owned
subsidiary of WHX (the “Merger”).  At the effective time of the
Merger, each Bairnco common share then outstanding (other than shares owned by
BZA or its direct parent entity, shares owned by Bairnco as treasury stock and
shares held by stockholders who properly exercised their appraisal rights) was
automatically converted into the right to receive $13.50 per share in cash
without interest and subject to applicable withholding taxes.  The
proceeds required to fund the closing of the Offer and the resulting
Merger and to pay related fees and expenses were approximately $101.5
million.  In connection with the closing of the Offer, initial
financing was provided by Steel Partners through two credit
facilities.  One of the initial financing facilities was refinanced on
July 18, 2007.







2
 Table of Contents




We refer
to the Offer and the Merger as the “Bairnco Acquisition”.   WHX
believes that the Bairnco Acquisition will be beneficial because of Bairnco’s
strong positions in its three business segments, and that Bairnco’s plant level
operations, profit margins and working capital can be improved.




Other
Events




On
October 18, 2007, WHX filed a registration statement on Form S-1 with the
Securities and Exchange Commission (“SEC”) for a rights offering to its existing
stockholders, and subsequently filed amendments thereto dated November 30, 2007
and December 21, 2007.  The rights offering will be made through the
distribution of non-transferable subscription rights to purchase shares of WHX’s
common stock, par value $0.01 per share, at a subscription price to be
determined.  Assuming the rights offering is fully subscribed, WHX
could receive gross proceeds of approximately $200 million, less expenses of the
rights offering.  The registration statement has been subsequently amended
but has not yet become effective.





The
rights offering includes an oversubscription privilege which permits each rights
holder, that exercises its rights in full, to purchase additional shares of
common stock that remain unsubscribed at the expiration of the
offering.  This oversubscription privilege is subject to (i) the
availability and allocation of shares among persons exercising this
oversubscription privilege and (ii) a maximum number of shares for which
stockholders can oversubscribe for without endangering the availability of the
Company’s net operating loss carry forwards (“NOLs”) under Section 382 of the
Internal Revenue Code, in each case as further described in the rights offering
documents.





Steel
Partners has indicated that it intends to exercise all of its rights and to
oversubscribe for the maximum number of shares it can oversubscribe for without
(i) endangering the availability of the Company’s NOLs or (ii) increasing its
ownership to in excess of 75% of the outstanding shares of WHX’s common
stock.





The
purpose of this rights offering is to raise equity capital in a cost-effective
manner that gives all WHX’s stockholders the opportunity to
participate.  The net proceeds will be used to (i) make partial
payments to certain senior lenders to certain wholly-owned subsidiaries of WHX
and/or to contribute to the working capital of such subsidiaries, (ii) redeem
preferred stock which is held by Steel Partners, and was issued by a
wholly-owned subsidiary of WHX, (iii) to purchase shares of common stock of
CoSine Communications, Inc. from Steel Partners, (iv) to repay WHX indebtedness
to Steel Partners, and (v) to repay indebtedness of  wholly-owned
subsidiaries of WHX to Steel Partners.





WHX has
an agreement in principle with Steel Partners to acquire 2,631,384 shares of
common stock of CoSine Communications, Inc. for an aggregate purchase price of
approximately $5.9 million.  The transaction is anticipated to close
immediately following the closing of the rights offering discussed
above.




Business
Strategy




Our
business strategy is to enhance the growth and profitability of H&H and
Bairnco and to build upon the strengths of certain of H&H and Bairnco’s
businesses through internal growth and strategic acquisitions.




We expect
H&H to continue to focus on high margin products and innovative technology,
while limiting its exposure to low margin, capital-intensive
businesses.  As part of that strategy, in 2007 we sold certain assets
of our Handy & Harman Electronic Materials Corporation subsidiary located in
East Providence, Rhode Island, as well as certain assets and inventory located
in Malaysia (collectively referred to as "HHEM"); in 2006 we closed the
Norristown, Pennsylvania location (the “Norristown facility”) of H&H Tube
Co. (“H&H Tube”), and in 2005, closed H&H’s wire and cable operations
due to continuing operating losses, deteriorating margins and rising raw
material costs experienced by these businesses.  H&H focuses on
its materials engineering expertise to expand production of higher value-added
products.  Bairnco is focusing each of its business units on lean
manufacturing while at the same time continuing to invest in marketing and
product development to grow new product and service revenues.





We
continue to evaluate the sale of non-core assets and certain underperforming
businesses, as well as strategic acquisitions.  WHX has provided, and
may provide from time to time in the future, information to interested parties
regarding portions of its non-core assets and businesses for such
purposes.







3
 Table of Contents





Customers




H&H
is diversified across industrial markets and customers.  H&H sells
to customers in the construction, electronics, telecommunications, home
appliance OEM, transportation, utility, medical, semiconductor, aerospace and
general manufacturing industries.  In 2007 and 2006 , no customer
accounted for more than 5% of H&H’s sales.




Bairnco’s
Arlon Em and Arlon CM segments sell to customers in a broad range of industries
where material performance is critical to the success of the end application,
including military electronics, medical and aerospace technologies,
telecommunications, automotive and semiconductor markets, railroad and aviation
markets, and the signage industry.  Bairnco’s Kasco segment provides
meat-room products and maintenance services for the food industry.  No
customer of Bairnco accounted for more than 5% of its sales during 2007 or 2006,
respectively.




No
customer accounted for more than 5% of consolidated sales for 2007or 2006,
respectively.




Foreign
Revenues




The
following table presents revenue for the years ended
December 31.




Revenue2007
              
              
              2006
              
              
              2005(in
      thousands)United
      States
              
              $
              562,562
              
              
              $
              417,866
              
              
              $
              371,216Foreign
              
              
              75,304
              
              
              
              43,097
              
              
              
              32,599$
              637,866
              
              
              $
              460,963
              
              
              $
              403,815




Foreign
revenue is based on the country in which the legal subsidiary is
domiciled.




Raw
Materials




H&H




The raw
materials used by H&H in its Precious Metal operations consist principally
of silver, gold, copper, zinc, nickel, tin, and the platinum group metals in
various forms.  H&H purchases its precious metal at market prices
from primary producers, bullion dealers, or in the form of scrap.  The
prices of silver, gold, and palladium are subject to fluctuations and are
expected to continue to be affected by world market
conditions.  Nonetheless, H&H has not experienced any significant
problem in obtaining the necessary quantities of raw materials.  To
the extent that supplier or customer metals are used by H&H, the amount of
inventory which H&H owns is generally reduced.  Precious metal raw
materials are readily available from several sources.  Precious metals
are purchased in quantities commensurate with customer orders.




The raw
materials used by H&H in its non-precious metal operations consist
principally of stainless, galvanized, and carbon steel, nickel alloys, a variety
of high-performance alloys, and various plastic compositions.  H&H
purchases all such raw materials at open market prices from domestic and foreign
suppliers.  H&H has not experienced any significant problem in
obtaining the necessary quantities of raw materials.  Prices and
availability, particularly of raw materials purchased from foreign suppliers,
are affected by world market conditions and government policies.  The
raw materials used by H&H in its non-precious metal operations are generally
readily available from more than one source.




Bairnco




The
essential raw materials used in Arlon EM and Arlon CM segments are silicone
rubber, fiberglass cloth, pigments, copper foil, aluminum and Alloy 600 foil,
polyethylene foam and various plastic films, special papers and release liners,
vinyl resins, various adhesives and solvents, TeflonTM or PTFE resin, polyimide
resin, epoxy resins, other thermoset resins, as well as, various
chemicals.  Generally, these materials are each available from several
qualified suppliers.  There are, however, several raw materials used
in products that are purchased from chemical companies that are proprietary in
nature.  Other raw materials are purchased from a single approved
vendor on a “sole source” basis, although alternative sources could be developed
in the future if necessary.  However, the qualification procedure can
take several months or longer and could therefore interrupt production if the
primary raw material source became unexpectedly unavailable.  Current
suppliers are located in the United States, Asia, and Europe.







4
 Table of Contents





Regarding
the Kasco segment, high quality carbon steel and stainless steel are the
principal raw materials used in the manufacture of band saw blades; they are
purchased from multiple domestic and international suppliers.  Tool
steel is utilized in manufacturing meat grinder plates and knives and is
purchased from qualified suppliers located in the United States, Europe and
Japan.  Equipment, replacement parts, and supplies are purchased from
a number of manufacturers and distributors in Asia, the United States, and
Europe.  In France and Canada, certain specialty equipment and other
items used in the supermarket industry and in the food processing industry are
purchased and resold under exclusive distributorship agreements with the
equipment manufacturers.  All of the raw materials and purchased
products utilized by this segment have been readily available throughout this
last year.




Capital
Investments




The
Company believes that its business segments must continuously strive to improve
productivity and product quality, and control and/or reduce manufacturing costs,
in order to remain competitive.  Accordingly, H&H’s business
segments expect to continue to incur capital investments that reduce overall
manufacturing costs, improve the quality of products produced, and broaden the
array of products offered to the several markets H&H serves, as well as
replace equipment as necessary to maintain compliance with environmental, health
and safety laws and regulations.  H&H’s capital expenditures for
2007, 2006 and 2005 for continuing operations were $7.1 million, $7.7 million
and $20.4 million, respectively.  A major capital project in 2005 and
2006 consisted of establishing a carbon tubing facility for the refrigeration
and automotive markets in Mexico.  Approximately $10.0 million of the
2005 exepnditures related to a plant expansion at H&H’s fastener
facility in Agawam, MA.  The level of capital expenditure in 2007 and prior
were needed to expand and maintain productive capacity, improve productivity and
upgrade selected facilities to meet competitive requirements and maintain
compliance with environmental health and safety laws and
regulations.  H&H anticipates funding its capital expenditures in
2007 from funds generated by operations and borrowed funds.  H&H
anticipates its capital expenditures will approximate depreciation, on average,
and may approximate between $10 to $12 million per year for the next few
years.




Bairnco
made capital expenditures of $3.1 million during the period from the acquisition
date, April 13, 2007, through December 31, 2007 ($4.9 million for the full year
2007), $8.7 million in 2006 and $7.3 million in 2005.  The capital
expenditures were focused on equipment replacements, expenditures associated
with a new China manufacturing facility, and the implementation of Bairnco’s new
information systems software.  Total capital expenditures are expected
to be less than depreciation over the next three years, and may approximate
between $4.0 and $7.0 million per year.  These capital expenditures
are associated with ongoing cost reduction initiatives and necessary equipment
replacements.




Energy
Requirements




H&H
and Bairnco both require significant amounts of electricity and natural gas to
operate their facilities and are subject to price changes in these
commodities.  A shortage of electricity or natural gas, or a
government allocation of supplies resulting in a general reduction in supplies,
could increase costs of production and could cause some curtailment of
production.




Employment




As of
December 31, 2007, the Company employed 2,552 employees worldwide.  Of
these employees, 593 were office employees, 676 were covered by collective
bargaining agreements and 1,283 were non-union operating employees.




Competition




There are
many companies, both domestic and foreign, which manufacture tubing products,
and other specially engineered products of the type H&H
manufactures.  There are also a number of competitors in each of the
classes of precious metal products we sell.  Some of these competitors
are larger than we are and have financial resources greater than we
do.  Some of these competitors enjoy certain other competitive
advantages, including greater name recognition; greater financial, technical,
marketing and other resources; a larger installed base of customers; and
well-established relationships with current and potential
customers.  Competition is based on quality, technology, service, and
price and in some industries, new product introduction, each of which is
important.




There are
numerous competitors ranging in size from small, sole proprietorships to units
of very large, multinational corporations that in certain instances have far
greater market positions and financial resources than the Company’s Arlon EM
segment and CM segment.




Competition
for Arlon’s products varies by product line and type of
customer.  Competition for established lines is usually based on one
or more elements such as specification position, lead time, price, product
performance, or technical support and customer service.  It may also
be based on the ability to service emerging technologies through the custom
design of new products, or redesign of existing products, as well as the
development of materials for new applications.  As an example, for
some high performance materials sold to the printed circuit board industry, the
consistent technical performance of the materials supplied in excess of
specified standards can be the critical competitive element.  In
addition, Arlon sells a significant portion of its circuit board materials into
the Far East and European markets where local producers of similar materials
have a competitive advantage related to their geographic location.







5
 Table of Contents





Since
2000, the market environment for Kasco has been difficult due to market
contraction through retail consolidation and the industry’s shift to “Case
Ready” meat product offerings.  Kasco has responded by diversifying
into repair and maintenance services for the food service and retail grocery
industries, and by globally sourcing and effectively distributing high quality
and competitively priced butcher supplies and equipment.  During 2007,
Kasco completed the integration of Kasco and Atlanta SharpTech (which business
it acquired in late 2006), and continued to diversify and expand its repair
services business and butcher supplies distribution business.




Distribution




The
businesses comprising the Company’s Precious Metal segment distribute their
products directly to customers through Company sales personnel, although certain
products are distributed through independent distributors throughout the United
States and Canada.  The products manufactured by the Company’s Tubing
segment are principally sold directly to customers through Company sales
personnel and the remainder is sold through manufacturers’ representatives and
distributors.  Most of the Company’s products comprising the
Engineered Materials segment are sold directly to customers through Company
sales personnel and the remaining sales are made by agents and manufacturers’
representatives.




Arlon EM
and Arlon CM products are marketed by Company sales personnel, outside sales
representatives and distributors in North and South America, Europe, Australia,
the Far East and several other international markets.  Kasco has a
distribution network that reaches over 30,000 retail grocery stores,
restaurants, delis, equipment distributors, and processing plants in the US,
Canada, Europe, South America and Asia.  Kasco’s distribution network
is made up of corporate-direct salesmen, route salesmen, repair service
technicians, and distributors who have knowledge of the local markets and the
customer’s needs.




Patents
and Trademarks




The
Company owns patents and several registered trademarks under which certain of
its products are sold.  In addition, the Company owns a number of US
and foreign mechanical patents related to several of its products, as well as a
number of design patents and registered trademarks.  The Company does
not believe that the loss of any or all of these trademarks would have a
material adverse effect on its businesses.  The Company’s material
patents have durations ranging from 16 to 22 years, with expiration dates
occurring in 2009 through 2025.




Prior
Operations





WHX’s
other business through August 1, 2003, consisted of Wheeling-Pittsburgh
Corporation (“WPC”) and six of its subsidiaries including Wheeling-Pittsburgh
Steel Corporation (“WPSC”), a vertically integrated manufacturer of value-added
and flat rolled steel products.  WPSC, together with WPC and its other
subsidiaries shall be referred to herein as the “WPC Group.”  In 2000,
the WPC Group filed petitions for relief under Chapter 11 of the Bankruptcy
Code, and emerged from bankruptcy on August 1, 2003.  Pursuant to the
terms of the WPC Plan of Reorganization, the WPC Group ceased to be a subsidiary
of WHX effective August 1, 2003, and from that date forward has been an
independent company.  However, the Company continues to have certain
obligations related to WPC as it relates to the WHX Pension Plan.  See
Item 7-“Management’s Discussion and Analysis of Financial Condition and Results
of Operations--Obligations”.







Item
1A.     Risk
Factors





This
Report includes “forward-looking statements” within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
including, in particular, forward-looking statements under the headings “Item 7
- Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and “Item 8 - Financial Statements and Supplementary
Data.”  These statements appear in a number of places in this Report
and include statements regarding the Company’s intent, belief or current
expectations with respect to (i) its financing plans, (ii) trends affecting its
financial condition or results of operations, and (iii) the impact of
competition.  The words “expect,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “estimate,” and similar expressions are intended to identify
such forward-looking statements; however, this Report also contains other
forward-looking statements in addition to historical information.




Any
forward-looking statements made by the Company are not guarantees of future
performance and there are various important factors that could cause actual
results to differ materially from those indicated in the forward-looking
statements.  This means that indicated results may not be
realized.




Factors
that could cause the actual results of the Company in future periods to differ
materially include, but are not limited to, the following:







6
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Risks
Relating to our Financial Condition and Recently Completed
Reorganization




We
Have a History of Losses and Substantial Indebtedness and Cash Flow
Obligations.  We Cannot Assure You that We Will Achieve Profitability
in 2008.




We have
incurred significant losses and negative cash flows from operations in recent
years.  The Company incurred net losses of $20.8 million and $18.2
million for the years ended December 31, 2007 and 2006, respectively, and had
negative net cash used in operating activities of $2.8 million and $17.7 million
for the years ended December 31, 2007 and 2006, respectively. As of December 31,
2007, the Company has an accumulated deficit of $434.1 million.




As
of December 31, 2007, WHX and its unrestricted subsidiaries had cash of
approximately $0.7 million and current liabilities of approximately $7.3
million, including $5.8 million of mandatorily redeemable preferred shares plus
accrued dividends payable to a related party.  WHX is a holding
company and we have as our sole source of cash flow, distributions from our
operating subsidiaries, H&H and Bairnco, or other discrete
transactions.  H&H’s credit facilities effectively do not permit
it to transfer any cash or other assets to WHX (with the exception of
(i) an unsecured loan for required payments to the defined benefit pension
plan sponsored by WHX (the “WHX Pension Plan”), (ii) an unsecured loan for
other uses in the aggregate principal amount not to exceed $7.0 million, of
which $3.4 million has already been distributed, (iii) the loan,
distribution or other advance of up to approximately $7.4 million, subject to
certain limitations, to the extent loaned by Steel Partners to H&H, of which
approximately $3.2 million has already been distributed, and (iv) up to $13.1
million to be used by WHX solely to make a contribution to the WHX Pension Plan,
which contribution of $13.0 million was made on September 12,
2007.  H&H’s credit facilities are collateralized by substantially
all of H&H’s assets and contain affirmative, negative, and financial
covenants (including, EBITDA shall not be less than $30.0 million, the Senior
Leverage Ratio shall not be greater than 4.125:1.0, and Capital Expenditures
shall not be made in excess of $12.0 million in any 12 month period, as such
terms are defined therein).  Similarly, Bairnco’s credit facilities
and term loan do not permit it to make any distribution, pay any dividend or
transfer any cash or other assets to WHX other than common stock of
Bairnco.  WHX’s ongoing operating cash flow requirements consist of
funding the minimum requirements of the WHX Pension Plan and paying
administrative costs.




H&H’s
availability under its credit facilities as of December 31, 2007 was
approximately $12.3 million, and as of December 31, 2006, was approximately
$19.1 million.  As of February 29, 2008, H&H’s availability under
its credit facilities was approximately $18.6 million. H&H and Bairnco have
not been in compliance with certain of their bank covenants and have been
required to obtain waivers from their lenders related to such
covenants.  Following the receipt of such waivers, the Company was in
compliance.




On
January 22, 2008, H&H and certain of H&H's subsidiaries amended the Loan
and Security Agreement with Wachovia Bank, National Association (the "Wachovia
Facilities"), effective as of January 11, 2008 to, among other things, (i)
provide for a temporary reduction in the reserves required under Wachovia
Facilities from $2,500,000 to $1,000,000 until April 15, 2008, and (ii) revise
the criteria of Foreign Accounts to be included in the calculation of Eligible
Accounts, as defined thereunder. On February 14, 2008, H&H and certain of
its subsidiaries amended the Wachovia Facilities and its Loan and Security
Agreement with Steel Partners (the "Term B Loan"). Each of these agreements was
amended to, among other things, (i) reset the levels of certain financial
covenants, (ii) allow for the prepayment of the Term B Loan in the amount of and
upon receipt by H&H of a capital or debt infusion from the Company from
proceeds of a WHX rights offering, less $5 million which shall be used to pay
down the revolver under the Wachovia Facilities, (iii) extend the maturity date
to June 30, 2009, (iv) consent to the terms and conditions of that certain
Security Agreement by H&H in favor of Ableco Finance LLC ("Ableco") (the
"H&H Security Agreement") and that certain Limited Continuing Guaranty by
H&H in Favor of Ableco (the "H&H Guaranty"), and (v) amend applicable
interest rates. In addition, the Wachovia Facilities were also amended to
provide for an additional term loan of $4,000,000 to H&H and its
subsidiaries.





In
connection with the Bairnco Acquisition, initial financing was provided by Steel
Partners through two credit facilities.  Steel Partners extended to
BZA bridge loans in the aggregate principal amount of approximately $86.5
million pursuant to a Loan and Security Agreement (the “Bridge Loan Agreement”),
between BZA and Bairnco, as borrowers, and Steel Partners, as
lender.  In addition, Steel Partners extended to WHX a $15.0 million
subordinated loan, which is unsecured at the WHX level, pursuant to a
Subordinated Loan and Security Agreement, dated as of April 17, 2007 (the
“Subordinated Loan Agreement”) between WHX, as borrower, and Steel Partners, as
lender.  WHX contributed the $15.0 million proceeds of the
subordinated loan to BZA as a capital contribution.




On July
18, 2007, Bairnco and certain of its subsidiaries entered into (i) a Credit
Agreement (the “First Lien Credit Agreement”) with Wells Fargo Foothill, Inc.
(“Wells Fargo”), as arranger and administrative agent thereunder which provides
for a revolving credit facility to the borrowers thereunder in an aggregate
principal amount not to exceed $30.0 million and a term loan facility of $28.0
million, (ii) a Credit Agreement (the “Second Lien Credit Agreement”) with
Ableco, as administrative agent thereunder which provides for a term loan
facility to the borrowers thereunder of $48.0 million, and (iii) an Amended
and Restated Credit Agreement (the “Subordinated Debt Credit Agreement”) with
Steel Partners as lender providing for a term loan of approximately $31.8
million, and completed the refinancing of: (A) all existing indebtedness of
Bairnco and its subsidiaries under its senior secured credit facility dated as
of November 9, 2006 with Bank of America, N.A. (the “Bairnco Senior Secured
Credit Facility”), and (B) approximately $56.7 million







7
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of the
indebtedness under the Bridge Loan Agreement.  The Subordinated Debt
Credit Agreement amended and restated the Bridge Loan Agreement.  The
scheduled maturity date of the indebtedness under each of the First Lien Credit
Agreement and the Second Lien Credit Agreement is July 17, 2012, and the
scheduled maturity date under the Subordinated Debt Credit Agreement is January
17, 2013.  The First Lien Credit Agreement and Second Lien Credit Agreement
contain affirmative, negative, and financial covenants (including, for the
applicable periods set forth therein, permitting trailing twelve months (“TTM”)
EBITDA to be less than $14.0 million to $18.0 million, having a Leverage Ratio
of more than 6.74:1.0 to 5.0:1.0, having a Fixed Charge Coverage Ratio of less
than 0.75:1.0 to 1.0:1.0 and making Capital Expenditures in excess of $9.0
million in any fiscal year, as such terms are defined therein).  The
Subordinated Debt Credit Agreement contains customary representations,
warranties, affirmative and negative covenants, events of default and
indemnification provisions.




Bairnco’s
availability under its credit facilities as of December 31, 2007 was
approximately $5.3 million, and as of February 29, 2008, was approximately $6.1
million. On February 14, 2008, Bairnco and certain of its subsidiaries amended
the First Lien Credit Agreement and the Second Lien Credit Agreement to, among
other things, reset the levels of certain financial covenants. The Second Lien
Credit Agreement was also amended to provide for, among other things, a limited
guaranty by H&H of up to $10 million, secured by a second lien on all of the
assets of H&H pursuant to the terms and conditions of the H&H Security
Agreement and the H&H Guaranty. In addition, each of the First Lien Credit
Agreement and the Second Lien Credit Agreement was also amended to, among other
things, provide for either (i) the Company to invest $10 million from the
proceeds of the WHX rights offering by March 31, 2008 in Bairnco and for
such proceeds to be used to prepay at least $10 million under the Wells Fargo
term loan, (ii) Steel Partners to issue a limited $10 million guaranty, or (iii)
a capital or debt infusion of $1 0 million by either Steel Partners or WHX into
Bairnco, or any combination of the foregoing.







In recent
years, WHX experienced liquidity issues.  On March 7, 2005, WHX filed
a voluntary petition (the “Bankruptcy Filing”) to reorganize under Chapter 11 of
the United States Bankruptcy Code (the “Bankruptcy
Code”) with
the United States Bankruptcy Court for the Southern District of New York (the
“Bankruptcy Court”).  WHX continued to operate its business and own
and manage its properties as a debtor-in-possession (the “Debtor”) under the
jurisdiction of the bankruptcy court until it emerged from protection under
Chapter 11 of the Bankruptcy Code on July 29, 2005.




Since WHX
emerged from bankruptcy, due to covenant restrictions in H&H and Bairnco’s
respective credit facilities, there have been no dividends from H&H or
Bairnco to WHX and WHX’s sources of cash flow have consisted of:




·
            The
      issuance of $5.1 million in preferred stock by a newly created subsidiary
      in October 2005, which was invested in the equity of a public company
      (CoSine Communications Inc.);


·
            Partial
      payment by H&H of a subordinated debt to WHX of $9.0 million, which
      required the approval of the banks participating in the H&H credit
      facilities.  Subsequent to this transaction in 2006, the
      remaining intercompany loan balance of the subordinated debt of $44.2
      million was converted to equity;


·
            As
      permitted by a March 29, 2007 amendment and waiver to the H&H credit
      facilities, an unsecured loan from H&H for required payments to the
      WHX Pension Plan, and an unsecured loan for other uses in the aggregate
      principal amount not to exceed $3.5 million (subsequently amended on
      February 14, 2008 to $7.0 million), of which approximately $3.4 million
      has already been distributed;


·
            A
      $15.0 million subordinated loan from Steel Partners pursuant to the
      Subordinated Loan Agreement which WHX used to fund a capital contribution
      to BZA to finance in part the Bairnco
  Acquisition;


·
            As
      permitted by a July 27, 2007 amendment to the H&H credit
      facilities, an unsecured loan, distribution or other advance from H&H
      to WHX of up to approximately $7.4 million, subject to certain
      limitations, to the extent loaned by Steel Partners to H&H, of which
      approximately $3.2 million has already been distributed;
    and


·
            As
      permitted by a September 10, 2007 amendment to the H&H credit
      facilities, an unsecured loan from H&H of $13.0 million which was used
      by WHX to make a payment to the WHX Pension Plan on September 12,
      2007.





We do not
anticipate that the Company will have any additional sources of cash flow other
than (i) as described above, (ii) from operations, (iii) from the sale of
non-core assets, and (iv)  from the proceeds of the proposed rights
offering.  In addition, the proceeds of the proposed rights offering
are expected to be used to redeem preferred stock and to retire indebtedness,
and accordingly will not be available for general corporate purposes, except
that $5 million of which shall be used to pay down the revolver under the
Wachovia Facilities pursuant to the February 14, 2008 amendment to H&H’s
credit facilities.







8
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We
Sponsor a Defined Benefit Pension Plan Which Could Subject Us to Substantial
Cash Funding Requirements in the Future.




On
September 15, 2006, WHX was required to make a minimum contribution to the WHX
Pension Plan for the 2005 plan year in the amount of $15.5
million.  However, we did not make that contribution due to liquidity
issues.  We applied to the Internal Revenue Service (“IRS”) for a
funding waiver for the 2005 plan year, and on December 20, 2006, the IRS granted
a conditional waiver of the minimum funding requirements for the 2005 plan year
(the “IRS Waiver”) in accordance with section 412 (d) of the Internal Revenue
Code and section 303 of the Employee Retirement Income and Security Act of 1974,
as amended (“ERISA”).  On December 28, 2006, WHX, H&H, and the
Pension Benefit Guaranty Corporation (the “PBGC”) entered into a settlement
agreement (the “PBGC Settlement Agreement”) in connection with the IRS Waiver
and certain other matters.  The IRS Waiver is subject to certain
conditions, including a requirement that we meet the minimum funding
requirements for the WHX Pension Plan for the plan years ending December 31,
2006 through 2010, without applying for a waiver of such
requirements.  The PBGC Settlement Agreement and related agreements
include the following: (i) the amortization of the waived amount of $15.5
million (the “Waiver Amount”) over a period of five years, (ii) the PBGC’s
consent to increase borrowings under H&H’s senior credit facility to $125
million in connection with the closing of an acquisition (iii) the
resolution of any potential issues under Section 4062(e) of ERISA, in connection
with the cessation of operations at certain facilities owned by WHX, H&H or
their subsidiaries, and (iv) the granting to the PBGC of subordinate liens
on the assets of H&H and its subsidiaries, and specified assets of WHX, to
collateralize WHX’s obligation to pay the Waiver Amount to the WHX Pension Plan
and to make certain payments to the WHX Pension Plan in the event of its
termination.  Payments made during 2006 and 2007 totaled $13.1 million
and $21.6 million, respectively.  On September 12, 2007, WHX made a
payment to the WHX Pension Plan of $13.0 million, which exceeded the minimum
required contribution under ERISA.  As a result of such accelerated
contribution, our required contributions to the WHX Pension Plan over the next
five years are expected to significantly decline, and the Company believes that
the full amount of the IRS Waiver has been repaid, and all liens granted to the
PBGC pursuant to the PBGC Settlement Agreement have been
released.  Our expected minimum funding requirements for the WHX
pension plan are $0.0, $2.5 million, $2.7 million, $0.8 million and $0.0 for
2008, 2009, 2010, 2011 and 2012, respectively.  All minimum funding
requirement calculations reflect the Pension Protection Act of 2006 as well as
all other relevant rules.  In addition, the Company entered into an
agreement with the PBGC on July 24, 2003 in which, among other things, WHX
agreed that it will not contest a future action by the PBGC to terminate the WHX
Pension Plan in connection with a future WPC Group facility
shutdown.  In the event that such a plan termination occurs, the PBGC
has agreed to release WHX from any claims relating to the
shutdown.  However, there may be PBGC claims related to unfunded
liabilities that may exist as a result of a termination of the WHX Pension
Plan.  Please see “Item 7.  Management’s Discussion and
Analysis of Financial Condition and Results of Operations—Liquidity, Cash Flow
and Commitments—Other Obligations—Pension Plan Contingency Arising from the WPC
Group Bankruptcy.”




Our
pension benefit costs are valued annually.  Inherent in these
valuations are assumptions including discount rates and expected long-term rates
of return on plan assets.  Material changes in our pension costs may
occur in the future due to changes in market conditions not consistent with the
assumptions, changes in assumptions, or other changes such as a plan
termination, in which case there may be additional claims related to payment for
unfunded liabilities.




If
We Are Unable to Access Funds Generated by Our Subsidiaries We May Not Be Able
to Meet Our Financial Obligations.




Because
we are a holding company that conducts our operations through our subsidiaries,
we depend on those entities for dividends, distributions and other payments to
generate the funds necessary to meet our financial
obligations.  Failure by one of our subsidiaries to generate cash flow
and obtain refinancing of its debt, on terms which would permit dividends,
distributions or other payments to WHX, will likely have a material adverse
effect on our business, financial condition and results of
operations.  As previously described, due to covenant restrictions in
H&H and Bairnco’s respective credit facilities, there have been no dividends
from H&H or Bairnco to WHX, and WHX’s sources of cash have been extremely
limited.




Risks
Relating to Our Business




In
Many Cases, Our Competitors Are Larger Than Us and Have Manufacturing and
Financial Resources Greater Than We Do, Which May Have a Negative Impact on Our
Business, Operating Results or Financial Condition.




There are
many companies, both domestic and foreign, which manufacture products of the
type we manufacture.  Some of these competitors are larger than we are
and have financial resources greater than we do.  Some of these
competitors enjoy certain other competitive advantages, including greater name
recognition, greater financial, technical, marketing and other resources, a
larger installed base of customers, and well-established relationships with
current and potential customers.  Competition is based on quality,
technology, service, and price and in some industries, new product introduction,
each of which is of equal importance.  We may not be able to compete
successfully and competition may have a negative impact on our business,
operating results or financial condition by reducing volume of products sold
and/or selling prices, and accordingly reducing our revenues and
profits.




In our
served markets, we compete against large private and public
companies.  This results in intense competition in a number of markets
in which we operate.  In addition, the ongoing move of our customer
base in the Arlon EM segment to low cost China manufacturing
reduces pricing and increases competition.  Significant competition
could in turn lead to lower prices, lower levels of shipments and/or higher
costs in some markets that could have a negative effect on our results of
operations.







9
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Our
Profitability May Be Adversely Affected by Fluctuations in the Cost of Raw
Materials.




We are
exposed to market risk and price fluctuation related to the purchase of natural
gas, electricity, precious metal, steel products and certain non-ferrous metals
used as raw materials.  Our results of operations may be adversely
affected during periods in which either the prices of such commodities are
unusually high or their availability is restricted.  In addition, we
hold precious metal positions that are subject to market
fluctuations.  Precious metal inventory is included in inventory using
the last-in, first-out method of inventory accounting.  We enter into
forward or future contracts with major financial institutions to reduce the
economic risk of price fluctuations.




Some
of Our Raw Materials Are Available From a Limited Number of
Suppliers.   There Can Be No Assurance that the Production of
These Raw Materials Will Be Readily Available.




Several
raw materials used in Bairnco’s products are purchased from chemical companies
that are proprietary in nature.  Other raw materials are purchased
from a single approved vendor on a “sole source” basis.  Although
alternative sources could be developed in the future if necessary, the
qualification procedure can take several months or longer and could therefore
interrupt the production of our products and services if the primary raw
material source became unexpectedly unavailable.




Our
Business Is Subject to General Economic Conditions.




We
operate in a wide range of manufacturing businesses that serve customers in the
construction, electric, electronic, home appliance OEM, automotive,
refrigeration, utility, telecommunications, medical and energy related
industries.  As a result, our results of operations tend not to be
disproportionately affected by any one industry or segment, but tend to be
affected by general economic conditions and other factors worldwide, including
fluctuations in interest rates, customer demand, labor costs and other factors
beyond its control.  The demand for our customers’ products and,
therefore, our products, is directly affected by such fluctuations.




The Loss of Any of Our Major
Customers Could Adversely Affect Our Revenues and Financial
Health.




While no
single customer accounted for more than 5% of net sales in 2007, H&H’s 15
largest customers accounted for approximately 35% of H&H’s consolidated net
sales.  In 2007, Bairnco’s 15 largest customers accounted for
approximately 17% of Bairnco’s consolidated net sales. Together, the 15 largest
customers accounted for approximately 25% of consolidated WHX net sales. If we
were to lose any of our relationships with these customers, revenues and
profitability could fall significantly.




Our
Business Strategy Includes Selective Acquisitions and Acquisitions Entail
Numerous Risks.




Our
business strategy includes, among other things, strategic and selective
acquisitions.  This element of our strategy entails several risks,
including the diversion of management’s attention from other business concerns,
whether or not we are successful in finding acquisitions, and the need to
finance such acquisitions with additional equity and/or debt.




In
addition, once found, acquisitions entail further risks, including:
unanticipated costs and liabilities of the acquired businesses, including
environmental liabilities that could materially adversely affect our results of
operations; difficulties in assimilating acquired businesses; negative effects
on existing business relationships with suppliers and customers and losing key
employees of the acquired businesses.




Our
Competitive Advantage Could Be Reduced if Our Intellectual Property or Related
Proprietary Manufacturing Processes Become Known by Our Competitors or if
Technological Changes Reduce Our Customers’ Need for Our Products.




We own a
number of trademarks and patents (in the United States and other jurisdictions)
on our products and related proprietary manufacturing processes.  In
addition to trademark and patent protection, we rely on trade secrets,
proprietary know-how and technological advances that we seek to
protect.  If our intellectual property is not properly protected by us
or is independently discovered by others or otherwise becomes known, our
protection against competitive products could be diminished.









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We
Could Incur Significant Costs, Including Remediation Costs, as a Result of
Complying With Environmental Laws.
  Our
facilities and operations are subject to extensive environmental laws and
regulations imposed by federal, state, foreign and local authorities relating to
the protection of the environment.  We could incur substantial costs,
including cleanup costs, fines or sanctions, and third-party claims for property
damage or personal injury, as a result of violations of or liabilities under
environmental laws.  We have incurred, and in the future may continue
to incur, liability under environmental statutes and regulations with respect to




Our
Results of Operations May Be Negatively Affected by Variations in Interest
Rates.




Our
credit facilities are collateralized by accounts receivable, inventory, and
property, plant and equipment.  These credit facilities are variable
rate obligations, which expose us to interest rate risks.  A one
percent (1%) change in interest rates on our variable outstanding debt
obligations as of December 31, 2007 would increase or decrease interest expense
by approximately $3.6 million on an annual basis.




Our
Earnings Could Decrease if There Is A Decline in Governmental Funding for
Military Operations.




If, as a
result of a loss of funding or a significant cut in federal budgets, spending on
military projects were to be reduced significantly, our earnings and cash flows
related to the Arlon EM segment could be negatively affected.




Potential
Supply Constraints and Significant Price Fluctuations of Electricity, Natural
Gas and Other Petroleum Based Products Could Adversely Affect Our
Business.




In our
production and distribution processes, we consume significant amounts of
electricity, natural gas, fuel and other petroleum-based commodities, including
adhesives and other products.  The availability and pricing of these
commodities are subject to market forces that are beyond our
control.  Our suppliers contract separately for the purchase of such
commodities and our sources of supply could be interrupted should our suppliers
not be able to obtain these materials due to higher demand or other factors
interrupting their availability.  Variability in the supply and prices
of these commodities could materially affect our operating results from period
to period and rising costs could erode our profitability.




Adverse
Weather Could Materially Affect Our Results.




A
significant portion of our business in the Kasco segment involves on-site
delivery, service and repair.  In addition, a significant amount of
our business in the Arlon CM segment is to the outdoor sign
industry.  Inclement weather affects both our ability to produce and
distribute our products and affects our customers’ short-term demand since their
work also can be hampered by weather.  Therefore, our results can be
negatively affected by inclement weather.  Severe weather such as
hurricanes, tropical storms and earthquakes can damage our facilities, resulting
in increased repair costs and business disruption.




A
Failure to Manage Industry Consolidation Could Negatively Impact Our
Profitability.




The
industries within which we operate have experienced recent
consolidations.  This trend tends to put more purchasing power in the
hands of a few large customers who can dictate lower prices of our
products.  Failure to effectively negotiate pricing agreements and
implement on-going cost reduction projects can have a material negative impact
on our profitability.




Our
Future Success Depends Greatly Upon Attracting and Retaining Qualified
Personnel.




A
significant factor in our future profitability is our ability to attract,
develop and retain qualified personnel.  Our success in attracting
qualified personnel is affected by changing demographics of the available pool
of workers with the training and skills necessary to fill the available
positions, the impact on the labor supply due to general economic conditions,
and our ability to offer competitive compensation and benefit
packages.




Litigation
Could Affect Our Profitability.




The
nature of our businesses expose us to various litigation matters including
product liability claims, employment, health and safety matters, environmental
matters, regulatory and administrative proceedings.  We contest these
matters vigorously and make insurance claims where
appropriate.  However, litigation is inherently costly and
unpredictable, making it difficult to accurately estimate the outcome of any
litigation.  Although we make accruals as we believe warranted, the
amounts that we accrue could vary significantly from any
amounts we actually pay due to the inherent uncertainties in the estimation
process. As of December 31, 2007, we have accrued approximately $7.8 million for
environmental remediation costs but have not made any accruals for other
litigation matters.







11
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Our
Internal Controls Over Financial Reporting May Not Be Effective and Our
Independent Auditors May Not Be Able to Certify as to Their Effectiveness, Which
Could Have a Significant and Adverse Effect on Our Business and
Reputation.




We are
subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and
the rules and regulations of the Securities and Exchange Commission (the “SEC”)
thereunder (which we refer to as Section 404) as of December 31,
2007.  Section 404 requires us to report on the design and
effectiveness of our internal controls over financial reporting.  In
the past, our management has identified ‘‘material weaknesses’’ in our internal
controls over financial reporting, which we believe have been
remediated.  However, any failure to maintain or implement new or
improved controls, or any difficulties we encounter in their implementation,
could result in significant deficiencies or material weaknesses, and cause us to
fail to meet our periodic reporting obligations or result in material
misstatements in our financial statements.




Section
404 also requires an independent registered public accounting firm to test the
internal controls over financial reporting and report on the effectiveness of
such controls.  In our annual report on Form 10-K for the fiscal year
ended December 31, 2006, our independent auditor, Grant Thornton LLP (“GT”), an
independent registered public accounting firm, was not required to express an
opinion on our internal controls over financial reporting.  Prior to
the Bairnco Acquisition, Bairnco’s independent auditor, also GT, issued a
disclaimer of opinion on both management’s assessment and the effectiveness of
Bairnco’s internal controls over financial reporting in their annual report on
Form 10-K for the fiscal year ended December 31, 2006.  GT had
determined that Bairnco’s management did not support its evaluation with
sufficient evidence, including documentation, as a result of not extending its
testing into the three months ended December 31, 2006. Because management’s
process did not include sufficient evidence, including documentation, GT was
unable to apply the procedures required to express an opinion on management's
assessment and on the effectiveness of internal control over financial
reporting.  In this same report, Bairnco did not have any material
weaknesses identified in their internal controls over financial reporting. GT is
not required to issue a report attesting to our internal controls over financial
reporting until the year ended December 31, 2008.  There can be no
assurance that GT will issue an unqualified report attesting to our internal
controls over financial reporting at such time.  As a result, there
could be a negative reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements or our financials
statements could change.  We may also be required to incur costs to
improve our internal control system and hire additional
personnel.  This could negatively impact our results of
operations.




Risk
Relating to Our Ownership Structure




Warren
G. Lichtenstein, Our Chairman, and Certain Other Officers and Directors, Through
Their Affiliation with Steel Partners, Has the Ability to Exert Significant
Influence Over Our Operations.




Warren G.
Lichtenstein, our Chairman, as the sole managing member of the general partner
of Steel Partners, is deemed to own beneficially the shares of our common stock
owned by Steel Partners.  Steel Partners beneficially owns 5,029,793
shares of our common stock, representing approximately 50.3% of our outstanding
common stock.  Mr. Lichtenstein, as sole managing member and the
general partner of Steel Partners, has sole investment and voting control over
the shares beneficially owned by Steel Partners and thus has the ability to
exert significant influence over our policies and affairs, including the
election of our Board of Directors and the approval of any action requiring a
stockholder vote, such as amendments to our amended and restated certificate of
incorporation and approving mergers or sales of substantially all of our assets,
as well as matters where the interests of Mr.  Lichtenstein and Steel
Partners may differ from the interests of our other stockholders in some
respects.  In addition, employees of an affiliate of Steel Partners
hold positions with WHX, including Glen M. Kassan as Chief Executive Officer and
John J. Quicke as Vice President, and as directors, and Jack L. Howard and John
H. McNamara Jr. as directors.  Mr. Quicke also serves as the President
and Chief Executive Officer of Bairnco.




Factors
Affecting the Value of Securities Issued Under the Plan of
Reorganization




There
Is No Established Market for Our Common Stock.




No
established market exists for our common stock.  Our common stock is
presently quoted on the over-the-counter “Pink Sheets”.  No assurance
can be made that an active trading market will develop.  There can be
no assurance as to the degree of price volatility in any market for our common
stock that does develop.  Transfer restrictions contained in our
charter to help preserve our NOLs will generally prevent any person from rapidly
acquiring amounts of our common stock such that such person would hold 5% or
more of our common stock, in each case for up to ten years after July 29, 2005,
as specifically provided in our charter.  These transfer restrictions
could hinder development of an active market for our common stock.







12
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We
Do Not Anticipate Paying Dividends on Our Common Stock in the Foreseeable Future
Which May Limit Investor Demand.




We do not
anticipate paying any dividends on our common stock in the foreseeable
future.  Such lack of dividend prospects may have an adverse impact on
the market demand for our common stock as certain institutional investors may
invest only in dividend-paying equity securities or may operate under other
restrictions that may prohibit or limit their ability to invest in our common
stock.




Item
2.   Properties





As of
December 31, 2007, H&H had 17 active operating plants in the United States,
Canada, Denmark, France, and Mexico, with a total area of approximately
1,260,000 square feet, including warehouse, office and laboratory
space.  H&H also owns or leases sales, service and warehouse
facilities at 6 other locations in the United States (which, with H&H’s
general offices, have a total area of approximately 67,000 square feet) and owns
4 non-operating locations with a total area of approximately 267,000 square
feet.  Manufacturing facilities of H&H are located in: Toronto,
Canada; Camden, Delaware; Kolding, Denmark; Evansville and Indianapolis,
Indiana; Agawam, Massachusetts; Middlesex, New Jersey; Danville, New Hampshire;
Canastota, New York; Canfield, Ohio; Tulsa and Broken Arrow, Oklahoma; Cudahy,
Wisconsin; Itasca, Illinois; Coahuila, Mexico and Riberac,
France.  All H&H plants are owned except for the Canastota,
Middlesex, Itasca, Danville and Coahuila plants, which are leased.




As of
December 31, 2007, Bairnco had 17 active facilities in the United States,
Mexico, Canada, the United Kingdom, Germany, France and the People’s Republic of
China, as well as utilizing various field warehouses, with a total area of
approximately 1,199,000 square feet, including warehouse and office
space.  The operating facilities of Bairnco are located in: Bear,
Delaware; Rancho Cucamonga and Santa Ana, California; Dallas and San Antonio,
Texas; Atlanta, Georgia; St. Louis, Missouri; Matamoros, Mexico, Montreal,
Canada; Gwent, Wales, United Kingdom; Pansdorf, Germany; Paris, France; and
Suzhou New District, People’s Republic of China.  The facilities
located in Bear, Rancho Cucamonga, Atlanta, St. Louis, Matamoras, Gwent,
Pansdorf, and the Suzhou New District are owned.  The facilities
located in Santa Ana, Dallas, San Antonio, Montreal, and Paris, as well as
various field warehouses, are leased.




The
Company considers its manufacturing plants and service facilities to be well
maintained and efficiently equipped, and therefore suitable for the work being
done.  The productive capacity and extent of utilization of its
facilities is dependent in some cases on general business conditions and in
other cases on the seasonality of the utilization of its
products.  Capacity can be expanded at some locations.




Item
3.  Legal
Proceedings





Bankruptcy
Filing




On March
7, 2005, WHX filed a voluntary petition to reorganize under Chapter 11 of the
Bankruptcy Code with the Bankruptcy Court.  WHX continued to operate
its businesses and own and manage its properties as a Debtor under the
jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code until it emerged from protection on July 29,
2005.




On March 7, 2005, WHX also
filed a proposed Plan of Reorganization (as amended, the “Plan”) and a related
proposed disclosure statement (as amended, the “Disclosure Statement”) with the
Bankruptcy Court. The Plan was confirmed on July 21, 2005 (the “Confirmation
Order”) and became effective on July 29, 2005 (the “Effective
Date”).
 The Bankruptcy Filing
created an event of default under the Indenture governing the 10 1/2% Senior
Notes due April 15, 2005 (the “10 1/2% Senior Notes”). Under the terms of the 10
1/2% Senior Notes, as a result of the Bankruptcy Filing, the entire unpaid
principal and accrued interest (and any other additional amounts) became
immediately due and payable without any action on the part of the trustee or the
note holders.  The principal amount outstanding under the 10 1/2% Senior
Notes at March 7, 2005 was approximately $92.8 million.  Accrued interest
to March 7, 2005 was approximately $3.8 million.  However, as part of the
Plan all of the outstanding 10 1/2% Senior Notes were cancelled and
annulled.  In full and complete satisfaction of all such claims, holders of
the 10 1/2% Senior Notes received 9,200,000 shares of the new common stock
representing their pro rata share of the reorganized company.  These shares
represented 92% of the equity in the reorganized company.




Neither
H&H, the Company’s primary business at that time, nor any of WHX’s other
subsidiaries or affiliates, were included in its bankruptcy
filing.  All of H&H’s operating units conducted business in the
ordinary course during the bankruptcy.  WHX’s bankruptcy filing was
primarily intended to reduce its debt, simplify its capital structure, reduce
its overall cost of capital and provide it with better access to capital
markets.




The
following is a summary of certain material features of Plan of Reorganization
(as amended, the “Plan") .  On the Effective Date:




●
            All
      of WHX’s outstanding securities, including WHX’s pre-bankruptcy filing
      common stock, Series A preferred stock, Series B preferred stock and 10
      1/2% Senior Notes due April 15, 2005 (the “10 1/2% Senior Notes”) were
      deemed cancelled and annulled without further act or
    action.


●
            In
      full and complete satisfaction of all such claims, holders of the 10 1/2%
      Senior Notes received 9,200,000 shares of common stock representing their
      prorated share of the reorganized company.  These shares
      represent 92% of the equity in the reorganized
  company.


●
            In
      full and complete satisfaction of all such interests, Series A preferred
      stockholders received 366,322 shares of common stock representing their
      prorated share of the reorganized company and 344,658 warrants to purchase
      common stock of the reorganized company, exercisable at $11.20 per
      share.  The warrants expired on February 28,
    2008.





13
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●
            In
      full and complete satisfaction of all such interests, Series B preferred
      stockholders received 433,678 shares of common stock representing their
      prorated share of the reorganized company and 408,030 warrants to purchase
      common stock of the reorganized company, exercisable at $11.20 per
      share.  The warrants expired on February 28,
    2008.


●
            Holders
      of WHX’s pre-bankruptcy filing common stock received no distribution under
      the Plan.




The common stock received by the Series A and Series B preferred
stockholders, collectively, represented 8% of the equity in the reorganized
company.




On the Effective Date, all of the assets of WHX were vested in the
reorganized company free and clear of all liens, causes of actions, claims,
encumbrances, equity interests, and interests against, in, or on such assets,
except as explicitly provided in the Plan.


General




Sumco Inc. V. Underwriters
At Lloyd’s, London, Lexington Insurance Company, Hartford Fire Insurance
Company, and Wurttembergische Versicherung AG




On July
7, 2004, Sumco Inc. (“Sumco”), a wholly-owned subsidiary of H&H, filed suit
in the Marion County Superior Court of Indiana against certain underwriters
affiliated with Lloyd’s, London, Lexington Insurance Company, Hartford Fire
Insurance Company, and Wurttembergische Versicherung AG (the
defendants).  Sumco sought to recover monies from these insurance
carriers for losses incurred as a result of a January 20, 2002 fire at its metal
plating facility in Indianapolis, Indiana.  At the time of the fire,
Sumco’s parent corporation, WHX, had in place layered fire insurance policies
with combined limits of $25 million and a deductible of $100,000.  The
defendants represent carriers who provided $15 million in insurance coverage in
excess of two underlying policies of $5 million each.  Defendants had
previously paid $5 million in claims.  Sumco contended that its losses
were in excess of the policy limits, defendants acted in bad faith, and that it
was entitled to the payment of the remaining approximate $10 million in
insurance coverage provided by the defendants.  The parties settled
their claims in May 2007 for an aggregate payment to WHX of $5,689,276 from the
defendants (which proceeds were paid to Steel Partners in partial satisfaction
of its loan), and an assignment to WHX of defendants’ interest in an
interest-bearing escrow account with approximately $1.7 million in proceeds
resulting from the settlement of subrogation claims against various third
parties.  On August 29, 2007, Sumco filed a Declaratory Judgment
action in the Marion County Superior Court of Indiana against Royal Indemnity
Company and U.S. Fire Insurance Company, requesting a declaration that Sumco is
entitled to the funds in the escrow account.  Steel Partners has a
first lien on any additional proceeds recovered.  In December 2007,
the defendants agreed to a partial disbursement of the escrow funds, pursuant to
which the Company received approximately $849,000.  The Company
continues to seek the balance of the escrow funds.




HH East Parcel,
LLC.  V. Handy & Harman




This
action arises out of a purchase and sale agreement entered into in 2003 whereby
H&H agreed to sell a portion of a commercial site in Connecticut (“Sold
Parcel”) to HH East Parcel, LLC (“HH East”).  On or about April 5,
2005, HH East filed a Demand for Arbitration with the American Arbitration
Association seeking legal and equitable relief including completion of the
remediation of environmental conditions at the site in accordance with the terms
of the agreement.  An arbitration hearing was held in October 2005 in
Connecticut, pursuant to which HH East was awarded, among other things, an
amount equal to $5,000 per day from January 1, 2005 through the date on which
remediation is completed.  This award amounts to approximately $4.0
million through the completion date of April 6, 2007.  H&H applied
to the Connecticut Superior Court to have the arbitration award
vacated.  On June 26, 2006, the court issued a decision denying
H&H’s application and granting HH East’s motion to confirm the arbitration
award.  H&H appealed that decision. Oral
argument on H&H’s appeal took place before the Connecticut Supreme Court in
February 2008.  On March 28, 2008, the Supreme Court requested that
the parties submit supplemental briefs no later than April 9, 2008.The
Court is expected to issue its ruling on the appeal between approximately April
and June 2008.




On May
22, 2007, HH East served an Order for a Prejudgment Attachment in the amount of
approximately $3.5 million, issued by the Superior Court, Stamford, Connecticut
in December 2006, against certain Connecticut property of H&H and against
certain bank accounts maintained by H&H at banks in New
York.  H&H has brought proceedings in the Superior Court,
Stamford, Connecticut, and in the Supreme Court, State of New York, to oppose
the attachment of such bank accounts and to have it lifted.  The New
York proceeding has been discontinued.  The Connecticut proceeding is
pending.  The parties have engaged from time to time in settlement
discussions to resolve the open issues and proceedings between
them.  On June 14, 2007, HH East temporarily withdrew its
attachment/garnishment against certain bank accounts of H&H after the
posting of other satisfactory collateral by H&H and while settlement
discussions were continuing.  On June 29, 2007, and again on several
other dates, HH East re-served the Order against various bank accounts of
H&H.




H&H
has been working cooperatively with the Connecticut Department of Environmental
Protection (“CTDEP”) with respect to its obligations under a consent order
entered into in 1989 that applies to both parcels of the commercial
site.  H&H has been conducting an investigation of the remaining
parcel, and is continuing the process of evaluating various options for its
remediation.  The sale of the Sold Parcel, which is the subject of the
above-referenced litigation, triggered statutory obligations under Connecticut
law to investigate and remediate pollution at or emanating from the Sold
Parcel.  Remediation of all soil conditions on site was completed on
April 6, 2007, although H&H has since performed limited additional work on
site, solely in furtherance of ongoing settlement discussions between the
parties.  Although no groundwater remediation is required, there will
be monitoring of same for several years.  Approximately $28.9 million
had been expended through December 31, 2007, and the remaining remediation and
monitoring costs are expected
to approximate $0.3 million.  H&H received reimbursement of $2.0
million from its carrier under a cost-cap insurance policy and is pursuing its
potential entitlement to additional coverage.







14
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Paul E. Dixon & Dennis
C. Kelly V. Handy & Harman




Two
former officers of H&H filed a Statement of Claim with the American
Arbitration Association (“Arbitration”) on or about January 3,
2006.  The Claimants were employees of H&H until September 2005,
when their employment was terminated by H&H.  Their claims
included seeking payments allegedly due under employment contracts and allegedly
arising from their terminations, and seeking recovery of benefits under what
they allege was the Handy & Harman Supplemental Executive Retirement
Plan.




In the
Arbitration, Claimants sought an award in excess of $4 million each, plus
interest, costs and attorneys’ fees.  Claimants also sought
indemnification for certain matters and an injunction against H&H with
regard to life insurance policies.  H&H brought a special
proceeding on February 15, 2006 in the Supreme Court of the State of New York,
County of Westchester, for a judgment staying the arbitration of three of the
four claims.  On March 10, 2006, all of the parties filed a
stipulation with the court, discontinuing the court proceeding and agreeing
therein, among other things, that all claims asserted by the Claimants in the
Arbitration (which was also discontinued at that time) would be asserted in
Supreme Court, Westchester County.




In April
2006, Claimants served a request for benefits, severance and other amounts,
similar to those described above, on H&H and various plan administrators and
fiduciaries thereof.  The request was reviewed in accordance with the
procedures of the plans at issue and by letter dated September 27, 2006,
claimants were notified that their request was largely denied.  They
filed an appeal on December 11, 2006 with the Plan Administrator, which appeal
was denied on February 9, 2007.




In
January 2008, Kelly filed a lawsuit against WHX Corporation, Handy & Harman
and various benefit plans in the United States District Court for the Southern
District of New York.  Dixon did not join in this lawsuit, and his
counsel has not indicated whether Dixon intends to file his own
lawsuit.  Kelly’s claims in this lawsuit are essentially the same
claims that he asserted in the above-described arbitration and request for
benefits.  Kelly’s Complaint seeks approximately $4.0 million in money
damages plus unspecified punitive damages.  The defendants are
vigorously defending this lawsuit.  Nevertheless, there can be no
assurance that the defendants will be successful in defending against Kelly’s
claims, or that the defendants will not have any liability on account of Kelly’s
claims.  Such liability, if any, cannot be reasonably estimated at
this time, and accordingly, there can be no assurance that the resolution of
this matter will not be material to the financial position, results of
operations and cash flow of the Company.




Arista Development LLC V.
Handy & Harman Electronic Materials Corporation




In 2004,
a subsidiary of H&H, HHEM, entered into an agreement to sell a
commercial/industrial property in Massachusetts.  Disputes between the
parties led to suit being brought in Bristol Superior Court in
Massachusetts.  The plaintiff alleges that HHEM is liable for breach
of contract relating to HHEM’s alleged breach of the agreement, unfair and
deceptive acts and practices, and certain consequential and treble damages as a
result of HHEM’s termination of the agreement in 2005, although HHEM
subsequently revoked its notice of termination.  HHEM has denied
liability and has been vigorously defending the case.  The court
entered a preliminary injunction enjoining HHEM from conveying the property to
anyone other than the plaintiff during the pendency of the
case.  Discovery on liability and damages has been in abeyance while
the parties are actively engaged in settlement discussions. Since discovery is
not completed, it cannot be known at this time whether it is foreseeable or
probable that plaintiff would prevail in the litigation or whether H&H would
have any liability to the plaintiff.




Environmental
Matters




In
connection with the Sold Parcel, H&H was responsible for demolition and
environmental remediation of the site, the estimated cost of which was included
in the loss on sale recorded in 2003.  In 2004, H&H determined
that an increase in the reserve for environmental remediation was needed in the
amount of $28.3 million.  This change in reserve was caused by the
discovery of underground debris and soil contaminants that had not been
anticipated.  These additional costs are included in environmental
remediation expense.  An additional $4.0 million was also recorded in
selling, general and administrative ("SG&A") expenses in 2004 as a penalty
related to the Sold Parcel.  H&H retains title to a parcel of land
adjacent to the Sold Parcel.  This parcel is classified as other
non-current assets, in the amount of $2.0 million, on the consolidated balance
sheets at December 31, 2006 and December 31, 2007.




H&H
entered into an administrative consent order (the “ACO”) in 1986 with the New
Jersey Department of Environmental Protection (“NJDEP”) with regard to certain
property that it purchased in 1984 in New Jersey.  The ACO involves
investigation and remediation activities to be performed with regard to soil and
groundwater contamination.  H&H settled a case brought by the
local municipality in regard to this site in 1998 and also settled with certain
of its insurance carriers.  H&H is actively remediating the
property and continuing to investigate the most effective methods for achieving
compliance with the ACO.  A remedial investigation report
was







15
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filed
with the NJDEP in December of 2007.  Once the investigation has been
completed, it will be followed by a feasibility study and a remedial action work
plan that will be submitted to NJDEP.  H&H anticipates entering
into discussions in the near future with NJDEP to address that agency’s natural
resource damage claims, the ultimate scope and cost of which cannot be estimated
at this time.  The ongoing cost of remediation is presently estimated
at approximately $750,000.  Pursuant to a settlement agreement with
the former owner/operator of the site, the responsibility for site investigation
and remediation costs are allocated 75% to the former owner/operator and 25% to
H&H after the first $1 million.  The $1 million was paid solely by
the former owner/operator.  To date, over and above the $1 million,
total investigation and remediation costs of $731,000 and $244,000 have been
expended by the former owner/operator and H&H, respectively, in accordance
with the settlement agreement.  Additionally, H&H is currently
being reimbursed through insurance coverage for a portion of the investigation
and remediation costs for which the company is responsible.  H&H
believes that there is additional excess insurance coverage which it intends to
pursue as necessary.




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




In a case
entitled Agere Systems, Inc., et al. v. Advanced Environmental Technology Corp.,
et al. (U.S. District Court, EDPA), five companies, all of which are PRPs for
the Boarhead Farm site in Bucks County, Pennsylvania, brought CERCLA
contribution and similar claims under Pennsylvania’s environmental laws against
a number of companies in 2002.  A subsidiary of
H&H,  H&H Tube,  is one of the defendants that the
plaintiffs claim contributed to the contamination of the Boarhead Farm
site.  A number of the plaintiffs have entered into consent decrees
with the EPA regarding the remediation of groundwater and soil contamination at
the Boarhead Farm site.  In addition, plaintiffs have settled with a
number of the defendants.  There are currently six non-settling
defendants, including H&H Tube, against which the plaintiffs are pursuing
their claims.  Fact and expert discovery has been
concluded.  H&H Tube filed a motion for summary judgment in July
2007 seeking a dismissal of all claims against H&H Tube.  The
court denied that motion. Plaintiffs were granted to leave to file a fifth
amended complaint which adds a claim against the non-settling defendants for
joint and several liability  The plaintiffs have already made
substantial payments to the EPA in past response costs and have themselves
incurred costs for groundwater and soil remediation.  Remediation is
continuing.  Plaintiffs are seeking reimbursement of a portion of
amounts incurred and an allocation of future amounts from H&H Tube and the
other non-settling defendants.  Based upon expert testimony in the
litigation, H&H Tube’s  responsibility for this site, if any,
should be minimal.  This matter is expected to go to trial in late
Spring or early Summer of 2008.  It is not possible to accurately
estimate the cost of remediation or H&H Tube’s share, if any, of the
liability at this time.  In December 2007, H&H Tube and H&H
filed a lawsuit against The Chubb Group of Insurance Companies and several
related entities seeking a declaration that the defendants are obligated to
defend and indemnify H&H Tube with respect to the Boarhead Farm
lawsuit.  The parties are currently engaged in settlement
discussions.




H&H
received a notice letter from the EPA in August 2006 formally naming H&H as
a PRP at superfund site in Massachusetts (the “Superfund
site”).  H&H then voluntarily joined a group of ten (10) other
PRPs (which group has since increased to thirteen (13)) to work cooperatively
regarding remediation of this site.  Investigative work is ongoing to
determine whether there are other parties that sent hazardous substances to the
Superfund site but that have not received notice letters or been named as PRPs
to date.  The PRP group submitted its good faith offer to the EPA in
late October 2006.  The offer is contingent on the group arriving at
an acceptable allocation amongst the PRPs.  All of the PRPs have
reached proposed allocations as to percentages of responsibility for
investigation and remediation costs at the Superfund site.  It is
anticipated that there will be a “shortfall” in the overall allocation that will
then be shared, on a pro rata basis, among all of the participating
PRPs.  The EPA has currently agreed to an orphan share for the past
response costs incurred through September 30, 2007 and the PRPs continue to
negotiate with the EPA to have all future response and oversight costs included
in the orphan share.  The EPA seeks to have the consent decree lodged
as soon as practicable.  The consent decree will then be subject to a
public comment period of no less than 30 days.  After the expiration
of the 30 days (or such other time period), the court, in its discretion, can
enter the consent decree.  There are some PRPs who have not
participated to date in the consent decree negotiations and allocation
process.  Any non-participating PRPs may be sued later under
CERCLA.  That is a decision that will be made in the future by the
participating PRPs.  It is anticipated that PRP remedial activities at
the site will not begin until 2009.  The remediation of a significant
amount of the contamination at the site is the responsibility of the Department
of Energy (“DOE”).  That remediation is being accomplished by the U.S.
Army Corps of Engineers (the “ACOE”).  The DOE portion of the work has
begun but is not expected to be completed until 2009, at which time the
remaining work will be more clearly defined.  The ACOE recently
informed one of the radiological PRPs that it will seek contribution from that
PRP for the portion of the remediation performed by the ACOE.  The
radiological PRP in turn wishes to preserve its rights to sue the chemical PRPs
in the event any portion of the ACOE's claim relates to chemical
waste.  The PRPs are currently investigating the nature of the ACOE's
potential claim to determine if there is any realistic potential that the ACOE's
claim can legally or factually result in a contribution claim against the
chemical PRPs.  The Company has recorded a significant reserve in
connection with this matter.







16
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H&H
is continuing to comply with a 1987 consent order from the Massachusetts
Department of Environmental Protection (“MADEP”) to investigate and remediate
the soil and groundwater conditions at the property that is the subject of the
Arista Development litigation discussed above.  H&H is in
discussions with the EPA, the MADEP and the plaintiff in the Arista case in
connection with the remedial activities.  In addition, H&H has
engaged in discussions or received comments regarding its remedial plans from
abutters.  Discussions with some abutters are ongoing and, although no
formal claims have been asserted, it is possible that claims will be
asserted.  Since discussions regarding these matters are not complete
and since no claims have been asserted, it cannot be known what, if any,
liability H&H will have with respect to the abutters.




As
discussed above, H&H and Bairnco have existing and contingent liabilities
relating to environmental matters, including capital expenditures, costs of
remediation and potential fines and penalties relating to possible violations of
national and state environmental laws.  H&H and Bairnco have
substantial remediation expenses on an ongoing basis, although such costs are
continually being readjusted based upon the emergence of new techniques and
alternative methods.  In addition, WHX has insurance coverage
available for several of these matters.  The
Company has accrued $7.8 million related to estimated environmental remediation
costs as of December 31, 2007.Based upon information currently
available, including H&H and Bairnco’s prior capital expenditures,
anticipated capital expenditures, and information available to H&H and
Bairnco on pending judicial and administrative proceedings, H&H and Bairnco
do not expect their respective environmental compliance costs, including the
incurrence of additional fines and penalties, if any, relating to the operation
of their respective facilities to have a material adverse effect on their
financial position, but there can be no such assurances.  Such costs
could be material to H&H and Bairnco’s results of operations and cash
flows.  We anticipate that H&H and Bairnco will pay such amounts
out of their respective working capital, although there is no assurance that
H&H and Bairnco will have sufficient funds to pay such
amounts.  In the event that H&H and Bairnco are unable to fund
these liabilities, claims could be made against WHX for payment of such
liabilities.  As further information comes into the Company’s
possession, it will continue to reassess such evaluations.




Other
Litigation




We or
certain of our subsidiaries are a defendant in numerous cases pending in a
variety of jurisdictions relating to welding emissions.  Generally,
the factual underpinning of the plaintiffs’ claims is that the use of welding
products for their ordinary and intended purposes in the welding process causes
emissions of fumes that contain manganese, which is toxic to the human central
nervous system.  The plaintiffs assert that they were over-exposed to
welding fumes emitted by welding products manufactured and supplied by us and
other co-defendants.  We have various levels of exposure in the
different cases, from being the primary or sole defendant to being one of many
defendants.  We deny liability and are defending these actions. The
first of such cases is scheduled for trial in June 2008.  It is not
possible to reasonably estimate our exposure or share, if any, of the liability
at this time.




In
addition to the foregoing cases, there are a number of other product liability,
exposure, accident, casualty and other claims against us or certain of our
subsidiaries in connection with a variety of products sold by our subsidiaries
over several years, as well as litigation related to employment matters,
contract matters, sales and purchase transactions and general liability claims,
many of which arise in the ordinary course of business.  It is not
possible to reasonably estimate our exposure or share, if any, of the liability
at this time.




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




Item
4.  Submission of Matters to a Vote of Security
Holders





A special
meeting of stockholders was held on January 31, 2008, at which WHX’s
stockholders approved a proposal to amend the Company’s amended and restated
certificate of incorporation to increase the Company’s authorized capital stock
from 55,000,000 shares, consisting of 50,000,000 shares of common stock, par
value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01
per share, to a total of 100,000,000 shares, consisting of 95,000,000 shares of
common stock and 5,000,000 shares of preferred stock .  The following
sets forth the results of the voting at the meeting:   For
7,121,168; Against 223,886; and Abstain 5,263.







17
 Table of Contents




PART  II







Item
5.   Market
for the Registrant’s Common Stock, Related Security Holder Matters, and Issuer
Purchases of Equity Securities





WHX emerged
from bankruptcy on July29, 2005.  Our common stock trades on the
over-the-counter “Pink Sheets” under the symbol WXCP.PK.  The number
of shares of common stock issued and outstanding as of March 26, 2008 was
10,000,498.  As of March 26, 2008, there were approximately 39 holders
of record of common stock.  As of March 26, 2008 the price per share
of our common stock was $2.00.




The
prices set forth in the following table represent the high and low sales prices
of WHX’s common stock on the over-the-counter “Pink Sheets” for 2007 and
2006:




2007
            
            HIGH
            
            
            LOWFirst
      Quarter
            
            $
            10.30
            
            
            $
            7.60Second
      Quarter
            
            $
            10.00
            
            
            $
            8.00Third
      Quarter
            
            $
            9.00
            
            
            $
            7.05Fourth
      Quarter
            
            $
            7.50
            
            
            $
            3.80





2006
            
            HIGH
            
            
            LOWFirst
      Quarter
            
            $
            10.95
            
            
            $
            10.05Second
      Quarter
            
            $
            10.55
            
            
            $
            8.75Third
      Quarter
            
            $
            9.20
            
            
            $
            7.40Fourth
      Quarter
            
            $
            10.30
            
            
            $
            7.80




Source:  http://finance.yahoo.com




As part
of the Plan of Reorganization of WHX (as amended, the “Plan”), on July 29, 2005
all of WHX’s outstanding securities, including WHX’s pre-bankruptcy filing
common stock, Series A preferred stock, Series B preferred stock and 10 1/2%
Senior Notes, were cancelled and annulled.  In full and complete
satisfaction of all such claims, holders of the 10 1/2% Senior Notes received
9,200,000 shares of the new common stock representing their pro rata share of
the reorganized company.  These shares represented 92% of the equity
in the reorganized Company.  In full and complete satisfaction of all
such interests, preferred stockholders received 800,000 shares of the new common
stock representing their pro rata share of the reorganized company and 753,155
warrants to purchase common stock of the reorganized company, exercisable at
$11.20 per share.  The warrants expired on February 28,
2008.  The common stock received by the preferred stockholders,
collectively, represented 8% of the equity in the reorganized company. Holders
of our common stock received no distributions under the Plan.




Dividend
Policy




We have
never declared or paid any cash dividend on our common stock.  We
currently intend to retain any future earnings and do not expect to pay any
dividends in the foreseeable future.  H&H and Bairnco are
restricted by the terms of their respective financing agreements from making
dividends to WHX.







Item
7.  Management’s Discussion and Analysis of Financial
Condition and Results of Operations




Results
of Operations





WHX, the
parent company, is a holding company that invests in and manages a group of
businesses on a decentralized basis.  WHX owns H&H, which is a
diversified manufacturing company whose strategic business units encompass three
reportable segments: Precious Metal, Tubing, and Engineered Materials. In April
2007, WHX acquired Bairnco. Bairnco operates business units in three reportable
segments:  Arlon EM, Arlon CM and Kasco.  H&H
and Bairnco principally operate in North America.




H&H’s
Precious Metal activities include the fabrication of precious metal and their
alloys into brazing alloys and the utilization of precious metal in precision
electroplating.   The Company’s brazing alloys are used to join
most common metals as well as specialty metals with strong, hermetic
joints.  The Company offers a wide variety of these metal joining
products, including gold, silver, palladium, copper, nickel, and aluminum based
materials.  These brazing alloys are fabricated into a variety of
engineered forms and are used in many industries including automotive, air
conditioning, general industrial and other metal-joining industries. This
segment is also engaged in precision electroplating (often using gold, silver,
palladium and various base metals) of electronic and electrical components
primarily for use in the automotive industry. The Tubing segment manufactures a
wide variety of steel tubing products.  The Stainless Steel Tubing
Group manufactures small-diameter precision-drawn seamless tubing both in
straight lengths and coils.  The Stainless Steel







18
 Table of Contents





Tubing
Group’s capabilities in long continuous drawing of seamless stainless steel
coils allow the Group to serve the petrochemical infrastructure and shipbuilding
markets.   The Stainless Steel Tubing Group also produces
products for use in the medical, semiconductor fabrication, aerospace and
instrumentation industries.   The Specialty Tubing Group
manufactures welded carbon steel tubing in straight lengths and coils with a
primary focus on products for the refrigeration and automotive
industries.  In addition to producing bulk tubing, the Specialty
Tubing Group also produces value added products for the appliance market by
fabricating tubing into condensers for refrigerators and
freezers.  The Engineered Materials segment supplies products to the
construction and building industries. This segment manufactures fasteners and
fastening systems for the commercial flat roofing industry.  Products
are sold to building and roofing distributors and as private labels to roofing
systems manufacturers. A line of specialty fasteners is produced for the
building products industry for fastening applications in log homes, landscaping,
masonry, and wood decks.  This segment also manufactures plastic and
steel fittings and connectors for natural gas and water distribution service
lines along with exothermic welding products for electrical grounding, cathodic
protection, and lightning protection. In addition, the segment manufactures
electro-galvanized steel products primarily for the construction industry. The
Arlon EM segment designs, manufactures, markets and sells high performance
laminate materials and bonding films utilized in the military/aerospace,
wireless communications, automotive, oil drilling, and semiconductor markets.
Among the products included in the Arlon EM segment are high technology
materials for the printed circuit board industry and silicone rubber products
for insulating tapes and flexible heaters. The Arlon CM segment designs,
manufactures, markets and sells laminated and coated products to the electronic,
industrial and commercial markets under the Arlon and Calon brand
names.  Among the products included in the Arlon CM segment are vinyl
films for graphics art applications, foam tapes used in window glazing, and
electrical and thermal insulation products.  The Kasco segment is a
leading provider of meat-room products (principally replacement band saw blades)
and on site maintenance services principally to retail food stores, meat and
deli operations, and meat, poultry and fish processing plants throughout the
United States, Canada and Europe. In Canada and France, in addition to providing
its replacement products, Kasco also sells equipment to the supermarket and food
processing industries.




In
addition to the table below, please refer to Part II, Item 8 on page 37 of this
Report on Form 10-K for the Consolidated Financial Statements to which the
following discussion and analysis also applies.







19
 Table of Contents





Also, the
following table presents information about our reportable segments for the years
ended December 31:




(in
      thousands)2007
              
              
              2006Net
      SalesPrecious
      Metal
              
              $
              150,484
              
              
              $
              146,014Tubing
              
              
              117,627
              
              
              
              120,873Engineered
      Materials
              
              
              228,248
              
              
              
              194,076Arlon
      Electronic Materials (c)
              
              
              45,576
              
              
              
              -Arlon
      Coated Materials  (c)
              
              
              47,647
              
              
              
              -Kasco  (c)
              
              
              48,284
              
              
              
              -Net
      sales
              
              $
              637,866
              
              
              $
              460,963Segment
      operating income (loss)Precious
      Metal (a)
              
              $
              8,203
              
              
              $
              5,122Tubing
      (b)
              
              
              138
              
              
              
              (8,916
              )Engineered
      Materials
              
              
              17,216
              
              
              
              15,855Arlon
      Electronic Materials (c), (d), (f)
              
              
              (118
              )
              
              
              -Arlon
      Coated Materials (c), (d)
              
              
              (3,522
              )
              
              
              -Kasco
      (c), (d)
              
              
              1,007
              
              
              
              -Subtotal
              
              
              22,924
              
              
              
              12,061Unallocated
      pension expense (credit)
              
              
              (4,963
              )
              
              
              (4,785
              )Unallocated
      corporate expenses
              
              
              6,749
              
              
              
              4,069Insurance
      proceeds
              
              
              (6,538
              )
              
              
              (811
              )Environmental
      remediation expenses (e)
              
              
              4,678
              
              
              
              2,909Fairfield
      East penalty (e)
              
              
              -
              
              
              
              180Loss
      (gain) on disposal of assets
              
              
              283
              
              
              
              (31
              )Income
      from operations
              
              
              22,715
              
              
              
              10,530Interest
      expense
              
              
              39,488
              
              
              
              22,535Realized
      and unrealized loss on derivatives
              
              
              1,888
              
              
              
              7,993Other
      (income) expense
              
              
              272
              
              
              
              834Loss
      from continuing operations before taxes
              
              $
              (18,933
              )
              
              $
              (20,832
              )




(a)  
      Includes an asset impairment charge of $3.4 million in
    2006.(b)  
      Includes an asset impairment charge of $1.8 million and restructuring
      charges of $2.4 million in 2006.(c)  
      Bairnco segment information includes the period April 14, 2007 through
      December 31, 2007.(d)  
      The following non-recurring charges relating to the purchase accounting
      for the BairncoAcquisition are included in the 2007 results above: Arlon EM $3,509, Arlon
      CM $2,409,and Kasco $1,460.(e)  
      Environmental remediation expenses have not been allocated to the
      reporting segmentssince the related facilities have been closed for several years and are
      not indicativeof current operating results.(f)   
      Arlon EM operating loss includes $1,151 of amortization of intangible
      assets arising from the Bairnco
acquisition.




2007 Compared to
2006





Net sales
for 2007 increased by $176.9 million, or 38.3%, to $637.9 million, as compared
to $461.0 million in 2006. The Bairnco Acquisition generated $141.5 million of
this increase. The results of operations of Bairnco are included in the
financial results of WHX beginning April 13, 2007, and comprise approximately 37
weeks of operations. Net sales increased by $4.5 million at the Precious Metal
segment, decreased by $3.2 million at the Tubing segment, and increased $34.2
million at the Engineered Materials segment, principally due to sales from a
roofing fastener business acquired by the Company in December
2006.  Additionally, net sales increased at the current businesses
included in the Precious Metal and Tubing segments, but they were offset by a
decrease of approximately $30 million in net sales from businesses that were
sold or exited in 2007. HHEM was sold on March 4, 2007 and the operations of
H&H Tube were closed in 2006.




Gross
profit percentage increased to 20.8% in 2007 from 18.3% in 2006. The 2007 period
was positively affected by the acquisition of Bairnco, which contributed $36.7
million to gross profit and increased the Company’s consolidated gross profit
percentage by 1.5%. This was despite the fact that Bairnco’s  gross
profit had been negatively impacted by a $5.5 million  non-recurring
charge to cost of
sales that related to the acquisition value of Bairnco’s
inventory.  In both 2007 and 2006, the Company liquidated precious
metal inventories valued at last-in, first-out (“LIFO”) cost, resulting in a
favorable effect on gross margin in each year ($4.7 million in 2007 and $5.2
million in 2006). The Tubing segment increased gross profit as compared to the
2006 period primarily from higher margin in the stainless steel tubing
group.







20
 Table of Contents




SG&A
expenses increased $47.8 million to $111.4 million, or 17.5% of net sales, in
2007 from $63.6 million, or 13.8% of net sales, in 2006.  SG&A
expenses of Bairnco, which was acquired in April 2007, accounted for
approximately $39.0 million of the increase (6.1% of net sales in 2007), and
such SG&A expenses reflect $1.6 million of non-recurring charges for
acquired research and development and $0.2 million for acquired backlog. They
also include amortization of $1.3 million due to the intangibles acquired in the
Bairnco Acquisition. In addition, there was also an increase in 2007 from the
acquisition of a roofing fastener business in December 2006.  Its
costs include operating costs as well as amortization of certain acquired
intangible assets. Furthermore, under Revised Statement of Financial Accounting
Standards No. 123(R), the Company is required to record its obligation for stock
options at the fair value on the date of grant. The Company recorded $1.6
million of stock-based compensation expense in 2007 related to stock options and
other incentive arrangements.  In addition, costs also rose in the
2007 period due to additional audit and other professional fees, costs of
complying with the Sarbanes-Oxley Act of 2002, certain start up costs of a China
operation within the Precious Metal segment, partially offset by reduced costs
resulting from the closure of the HHEM and Norristown facilities.




The
Company recorded gains from insurance claims of $6.5 million and $0.8 million in
2007 and 2006, respectively. The insurance proceeds that the Company collected
related to claims from a fire at an H&H subsidiary’s plant in
2002.




Environmental
remediation expenses of $4.7 million were recorded in 2007 as compared to $2.9
million in 2006. During 2007, the Company revised its estimates of future
remediation costs for various locations and also increased its environmental
reserves based on the latest estimate of cleanup costs, together with certain
past oversight costs, and an expected increase in the Company’s allocation
percentage among the PRPs.




Asset
impairment charges in 2006 totaling $5.2 million include $1.8 million relating
to the assets of H&H Tube and $3.4 million relating to the assets of
HHEM.  In 2006, the Company announced the closing of the Norristown
facility.  The decision to close the Norristown facility was
principally based on the economics of operating H&H Tube’s business at the
facility.  H&H Tube manufactured stainless steel tubing that was
supplied in various lengths and forms in both coil and straight
lengths.  H&H Tube's small coil business was relocated to
H&H's Camdel facility located in Camden, Delaware.  In conjunction
with the decision to close the Norristown facility, the Company reviewed the
recoverability of the Norristown facility’s long-lived assets in accordance
with Statements of Financial Accounting Standards No. 144, “Accounting
for Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”).  A
review of future cash flows, based on the expected closing date, indicated that
cash flows would be insufficient to support the carrying value of certain
machinery and equipment at the Norristown facility.  As a result, the
Company recorded an asset impairment charge of $1.8 million in its statement of
operations for 2006.  No impairment loss was incurred on the real
estate assets based on the Company’s analysis.





In
accordance with SFAS No. 144, in 2004, the Company evaluated fixed assets
associated with its HHEM facilities in light of ongoing operating losses. This
evaluation resulted in the recording of accelerated depreciation of $0.2 million
in 2004, $0.8 million in 2005 and $0.8 million in 2006. This accelerated
depreciation is a charge to cost of goods sold in the applicable
period.  In the fourth quarter of 2006, the Company again measured the
recoverability of the long-lived assets of the HHEM business for impairment when
it was determined that the assets should be classified as held for sale in
accordance with SFAS No. 144, and recorded an asset impairment charge of $3.4
million.  The amount of the impairment loss was based upon the actual
selling price of the long-lived assets in March 2007.





Restructuring
charges of $2.4 million in 2006 relate to the Norristown facility
closing.   The restructuring charges included termination
benefits of $2.0 million and $0.1 million resulting from a pension plan
curtailment and $0.3 million for other charges.





Income
from operations for 2007 was $22.7 million, which was $11.4 million higher than
2006. A principal cause of the increase in operating income was the gain on
insurance proceeds of $6.5 million in 2007.  In addition, income from
operations for 2006 included $7.6 million for asset impairment and restructuring
charges related to the closing of HHEM and the Norristown
facility.  Decreases to operating income in 2007 resulted from
Bairnco’s operating loss of $2.6 million, which was negatively impacted by
non-recurring charges of $7.4 million for acquired manufacturing profit in
inventory, acquired research and development costs, and acquired backlog. In
addition, there were also higher SG&A expenses in 2007, related to
additional audit and other professional fees, the costs of complying with the
Sarbanes-Oxley Act of 2002, and expenses associated with share-based
compensation for certain executives, partially offset by reduced SG&A costs
resulting from the closure of the HHEM and Norristown
facilities.  Environmental remediation charges were $1.8 million
higher in 2007 than in 2006.


21
 Table of Contents




Interest
expense for 2007 rose by $17.0 million to $39.5 million from $22.5 million in
2006 as borrowings and the related interest rates both
increased.  Debt as of December 31, 2007 exceeded the December 31,
2006 balance by $153.8 million, of which approximately $132.5 million related to
Bairnco,




Realized
and unrealized losses on derivatives totaled $1.9 million in 2007, compared to
$8.0 million in 2006. H&H enters into commodity futures and forwards
contracts on precious metals in order to economically hedge its precious metals
inventory against price fluctuations.  The loss declined in 2007
principally because the volume of the Company’s precious metal inventories
declined, and thus its hedged quantities of precious metals declined
substantially in 2007. In addition, the market price of silver increased at a
lower rate in 2007 than in 2006.




In 2007,
a tax provision of $1.8 million was recorded for state and foreign taxes. The
2006 net tax provision for continuing operations of $31,000 includes a tax
benefit of $1.6 million related to discontinued operations.  The
Company’s net tax provision from both continuing and discontinued operations was
$1.7 million in 2006, and was also principally for state and foreign taxes. The
Company recorded a valuation allowance related to the tax benefits associated
with its operating losses in each period due to the uncertainty of realizing
these benefits in the future.




Net
income from discontinued operations in 2006 relates to the Company’s wire and
cable business, which had been part of the former Wire and Tubing
segment.  All operations of the wire and cable business were concluded
during 2005, and accordingly, these businesses are reported as discontinued
operations in 2006.  A gain on the disposal of assets, net of tax, of
$2.9 million in 2006 reflects a gain on the sale of the land and building
formerly used in the wire and cable business.




Net loss
for 2007 was $20.8 million, or ($2.08) per share, compared to a net loss from
continuing operations of $20.9 million or ($2.09) per share for
2006.   Including discontinued operations, net loss was $18.2
million, or $(1.82) per share for 2006.




The
comments that follow compare revenues and operating income by segment for 2007
and 2006:




Precious
Metal





Net sales
for the Precious Metal segment increased $4.5 million, or 3.1%, from $146.0
million in 2006 to $150.5 million in 2007. The sale of the HHEM business
resulted in a $15.6 million reduction in net sales for 2007 compared to 2006,
partially offset by a transfer of certain business to another entity within the
Precious Metal segment.  Aside from the reduction caused by the sale
of the HHEM business, the segment, particularly the precious metal fabrication
group, experienced higher net sales totaling $20.0 million, or 15%, including
the transferred business.  The sales increase resulted from both
increased volume and market share with increased sales to existing customers as
well as to new customers because of new distribution and sales force
initiatives. In addition, an increase in precious metal prices during 2007 also
contributed to higher sales compared to 2006. The average market price of
silver rose by 16% year over year, and the average market price of gold rose by
15%.  H&H’s profits from precious metal products are principally
derived from the “value added” of processing and fabricating and not from the
purchase and resale of precious metal.  In accordance with general
practice in the industry, prices to customers are principally a composite of two
factors: (1) the value of the precious metal content of the product and
(2) the “fabrication value”, which includes the cost of base metals, labor,
overhead, financing and profit.




Operating
income for the Precious Metal segment increased $3.1 million to $8.2 million in
2007 from $5.1 million in 2006, principally because 2006 included an asset
impairment charge of $3.4 million related to the Company’s HHEM
subsidiary.  The effect of higher sales in 2007 was offset by a less
profitable mix of industrial products sold and higher base metal and precious
metal costs. In addition, operating income was reduced by a $0.4 million loss
upon sale of certain inventory when the HHEM business was sold in March 2007,
and by $0.5 million of employee-related termination
costs.  Furthermore, both 2007 and 2006 results were positively
impacted by gains of $4.7 million and $5.2 million, respectively, resulting from
the liquidation of precious metal inventories valued at LIFO
cost.  There were also increases in salaries due to new hires, and
approximately $0.4 million of start up costs for a new China
operation.




Tubing





In 2007,
net sales for the Tubing segment decreased $3.2 million, or 2.7%, from $120.9
million in 2006 to $117.6 million in 2007, principally due to the closure of the
Norristown facility in 2007.  The Norristown facility continued to
operate during 2006 and recorded sales of $14.6 million, principally due to
special non-recurring sales and accelerated shipment of product prior to
shutdown. The reduction in net sales from the closure of the Norristown facility
was partially offset by a transfer of approximately $5.0 million of the
Norristown facility’s small coil business to another stainless steel tubing
facility.  Net sales at the other stainless steel tubing facilities
increased by approximately $12.4 million, including the $5.0 million transferred
business.  The net sales increase occurred principally because of
strong demand from the petrochemical and ship-building markets. The specialty
tubing group
experienced reduced sales volume resulting from weak demand from the North
American refrigeration market, partially offset by an increase in sales in the
European refrigeration market, for a net reduction in sales of approximately
$1.0 million.





22
 Table of Contents




Operating
loss decreased by $9.0 million to operating income of $0.1 million in 2007 from
an operating loss of $8.9 million in 2006.  The 2006 loss included a
total of $4.2 million for restructuring costs of $2.4 million and an asset
impairment charge of $1.8 million; both of which related to the closing of the
Norristown facility. Improvement in operating income also occurred due to the
strength of the sales at the other stainless steel tubing
facilities.  However, cost inefficiencies at the specialty tubing
group’s Mexican refrigeration facility continued to contribute to the operating
loss in both periods.





Engineered
Materials





Net sales
for the Engineered Materials segment increased $34.2 million, or 17.6%, from
$194.1 million in 2006 to $228.2 million in 2007 due to increased volume in the
commercial roofing fastener business (principally due to an acquisition in
December 2006).  This increase was partially offset by weaker sales of
products used in the domestic housing market, which is experienced a
slowdown.




Operating
income increased in 2007 by $1.3 million from $15.9 million in 2006 to $17.2
million in 2007.  Factors resulting in marginal operating income
improvement as compared to the sales growth of this segment, included soft
demand from the housing construction market, reduced gross margin from a mix of
lower margin products as well as higher SG&A expenses including $0.7 million
of amortization of certain intangibles acquired in December 2006 and the
postretirement welfare plan curtailment charge of $0.7 million at one of the
H&H subsidiaries included in this segment.  This was partially
offset by improved sales in the commercial roofing market and higher operating
income at the segment’s facility that serves the electric, natural gas and water
distribution industries.




Bairnco
Segments





The Arlon
EM, Arlon CM and Kasco segments (collectively, the "Bairnco Segments") were
established during Apri1 2007 with the acquisition of Bairnco. Any references to
the Bairnco Segments' financial information prior to the Company's acquisition
of Bairnco in 2007 have been included for comparative purposes only to assist in
better understanding the results of the Bairnco Segments, and such amounts have
not been included in the Company's consolidated results. The Bairnco Segments'
pre-acquisition financial information is not intended to represent, or be
indicative of, the consolidated results of operations or financial condition
that would have been reported had the acquisition of Bairnco been completed as
of the beginning of the period referenced. Moreover, the Bairnco Segments'
pre-acquisition financial information should not be considered as representative
of the Company's future consolidated results of operations or financial
condition.





Net sales
for the Bairnco Segments on a combined basis for the period April 13 through
December 31, 2007 were $141.5 million. Arlon EM's sales of $45.6 million
improved over prior year on strong activity in both the electronics and
industrial markets. Arlon CM's sales of $47.7 million increased only slightly
from 2006 as sales to the domestic graphics and industrial markets were
relatively flat.  Kasco's sales of $48.3 million were up significantly
over prior year from the impact of the Atlanta SharpTech acquisition made in
late 2006 and the impact of exchange rates of a weakened US dollar on European
sales.





Gross
profit for the Bairnco Segments on a combined basis for the period April 13
through December 31, 2007 was $36.6 million or 25.9% of sales. Gross profit was
negatively impacted by a charge to cost of sales for $5.5 million of
manufacturing profit that was included in the acquisition value of the inventory
purchased by WHX and sold in the reporting period.  Arlon’s EM gross
profit margin was down slightly due to a less favorable sales mix, increased raw
material costs, scrap and operating inefficiencies. Gross profit margins at
Arlon CM were negatively impacted by increased inefficiencies from lower
production volumes as sales to the corporate re-imaging markets softened.
Kasco’s gross profit margins improved from the prior year as certain sales and
cost efficiencies from the Atlanta SharpTech acquisition were
implemented.





SG&A
expenses for the Bairnco Segments on a combined basis for the period April 13
through December 31, 2007 of $39.2 million included $1.6 million of
non-recurring charges for acquired research and development and $0.2 million for
acquired backlog. They also include amortization of $1.3 million due to the
valuation of intangibles acquired in the acquisition by WHX.




The
valuation of the acquired assets of Bairnco included $1.6 million of acquired
in-process research and development.  This asset related to eight
specific research and development projects that were considered by management to
be within 6 to 12 months of commercialization.  The valuation method
used was an income approach that valued projected future operating profit from
the projects less the costs to complete the projects, and less a charge for the
use of existing technology assets such as the Company’s existing chemical
formulations and processing know-how, as well as a charge for the use of other
contributory assets. The resulting projected cash flows were then discounted
using an 18.5% discount rate. The acquired in-process research and development
asset of $1.6 million was charged to income in 2007 as part of selling, general
and administrative expenses.





23
 Table of Contents





Unallocated Corporate
Expenses




Unallocated corporate expenses increased from $4.1 million in 2006 to $6.7
million in 2007.  There were increases in the costs for audit and
legal fees, the cost of complying with the Sarbanes-Oxley Act of 2002, and
non-cash expenses associated with stock-based compensation for certain
executives.




Liquidity,
Cash Flow, and Commitments





Liquidity





The
Company incurred net losses of $20.8 million and  $18.2 million for
the years ended December 31, 2007 and 2006, respectively, and had negative cash
used in operating activities of $2.4 million and $17.7 million for the years
ended December 31, 2007 and 2006, respectively.  As of December 31,
2007, the Company had an accumulated deficit of $434.1 million.  On
February 14, 2008, H&H and certain of its subsidiaries amended the Wachovia
Facilities and the Term B Loan to, among other things, extend the maturity date
to June 30, 2009.  Bairnco’s bank debt was refinanced in July 2007
with a new scheduled maturity of 2012.  H&H and Bairnco have not
been in compliance with certain of their bank covenants and have been required
to obtain waivers from their lenders related to such covenants.  Upon
receipt of such waivers, the Company was in compliance.




WHX is a
holding company and has as its sole source of cash flow distributions from its
operating subsidiaries, H&H and Bairnco, or other discrete
transactions.  H&H’s credit facilities effectively do not permit
it to transfer any cash or other assets to WHX (with the exception of
(i) an unsecured loan for required payments to the WHX Pension Plan,
(ii) an unsecured loan for other uses in the aggregate principal amount not
to exceed $7.0 million, of which approximately $3.4 million has been
distributed, (iii) the loan, distribution or other advance of up to
approximately $7.4 million, subject to certain limitations, to the extent loaned
by Steel Partners to H&H, of which approximately $3.2 million has already
been distributed, and (iv) up to $13.1 million to be used by WHX solely to make
a contribution to the WHX Pension Plan, which contribution of $13.0 million was
made on September 12, 2007.  H&H’s credit facilities are
collateralized by substantially all of H&H’s assets.  Similarly,
Bairnco’s bank credit facilities and term loan do not permit it to make any
distribution, pay any dividend or transfer any cash or other assets to WHX other
than common stock of Bairnco.




WHX’s
ongoing operating cash flow requirements consist of funding the minimum
requirements of the WHX Pension Plan and paying administrative
costs.  On September 12, 2007, WHX made a payment to the WHX Pension
Plan of $13.0 million, which exceeded the minimum required contribution under
ERISA.  As a result of such accelerated contribution, the required
contributions to the WHX Pension Plan over the next five years are expected to
significantly decline, with no contribution required in 2008, and the Company
believes that the full amount of the IRS Waiver has been repaid, and all liens
granted to the PBGC pursuant to the PBGC Settlement Agreement have been
released. As of December 31, 2007, WHX and its subsidiaries that are not
restricted by loan agreements or otherwise from transferring funds to WHX
(collectively, its “Unrestricted Subsidiaries”) had cash of approximately $0.7
million and current liabilities of approximately $7.3 million, including $5.8
million of mandatorily redeemable preferred shares plus accrued dividends
payable to a related party.




H&H’s
availability under its credit facilities as of December 31, 2007 was $12.3
million, and as of February 29, 2008, was approximately $18.6 million. See
“Debt-Handy & Harman” for a discussion of H&H’s credit facilities,
including recent amendments.




On March
4, 2007, the Company sold certain assets, including the land and building,
certain machinery and equipment, and inventory of HHEM, located in East
Providence, Rhode Island, as well as certain assets and inventory located in
Malaysia for net proceeds of approximately $3.8 million.  Of the total
net proceeds, $2.5 million was used to make an incremental payment to the WHX
Pension Plan, pursuant to the terms of a prior agreement with the
PBGC.  Under the terms of the sale agreement, the Company has retained
responsibility for any pre-existing environmental conditions requiring
remediation at the Rhode Island site.




In
connection with the closing of the Bairnco Acquisition in April 2007, initial
financing was provided by Steel Partners through two credit
facilities.  Steel Partners extended bridge loans in the aggregate
principal amount of approximately $86.5 million pursuant to the Bridge Loan
Agreement.  In addition, Steel Partners extended to WHX a $15.0
million subordinated loan pursuant to the Subordinated Loan
Agreement.  WHX contributed the $15.0 million proceeds of the
subordinated loan to BZA as a capital contribution.




On July
18, 2007, Bairnco and certain of its subsidiaries entered into (i) the
First Lien Credit Agreement with Wells Fargo, which provides for a revolving
credit facility to the borrowers in an aggregate principal amount not to exceed
$30.0 million and a term loan facility of $28.0 million, (ii) the Second
Lien Credit Agreement with Ableco, which provides for a term loan facility to
the borrowers of $48.0 million., and (iii) the Subordinated Debt Credit
Agreement with Steel Partners as lender providing for a term loan of
approximately $31.8 million, and completed the refinancing of: (A) all
existing indebtedness of Bairnco and its subsidiaries under the Bairnco Senior
Secured Credit Facility and (B) approximately $56.7 million of the
indebtedness under the Bridge Loan Agreement.  The
Subordinated Debt Credit Agreement amended and restated the Bridge Loan
Agreement.  The scheduled maturity date of the indebtedness under each
of the First Lien Credit Agreement and Second Lien Credit Agreement is July 17,
2012, and the scheduled maturity date of the indebtedness under the Subordinated
Debt Credit Agreement is January 17, 2013.





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Bairnco’s
availability under its credit facilities as of December 31, 2007 was
approximately $5.3 million, and as of February 29, 2008, was approximately $6.1
million.  See “Debt-Bairnco” for a discussion of Bairnco’s credit
facilities, including amendments.




In
addition to the obligations under the current credit facilities, the Company
also has significant cash flow obligations, including without limitation the
amounts due to the WHX Pension Plan (as amended by the IRS Waiver and PBGC
Settlement Agreement entered into December 28, 2006).  As a result of
the $13.0 million contribution to the WHX Pension Plan in September 2007,
however, the Company's required contributions to the WHX Pension Plan over the
next five years are expected to significantly decline, and the Company believes
that the full amount of the IRS Waiver has been repaid, and all liens granted to
the PBGC pursuant to the PBGC Settlement Agreement have been
released.  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, as well as
considering the reduction of certain discretionary expenses and sale of certain
non-core assets.  There can be no assurance that the funds available
from operations and under the Company’s credit facilities will be sufficient to
fund its debt service costs, working capital demands, pension plan
contributions, and environmental remediation costs. The Company’s inability to
generate sufficient cash flows from its operations could impair its liquidity,
and would likely have a material adverse effect on its business, financial
condition and results of operations, and could raise substantial doubt that the
Company would be able to continue to operate.




In recent
years, the Company experienced liquidity issues.  On March 7, 2005,
WHX filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy
Code.  WHX continued to operate its business and own and manage its
properties as a Debtor until it emerged from protection under Chapter 11 of the
Bankruptcy Code on July 29, 2005.




Since
emerging from bankruptcy, due to covenant restrictions in their respective
credit facilities, there have been no dividends from H&H or Bairnco to WHX
and WHX’s sources of cash flow have consisted of:




·
            The
      issuance of $5.1 million in preferred stock by a newly created subsidiary
      in October 2005, which was invested in the equity of a public company
      (CoSine Communications Inc.);


·
            Partial
      payment by H&H of a subordinated debt to WHX of $9.0 million, which
      required the approval of the banks participating in the H&H credit
      facilities.  Subsequent to this transaction in 2006, the
      remaining intercompany loan balance of the subordinated debt of $44.2
      million was converted to equity;


·
            As
      permitted by the March 29, 2007 amendment and waiver to the H&H credit
      facilities, an unsecured loan from H&H for required payments to the
      WHX Pension Plan, and an unsecured loan for other uses in the aggregate
      principal amount not to exceed $3.5 million (subsequently amended on
      February 14, 2008 to $7.0 million), of which approximately $3.4 million
      has been distributed;


·
            A
      $15.0 million subordinated loan from Steel Partners pursuant to the
      Subordinated Loan Agreement which WHX used to fund a capital contribution
      to BZA to finance in part the Bairnco
  Acquisition;


·
            As
      permitted by the July 27, 2007 amendment to the H&H credit
      facilities, an unsecured loan, distribution or other advance from H&H
      to WHX of up to approximately $7.4 million, subject to certain
      limitations, to the extent loaned by Steel Partners to H&H, of which
      approximately $3.2 million has already been distributed;
    and


·
            As
      permitted by a September 10, 2007 amendment to the H&H credit
      facilities, an unsecured loan from H&H of $13.0 million which was used
      by WHX to make a payment to the WHX Pension Plan on September 12,
      2007.





We do not
anticipate that the Company will have any additional sources of cash flow other
than (i) as described above, (ii) from operations, (iii) from the sale of
non-core assets, and (iv)  from the proceeds of a proposed rights
offering.  In addition, the proceeds of the proposed rights offering
are expected to be used to redeem preferred stock and to retire indebtedness,
and accordingly will not be available for general corporate purposes, except
that $5 million of which shall be used to pay down the revolver under the
Wachovia Facilities pursuant to the February 14, 2008 amendment to H&H’s
credit facilities.




In
addition to obtaining the extension of maturity and amendments to its financing
agreements that are described above, management has the following strategies
planned in order to enhance liquidity: (1) continuing to implement and enhance
systems and processes to increase operating efficiencies at its facilities,
(2) supporting profitable sales growth both internally and through
acquisition, (3) evaluating strategic alternatives with respect to
underperforming and/or non-core lines of business and/or assets and (4) seeking
financing alternatives that may lower its cost of capital and/or enhance current
cash flow.




Discussion
of Consolidated Statement of Cash Flows for 2007 and 2006
 
 Overview
 As of
December 31, 2007, the Company had consolidated cash of $6.1 million compared to
$4.8 million of consolidated cash at December 31, 2006.  For the year
ended December 31, 2007, the Company used $2.4 million in operating activities,
used $110.5 million in investing activities, and provided $114.0 million by
financing activities.  It used $17.7 million in operating activities,
used $34.1 million in investing activities, and provided $52.3 million by
financing activities in 2006.
 25
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As of
December 31, 2007, the Company’s current assets totaled $194.7 million and its
current liabilities totaled $179.7 million; therefore, working capital was $15.0
 million. Included in the current liabilities as of December 31, 2007 is a
total of $24.7 million of loan interest and mandatorily redeemable preferred
stock payable to Steel Partners, a related party. The Company had a working
capital deficit of $1.6 million at December 31, 2006.




Operating
Activities





Net cash
used by operating activities in 2007 totaled $2.4 million. Net loss adjusted for
non-cash income and expense items provided approximately $10.6 million of cash.
Working capital accounts used $12.9 million of cash, as follows: accounts
receivable provided $2.1 million, inventories provided $13.8 million, interest
accrued but not paid to a related party provided $9.4 million, and net other
current assets and liabilities used $38.3 million.




Net cash
used by operating activities for 2006 totaled $17.7 million.  Net loss
adjusted for non-cash income and expense items provided $6.0 million of
cash.  Working capital accounts used $22.6 million of cash, as
follows: accounts receivable provided $2.0 million, inventories provided $4.6
million, interest accrued but not paid to a related party provided $8.3 million
and net other current assets and liabilities used $37.5 million (see
below).  Other non-working capital items included in operations used
$1.1 million.




Cash flow
provided by inventory totaled $13.8 million in 2007, principally due to a
decrease in the quantities of precious metal inventory. In the normal course of
business, H&H accepts precious metal from suppliers and customers, which
quantities are returnable in fabricated or commercial bar form under agreed-upon
terms. To the extent such metals are used by the Company to meet its operating
requirements, the amount of inventory which H&H must own is
reduced.  In the first quarter of 2007, the Company received 400,000
ounces of silver from a customer under an unallocated pool agreement. As a
result of this agreement, the Company was able to reduce its owned quantity of
silver by over 400,000 troy ounces, providing over $5.0 million in cash. For the
entire year, the Company reduced the quantity of its owned precious metal
inventory by 1,184 troy ounces of gold and 690,200 troy ounces of silver, which
approximates $10 million at average market value.  In addition, as the
Company sold the inventory that it had acquired in the Bairnco Acquisition in
April 2007, it recovered the manufacturing profit of $5.5 million that was paid
for the inventory at that date.




For 2006,
inventory provided $4.6 million of cash flow, also primarily due to a decrease
in its quantities of precious metal inventory.  Inventories totaled
$57.2 million at December 31, 2006, a decrease of $3.8 million, or 6.2%, as
compared to December 31, 2005.  During 2006, the Company reduced its
quantities of precious metal in inventory principally because of the wind-down
of the HHEM business and because of the sale of its interest in a Singapore
operation.  Non-precious metal inventory at the Tubing segment also
declined, principally because of the closure of the Norristown
facility.  These decreases were partially offset by inventory
purchased as part of the December 2006 acquisition of a roofing fastener
business that H&H made.




Accounts
receivable provided cash of $2.1 million in 2007. Accounts receivable totaled
$89.5 million as of December 31, 2007, an increase of $30.8 million as compared
to December 31, 2006, principally due to the Bairnco Acquisition, as well as to
higher fourth quarter 2007 sales for the H&H businesses.  For
2006, account receivable provided $2.0 million of operating cash
flow.  Accounts receivable totaled $58.7 million as of December 31,
2006, an increase of $1.5 million, or 2.5%, as compared to December 31, 2005,
principally because of the December 31, 2006 acquisition of a roofing fastener
business.  Partially offsetting this increase, accounts receivable
declined due to the shutdown of a portion of the H&H Tube and HHEM
businesses.




Net other
current assets and liabilities used $28.8 million of cash flow in 2007 and $29.2
million in 2006. The 2007 use of cash was driven by $21.6 million of payments
made to the WHX Pension Plan, and approximately $6.3 million of payments for
environmental remediation costs, but was partially offset by the accrual of $9.4
million of interest payable to a related party (net of payments), and additional
environmental remediation accruals totaling $4.7 million.  The use of
cash of $29.2 million in 2006 was driven by cash used for the payment of $18.7
million of environmental remediation costs and payments to the WHX Pension Plan
totaling $13.1 million, partially offset by the accrual of $8.7 million of
interest payable to a related party (net of payments), the recording of a $2.9
million environmental remediation accrual and a restructuring reserve of $2.4
million.  Other non-working capital items included in operating
activities used $1.1 million in 2006.




Investing
Activities




Investing
activities in 2007 used $110.5 million, driven by the Bairnco Acquisition, which
used $99.5 million, net of cash acquired, and the acquisition by H&H of Omni
Technologies Corporation in November 2007 for $3.1 million, net of cash
acquired. WHX believes that the Bairnco Acquisition will be beneficial because
of Bairnco’s strong positions in its three business segments, and that Bairnco’s
plant level operations, profit margins and working capital can be
improved.  The Company believes that certain intangible assets owned
by Omni Technologies Corporation, a manufacturer of flux cored brazing wire and
metal powders used for brazing and soldering pastes, would be beneficial to the
Precious Metal segment’s business. The cash expended for acquisitions was
partially offset by $4.3 million of proceeds from the sale of assets,
principally related to the sale of the HHEM assets and certain of the Norristown
facility assets.  Capital spending in 2007 was $10.2 million, and $2.0
million of net cash was paid out for precious metal derivative
contracts.





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 Table of Contents




Investing
activities in 2006 used net cash of $34.1 million, principally due to the
acquisition of a mechanical roofing fastener business on December 28,
2006.  The purchase price was approximately $26 million, including a
working capital adjustment.  This acquired business manufactures
fastening systems for the commercial roofing industry.  WHX believes
this acquisition solidifies H&H’s position as a leading manufacturer and
supplier of mechanical fasteners, accessories and components, and building
products for the North American commercial and residential construction
industry.  Also in 2006, $8.7 million of net cash was paid out for
precious metal derivative contracts due to steep increases in precious metal
market prices during the year.  In 2006, $7.7 million was spent on
capital improvements.  The Company sold the remaining land and
building from its discontinued wire and cable business for net proceeds of $7.3
million, as well as its interest in a Singapore operation for $0.6 million, and
cash proceeds from other asset sales of $0.3 million during 2006.




Financing
Activities





Financing
activities provided $114.0 million in 2007, $101.4 million of which was due to
the financing of the Bairnco Acquisition in April 2007. In July 2007, Bairnco
completed a refinancing of its debt, which resulted in new term loan borrowings
of $76.0 million and payments of approximately $55.5 million to Steel Partners
and $14.8 million of term loan payments to its former credit bank.  In
2007, H&H borrowed a total of $14.5 million from Steel Partners; $5.7
million in July, $8.0 million in September 2007, and $0.8 million in December.
There were additional net drawdowns of $3.4 million on the revolving credit
facilities of both H&H and Bairnco (post–acquisition), partially offset by
$8.3 million of additional principal repaid on term loans and $3.7 million
related to financing fees principally in connection with the extension of the
maturity of the H&H credit facilities and the refinancing of Bairnco’s
debt.




Financing
activities provided $52.2 million of net cash in 2006, principally from new
borrowings, which totaled $75.0 million during the period.  The
increase in debt during 2006 consisted of the following:  In January
2006, H&H increased its Term B Loan with Steel Partners by $10.0
million.  On January 24, 2006, H&H’s wholly-owned subsidiary, OMG,
Inc. entered into a loan agreement with Sovereign Bank for $8.0 million,
collateralized by a mortgage on OMG, Inc.’s real property.  On March
31, 2006, H&H and Steel Partners agreed to an increase in the Term B Loan in
the amount of $9.0 million and the prepayment in the same amount of a portion of
H&H’s subordinated intercompany promissory note issued to WHX.  On
October 30, 2006, H&H and its bank group amended its facilities to provide,
among other things, an additional $7.0 million term loan upon the filing of its
2005 Annual Report on Form 10-K, and an immediate $3.0 million of borrowing
availability under its revolving credit facility.  On December 27,
2006, Wachovia provided H&H with such $7.0 million loan.  On
December 28, 2006, H&H and certain of H&H’s subsidiaries amended the
Wachovia Facilities and the Term B Loan with Steel Partners to provide, among
other things, for a $42.0 million term loan funded by Ableco.  A
portion of the funds from this loan ($26.0 million) was used to fund the
acquisition discussed in the Investing Activities section above.  Also
during 2006, the Company made principal repayments totaling $8.9 million on term
loans, utilizing funds mainly obtained from the sale of the assets of the
discontinued wire and cable business discussed above.




Debt





Handy &
Harman





H&H’s
financing agreements include the Wachovia Facilities, which provide for
revolving credit and term loan facilities, and the Term B Loan with Steel
Partners.





The
Wachovia Facilities currently provide for maximum borrowings of $129 million,
consisting of a revolving credit facility of up to $83 million of borrowings
dependent on the levels of and collateralized by eligible accounts receivable
and inventory, and reduced by the amount of certain term loans outstanding to
Wachovia. In addition, the Wachovia Facilities also include term loans funded by
Ableco ($42 million as of December 31, 2007 and $46 million currently). The term
loans are collateralized by eligible equipment and real estate. The revolving
credit facility and the term loans payable to Wachovia bear interest at LIBOR
plus applicable margins of between 2.00% and 2.50%, or the U.S. Base rate (prime
rate) plus .25% to .75%. The Wachovia Facilities also include a provision for
Supplemental Term Loans, which currently total approximately $5 million, and
bear interest at LIBOR plus applicable margins of between 4.00% and 4.50%, or
the U.S. Base rate (prime rate) plus 2.25% to 2.75%. The applicable margin for
the revolving credit facility and the term loans payable to Wachovia is
dependent on H&H’s Quarterly





27
 Table of Contents





Average
Excess Availability for the prior quarter, as that term is defined in the
agreement. The term loans payable to Ableco bear interest at LIBOR plus
applicable margins of between 4.75% and 5.50%, or the U.S. Base rate (prime
rate) plus 2.00% to 2.75%. The applicable margin for the term loans payable to
Ableco is dependent on H&H’s Senior Leverage Ratio for the prior quarter, as
that term is defined in the agreement. Borrowings under the Wachovia Facilities
are collateralized by first priority security interests in and liens upon all
present and future stock and assets of H&H and its subsidiaries, including
all contract rights, deposit accounts, investment property, inventory,
equipment, real property, and all products and proceeds
thereof.  Principal payments for the term loans under the Wachovia
Facilities are due in monthly installments of $0.3 million (rising to $0.7
million per month for one year beginning May 2008). The Wachovia Facilities
contain affirmative, negative, and financial covenants (including, EBITDA shall
not be less than $30.0 million, the Senior Leverage Ratio shall not be greater
than 4.125:1.0, Capital Expenditures shall not be made in excess of $12.0
million in any 12 month period, as such terms are defined therein), and cash
distributions that can be made to WHX are restricted.  The Wachovia
Facilities mature on June 30, 2009. The revolving and term loans under the
Wachovia Facilities bore interest at rates ranging from 7.0% to 8.6% as of
December 31, 2007.





The Term
B Loan with Steel Partners matures on June 30, 2009 and provides for annual
payments based on 40% of excess cash flow as defined in the agreement (no
principal payments are currently payable).  Interest accrues monthly
at the Prime Rate plus 6%, and at no time shall the Prime Rate (as that term is
defined in the agreement) be below 4.0%. Pursuant to the terms of a
subordination agreement between Steel Partners and Wachovia, H&H’s interest
payable to Steel is accrued but not paid.  The Term B Loan has a
second priority security interest in and lien on all assets of H&H, subject
to the prior lien of the Wachovia Facilities and H&H’s $10 million guaranty
and security interest for the benefit of Ableco as agent of the Bairnco
indebtedness. In addition, H&H has pledged a portion of all outstanding
stock of Indiana Tube Danmark A/S, a Danish corporation, and Protechno, S.A., a
French corporation, both of which are indirect wholly-owned subsidiaries of
H&H. The Term B Loan contains affirmative, negative, and financial covenants
(including, EBITDA shall not be less than $30.0 million, the Senior Leverage
Ratio shall not be greater than 4.125:1.0, Capital Expenditures shall not be
made in excess of $12.0 million in any 12 month period, as such terms are
defined therein), and cash distributions that can be made to WHX are restricted.
The Term B Loan also contains cross-default provisions with the Wachovia
Facilities.   The Term B Loan bore interest at 13.5% as of
December 31, 2007.




On March
29, 2007, all such credit facilities, including the term loans, were amended to
(i) redefine EBITDA, (ii) reset the levels and amend certain of the
financial covenants, (iii) extend the termination date of the credit
facilities from March 31, 2007 to June 30, 2008, (iv) permit the extension
by H&H to WHX of an unsecured loan for required payments to the WHX Pension
Plan, under certain conditions, and (v) permit the extension by H&H to
WHX of an unsecured loan for other uses in the aggregate principal amount not to
exceed $3.5 million under certain conditions.  The amendments also
provided for the pledge of 65% of all outstanding securities of Indiana Tube
Danmark A/S, a Danish corporation and a wholly-owned indirect subsidiary of
H&H., and Protechno, a French corporation and a wholly-owned indirect
subsidiary of H&H.  Finally, the amendments also provided for
waivers of certain events of default existing as of March 29, 2007.




On June
15, 2007, the lenders under H&H’s credit facilities granted a waiver to the
events of default arising as a result of the Order of Prejudgment Attachment
entered by the Superior Court of Stamford, Connecticut on December 18, 2006 in
connection with the litigation known as HH East Parcel v.  Handy &
Harman currently pending in the Superior Court, Stamford, Connecticut in the
amount of approximately $3.5 million and the Notice of Bank
Attachment/Garnishment dated May 21, 2007 by the State Marshal of Fairfield
County, Connecticut to JPMorgan Chase Bank in the amount of approximately $3.5
million, and related matters.




On July
27, 2007, H&H and certain of its subsidiaries amended its credit facilities,
effective as of July 20, 2007 to, among other things, (i) change the
definition of EBITDA, (ii) permit additional loans by Steel Partners to
H&H in an aggregate amount not to exceed approximately $7.4 million, and
(iii) permit the loan, distribution or other advances by H&H to WHX of
up to approximately $7.4 million, subject to certain limitations, to the extent
loaned by Steel Partners to H&H as permitted by these
amendments.  On July 31, 2007, Steel Partners loaned H&H
approximately $5.7 million.




On
September 10, 2007, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, (i) provide for an additional term loan by
Steel Partners of $8.0 million to H&H and its subsidiaries, and (ii) permit
a loan by H&H to WHX of up to $13.1 million to be used by WHX solely to make
a contribution to the WHX Pension Plan.  On September 12, 2007, the
Company made a payment to the WHX Pension Plan of $13.0 million, which exceeded
the minimum required contribution under ERISA.  As a result of such
accelerated contribution, the Company’s required contributions to the WHX
Pension Plan over the next five years are expected to decline and the Company
believes that the full amount of the IRS Waiver has been repaid, and that all
liens granted to the PBGC pursuant to the PBGC Settlement Agreement have been
released.




On
October 31, 2007, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, make Omni Technologies Corporation, a company
acquired by H&H in 2007, a borrower under such facilities.




On
January 22, 2008, H&H and certain of its subsidiaries amended its credit
facilities to, effective January 11, 2008, among other things, (i) provide for a
temporary reduction in the reserves required under the Wachovia Facilities from
$2.5 million to $1.0 million
until April 15, 2008, and (ii) revise the criteria of Foreign Accounts, as that
term is defined in the agreement, to be included in the calculation of
availability.







28
 Table of Contents




On
February 14, 2008, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, (i) reset the levels of certain financial
covenants, (ii) allow for the prepayment of the Term B Loan with Steel Partners
in the amount of and upon receipt by H&H of a capital or debt infusion from
the Company from proceeds of the rights offering, less $5.0 million which shall
be used to pay down the revolver under the Wachovia Facilities, (iii) extend the
maturity date to June 30, 2009, (iv) consent to the terms and conditions of the
H&H Security Agreement and the H&H Guaranty,  both terms as
defined below in the description of the February 14, 2008 amendment by Bairnco
to its credit agreements, and (v) amend applicable interest rates.  In
addition, the Wachovia Facilities were also amended to provide for an additional
term loan of $4.0 million to H&H and its subsidiaries.




Bairnco




In
connection with the Bairnco Acquisition, initial financing was provided by Steel
Partners through two credit facilities.  Steel Partners extended to
BZA bridge loans in the aggregate principal amount of approximately $86.5
million pursuant to the Bridge Loan Agreement between BZA and Bairnco, as
borrowers, and Steel Partners, as lender.  In addition, Steel Partners
extended to WHX a $15.0 million subordinated loan, which is unsecured at the WHX
level, pursuant to the Subordinated Loan Agreement, between WHX, as borrower,
and Steel Partners, as lender.  WHX contributed the $15.0 million
proceeds of the Subordinated Loan Agreement to BZA as a capital
contribution.




On July
18, 2007, Bairnco completed the refinancing of: (i) all  of its
existing indebtedness under its prior debt agreement, the Bairnco Senior Secured
Credit Facility, and (ii) a portion (approximately $56.7 million) of its
existing indebtedness under the Bridge Loan Agreement, as follows:





On July
18, 2007, Bairnco and certain of its subsidiaries entered into the First Lien
Credit Agreement with Wells Fargo,, which provides for a revolving credit
facility to the borrowers in an aggregate principal amount not to exceed $30.0
million and a term loan facility of $28.0 million, (ii) the Second Lien
Credit Agreement with Ableco, which provides for a term loan facility to the
borrowers of $48.0 million, and (iii) the Subordinated Debt Credit
Agreement with Steel Partners,  providing for a term loan of
approximately $31.8 million.  The Subordinated Debt Credit Agreement
amended and restated the Bridge Loan Agreement.




The First
Lien Credit Agreement provides for a revolving credit facility in an aggregate
principal amount not to exceed $30.0 million and a term loan facility to the
Borrowers of $28.0 million.  Borrowings under the First Lien Credit
Agreement bear interest, (A) in the case of base rate loans, at 0.25% above the
Wells Fargo prime rate, (B) in the case of LIBOR rate loans, at rates of 2.00%
or 2.50%, as applicable, above the LIBOR rate, and (C) otherwise, at a rate
equal to the Wells Fargo prime rate minus 0.25%.  The revolving and
term loans under the First Lien Credit Agreement bore interest at rates ranging
from 6.87% to 7.58% as of December 31, 2007.  Obligations under the
First Lien Credit Agreement are guaranteed by certain of Bairnco’s subsidiaries,
and secured by a first priority lien on all assets of Bairnco and such
subsidiaries. Principal payments for the term loans under the First Lien Credit
Agreement are due in monthly installments of $0.2 million. The scheduled
maturity date of the indebtedness under the First Lien Credit Agreement is July
17, 2012.





The
Second Lien Credit Agreement provides for a term loan facility of $48.0
million.  Borrowings under the Second Lien Credit Agreement bear
interest, in the case of base rate loans, at 3.50% above the rate of interest
publicly announced by JPMorgan Chase Bank in New York, New York as its reference
rate, base rate or prime rate, and, in the case of LIBOR rate loans, at 6.00 %
above the LIBOR rate. The Second Lien Credit Agreement bore interest at 11.2% as
of December 31, 2007. Obligations under the Second Lien Credit Agreement are
guaranteed by Bairnco and certain of its subsidiaries, and secured by a second
priority lien on all of their assets. Principal payments for the term loans
under the Second Lien Credit Agreement are due on the maturity date, which is
July 17, 2012.





The First
Lien Credit Agreement and Second Lien Credit Agreement contain affirmative,
negative, and financial covenants (including, for the applicable periods set
forth therein, permitting TTM EBITDA to be less than $14.0 million to $18.0
million, having a Leverage Ratio of more than 6.74:1.0 to 5.0:1.0, having a
Fixed Charge Coverage Ratio of less than 0.75:1.0 to 1.0:1.0 and making Capital
Expenditures in excess of $9.0 million in any fiscal year, as such terms are
defined therein).




The
Subordinated Debt Credit Agreement with Steel Partners provides for a term loan
facility in the amount of approximately $31.8 million.  All borrowings
under the Subordinated Debt Credit Agreement bear interest at 6.75% above the
rate of interest publicly announced by JPMorgan Chase Bank in New York, New York
as its reference rate, base rate or prime rate. The interest rate under the
Subordinated Debt Credit Agreement as of December 31, 2007 was
14.0%.  Principal, interest and all fees payable under the
Subordinated Debt Credit Agreement are due and payable on the scheduled maturity
date, January 17, 2013. Obligations under the Subordinated Debt Credit Agreement
are guaranteed by Bairnco and certain of its subsidiaries, and secured by a
subordinated priority
lien on their assets.  The Subordinated Debt Credit Agreement contains
customary representations, warranties, affirmative and negative covenants,
events of default and indemnification provisions.





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H&H
and Bairnco have not been in compliance with certain of their bank covenants and
have been required to obtain waivers from their lenders related to such
covenants.  Upon receipt of such waivers, the Company has been in
compliance.




On
February 14, 2008, Bairnco and certain of its subsidiaries amended the First
Lien Credit Agreement and the Second Lien Credit Agreement to, among other
things, reset the levels of certain financial covenants.  The Second
Lien Credit Agreement was also amended to provide for, among other things, a
limited guaranty by H&H of up to $10 million, secured by a second lien on
all of the assets of H&H pursuant to the terms and conditions of the H&H
Security Agreement and the H&H Guaranty.   In addition, each
of the First Lien Credit Agreement and the Second Lien Credit Agreement was also
amended to, among other things, provide for either (i) the Company to invest $10
million from the proceeds of the rights offering by March 31, 2008 in Bairnco
and for such  proceeds to be used to prepay at least $10 million under
the Wells Fargo term loan, (ii) Steel Partners to issue a limited $10 million
guaranty, or (iii) a capital or debt infusion of $10 million by either Steel
Partners or WHX into Bairnco, or any combination of the foregoing.





The
Subordinated Loan Agreement provided for a subordinated term loan of $15 million
from Steel Partners to WHX, which is unsecured at the WHX
level.  Borrowings under the Subordinated Loan Agreement bear
pay-in-kind interest at a rate per annum equal to the prime rate of JP Morgan
Chase plus 7.75%, with a minimum interest rate of 16% per annum and a maximum
interest rate of 19% per annum.  The interest rate under the
Subordinated Loan Agreement as of December 31, 2007 was
16.0%.  Obligations under the Subordinated Loan Agreement are
guaranteed by Bairnco and certain of its subsidiaries and secured by a junior
lien on the assets of Bairnco and certain of its subsidiaries and capital stock
of certain of Bairnco’s subsidiaries. Principal and interest due under the
Subordinated Loan Agreement matures April 2009.




Other
Obligations





Pension
Plan




On
December 20, 2006, the IRS granted a conditional waiver of the minimum funding
requirements for the WHX Pension Plan for the 2005 plan year in accordance with
section 412 (d) of the Internal Revenue Code and section 303 of ERISA, which had
not been paid by the Company due to liquidity issues.  On December 28,
2006, WHX, H&H, and the PBGC entered into the PBGC Settlement Agreement in
connection with the IRS Waiver and certain other matters.  The IRS
Waiver is subject to certain conditions, including a requirement that the
Company meet the minimum funding requirements for the WHX Pension Plan for the
plan years ending December 31, 2006 through 2010, without applying for a waiver
of such requirements.  The PBGC Settlement Agreement and related
agreements include the following: (i) the amortization of the waived amount
of $15.5 million over a period of five years, (ii) the PBGC’s consent to
increase borrowings under H&H’s senior credit facility to $125 million in
connection with the closing of an acquisition, (iii) the resolution of any
potential issues under Section 4062(e) of ERISA, in connection with the
cessation of operations at certain facilities owned by WHX, H&H or their
subsidiaries, and (iv) the granting to the PBGC of subordinate liens on the
assets of H&H and its subsidiaries, and specified assets of WHX, to
collateralize WHX’s obligation to pay the Waiver Amount to the WHX Pension Plan
and to make certain payments to the WHX Pension Plan in the event of its
termination.  Payments made during 2006 and 2007 were $13.1 million
and $21.6 million, respectively.  On September 12, 2007, the Company
made a payment to the WHX Pension Plan of $13.0 million, which exceeded the
minimum required contributions under ERISA.  As a result of such
accelerated contribution, our required contributions to the WHX Pension Plan
over the next five years are expected to significantly decline, and the Company
believes that the full amount of the IRS Waiver has been repaid, and all liens
granted to the PBGC pursuant to the PBGC Settlement Agreement have been
released.  Our expected minimum funding requirements are $0.0, $2.5
million, $2.7 million, $0.8 million and $0.0 for 2008, 2009, 2010, 2011 and
2012, respectively.  All minimum funding requirement calculations
reflect the Pension Protection Act of 2006 as well as all other relevant rules.
On February 28, 2008, the Company adopted an amendment to the WHX Pension Plan
allowing certain Wheeling-Pittsburgh Steel Corporation participants to elect to
receive, between March 1, 2008 and August 31, 2008, a single lump sum
payment in lieu of all benefits otherwise payable under the WHX Pension Plan.
The election was made available to more than 2,100 participants of the WHX
Pension Plan. Without regard to the number of participants who elect to
participate in this distribution, there will be no material effect upon the
funded status of the WHX Pension Plan or on the estimated minimum funding
requirements.





Environmental
Issues





H&H’s
facilities and operations are subject to extensive environmental laws and
regulations imposed by federal, state, foreign and local authorities relating to
the protection of the environment.  It could incur substantial costs,
including cleanup costs, fines or sanctions, and third-party claims for property
damage or personal injury, as a result of violations of or liabilities under
environmental laws.  H&H has incurred, and in the future may
continue to incur, liability under environmental statutes and regulations with
respect to the contamination detected at sites owned or operated by it
(including contamination caused by prior owners and operators of such sites,
abutters or other persons) and the sites at which H&H disposed of hazardous
substances.  As of December 31, 2007, H&H has established a
reserve totaling $7.8 million with respect to certain presently estimated
environmental remediation costs at certain of its facilities.  This
reserve may not be adequate to cover the ultimate costs of remediation,
including discovery of additional contaminants or the imposition of additional
cleanup obligations, which could result in significant additional
costs.  In addition, H&H expects that future regulations, and
changes in the text or interpretation of existing regulations, may subject it to
increasingly stringent standards.  Compliance with such requirements
may make it necessary for H&H to retrofit existing facilities with
additional pollution-control equipment, undertake new measures in connection
with the storage, transportation, treatment and disposal of by-products and
wastes or take other steps, which may be at a substantial cost to
H&H.







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Mandatorily
Redeemable Preferred Stock





On
October 26, 2005, WHX CS Corp. (“CS”), a wholly-owned subsidiary of WHX, entered
into a Stock Purchase Agreement by and between CS and Steel
Partners.  Pursuant to this agreement, CS sold 1,000 shares of Series
A preferred stock, par value $0.01 per share (the “WHX CS Preferred”), to Steel
Partners.  Steel Partners paid a purchase price of $5,100 per share or
an aggregate purchase price of $5.1 million.  The proceeds of the sale
were used by CS to purchase 1,898,337 shares of CoSine Communications,
Inc.  The WHX CS Preferred accrue dividends at 6.0% per
annum.  The WHX CS Preferred were required to be redeemed by CS for
$5.1 million plus all accrued and unpaid dividends on October 26, 2006 or, at
the sole option of the Board of Directors of CS, on any earlier
date.  However, there was no such redemption on that
date.




Pension
Plan Contingency Arising from the WPC Group Bankruptcy





The WPC
Group was a wholly owned subsidiary of WHX.  On November 16, 2000, the
WPC Group filed a petition seeking reorganization under Chapter 11 of the
Bankruptcy Code.  The WPC Group Chapter 11 Plan of Reorganization (the
“WPC POR”) was consummated on August 1, 2003, pursuant to which, among other
things, the WPC Group ceased to be a subsidiary of WHX effective August 1, 2003,
and from that date forward has been an independent company.




As part
of the WPC POR, the Company agreed to make certain contributions (the “WHX
Contributions”) to the reorganized company.  Under the WHX
Contributions, the Company forgave the repayment of its claims against the WPC
Group of approximately $39.0 million and, additionally, contributed to the
reorganized company $20.0 million of cash, for which the Company received a note
in the amount of $10.0 million.  The note was fully reserved upon
receipt.




On March
6, 2003, the PBGC published its Notice of Determination (“Notice”) and on March
7, 2003 filed a Summons and Complaint (“Complaint”) in United States District
Court for the Southern District of New York seeking the involuntary termination
of the WHX Pension Plan, a defined-benefit pension plan sponsored by the Company
that provides pension benefits to active and retired employees of WHX and
H&H and certain benefits to active and retired employees or members of the
WPC Group.  WHX filed an answer to this complaint on March 27, 2003,
contesting the PBGC’s action.  On July 24, 2003, the Company entered
into an agreement among the PBGC, WPC, WPSC, and the United Steelworkers of
America, AFL-CIO-CLC (“USWA”) in settlement of matters relating to the PBGC V.
WHX Corporation (“Termination Litigation”), in which the PBGC was seeking to
terminate the WHX Pension Plan.  Under the settlement, among other
things, WHX agreed (a) that the WHX Pension Plan, as it is currently
constituted, is a single employer pension plan, (b) to contribute funds to the
WHX Pension Plan equal to moneys spent (if any) by WHX or its affiliates to
purchase the 10 1/2% Senior Notes in future open market transactions, and (c) to
grant to the PBGC a pari passu security interest of up to $50.0 million in the
event WHX obtained any future financing on a secured basis or provided any
security or collateral for the 10 1/2% Senior Notes.




Also
under the settlement, all parties agreed that as of the effective date of the
WPC POR, (a) no shutdowns had occurred at any WPC Group facility, (b) no member
of the WPC Group is a participating employer under the WHX Pension Plan, (c)
continuous service for WPC Group employees was broken, (d) no WPC Group
employees will become entitled to “Rule of 65” or “70/80” Retirement Benefits
(collectively, “Shutdown Benefits”) by reason of events occurring after the
effective date of the WPC POR, and (e) the WHX Pension Plan would provide for a
limited early retirement option to allow up to 650 WPSC USWA-represented
employees the right to receive retirement benefits based on the employee’s years
of service as of July 31, 2003 with a monthly benefit equal to $40 multiplied by
the employee’s years of service.




Finally,
under the settlement, the PBGC agreed (a) that, after the effective date of the
WPC POR, if it terminates the WHX Pension Plan at least one day prior to a WPC
Group facility shutdown, WHX shall be released from any additional liability to
the PBGC resulting from the shutdown, (b) to withdraw its claims in the WPC
Bankruptcy Proceedings, and (c) to dismiss the Termination
Litigation.




The
agreement with the PBGC also contains the provision that WHX will not contest a
future action by the PBGC to terminate the WHX Pension Plan in connection with a
future WPC Group facility shutdown.  In the event that such a plan
termination occurs, the PBGC has agreed to release WHX from any claims relating
to the shutdown.  However, there may be PBGC claims related to
unfunded liabilities that may exist as a result of a termination of the WHX
Pension Plan.







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Off-balance
Sheet Arrangements




It is not
the Company’s usual business practice to enter into off-balance sheet
arrangements such as guarantees on loans and financial commitments,
indemnification arrangements, and retained interests in assets transferred to an
unconsolidated entity for securitization purposes. Certain customers and
suppliers of the Precious Metal segment choose to do business on a “pool”
basis.  Such customers or suppliers 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’s precious metal is returned in fabricated
form, the customer is charged a fabrication charge.  The value of
consigned precious metal is not included in the Company’s balance
sheet.  As of December 31, 2007, the Company held customer metal
comprised of 795,336 ounces of silver, 779 ounces of gold, and 1,346 ounces of
palladium.  The market value per ounce of silver, gold, and palladium
as of December 31, 2007 was $14.81, $834.70, and $364.00,
respectively





Summary





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, as well as considering the reduction of certain
discretionary expenses and sale of certain non-core assets.  There can
be no assurance that the funds available from operations and under the Company’s
credit facilities will be sufficient to fund its debt service costs, working
capital demands, pension plan contributions, and environmental remediation
costs.  The Company’s inability to generate sufficient cash flows from
its operations could impair its liquidity, and would likely have a material
adverse effect on its business, financial condition and results of operations,
and could raise substantial doubt that the Company will be able to continue to
operate.




The
Company believes that recent new and amended financing arrangements, significant
payments made during 2007 to the WHX Pension Plan and complete satisfaction of
the IRS Waiver, acquisitions, the sale of a non-essential operating unit, as
well as continuing improvements in its core operations and the substantial
completion of a major remediation of property relating to certain environmental
liabilities have permitted the Company to generate sufficient working capital to
meet its obligations as they mature.  The ability of the Company to
meet its cash requirements for at least the next twelve months is dependent, in
part, on the Company’s ability to meet its business plan.  Management
believes that existing capital resources and sources of credit, including the
H&H credit facilities and the Bairnco credit facilities, will be adequate to
meet its current and anticipated cash requirements.  However, if the
Company’s cash needs are greater than anticipated or the Company does not
materially satisfy its business plan, the Company may be required to seek
additional or alternative financing sources.  There can be no
assurance that such financing will be available or available on terms acceptable
to the Company.




As noted
above, the Company has taken the following actions, which it believes will
improve liquidity and help provide for adequate liquidity to fund the Company’s
capital needs:




·
            The
      Company requested and obtained, on December 20, 2006, a conditional waiver
      from the IRS of the $15.5 million minimum funding requirement for the WHX
      Pension Plan for the 2005 plan year.  On December 28, 2006, WHX,
      H&H, and the PBGC entered into the PBGC Settlement Agreement in
      connection with the IRS Waiver and certain other matters.  The
      Company made substantial payments to its WHX Pension Plan during 2006 and
      2007of $13.1 million and $21.6 million, respectively, including a payment
      on September 12, 2007 of $13.0 million, which exceeded minimum required
      contributions under ERISA.  As a result of such accelerated
      contribution, our required contributions to the WHX Pension Plan over the
      next five years are expected to significantly decline, and the Company
      believes that the full amount of the IRS Waiver has been repaid, and all
      liens granted to the PBGC pursuant to the PBGC Settlement Agreement have
      been released.  Our expected minimum funding requirements are
      $0.0, $2.5 million, $2.7 million, $0.8 million and $0.0 for 2008, 2009,
      2010, 2011 and 2012, respectively.  All minimum funding
      requirement calculations reflect the Pension Protection Act of 2006 as
      well as all other relevant rules.  On various dates in 2007 and
      2008, H&H and certain of its subsidiaries amended the Wachovia
      Facilities and the Term B Loan.  These agreements were each
      amended to, among other things, (i) extend the maturity date to June 30,
      2009 (ii) reset the levels of certain financial covenants, (iii) grant a
      waiver to the events of default arising as a result of the attachment and
      garnishment of $3.5 million in connection with certain litigation, (iv)
      permit additional loans by Steel Partners to H&H, (v) permit loans or
      advances from H&H to WHX, subject to certain conditions, (vi) allow
      for the acquisition of Omni Technologies Corporation, (vii) allow for the
      prepayment of the Term B Loan in the amount of and upon receipt by H&H
      of a capital or debt infusion from the Company from proceeds of the WHX
      rights offering, less $5 million to be used to pay down the revolver under
      the Wachovia Facilities, (viii) consent to the terms of the H&H
      Security Agreement and the H&H Guaranty which were granted in
      connection with amendments to Bairnco’s debt agreements, and (ix) amend
      applicable interest rates.  The Wachovia Facilities were also
      amended to permit an additional term loan to H&H of $4.0 million,
      funded by Ableco.  (Please
      see “Debt” section of this Item 7-“Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” for additional information
      about these amendments).





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·
            On
      October 18, 2007, WHX filed a registration statement on Form S-1 with the
      SEC for a proposed rights offering to its existing stockholders, and
      subsequently filed Amendments thereto dated November 30, 2007 and December
      21, 2007.  The proposed rights offering will be made through the
      distribution of non-transferable subscription rights to purchase shares of
      WHX’s common stock, par value $0.01 per share, at a subscription price to
      be determined.  Assuming the proposed rights offering is fully
      subscribed, WHX could receive gross proceeds of approximately $200
      million, less expenses of the rights offering.  The proposed
      rights offering includes an oversubscription privilege which permits each
      rights holder, that exercises its rights in full, to purchase additional
      shares of common stock that remain unsubscribed at the expiration of the
      offering.  This oversubscription privilege is subject to (i) the
      availability and allocation of shares among persons exercising this
      oversubscription privilege and (ii) a maximum number of shares for which
      stockholders can oversubscribe for without endangering the availability of
      the Company’s NOLs under Section 382 of the Internal Revenue Code, in each
      case as further described in the rights offering
      documents.  Steel Partners has indicated that it intends to
      exercise all of its rights and to oversubscribe for the maximum number of
      shares it can oversubscribe for without (i) endangering the availability
      of the Company’s NOLs or (ii) increasing its ownership to in excess of 75%
      of the outstanding shares of WHX’s common stock.  A registration
      statement relating to these securities has been filed with the SEC but has
      not yet become effective. The purpose of this proposed rights offering is
      to raise equity capital in a cost-effective manner that gives all WHX’s
      stockholders the opportunity to participate. The net proceeds will be used
      to (i) make partial payments to certain senior lenders to certain
      wholly-owned subsidiaries of WHX and/or to contribute to the working
      capital of such subsidiaries, (ii) redeem preferred stock which is held by
      Steel Partners, and was issued by a wholly-owned subsidiary of WHX, (iii)
      to purchase shares of common stock of CoSine Communications, Inc. from
      Steel Partners, (iv) to repay WHX indebtedness to Steel Partners, and (v)
      to repay indebtedness of  wholly-owned subsidiaries of WHX to
      Steel Partners.





·
            The
      acquisition of Bairnco in April 2007 for approximately $101.5 million,
      which we believe will prove to be a valuable acquisition. On July 17,
      2007, Bairnco completed the refinancing of: (i) all of its indebtedness
      under its existing credit facility and (ii) approximately $56.7 million of
      indebtedness under the Bridge Loan Agreement with Steel Partners.
      Availability under Bairnco’s revolving credit facility as of December 31,
      2007 was $5.3 million, and as of February 29, 2008, was approximately $6.1
      million.  On February 14, 2008, Bairnco and certain of its
      subsidiaries amended its First Lien Credit Agreement with Wells Fargo and
      its Second Lien Credit Agreement with Ableco to, among other things, reset
      the levels of certain financial covenants.  The Second Lien
      Credit Agreement was also amended to provide for, among other things, a
      limited guaranty by H&H of up to $10.0 million, secured by a second
      lien on all of the assets of H&H pursuant to the H&H Security
      Agreement and the H&H Guaranty”. In addition, each of the First Lien
      Credit Agreement and the Second Lien Credit Agreementwas also amended to,
      among other things, provide for either (i) the Company to invest $10.0
      million from the proceeds of the WHX rights offering by March 31, 2008 in
      Bairnco and for such  proceeds to be used to prepay at least
      $10.0 million under the First Lien Credit Agreement Term Loan, (ii) Steel
      Partners to issue a limited $10.0 million guaranty, or (iii) a capital or
      debt infusion of $10.0 million by either Steel Partners or WHX into
      Bairnco, or any combination of the
foregoing.





·
            The
      acquisition by a subsidiary of H&H of a mechanical roofing fastener
      business for approximately $26 million, on December 28, 2006, which we
      believe will prove to be a valuable acquisition which will solidify
      H&H’s position as a leading manufacturer and supplier of mechanical
      fasteners, accessories and components, and building products for the North
      American commercial and residential construction
      industry.  Also, in November 2007, H&H purchased all of the
      outstanding common stock of Omni Technologies Corporation of Danville, a
      manufacturer of flux cored brazing wire and metal powders used for brazing
      and soldering pastes.





·
            The
      sale in March 2007 of a non-core business which had generated operating
      losses in 2006.





·
            The
      substantial completion of remediation of property relating to certain
      environmental liabilities.





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




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


33
 Table of Contents




Financial
Reporting Release No. 60 requires all companies to include a discussion of
critical accounting policies or methods used in the preparation of financial
statements.  Note 2 to the consolidated financial statements, included
elsewhere in this Form 10-K, includes a summary of the significant accounting
policies and methods used in the preparation of the Company’s financial
statements.  The following is a brief discussion of the critical
accounting policies and methods used by the Company.





Inventories





H&H
holds precious metal positions that are subject to market fluctuations. The
precious metal inventory is included in inventory using the LIFO method of
inventory valuation, which is equal to the lower of cost or market, with any
adjustments recorded through cost of goods sold. For precious metals
inventories, no segregation among raw materials, work in process and finished
goods is practicable.





Non-precious
metal inventories are stated at the lower of cost or
market.  Non-precious metal inventory is evaluated for estimated
excess and obsolescence based upon assumptions about future demand and market
conditions and is adjusted accordingly.  If actual market conditions
are less favorable than those projected by H&H, write-downs may be
required.





Derivatives





H&H
enters into commodity futures and forwards contracts on precious metals that are
subject to market fluctuations in order to economically hedge its precious
metals inventory against price fluctuations.  Future and forward
contracts to sell or buy precious metal are the derivatives used for this
objective.   The Company also economically hedges its exposure on
variable interest rate debt at one of its foreign
subsidiaries.   As these derivatives are not designated as
accounting hedges under SFAS No. 133, they are accounted for as derivatives with
no hedge designation.  These derivatives are marked to market and both
realized and unrealized gains and losses on these derivatives are recorded in
current period earnings as other income (loss) in the case of the precious metal
contracts and in interest expense with respect to the interest rate
derivative.  The unrealized gain or loss (open trade equity) on the
derivatives is included in other current assets or other current liabilities,
respectively.





As of
December 31, 2007 and 2006, the Company had contracted for $11.6 million and
$17.3 million, respectively, of forward contracts with a AA- rated counter
party, and the future contracts are exchange traded contracts through a third
party broker.  Accordingly, the Company has determined that there is
minimal credit risk of default.  The Company estimates the fair value
of its derivative contracts through use of market quotes or broker valuations
when market information is not available.





Goodwill,
Other Intangibles and Long-Lived Assets





Goodwill
is reviewed annually for impairment in accordance with the provisions of SFAS
No. 142, “Goodwill and Other Intangible Assets”. The evaluation of the
recoverability of the unamortized balance of goodwill is based on a comparison
of the respective reporting unit’s fair value to its carrying value, including
allocated goodwill. Fair values are determined by discounting estimated future
cash flows. The recoverability of goodwill may be impacted if estimated future
operating cash flows are not achieved.  Other intangible assets with
indefinite lives are subjected to an annual lower of cost or fair value
impairment test.  Intangible assets with finite lives are amortized
over their estimated useful lives. We also
estimate the depreciable lives of property, plant and equipment, and review the
assets for impairment if events, or changes in circumstances, indicate that we
may not recover the carrying amount of an asset. Long-lived
assets consisting of land and buildings used in previously operating businesses
are carried at the lower of cost or fair value, and are included in Other
Non-Current Assets in the consolidated balance
sheets.





Pension
and Postretirement Benefit Costs





H&H,
Bairnco and certain of their respective subsidiaries maintain qualified and
several non-qualified pension plans and other postretirement benefit plans.
Pension benefits for the WHX and H&H participants included in the WHX
Pension Plan are based on years of service and the amount of compensation at the
time of retirement. However, the qualified pension benefits were frozen for most
participants as of December 31, 2005 and April 30, 2006 for hourly and salaried
non-bargaining participants, respectively, with the exception of a single
subsidiary.





34
 Table of Contents








The
Company’s pension and postretirement benefit costs are developed from actuarial
valuations.  Inherent in these valuations are key assumptions
including discount rates and expected long-term rates of return on plan
assets.  Material changes in the Company’s pension and postretirement
benefit costs may occur in the future due to changes in these assumptions,
changes in the number of plan participants, changes in the level of benefits
provided, changes to the level of contributions to these plans and other
factors.





The Company determines its actuarial
assumptions for its pension and postretirement plans on December 31 of each year
to calculate liability information as of that date and pension and
postretirement expense for the following year.  The discount rate
assumption is derived from the rate of return on high quality bonds as of
December 31 of each year.





The
Plan’s assets are diversified as to type of assets, investment strategies
employed, and number of investment managers used.  Investments may
include equities, fixed income, cash equivalents, convertible securities, and
hedge funds.  Derivatives may be used as part of the investment
strategy.  The Company may direct the transfer of assets between
investment managers in order to rebalance the portfolio in accordance with asset
allocation guidelines established by the Company.





Management
uses judgment to make assumptions on which our employee benefit liabilities and
expenses are based. The effect of a 1% change in two key assumptions for the WHX
Pension Plan is summarized as follows:




Assumptions
              
              Statement
      of Operations (1)
              
              
              Balance
      Sheet Impact (2)(in
      millions)Discount
      rate+1%
      increase
              
              $
              (1.7
              )
              
              $
              (37.2
              )-1%
      decrease
              
              
              1.6
              
              
              
              40.8Expected
      return on assets+1%
      increase
              
              
              (3.8
              )-1%
      decrease
              
              
              3.8(1)
      Estimated impact on 2007 net periodic benefit costs.(2)
      Estimated impact on 2007 pension liability.




Environmental
Remediation




The
Company provides for remediation costs and penalties when the responsibility to
remediate is probable and the amount of associated costs is reasonably
determinable. Remediation liabilities are accrued based on estimates of known
environmental exposures.  The Company regularly monitors the progress
of environmental remediation. Should studies indicate that the cost of
remediation is to be more than previously estimated, an additional accrual would
be recorded in the period in which such determination was made. As of
December 31, 2007, total accruals for environmental remediation were $7.8
million.




Legal
Contingencies




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





Going
Concern





The
Company forecasts cash availability under its revolving credit facility
considering historical and forecast results in order to determine that it can
reasonably meet its obligations as they come due over the next
year.  Additionally, the Company forecasts its compliance with the
financial covenants of its loan agreements to reasonably determine that it will
meet them over the next year and will not need to restructure its
debt.





Purchase
Price Allocation





The
Company records assets and liabilities of acquired companies at their fair value
in accordance with SFAS No. 141 “Business Combinations.”  In April
2007, the Company acquired Bairnco.  The fair value of inventory was
determined using the cost method for raw materials and the comparative sales
method for work in process and finished goods.  Fixed assets were
valued using the cost method.  The fair value of intangible assets was
determined using discounted cash flow methodologies.





35
 Table of Contents




New
Accounting Standards





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 141 (revised 2007),
Business Combinations (“SFAS No. 141R”). SFAS No. 141R requires an entity
to recognize assets acquired, liabilities assumed, contractual contingencies and
contingent consideration at their fair value on the acquisition date. SFAS
No. 141R also requires that (1) acquisition-related costs be expensed as
incurred; (2) restructuring costs generally be recognized as a post-acquisition
expense; and (3) changes in deferred tax asset valuation allowances and income
tax uncertainties after the measurement period impact income tax expense. The
Company will adopt SFAS No.141R on January 1, 2009 and is currently
evaluating this statement to determine its effect, if any, on its results of
operations and financial position.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS No. 159).  SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair
value.  SFAS No. 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The Company is
currently evaluating the impact of adopting SFAS No. 159 on its consolidated
financial position and results of operations.





In
September 2006, the FASB issued SFAS No. 157; “Fair Value Measurements” SFAS No.
157 defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the United States,
and expands disclosures about fair value measurements.  This statement
does not require any new fair value measurements; rather, it applies under other
accounting pronouncements that require or permit fair value
measurements.  The provisions of SFAS No. 157 are effective for fiscal
years beginning after November 15, 2007.  The Company is currently
evaluating the impact of adopting  SFAS No. 157 on its consolidated
financial position and results of operations.








36
 Table of Contents





Item
8.  Financial Statements and Supplementary
Data







REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Board of
Directors and Shareholders


WHX Corporation





We have
audited the accompanying consolidated balance sheets of WHX Corporation and
Subsidiaries as of December 31, 2007 and 2006, and the related consolidated
statements of operations, cash flows and changes in stockholders’ deficit and
comprehensive loss for each of the two years in the period ended December 31,
2007. Our audits of the basic financial statements included the financial
statement schedules listed in the index appearing under Item 15(b)(1) and Item
15 (b)(2).  These consolidated financial statements and financial
statement schedules are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.





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





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of WHX Corporation and
Subsidiaries as of December 31, 2007 and 2006, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
2007 in conformity with accounting principles generally accepted in the United
States of America.  Also in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.





As
discussed in Note 7 to the consolidated financial statements, the Company
changed its method of accounting for uncertain tax positions as of January 1,
2007, in connection with the adoption of Financial Accounting Standards Board
Interpretation No.48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of SFAS Statement 109."











/s/ GRANT
THORNTON LLP





New York,
NY


March 31,
2008





37
 Table of Contents




WHX
      CORPORATIONConsolidated
      Statements of OperationsYear
      ended December 31,2007
              
              
              2006(in
      thousands except per share)Net
      sales
              
              $
              637,866
              
              
              $
              460,963Cost
      of goods sold
              
              
              505,341
              
              
              
              376,389Gross
      profit
              
              
              132,525
              
              
              
              84,574Selling,
      general and administrative expenses
              
              
              111,387
              
              
              
              63,551Asset
      impairment
              
              
              -
              
              
              
              5,195Proceeds
      from insurance claims
              
              
              (6,538
              )
              
              
              (810
              )Environmental
      remediation expense
              
              
              4,678
              
              
              
              2,909Restructuring
      charges
              
              
              -
              
              
              
              2,420Loss
      (gain) on disposal of assets
              
              
              283
              
              
              
              (31
              )Income from
      operations
              
              
              22,715
              
              
              
              11,340Other:Interest
      expense
              
              
              39,488
              
              
              
              22,535Realized
      and unrealized loss on derivatives
              
              
              1,888
              
              
              
              7,993Other
      expense (income)
              
              
              272
              
              
              
              1,644Loss
      from continuing operations before taxes
              
              
              (18,933
              )
              
              
              (20,832
              )Tax
      provision
              
              
              1,838
              
              
              
              31Loss
      from continuing operations, net
              
              
              (20,771
              )
              
              
              (20,863
              )Discontinued
      operations:Loss
      from discontinued operations
              
              
              -
              
              
              
              (167
              )Gain
      on disposal, net of tax
              
              
              -
              
              
              
              2,880Net
      income from discontinued operations, net of tax
              
              
              -
              
              
              
              2,713Net
      loss
              
              $
              (20,771
              )
              
              $
              (18,150
              )Basic
      and diluted per share of common stockIncome
      (loss) from continuing operations
              
              $
              (2.08
              )
              
              $
              (2.09
              )Discontinued
      operations
              
              
              -
              
              
              
              0.27Net
      income (loss) per share
              
              $
              (2.08
              )
              
              $
              (1.82
              )





SEE NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





38
 Table of Contents


WHX
      CORPORATIONConsolidated
      Balance Sheets
              
              December
      31,2007
              
              
              2006(in
      thousands)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              6,090
              
              
              $
              4,776Trade
      receivables, less allowance for doubtful accountsof  $2,776
      and $1,090
              
              
              89,546
              
              
              
              58,697Inventories
              
              
              83,709
              
              
              
              57,177Deferred
      income taxes
              
              
              3,339
              
              
              
              339Assets
      held for sale
              
              
              -
              
              
              
              3,967Other
      current assets
              
              
              12,023
              
              
              
              5,611Total
      current assets
              
              
              194,707
              
              
              
              130,567Property,
      plant and equipment, at cost lessaccumulated
      depreciation and amortization
              
              
              124,336
              
              
              
              78,120Goodwill
              
              
              64,317
              
              
              
              53,030Other
      intangibles, net
              
              
              39,892
              
              
              
              15,242Other
      non-current assets
              
              
              18,337
              
              
              
              16,906$
              441,589
              
              
              $
              293,865LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      liabilities:Trade
      payables
              
              $
              49,053
              
              
              $
              39,194Accrued
      environmental liability
              
              
              7,805
              
              
              
              9,421Accrued
      liabilities
              
              
              40,308
              
              
              
              28,092Accrued
      interest expense - related party
              
              
              19,615
              
              
              
              10,191Current
      portion of long-term debt
              
              
              7,513
              
              
              
              4,778Short-term
      debt - related party
              
              
              5,100
              
              
              
              5,100Short-term
      debt
              
              
              50,180
              
              
              
              35,221Deferred
      income taxes
              
              
              142
              
              
              
              123Total
      current liabilities
              
              
              179,716
              
              
              
              132,120Long-term
      debt
              
              
              141,678
              
              
              
              70,901Long-term
      debt - related party
              
              
              154,901
              
              
              
              89,627Accrued
      pension liability
              
              
              15,653
              
              
              
              53,445Other
      employee benefit liabilities
              
              
              7,595
              
              
              
              8,667Deferred  income
      taxes
              
              
              8,217
              
              
              
              2,868Other
      long term liabilities
              
              
              3,374
              
              
              
              -511,134
              
              
              
              357,628Commitments
      and contingenciesStockholders'
      (deficit) equity:Preferred
      stock - $.01 par value; authorized 5,000 shares;issued
      and outstanding -0- shares as ofDecember
      31, 2007 and 2006
              
              
              -
              
              
              
              -Common
      stock -  $.01 par value; authorized 50,000 and40,000
      shares, respectively; issued and outstanding: 10,000 shares
    asof
      December 31, 2007 and 2006
              
              
              100
              
              
              
              100Warrants
              
              
              1,287
              
              
              
              1,287Accumulated
      other comprehensive loss
              
              
              (32,559
              )
              
              
              (47,335
              )Additional
      paid-in capital
              
              
              395,748
              
              
              
              394,308Accumulated
      deficit
              
              
              (434,121
              )
              
              
              (412,123
              )(69,545
              )
              
              
              (63,763
              )$
              441,589
              
              
              $
              293,865










39
 Table of Contents




WHX
      CORPORATIONConsolidated
      Statements of Cash Flows
              
              2007
              
              
              2006(in
      thousands)Cash
      flows from operating activities:Net
      loss
              
              $
              (20,771
              )
              
              $
              (18,150
              )Adjustments
      to reconcile net loss to net cash provided by(used
      in) operating activities:Depreciation
      and amortization
              
              
              18,242
              
              
              
              12,401Non-cash
      stock based compensation
              
              
              1,612
              
              
              
              -Acquired
      in-process research and development and backlog
              
              
              1,851
              
              
              
              -Asset
      impairment charge
              
              
              -
              
              
              
              5,195Unrealized
      loss on equity investment
              
              
              -
              
              
              
              820Amortization
      of debt related costs
              
              
              2,111
              
              
              
              2,167Payment
      in kind interest on related party debt
              
              
              4,721
              
              
              
              -Other
      postretirement benefits
              
              
              514
              
              
              
              9Deferred
      income taxes
              
              
              (531
              )
              
              
              293Curtailment
      of employee benefit obligations
              
              
              727
              
              
              
              128(Gain)
      loss on asset dispositions
              
              
              282
              
              
              
              (31
              )Equity
      in after-tax income of affiliated companies
              
              
              (66
              )
              
              
              (134
              )Gain
      on sale of investment in an affiliate
              
              
              -
              
              
              
              (188
              )Unrealized
      (gain) loss on derivatives
              
              
              (103
              )
              
              
              (692
              )Reclassification
      of net cash settlements on derivative instruments
              
              
              1,991
              
              
              
              8,685Discontinued
      operations
              
              
              -
              
              
              
              (4,518
              )Decrease
      (increase)  in operating assets and liabilitiesnet
      of effect of acquisitions:Trade
      receivables
              
              
              2,114
              
              
              
              1,987Inventories
              
              
              13,826
              
              
              
              4,649Other
      current assets
              
              
              1,699
              
              
              
              1,182Accrued
      interest expense-related party
              
              
              9,424
              
              
              
              8,693Other
      current liabilities
              
              
              (39,954
              )
              
              
              (38,683
              )Other items-net
              
              
              (42
              )
              
              
              (1,143
              )Discontinued
      operations
              
              
              -
              
              
              
              (401
              )Net
      cash used in operating activities
              
              
              (2,353
              )
              
              
              (17,731
              )Cash
      flows from investing activities:Acquisitions,
      net of cash acquired
              
              
              (102,595
              )
              
              
              (25,971
              )Plant
      additions and improvements
              
              
              (10,226
              )
              
              
              (7,695
              )Net
      cash settlements on derivative instruments
              
              
              (1,991
              )
              
              
              (8,685
              )Proceeds
      from sales of assets
              
              
              4,314
              
              
              
              278Proceeds
      from sales of investment in an affiliate
              
              
              -
              
              
              
              616Discontinued
      operations
              
              
              -
              
              
              
              7,310Net
      cash used in investing activities
              
              
              (110,498
              )
              
              
              (34,147
              )Cash
      flows from financing activities:Proceeds
      from term loans - related party
              
              
              115,929
              
              
              
              19,000Proceeds
      from term loans - domestic
              
              
              76,000
              
              
              
              56,000Proceeds
      from term loans - foreign
              
              
              93
              
              
              
              -Net
      revolver borrowings (repayments)
              
              
              3,368
              
              
              
              (10,759
              )Repayment
      of term loans - related party
              
              
              (55,376
              )
              
              
              -Repayments
      of term loans - foreign
              
              
              (588
              )
              
              
              (462
              )Repayments
      of term loans - domestic
              
              
              (22,127
              )
              
              
              (8,460
              )Other
              
              
              453
              
              
              
              -Deferred
      finance charges
              
              
              (3,671
              )
              
              
              (610
              )Net
      change in overdrafts
              
              
              (102
              )
              
              
              (2,429
              )Net
      cash provided by financing activities
              
              
              113,979
              
              
              
              52,280Net
      change for the year
              
              
              1,128
              
              
              
              402Effect
      of exchange rate changes on net cash
              
              
              186
              
              
              
              298Cash
      and cash equivalents at beginning of period
              
              
              4,776
              
              
              
              4,076Cash
      and cash equivalents at end of year
              
              $
              6,090
              
              
              $
              4,776








40
 Table of Contents






WHX
      CorporationConsolidated
      Statements of Changes in Stockholders' (Deficit) Equity and Comprehensive
      Income (Loss)(Dollars
      and shares in thousands)Common Stock
              
              
              
              
              
              Accumulated
      Other Comprehensive
              
              
              Accumulated
              
              
              Capital
      in
                Excess
      of
              
              
              Total
      Stockholders'Shares
              
              
              Amount
              
              
              Warrants
              
              
              Income
      (Loss)
              
              
              Deficit
              
              
              Par
      Value
              
              
              (Deficit)
      EquityBalance,
      January 1, 2006
              
              10,000
              
              
              $
              100
              
              
              $
              1,287
              
              
              $
              (57,426
              )
              
              $
              (393,973
              )
              
              $
              394,308
              
              
              $
              (55,704
              )Current
      period change
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              11,293
              
              
              
              -
              
              
              
              -
              
              
              
              11,293Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (18,150
              )
              
              
              -
              
              
              
              (18,150
              )Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (6,857
              )Adoption
      of SFAS No. 158
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,202
              )
              
              
              -
              
              
              
              -
              
              
              
              (1,202
              )Balance,
      December 31, 2006
              
              10,000
              
              
              $
              100
              
              
              $
              1,287
              
              
              $
              (47,335
              )
              
              $
              (412,123
              )
              
              $
              394,308
              
              
              $
              (63,763
              )Current
      period change
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              14,776
              
              
              
              -
              
              
              
              -
              
              
              
              14,776Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (20,771
              )
              
              
              -
              
              
              
              (20,771
              )Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,995
              )Adoption
      of FIN 48
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,227
              )
              
              
              -
              
              
              
              (1,227
              )Amortization
      of stock options
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,440
              
              
              
              1,440Balance,
      December 31, 2007
              
              10,000
              
              
              $
              100
              
              
              $
              1,287
              
              
              $
              (32,559
              )
              
              $
              (434,121
              )
              
              $
              395,748
              
              
              $
              (69,545
              )
  Year
      Ended December 31,2007
              
              
              2006Comprehensive
      Income (Loss)Net
      loss
              
              $
              (20,771
              )
              
              $
              (18,150
              )Changes
      in pension plan assets and other benefitobligations:Curtailment
      adjustment
              
              
              1,346
              
              
              
              -Current
      year actuarial (gain)/loss
              
              
              9,884
              
              
              
              -Amortization
      of actuarial (gain)/loss
              
              
              1,082
              
              
              
              -Amortization
      prior service credit/(cost)
              
              
              (165
              )
              
              
              -Minimum
      pension liability adjustment
              
              
              -
              
              
              
              10,431Foreign
      currency translation adjustment
              
              
              2,629
              
              
              
              862Comprehensive
      loss
              
              $
              (5,995
              )
              
              $
              (6,857
              )





41
 Table of Contents




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





Note
1 – Nature of the Business





Organization





WHX
Corporation (“WHX”) is a holding
company that invests in and manages a group of businesses on a decentralized
basis.  WHX owns Handy & Harman (“H&H”), which is a
diversified manufacturing company whose strategic business units encompass three
reportable segments: Precious Metal, Tubing, and Engineered
Materials.  In April 2007, WHX acquired Bairnco Corporation
(“Bairnco”).  Bairnco operates business units in three reportable
segments: Arlon Electronic Materials (“Arlon EM”), Arlon Coated
Materials (“Arlon
CM”),
and Kasco Replacement Products and Services (“Kasco”).  H&H
and Bairnco principally operate in North America.WHX, together
with all of its subsidiaries, are referred to herein as the
“Company”.





Note
1a - Management’s Plans and Liquidity





The
Company incurred net losses of $20.8 million and $18.2 million for the years
ended December 31, 2007and 2006, respectively, and had negative cash used in
operating activities of $2.4 million and $17.7 million for the years ended
December 31, 2007and 2006, respectively.  As of December 31, 2007, the
Company had an accumulated deficit of $434.1 million.  On February 14,
2008, H&H and certain of its subsidiaries amended its Loan and Security
Agreement with Wachovia Bank, National Association (the “Wachovia Facilities”)
and its Loan and Security Agreement with Steel Partners (the “Term B Loan”) to,
among other things, extend the maturity date to June 30,
2009.  Bairnco’s bank debt was refinanced in July 2007 with a new
scheduled maturity of 2012.  H&H and Bairnco have not been in
compliance with certain of their bank covenants and have been required to obtain
waivers from their lenders related to such covenants.  Upon receipt of
such waivers, the Company has been in compliance.





In recent
years, the Company experienced liquidity issues.  On March 7, 2005,
WHX, the parent company, filed a voluntary petition (“Bankruptcy Filing”) to
reorganize under Chapter 11 of the United States Bankruptcy Code. It emerged
from protection under Chapter 11 on July 29, 2005 (the "Effective
Date").  WHX is a holding company and has as its sole source of cash
flow distributions from its operating subsidiaries, H&H and Bairnco, or
other discrete transactions.  H&H’s credit facilities effectively
do not permit it to transfer any cash or other assets to WHX (with the exception
of (i) an unsecured loan for required payments to the WHX Pension Plan,
(ii) an unsecured loan for other uses in the aggregate principal amount not
to exceed $7.0 million, of which approximately $3.4 million has been
distributed, (iii) the loan, distribution or other advance of up to
approximately $7.4 million, subject to certain limitations, to the extent loaned
by Steel Partners to H&H, of which approximately $3.2 million has already
been distributed, and (iv) up to $13.1 million to be used by WHX solely to make
a contribution to the WHX Pension Plan, which contribution of $13.0 million was
made on September 12, 2007.  H&H’s credit facilities are
collateralized by substantially all of H&H’s assets.  Similarly,
Bairnco’s bank credit facilities and term loan do not permit it to make any
distribution, pay any dividend or transfer any cash or other assets to WHX other
than common stock of Bairnco.




Since
emerging from bankruptcy, due to covenant restrictions in their respective
credit facilities, there have been no dividends from H&H or Bairnco to WHX
and WHX’s sources of cash flow have consisted of:




·
            The
      issuance of $5.1 million in preferred stock by a newly created subsidiary
      in October 2005, which was invested in the equity of a public company
      (CoSine Communications Inc.);


·
            Partial
      payment by H&H of a subordinated debt to WHX of $9.0 million, which
      required the approval of the banks participating in the H&H credit
      facilities.  Subsequent to this transaction in 2006, the
      remaining intercompany loan balance of the subordinated debt of $44.2
      million was converted to equity;


·
            As
      permitted by the March 29, 2007 amendment and waiver to the H&H credit
      facilities, an unsecured loan from H&H for required payments to the
      WHX Pension Plan, and an unsecured loan for other uses in the aggregate
      principal amount not to exceed $3.5 million (subsequently amended on
      February 14, 2008 to $7.0 million), of which approximately $3.4 million
      has been distributed;


·
            A
      $15.0 million subordinated loan from Steel Partners pursuant to the
      Subordinated Loan Agreement which WHX used to fund a capital contribution
      to BZA to finance in part the Bairnco
  Acquisition;


·
            As
      permitted by the July 27, 2007 amendment to the H&H credit
      facilities, an unsecured loan, distribution or other advance from H&H
      to WHX of up to approximately $7.4 million, subject to certain
      limitations, to the extent loaned by Steel Partners to H&H, of which
      approximately $3.2 million has already been distributed;
    and


·
            As
      permitted by a September 10, 2007 amendment to the H&H credit
      facilities, an unsecured loan from H&H of $13.0 million which was used
      by WHX to make a payment to the WHX Pension Plan on September 12,
      2007.





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We do not
anticipate that the Company will have any additional sources of cash flow other
than (i) as described above, (ii) from operations, (iii) from the sale of
non-core assets, and (iv) from the proceeds of a proposed rights
offering  (see Note 16).  In addition, the proceeds of the
proposed rights offering are expected to be used to redeem preferred stock and
to retire indebtedness, and accordingly will not be available for general
corporate purposes, except that $5 million of which shall be used to pay down
the revolver under the Wachovia Facilities pursuant to a February 14, 2008
amendment to H&H’s credit facilities.




As of
December 31, 2007, WHX and its subsidiaries that are not restricted by loan
agreements or otherwise from transferring funds to WHX (collectively, its
“Unrestricted Subsidiaries”) had cash of approximately $0.7 million and current
liabilities of approximately $7.3 million, including $5.8 million of mandatorily
redeemable preferred shares plus accrued dividends payable to a related
party.




H&H’s
availability under its credit facilities as of December 31, 2007 was $12.3
million, and as of February 29, 2008, was approximately $18.6 million. See Note
11 for a description of H&H’s credit facilities, including recent
amendments.




In
connection with the closing of the Bairnco Acquisition (see Note 5) in April
2007, initial financing was provided by Steel Partners II, L.P, a 50.3%
stockholder of WHX (“Steel Partners”) through two credit
facilities.  Steel Partners extended bridge loans in the aggregate
principal amount of approximately $86.5 million pursuant to a Loan and Security
Agreement (the “Bridge Loan Agreement”), between BZA and Bairnco, as borrowers,
and Steel Partners, as lender.  In addition, Steel Partners extended
to WHX a $15.0 million subordinated loan, which is unsecured at the WHX level,
pursuant to a Subordinated Loan and Security Agreement, dated as of April 17,
2007 (the “Subordinated Loan Agreement”) between WHX, as borrower, and Steel
Partners, as lender.  WHX contributed the $15.0 million proceeds of
the subordinated loan to Bairnco as a capital contribution.




On July
18, 2007, Bairnco and certain of its subsidiaries entered into (i) the
First Lien Credit Agreement with Wells Fargo, which provides for a revolving
credit facility to the borrowers in an aggregate principal amount not to exceed
$30.0 million and a term loan facility of $28.0 million, (ii) the Second
Lien Credit Agreement with Ableco, which provides for a term loan facility to
the borrowers of $48.0 million., and (iii) the Subordinated Debt Credit
Agreement with Steel Partners as lender providing for a term loan of
approximately $31.8 million, and completed the refinancing of: (A) all
existing indebtedness of Bairnco and its subsidiaries under the Bairnco Senior
Secured Credit Facility and (B) approximately $56.7 million of the
indebtedness under the Bridge Loan Agreement.  The Subordinated Debt
Credit Agreement amended and restated the Bridge Loan Agreement.  The
scheduled maturity date of the indebtedness under each of the First Lien Credit
Agreement and Second Lien Credit Agreement is July 17, 2012, and the scheduled
maturity date of the indebtedness under the Subordinated Debt Credit Agreement
is January 17, 2013.




Bairnco’s
availability under its credit facilities as of December 31, 2007 was
approximately $5.3 million, and as of February 29, 2008, was approximately $6.1
million.  See Note 11 for a description of Bairnco’s credit
facilities, including amendments.




In
addition to the obligations under the current credit facilities, the Company
also has significant cash flow obligations, including without limitation the
amounts due to the WHX Pension Plan (as amended by the IRS Waiver and PBGC
Settlement Agreement entered into December 28, 2006) and paying administrative
costs.  As a result of the $13.0 million contribution to the WHX
Pension Plan in September 2007, however, the Company's required contributions to
the WHX Pension Plan over the next five years are expected to significantly
decline, and the Company believes that the full amount of the IRS Waiver has
been repaid, and all liens granted to the PBGC pursuant to the PBGC Settlement
Agreement have been released. (See Note 6 regarding the Company’s pension and
benefit plans).




There
can be no assurance that the funds available from operations and under the
Company’s credit facilities will be sufficient to fund its debt service costs,
working capital demands, pension plan contributions, and environmental
remediation costs. However, as discussed further below, the Company believes
that recent new and amended financing arrangements, significant payments made
during 2007 to the WHX Pension Plan and the complete satisfaction of the IRS
Waiver, acquisitions, the sale of a non-essential operating unit, as well as
continuing improvements in its core operations and the substantial completion of
a major remediation of property relating to certain environmental liabilities
have permitted the Company to generate sufficient working capital to meet its
obligations as they mature for at least the next 12 months.  The
ability of the Company to meet its cash requirements over the next twelve months
is dependent, in part, on the Company’s ability to meet its business
plan.  Management believes that existing capital resources and sources
of credit, including the H&H credit facilities and the Bairnco credit
facilities, are adequate to meet its current and anticipated cash requirements.
The Company also continues to examine all of its options and strategies,
including acquisitions, divestitures, and other corporate transactions, to
increase cash flow and stockholder value, as well as considering the reduction
of certain discretionary expenses and sale of certain non-core
assets.   However, if the Company’s cash needs are greater than
anticipated or the Company does not materially satisfy its business plan, the
Company may be required to seek additional or alternative financing
sources.  There can be no assurance that such financing will be
available or available on terms acceptable to the Company.







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As more
fully described in the specific notes to these financial statements, the Company
has taken the following actions which it believes will improve liquidity and
help provide for adequate liquidity to fund the Company’s capital needs for the
next twelve months:







·
            The
      Company requested and obtained, on December 20, 2006, a conditional waiver
      from the IRS of the $15.5 million minimum funding requirement for the WHX
      Pension Plan for the 2005 plan year.  On December 28, 2006, WHX,
      H&H, and the PBGC entered into the PBGC Settlement Agreement in
      connection with the IRS Waiver and certain other matters.  The
      Company made substantial payments to its WHX Pension Plan during 2006 and
      2007 of $13.1 million and $21.6 million, respectively, including a payment
      on September 12, 2007 of $13.0 million, which exceeded minimum required
      contributions under ERISA.  As a result of such accelerated
      contribution, our required contributions to the WHX Pension Plan over the
      next five years are expected to significantly decline, and the Company
      believes that the full amount of the IRS Waiver has been repaid, and all
      liens granted to the PBGC pursuant to the PBGC Settlement Agreement have
      been released.  Our expected minimum funding requirements are
      $0.0, $2.5 million, $2.7 million, $0.8 million and $0.0 for 2008, 2009,
      2010, 2011 and 2012, respectively.  All minimum funding
      requirement calculations reflect the Pension Protection Act of 2006 as
      well as all other relevant rules.





·
            On
      various dates in 2007 and 2008, H&H and certain of its subsidiaries
      amended the Wachovia Facilities and the Term B Loan.  These
      agreements were each amended to, among other things, (i) extend the
      maturity date to June 30, 2009, (ii) grant a waiver to the events of
      default arising as a result of the attachment and garnishment of $3.5
      million in connection with certain litigation, (iii) permit additional
      loans by Steel Partners to H&H, (iv) permit loans or advances from
      H&H to WHX, subject to certain conditions, (v) allow for the
      acquisition of Omni Technologies Corporation, (vi) allow for the
      prepayment of the Term B Loan in the amount of and upon receipt by H&H
      of a capital or debt infusion from the Company from proceeds of the WHX
      rights offering, less $5 million to be used to pay down the revolver under
      the Wachovia Facilities,  (vii), reset the levels of certain
      financial covenants, (viii) consent to the terms of the H&H Security
      Agreement and the H&H Guaranty which were granted in connection with
      amendments to Bairnco’s debt agreements, and (v) amend applicable interest
      rates.  The Wachovia Facilities were also amended to permit an
      additional term loan to H&H of $4.0 million, funded by Ableco (see
      Note 11- “Debt” for additional information about these
      amendments).





·
            On
      October 18, 2007, WHX filed a registration statement on Form S-1 with the
      Securities and Exchange Commission (“SEC”) for a proposed rights offering
      to its existing stockholders, and subsequently filed Amendments thereto
      dated November 30, 2007 and December 21, 2007.  The proposed
      rights offering will be made through the distribution of non-transferable
      subscription rights to purchase shares of WHX’s common stock, par value
      $0.01 per share, at a subscription price to be
      determined.  Assuming the proposed rights offering is fully
      subscribed, WHX could receive gross proceeds of approximately $200
      million, less expenses of the rights offering.  The proposed
      rights offering includes an oversubscription privilege which permits each
      rights holder, that exercises its rights in full, to purchase additional
      shares of common stock that remain unsubscribed at the expiration of the
      offering.  This oversubscription privilege is subject to (i) the
      availability and allocation of shares among persons exercising this
      oversubscription privilege and (ii) a maximum number of shares for which
      stockholders can oversubscribe for without endangering the availability of
      the Company’s NOLs under Section 382 of the Internal Revenue Code, in each
      case as further described in the rights offering
      documents.  Steel Partners has indicated that it intends to
      exercise all of its rights and to oversubscribe for the maximum number of
      shares it can oversubscribe for without (i) endangering the availability
      of the Company’s NOLs or (ii) increasing its ownership to in excess of 75%
      of the outstanding shares of WHX’s common stock.  A registration
      statement relating to these securities has been filed with the SEC but has
      not yet become effective. The purpose of this proposed rights offering is
      to raise equity capital in a cost-effective manner that gives all WHX’s
      stockholders the opportunity to participate. The net proceeds will be used
      to (i) make partial payments to certain senior lenders to certain
      wholly-owned subsidiaries of WHX and/or to contribute to the working
      capital of such subsidiaries, (ii) redeem preferred stock which is held by
      Steel Partners, and was issued by a wholly-owned subsidiary of WHX, (iii)
      to purchase shares of common stock of CoSine Communications, Inc. from
      Steel Partners, (iv) to repay WHX indebtedness to Steel Partners, and (v)
      to repay indebtedness of  wholly-owned subsidiaries of WHX to
      Steel Partners.


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·
            The
      acquisition of Bairnco in April 2007 for approximately $101.5 million,
      which we believe will prove to be a valuable acquisition. On July 17,
      2007, Bairnco completed the refinancing of: (i) all of its indebtedness
      under its existing credit facility and (ii) approximately $56.7 million of
      indebtedness under the Bridge Loan Agreement with Steel Partners.
      Availability under Bairnco’s revolving credit facility as of December 31,
      2007 was
      $5.3 million, and as of February 29, 2008, was approximately $6.1
      million.  On February 14, 2008, Bairnco and certain of its
      subsidiaries amended its First Lien Credit Agreement with Wells Fargo and
      its Second Lien Credit Agreement with Ableco to, among other things, reset
      the levels of certain financial covenants.  The Second Lien
      Credit Agreement was also amended to provide for, among other things, a
      limited guaranty by H&H of up to $10 million, secured by a second lien
      on all of the assets of H&H pursuant to the H&H Security Agreement
      and the H&H Guaranty”. In addition, each of the First Lien Credit
      Agreement and the Second Lien Credit Agreement was also amended to, among
      other things, provide for either (i) the Company to invest $10 million
      from the proceeds of the proposed rights offering by March 31, 2008 in
      Bairnco and for such  proceeds to be used to prepay at least $10
      million under the First Lien Credit Agreement Term Loan, (ii) Steel
      Partners to issue a limited $10 million guaranty, or (iii) a capital or
      debt infusion of $10 million by either Steel Partners or WHX into Bairnco,
      or any combination of the
foregoing.




·
            The
      acquisition by a subsidiary of H&H of a mechanical roofing fastener
      business for approximately $26 million, on December 28, 2006, which we
      believe will prove to be a valuable acquisition which will solidify
      H&H’s position as a leading manufacturer and supplier of mechanical
      fasteners, accessories and components, and building products for the North
      American commercial and residential construction
      industry.  Also, in November 2007, H&H purchased all of the
      outstanding common stock of Omni Technologies Corporation of Danville, a
      manufacturer of flux cored brazing wire and metal powders used for brazing
      and soldering pastes.





·
            The
      sale in March 2007 of a non-core business, which had generated operating
      losses in 2006.





·
            The
      substantial completion of remediation of property relating to certain
      environmental liabilities.





In view
of the matters described in the preceding paragraphs, management believes that
the Company has the ability to meet its financing requirements on a continuing
basis for at least the next twelve months.  However, if the Company’s
2008 planned cash flow projections are not met, management could consider the
reduction of certain discretionary expenses and sale of certain
assets.  In the event that these plans are not sufficient and the
Company’s credit facilities are not available, the Company’s ability to operate
could be materially adversely affected.




Note
2 -   Summary of Accounting Policies





Basis
of Presentation





The
consolidated financial statements include the accounts of WHX and its
subsidiaries.  All material intercompany transactions and balances
have been eliminated.





Use
of Estimates





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements.  Estimates also affect the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ
from those estimates.  On an ongoing basis, the Company evaluates its
estimates, including those related to investments, accounts receivable,
inventories, property and equipment, assets held for sale, environmental
liabilities, accrued expenses, and income taxes.  The Company bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources.





Cash
and Cash Equivalents





Cash and
cash equivalents include cash on hand and on deposit and highly liquid debt
instruments with original maturities of three months or less.  As of
December 31, 2007 and 2006, the Company had cash held in foreign banks of $2.8
million and $3.2 million, respectively.





Revenue
Recognition





Revenues
are recognized when the title and risk of loss has passed to the customer. This
condition is normally met when product has been shipped or the service
performed. An allowance is provided for estimated returns and discounts based on
experience in accordance with SEC Staff Accounting Bulletin No. 104. Cash
received by the Company from customers prior to shipment of goods, or otherwise
not yet earned, is recorded as deferred revenue. Rental revenues are derived
from the rental of certain
equipment to the food industry where customers prepay for the rental
period-usually 3 to 6 month periods.  For prepaid rental contracts,
sales revenue is recognized on a straight-line basis over the term of the
contract.  Service revenues consist of repair and maintenance work
performed on equipment used at mass merchants, supermarkets and
restaurants.





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 Table of Contents




The
Company experiences a certain degree of sales returns that varies over time. In
accordance with Statement of Financial Accounting Standards No. 48 ("FAS No.
48"), "Revenue Recognition When Right of Return Exists," the Company is able to
make a reasonable estimation of expected sales returns based upon history and as
contemplated by the requirements of FAS No. 48. The Company records all shipping
and handling fees billed to customers as revenue, and related costs as cost of
sales, when incurred, in accordance with Emerging Issues Task Force "EITF"
Abstract 00-10, "Accounting for Shipping and Handling Fees and Costs." In
limited circumstances, the Company is required to collect and remit sales tax on
certain of its sales.  The Company accounts for sales taxes on a net
basis, and such sales taxes are not included in net sales on the consolidated
statements of operations.





Accounts
Receivable and Allowance for Doubtful Accounts





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





Inventories





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




Derivatives
and Risk




Interest
Rate Risk
 
 At
December 31, 2007 and 2006, the Company's portfolio of debt was comprised of
primarily variable rate instruments. A one percent (1%) change in interest rates
on its variable outstanding debt obligations as of December 31, 2007 would
increase or decrease interest expense by approximately $3.6 million on an annual
basis.  The Company economically hedges its exposure on variable
interest rate debt at one of its foreign subsidiaries.
 
 A
reduction in long-term interest rates could materially increase the Company’s
cash funding obligations to the WHX Pension Plan.
 
 Precious
Metal Risk





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




As of
December 31, 2007 and 2006, the Company had contracted for $11.6 million and
$17.3 million, respectively, of forward contracts with a AA- rated counter
party, and the future contracts are exchange traded contracts through a third
party broker.  Accordingly, the Company has determined that there is
minimal credit risk of default.  The Company estimates the fair value
of its derivative contracts through use of market quotes or broker valuations
when market information is not available.




As these
derivatives are not designated as accounting hedges under Statement of Financial
Accounting Standards (“SFAS”) No. 133, they are accounted for as derivatives
with no hedge designation.  These derivatives are marked to market and
both realized and unrealized gains and losses on these derivatives are recorded
in current period earnings as other income (loss) in the case of the precious
metal contracts and in interest expense with respect to the interest rate
derivative.  The unrealized gain or loss (open trade equity) on the
derivatives is included in other current assets or other current liabilities,
respectively.
 
 Foreign
Currency Exchange Rate Risk
 
 H&H
and Bairnco are subject to the risk of price fluctuations related to anticipated
revenues and operating costs, firm commitments for capital expenditures and
existing assets or liabilities denominated in currencies other than U.S.
dollars.  H&H and Bairnco have not generally used derivative
instruments to manage this risk.





Property,
Plant and Equipment




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




Goodwill,
Intangibles and Long-Lived Assets





Goodwill
is reviewed annually for impairment in accordance with the provisions of SFAS
No. 142, “Goodwill and Other Intangible Assets”. The evaluation of the
recoverability of the unamortized balance of goodwill is based on a comparison
of the respective reporting unit’s fair value to its carrying value, including
allocated goodwill. Fair values are determined by discounting estimated future
cash flows. The recoverability of goodwill may be impacted if estimated future
operating cash flows are not achieved.  Other intangible assets with
indefinite lives are subjected to an annual lower of cost or fair value
impairment test.  Intangible assets with finite lives are amortized
over their estimated useful lives. We also
estimate the depreciable lives of property, plant and equipment, and review the
assets for impairment if events, or changes in circumstances, indicate that we
may not recover the carrying amount of an asset. Long-lived
assets consisting of land and buildings used in previously operating businesses
are carried at the lower of cost or fair value, and are included in Other
Non-Current Assets in the consolidated balance
sheets.





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Equity
Investments





Investments
are accounted for using the equity method of accounting if the investment
provides the Company the ability to exercise significant influence, but not
control, over an investee. Significant influence is generally deemed to exist if
the company has an ownership interest in the voting stock of the investee of
between 20% and 50%, although other factors, such as representation on the
investee’s Board of Directors, are considered in determining whether the equity
method of accounting is appropriate. The Company accounts for its investment in
CoSine Communications, Inc. using the equity method of accounting. See Note
16.





Stock-Based
Compensation





In 2006,
revised Statement of Financial Accounting Standards No. 123, “Share-Based
Payment” (“SFAS No. 123R”) became effective for the Company.  SFAS No.
123R eliminated the intrinsic value method as an allowed method for valuing
stock options granted to employees. Under the intrinsic value method,
compensation expense was generally not recognized for the issuance of stock
options. The revised statement requires compensation expense to be recognized in
exchange for the services received based on the fair value of the equity
instruments on the grant-date. This statement did not have a material impact on
the Company’s financial position, results of operations or cash
flows.





At the
Company's Annual Meeting of Shareholders on June 21, 2007, the Company's
shareholders approved a proposal to adopt WHX Corporation’s 2007 Incentive Stock
Plan (the “2007 Plan”), and reserved 800,000 shares of common stock under the
2007 Plan.   On July 6, 2007, stock options for an aggregate of
620,000 shares of common stock were granted under the 2007 Plan to employees and
to two outside directors of the Company.





As
of December 31, 2006, the Company had no stock option plans.  However,
the Company had agreed to grant stock options upon adoption of a stock option
plan by the Board of Directors and registration thereof with the SEC, or in lieu
thereof, phantom stock options or equivalent other consideration (at the sole
discretion of the Company), to various officers and employees of the Company.
The Company satisfied the obligation for the phantom stock options by granting
actual stock options to various members of management on July 6,
2007.





Environmental
Liabilities





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





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





Income
Taxes





Income
taxes are provided using the asset and liability method presented by SFAS No.
109, “Accounting for Income Taxes” (“SFAS No. 109”).  Under this
method, income taxes (i.e., deferred tax assets, deferred tax liabilities, taxes
currently payable/refunds receivable and tax expense) are recorded based on
amounts refundable or payable in the current year and include the results of any
differences between U.S. GAAP and tax reporting.  Deferred income
taxes reflect the tax effect of net operating loss carryforwards, capital loss
carryforwards and the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting and income tax
purposes, as determined under enacted tax laws and rates.  Valuation
allowances are established when management determines that it is more likely
than not that some portion or the entire deferred tax asset will not be
realized.  The financial effect of changes in tax laws or rates is
accounted for in the period of enactment.





Earnings
Per Share





Pursuant
to SFAS No. 128, “Earnings per Share,” basic earnings per share are based on the
weighted average number of shares of Common Stock outstanding during each year,
excluding redeemable common shares.  Diluted earnings per share gives
effect to dilutive potential common shares outstanding during the
period.





Foreign
Currency Translation





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





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Fair
Value of Financial Instruments




The
carrying values of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value due to the short-term
maturities of these assets and liabilities. Fair value of the Company’s long
term debt approximates its carrying cost due to variable interest
rates.





Legal
Contingencies




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





Going
Concern





The
Company forecasts cash availability under its revolving credit facility
considering historical and forecast results in order to determine that it can
reasonably meet its obligations as they come due over the next
year.  Additionally, the Company forecasts its compliance with the
financial covenants of its loan agreements to reasonably determine that it will
meet them over the next year and will not need to restructure its
debt.





Purchase
Price Allocation





The
Company records assets and liabilities of acquired companies at their fair value
in accordance with SFAS No. 141 “Business Combinations.”  In April
2007, the Company acquired Bairnco.  The fair value of inventory was
determined using the cost method for raw materials and the comparative sales
method for work in process and finished goods.  Fixed assets were
valued using the cost method.  The fair value of intangible assets was
determined using discounted cash flow methodologies.





Advertising
Costs





Advertising
costs consist of sales promotion literature, samples, cost of trade shows, and
general advertising costs, and are included in Selling, general and
administrative expenses on the consolidated statements of
operations.  Advertising costs totaled $3.3 million in 2007 and $1.6
million in 2006.





Reclassification





Certain
amounts for prior years have been reclassified to conform to the current year
presentation.





Note
3 –Recently Issued Accounting Pronouncements





In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”).
SFAS No. 141R requires an entity to recognize assets acquired, liabilities
assumed, contractual contingencies and contingent consideration at their fair
value on the acquisition date. SFAS No. 141R also requires that (1)
acquisition-related costs be expensed as incurred; (2) restructuring costs
generally be recognized as a post-acquisition expense; and (3) changes in
deferred tax asset valuation allowances and income tax uncertainties after the
measurement period impact income tax expense. The Company will adopt SFAS 141R
on January 1, 2009 and is currently evaluating this statement to determine
its effect, if any, on its results of operations and financial
position.





In
February 2007, the FASB issued Statement of Financial Accounting Standards No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS No. 159).  SFAS No. 159 permits entities to choose to measure
many financial instruments and certain other items at fair
value.  SFAS No. 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The Company is
currently evaluating the impact of adopting SFAS No. 159 on its consolidated
financial position and results of operations.





In
September 2006, the FASB issued SFAS No. 157; “Fair Value Measurements” SFAS No.
157 defines fair value, establishes a framework for measuring fair value in
accordance with accounting principles generally accepted in the United States,
and expands disclosures about fair value measurements.  This statement
does not require any new fair value measurements; rather, it applies under other
accounting pronouncements that require or permit fair value
measurements.  The provisions of SFAS No. 157 are effective for fiscal
years beginning after November 15, 2007.  The Company is currently
evaluating the impact of adopting SFAS No. 157 on its consolidated financial
position and results of operations.




48
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Note
4 – Asset Impairment, Discontinued Operations and Business Restructuring
Charge




Norristown
Facility





On May 9,
2006, the Company announced the closing of the Handy & Harman Tube Co.
(“H&H Tube”) facility located in Norristown, Pennsylvania (the “Norristown
facility”), which is included in the Company’s Tubing segment.  The
decision to close the Norristown facility was principally based on the economics
of operating H&H Tube's business at the facility.  H&H Tube
manufactured stainless steel tubing that was supplied in various lengths and
forms in both coil and straight lengths.  H&H Tube's short coil
business was relocated to H&H's Camdel Metals Corporation ("Camdel")
facility located in Camden, Delaware.





In
conjunction with the decision to close the Norristown facility, the Company
reviewed the recoverability of the Norristown facility’s long-lived assets in
accordance with SFAS No. 144, “Accounting for Impairment or Disposal of
Long-Lived Assets” (“SFAS 144”).  A review of future cash flows
indicated that cash flows would be insufficient to support the carrying value of
certain machinery and equipment at the Norristown facility.  As a
result, the Company recorded an asset impairment charge of $1.8 million in its
statement of operations for 2006.  Certain of the Norristown
facility’s long-lived assets, principally consisting of machinery and equipment,
were classified as current assets held for sale in the balance sheet as of
December 31, 2006.  The real estate is included in non-current assets
(other assets).  No impairment loss was incurred on the real estate
assets based on the Company’s analysis.





Restructuring
charges related to the closing of the Norristown facility totaling $2.4 million
in 2006 were recorded in the statement of operations.  These charges
included termination benefits of $2.0 million, $0.1 million resulting from a
pension curtailment, and $0.3 million of other charges.




The
activity in the restructuring reserve was as follows for 2006 and
2007:




Reserve
              
              
              
              
              
              
              
              
              ReserveBalance
              
              
              
              
              
              
              
              
              BalanceBeginning
              
              
              
              
              
              
              
              
              End
      ofof
      Year
              
              
              Expense
              
              
              Paid
              
              
              Year2006
              
              (in
      thousands)Termination
      benefits
              
              $
              -
              
              
              $
              2,049
              
              
              $
              (1,729
              )
              
              $
              320Other
      facility closure costs
              
              
              -
              
              
              
              243
              
              
              
              (243
              )
              
              
              -Pension
      curtailment charge
              
              
              -
              
              
              
              128
              
              
              
              (128
              )
              
              
              -$
              -
              
              
              $
              2,420
              
              
              $
              (2,100
              )
              
              $
              3202007Termination
      benefits
              
              $
              320
              
              
              $
              -
              
              
              $
              (320
              )
              
              $
              -$
              320
              
              
              $
              -
              
              
              $
              (320
              )
              
              $
              -





The
Norristown facility operated through the third quarter of 2006.  The
closing of the Norristown facility and the sale of certain of its assets were
completed by the end of 2006.  The remaining machinery and equipment
was sold in 2007 for proceeds of $0.9 million.





Handy & Harman
Electronic Materials (“HHEM”)





On March
4, 2007, the Company sold certain assets, including the land and building,
certain machinery and equipment, and inventory of HHEM for net proceeds of
approximately $3.8 million. HHEM was part of the Company’s Precious Metal
segment.   In December 2006, the Company recorded an asset
impairment charge of $3.4 million relating to the long-lived assets offered for
sale, in accordance with SFAS No. 144. As a result of an earlier evaluation of
these assets, the Company had recorded accelerated depreciation of $0.6 million
in 2006 as a charge to cost of goods sold. The amount of the impairment loss was
based upon the actual selling price of the long-lived assets in March
2007.  In the Company’s balance sheet as of December 31, 2006, the
long-lived assets were classified as current assets held for
sale.   Upon sale, the Company recognized a loss of $0.4 million
relating to the sale of inventory.  Under the terms of the sale
agreement, the Company has retained responsibility for any pre-existing
environmental conditions requiring remediation at the Rhode Island
site.





Wire and Cable
Business





H&H’s
former wire and cable business is reported as a discontinued operation in the
accompanying financial statements.  The Company operated this business
on a limited basis in the first quarter of 2005 in order to fulfill customer
commitments.





The
sale of the land, buildings, and remaining machinery & equipment relating to
these businesses occurred in 2006 and resulted in a pretax gain on sale of
assets of $4.5 million ($2.7 million net of tax).







49
 Table of Contents


Operating
results of discontinued operations were as follows:
 2006(in
      thousands)Selling,
      general and administrative expenses
                
                
                $(167)Pretax
      gain on sale of fixed assets
                
                
                4,519Operating
      income (loss)
                
                
                4,352Interest/other
      expense
                
                
                -Net
      income
                
                
                2,713






Note
5 – Acquisitions





Acquisition
of Bairnco Corporation




On April
12, 2007, Steel Partners and WHX entered into a Stock Purchase Agreement whereby
WHX acquired Steel Partners’ entire interest in BZA, a wholly-owned subsidiary
of Steel Partners, for $10.00.  In addition, WHX agreed to reimburse
all reasonable fees and expenses incurred by Steel Partners in connection with
the acquisition.  BZA was the acquisition subsidiary in a tender offer
to acquire up to all of the outstanding stock of Bairnco for $13.50 per share in
cash (the “Offer”).




Steel
Partners, BZA, and Bairnco entered into the Merger Agreement pursuant to which
BZA amended its tender offer to acquire all of the outstanding common shares of
Bairnco at a price of $13.50 per share in cash.  On April 13, 2007,
upon the expiration of the Offer pursuant to the Merger Agreement, BZA acquired
approximately 88.9% of the outstanding common stock of Bairnco.




Pursuant
to the Merger Agreement, on April 24, 2007, BZA was merged with and into Bairnco
with Bairnco continuing as the surviving corporation as a wholly owned
subsidiary of WHX (the “Merger”).  At the effective time of the
Merger, each Bairnco common share then outstanding (other than shares owned by
BZA or its direct parent entity, shares owned by Bairnco as treasury stock and
shares held by stockholders who properly exercise their appraisal rights) was
automatically converted into the right to receive $13.50 per share in cash
without interest and subject to applicable withholding taxes. The Offer and the
Merger comprise the “Bairnco Acquisition”. The proceeds required to fund the
closing of the Offer and the resulting Merger and to pay related fees and
expenses were approximately $101.5 million.




In
connection with the closing of the Offer, initial financing was provided by
Steel Partners through two credit facilities.  Steel Partners extended
to BZA bridge loans in the principal amount of approximately $75.1 million, $1.4
million, and $10.0 million (with commitments to extend additional loans of
approximately $3.6 million, up to an aggregate total amount of borrowings of
$90.0 million) pursuant to the Bridge Loan Agreement.  Approximately
$56.7 million of the indebtedness under the Bridge Loan Agreement was repaid in
July 2007, leaving a principal balance of approximately $31.8
million.  In addition, Steel Partners extended to WHX a $15.0 million
subordinated loan, which is unsecured at the WHX level, pursuant to the
Subordinated Loan Agreement.  WHX contributed the $15.0 million
proceeds of the subordinated loan to BZA as a capital contribution.




On July
17, 2007, Bairnco completed the refinancing of: (i) all existing
indebtedness of Bairnco and its subsidiaries under the Bairnco Senior Secured
Credit Facility and (ii) approximately $56.7 million of indebtedness under
the Bridge Loan Agreement pursuant to which Steel Partners made an $86.5 million
term loan to Bairnco in April 2007.  See Note 12-“ Debt”.




WHX
believes that the Bairnco Acquisition will be beneficial because of Bairnco’s
strong positions in its three business segments, and that Bairnco’s plant level
operations, profit margins and working capital can be improved.





The
Bairnco Acquisition was accounted for under the purchase method of accounting.
The operations of Bairnco comprise three new reportable segments for WHX; Arlon
EM, Arlon CM, and Kasco.







50
 Table of Contents


The
Company has made an allocation of the purchase price, as detailed below, to the
assets acquired and liabilities assumed at estimated fair market
values:


Amount(in
      thousands)Current
      assets
              
              $
              79,953Property,
      plant & equipment
              
              
              51,169Identifiable
      intangible assets
              
              
              27,348Other
      non-current assets
              
              
              468Goodwill
              
              
              10,185Current
      liabilities
              
              
              (29,916
              )Debt
              
              
              (31,078
              )Other
      long term liabilities
              
              
              (6,739
              )Purchase
      price
              
              $
              101,390


The
components of the $27.3 million of estimated acquired Identifiable Intangible
Assets, listed in the above table, are as follows:





Amount
              
              Amortization(in
      thousands)
              
              PeriodCustomer
      relationships
              
              $
              22,152
              
              12-15
      yearsTrade
      names
              
              
              2,645
              
              10-20
      yearsEngineering
      drawings
              
              
              220
              
              5
      yearsBacklog
              
              
              211In-process
      research and development
              
              
              1,640Other
              
              
              480
              
              4-5
      yearsTotal
      Identifiable intangible assets
              
              $
              27,348Weighted
      average amortization period
              
              
              
              
              13
      years




Amortization
expense on these intangible assets recorded from acquisition through December
31, 2007 was approximately $1.3 million, and was charged to SG&A expense.
The
valuation of the acquired assets of Bairnco included $1.6 million of acquired
in-process research and development.  This asset related to eight
specific research and development projects that were considered by management to
be within 6 to 12 months of commercialization.  The valuation method
used was an income approach that valued projected future operating profit from
the projects less the costs to complete the projects, and less a charge for the
use of existing technology assets such as the Company’s existing chemical
formulations and processing know-how, as well as a charge for the use of other
contributory assets. The resulting projected cash flows were then discounted
using an 18.5% discount rate. The in-process research and development, and the
backlog were charged to SG&A expense in 2007.




Goodwill
has an indefinite life and, accordingly, will not be amortized, but will be
subject to periodic impairment testing at future periods in accordance with SFAS
142. As of
December 31, 2007, approximately $3.9 million of goodwill related to prior
acquisitions made by Bairnco is expected to be amortizable for income tax
purposes.





Effective
April 13, 2007, the consolidated financial statements of the Company include the
actual results of operations of Bairnco. The following table summarizes
unaudited pro forma financial data for the combined companies as though the
Company had acquired Bairnco as of January 1, 2006:





Pro
      Forma Combined Financial Information(in
      thousands)
              
              2007
              
              
              2006Net
      sales
              
              $
              692,635
              
              
              $
              639,791Loss
      from continuing operations before income taxes
              
              $
              (22,416
              )
              
              $
              (30,218
              )Loss
      from continuing operations, net of tax
              
              $
              (23,564
              )
              
              $
              (30,125
              )Discontinued
      operations, net of tax
              
              $
              -
              
              
              $
              2,713Net
      loss
              
              $
              (23,564
              )
              
              $
              (27,412
              )Loss
      from continuing operations per common share
              
              $
              (2.36
              )
              
              $
              (3.01
              )Discontinued
      operations per common share
              
              $
              -
              
              
              $
              0.27Net
      loss per common share
              
              $
              (2.36
              )
              
              $
              (2.74
              )





51
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Included
in the above pro forma results for 2007 are non-recurring pre-tax charges of
$5.7 million incurred because of the change in control of Bairnco and costs of
$1.4 million relating to the tender offer for Bairnco shares. Other
non-recurring charges totaling $7.4 million that are included in the
consolidated statement of operations of WHX for 2007 have been excluded from the
above pro forma results of operations.  Such charges consist of
approximately $5.5 million of acquired manufacturing profit in inventory that
was charged to cost of sales, approximately $1.6 million of acquired in-process
research and development costs, and $0.2 million of acquired backlog, and all
are related directly to the acquisition.  Also included in the above
pro forma pretax results for 2007 is pre-tax income of $6.5 million resulting
from WHX’s settlement of a fire insurance claim from a prior year.





Pro forma
adjustments to the historical results of operations for each of the periods
presented include additional interest expense on the acquisition-related
financing, additional depreciation and amortization expense relating to the
higher basis of fixed assets and acquired amortizable intangibles, and the
elimination of Federal income taxes on Bairnco’s results of
operations.  Since Bairnco will be included in the consolidated
federal income tax return of WHX, and due to the uncertainty of realizing the
benefit of WHX’s net operating loss carryforwards in the future, a deferred tax
valuation allowance has been established on a consolidated basis. Pro forma
interest rates reflect a refinancing of approximately $56 million of initial
acquisition financing three months after the pro forma acquisition date since
Bairnco actually refinanced the initial Bridge Loan Agreement approximately
three months (July 2007) after the actual acquisition date.





The pro
forma information noted above should be read in conjunction with the related
historical information and is not necessarily indicative of the results that
would have been attained had the transaction actually taken place as of January
1, 2006; nor is it indicative of any future operating results of the combined
entities.





Acquisition
of Omni Technologies Corporation





In
November 2007, H&H purchased all of the outstanding common stock of Omni
Technologies Corporation of Danville (“Omni”), a manufacturer of flux cored
brazing wire and metal powders used for brazing and soldering pastes, pursuant
to a stock purchase agreement dated as of September 19, 2007.  Omni is
part of the Precious Metal segment.  The purchase price of $3.2
million has been allocated as follows:  $0.7 million to tangible
assets, $1.5 million to identifiable intangible assets, and $1.0 million to
goodwill.




Acquisition
of OMG Midwest





Pursuant
to an Asset Purchase Agreement (the “Asset Purchase Agreement”) dated as of
December 28, 2006, a subsidiary of H&H acquired certain assets of ITW
Buildex.  The purchase price was approximately $26 million, including
a working capital adjustment.  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.  This acquired business
develops and manufactures fastening systems for the commercial roofing
industry.  WHX believes this acquisition solidifies its position as a
leading manufacturer and supplier of mechanical fasteners, accessories and
components, and building products for the North American commercial and
residential construction industry.





The
Company has made an allocation of the purchase price, as detailed below, to the
assets acquired and liabilities assumed at estimated fair market
values:




Amount(in
      thousands)Accounts
      receivable
              
              $
              3,054Inventories
              
              
              3,763Prepaid
      expenses
              
              
              29Equipment
              
              
              2,960Identifiable
      intangible assets
              
              
              13,900Goodwill
              
              
              3,584Accrued
      expenses
              
              
              (1,319
              )Purchase
      price
              
              $
              25,971


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 Table of Contents


The
components of the $13.9 million of acquired Identifiable Intangible Assets,
listed in the above table are as follows:




AmortizationAmount
              
              Period(in
      thousands)Products
      and customer relationships
              
              $
              11,500
              
              20
      yearsTrademark/Brand
      name
              
              
              1,200
              
              10
      yearsPatents
      and patent applications
              
              
              800
              
              15
      yearsNon-compete
      agreement
              
              
              400
              
              4
      yearsTotal
      Identifiable Intangible Assets
              
              $
              13,900Weighted
      average amortization period
              
              
              
              
              16
      years




No
amortization expense was recorded in 2006 since the acquisition was made the
last working day of the year.  The Goodwill has an indefinite life
and, accordingly, will not be amortized, but will be subject to periodic
impairment testing at future periods in accordance with SFAS No. 142.
The goodwill is expected to be amortizable for income tax purposes.





The
acquisition has been accounted for under the purchase method of
accounting.  The acquired business is now known as OMG Midwest, and is
included (as part of its parent company, OMG, Inc.), within the Company’s
Engineered Materials segment for reporting purposes.  Since the
business was acquired on the last working day of 2006, there are no results of
operations of this business for 2006 included in the 2006 Consolidated Financial
Statements, but it is included for the full year 2007. Proforma unaudited
financial data for the combined companies as though the Company had acquired the
assets of OMG Midwest as of January 1, 2006, is as follows:







Combined
      WHX and OMG Midwest2006(in
      thousands)Net
      sales
              
              $
              488,086Net
      loss
              
              $
              (17,969
              )Net
      loss per share
              
              $
              (1.80
              )


Included
in the above proforma results for OMG Midwest for 2006 is estimated depreciation
and amortization of $1.2 million and estimated interest expense of $2.3
million.  The proforma information noted above should be read in
conjunction with the related historical information and is not necessarily
indicative of the results that would have been attained had the transaction
actually taken place as of January 1, 2006.





Note
6 – Pensions, Other Postretirement and Post-Employment Benefits




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





Qualified Pension
Plans





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





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 Table of Contents





The
qualified pension benefits under the WHX Pension Plan were frozen as of December
31, 2005 and April 30, 2006 for hourly and salaried non-bargaining participants,
respectively, with the exception of a single operating unit.  Future
benefits for the impacted employees will be provided through additional
contributions to the defined contribution plan.





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




Bairnco
Corporation has several pension plans (“Bairnco Plans”) which cover
substantially all of its employees.  In 2006, Bairnco froze the Bairnco
Corporation Retirement Plan and initiated employer contributions to its 401(k)
plan.





Bairnco
Corporation’s Canadian subsidiary provides retirement benefits for its employees
through a defined contribution plan. The plan was converted from a defined
benefit plan in 1993 and, upon conversion a surplus was generated that is
maintained in a separate holding account to fund the employer portion of
contributions. As of December 31, 2007, the plan had approximately $2.6 million
in the holding account. The employer portion of contributions for the period
April 14, 2007 through December 31, 2007 was $45,000.





The
Company’s European subsidiaries provide retirement benefits for employees
consistent with local practices. The foreign plans are not significant in the
aggregate and therefore are not included in the following
disclosures.





On
December 31, 2006, the Company adopted Statement of Financial Accounting
Standards No. 158, Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans — an amendment of FASB Statements
No. 87, 88, 106, and 132(R) (“SFAS 158”). This statement requires
recognition of the funded status of a company’s defined benefit pension and
postretirement benefit plans as an asset or liability on the balance sheet and
previously unrecognized changes in that funded status through Accumulated Other
Comprehensive Income.  The Company recorded a charge to Accumulated
Other Comprehensive Income of $1.2 million in 2006 to recognize the funded
status of its benefit plans.





For
defined benefit plans, Other Comprehensive Income (Loss) for 2007 includes
amortization of actuarial losses and prior service costs of $0.9 million and
$0.1 million, respectively, and net actuarial gains of $9.7
million.  For other post retirement benefit plans, Other Comprehensive
Income (Loss) for 2007 includes amortization of actuarial losses and prior
service credits of $0.2 million and ($0.2 million), respectively, net actuarial
gains of $0.2 million, and a one time curtailment adjustment of $1.3
million.   The pretax amount of actuarial losses and prior
service cost (credits) included in Accumulated Other Comprehensive Income (Loss)
at December 31, 2007 that is expected to be recognized in net periodic benefit
cost in 2008 is $63,000 and $66,000, respectively, for defined benefit pension
plans and $0.1 million and ($0.2 million), respectively, for other post
retirement benefit plans.





Pension
benefits for the WHX and H&H participants included in the WHX Pension Plan
and the Bairnco participants included in the Bairnco pension plans are based on
years of service and the amount of compensation during their employment.
However, as noted above, the qualified pension benefits were frozen for most
participants.




Pension
benefits for the WPC participants include both defined benefit and defined
contribution features, since the plan includes the account balances from the
RSP. The gross benefit, before offsets, is calculated based on years of service
and the benefit multiplier under the plan.  This gross amount is then
offset for the benefits payable from the RSP and benefits payable by the Pension
Benefit Guaranty Corporation from previously terminated plans. Individual
employee accounts established under the RSP are maintained until retirement.
Upon retirement, participants who are eligible for the WHX Pension Plan and
maintain RSP account balances will normally receive benefits from the WHX
Pension Plan.  When these participants become eligible for benefits
under the Plan, their vested balances in the RSP Plan become assets of the WHX
Pension Plan.  Aggregate account balances held in trust in individual
employees’ accounts totaled $155 million at December 31, 2007.  Such
individual account balances can only be utilized to fund all or a portion of the
respective individual’s gross pension benefit as determined by the defined
benefit plan’s benefit formula.  These assets cannot be utilized to
fund any of the net benefit that is the basis for determining the defined
benefit plan’s benefit obligation at December 31, 2007.





The
Company's funding policy is to contribute annually an amount that satisfies the
minimum funding standards of ERISA.  Prior to 2004, the Company had
not been required to make any such contributions due to the plan’s fully funded
status.  On September 15, 2006, WHX was required to make a minimum
contribution to the WHX Pension Plan for the 2005 plan year in the amount of
$15.5 million. However, the Company did not make that contribution due to
liquidity issues, and applied to the Internal Revenue Service (“IRS”) for a
funding waiver for the 2005 plan year.  On December 20, 2006, the IRS
granted a conditional waiver of the minimum funding requirements for the 2005
plan year in accordance with section 412 (d) of the Internal Revenue Code and
section 303 of the Employee Retirement Income and Security Act of 1974, as
amended (“ERISA”).  On December 28, 2006, WHX, H&H, and the
Pension Benefit Guaranty Corporation (the "PBGC") entered into the PBGC
Settlement Agreement in connection with the IRS Waiver and certain other
matters. The IRS Waiver is subject to certain conditions, including a
requirement that the Company meet the minimum funding requirements for the WHX
Pension Plan for the plan years ending December 31, 2006







54
 Table of Contents





through
2010, without applying for a waiver of such requirements.  The PBGC
Settlement Agreement and related agreements included the following: (i) the
amortization of the waived amount of $15.5 million (the “Waiver Amount”) over a
period of five years, (ii) the PBGC’s consent to increase borrowings under
H&H’s senior credit facility to $125 million in connection with the closing
of an acquisition (iii) the resolution of any potential issues under Section
4062(e) of ERISA, in connection with the cessation of operations at certain
facilities owned by WHX, H&H or their subsidiaries, and (iv) the granting to
the PBGC of subordinate liens on the assets of H&H and its subsidiaries, and
specified assets of WHX, to collateralize WHX’s obligation to pay the Waiver
Amount to the WHX Pension Plan and to make certain payments to the WHX Pension
Plan in the event of its termination.




WHX
contributed $13.1 million to the WHX Pension Plan in 2006.  In 2007
WHX contributed $21.6 million to the WHX Pension Plan including a $13.0 million
contribution on September 12, 2007. This $13.0 million payment exceeded the
minimum required contribution under ERISA.  As a result of such
accelerated contribution, the Company estimates that future required
contributions to the WHX Pension Plan will significantly decline, with no
contribution required in 2008.




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





Summarized
information regarding the significant qualified defined benefit pension plans of
WHX Corporation and Bairnco is as follows:





WHX
      Pension Plan(in
      thousands)
              
              2007
              
              
              2006Components
      of net periodic benefit cost:Service
      cost
              
              $
              315
              
              
              $
              223Interest
      cost
              
              
              23,719
              
              
              
              23,056Expected
      return on plan assets
              
              
              (29,966
              )
              
              
              (28,436
              )Amortization
      of prior service cost
              
              
              63
              
              
              
              69Actuarial
      loss amortization
              
              
              906
              
              
              
              303(4,963
              )
              
              
              (4,785
              )Curtailment  loss
              
              
              -
              
              
              
              128$
              (4,963
              )
              
              $
              (4,657
              )


Bairnco
      Pension Plans(in
      thousands)
              
              2007Components
      of net periodic benefit cost:Service
      cost
              
              $
              55Interest
      cost
              
              
              1,916Expected
      return on plan assets
              
              
              (2,753
              )Amortization
      of prior service cost
              
              
              -Recognized
      actuarial loss
              
              
              -$
              (782
              )





55
 Table of Contents





2007
              
              
              2006WHX
              
              
              Bairnco
              
              
              
              
              
              WHXPlan
              
              
              Plans
              
              
              Total
              
              
              Plan(in
      thousands)Change
      in benefit obligation:Benefit
      obligation at January 1
              
              $
              415,419
              
              
              $
              -
              
              
              $
              415,419
              
              
              $
              424,054Service
      cost
              
              
              315
              
              
              
              55
              
              
              
              370
              
              
              
              223Interest
      cost
              
              
              23,719
              
              
              
              1,916
              
              
              
              25,635
              
              
              
              23,056Actuarial
      (gain) loss
              
              
              (1,402
              )
              
              
              (1,779
              )
              
              
              (3,181
              )
              
              
              4,867Benefits
      paid
              
              
              (33,773
              )
              
              
              (1,649
              )
              
              
              (35,422
              )
              
              
              (37,721
              )Business
      combinations
              
              
              -
              
              
              
              46,975
              
              
              
              46,975
              
              
              
              -Curtailments
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (557
              )Transfers
      from RSP
              
              
              1,587
              
              
              
              -
              
              
              
              1,587
              
              
              
              1,497Benefit
      obligation at December 31
              
              $
              405,865
              
              
              $
              45,518
              
              
              $
              451,383
              
              
              $
              415,419Change
      in plan assets:Fair
      value of plan assets at January 1
              
              $
              361,974
              
              
              
              -
              
              
              $
              361,974
              
              
              $
              342,237Business
      combinations
              
              
              -
              
              
              
              46,939
              
              
              
              46,939
              
              
              
              -Actual
      returns on plan assets
              
              
              40,082
              
              
              
              (829
              )
              
              
              39,253
              
              
              
              42,874Benefits
      paid
              
              
              (33,773
              )
              
              
              (1,649
              )
              
              
              (35,422
              )
              
              
              (37,721
              )Company
      contributions
              
              
              21,600
              
              
              
              -
              
              
              
              21,600
              
              
              
              13,087Transfers
      from RSP
              
              
              1,587
              
              
              
              -
              
              
              
              1,587
              
              
              
              1,497Fair
      value of plan assets at December 31
              
              $
              391,470
              
              
              $
              44,461
              
              
              $
              435,931
              
              
              $
              361,974Funded
      status
              
              $
              (14,395
              )
              
              $
              (1,057
              )
              
              $
              (15,452
              )
              
              $
              (53,445
              )The
      amounts recognized in the consolidatedbalance
      sheets:Accrued
      pension liability
              
              $
              (14,395
              )
              
              $
              (1,057
              )
              
              $
              (15,452
              )
              
              $
              (53,445
              )The
      pre tax amounts recognized inaccumulated
      other comprehensive income:Net
      actuarial loss
              
              $
              42,160
              
              
              $
              1,803
              
              
              $
              43,963
              
              
              $
              54,584Prior
      service cost (credit)
              
              
              326
              
              
              
              -
              
              
              
              326
              
              
              
              388$
              42,486
              
              
              $
              1,803
              
              
              $
              44,289
              
              
              $
              54,972Accumulated
      benefit obligation for qualifieddefined
      benefit pension plans :Accumulated
      benefit obligation at January 1
              
              $
              415,419
              
              
              $
              -
              
              
              $
              415,419
              
              
              $
              424,054Accumulated
      benefit obligation at December 31
              
              
              405,865
              
              
              
              45,518
              
              
              
              451,383
              
              
              $
              415,419




56
 Table of Contents


The
weighted average assumptions used in the valuations of pension benefits were as
follows:


WHX
      Plan
              
              
              Bairnco
      Plans2007
              
              
              2006
              
              
              2007Assumptions
      used to determine benefitobligations
      at December 31:Discount
      rate
              
              
              6.05
              %
              
              
              5.80
              %
              
              
              6.20
              %Rate
      of compensation increase
              
              
              N/A
              
              
              
              N/A
              
              
              
              N/AAssumptions
      used to determine netperiodic
      benefit cost for the periodending
      December 31:Discount
      rate
              
              
              5.80
              %
              
              
              5.50
              %
              
              
              5.90
              %Expected
      return on assets
              
              
              8.50
              %
              
              
              8.50
              %
              
              
              8.50
              %Rate
      of compensation increase
              
              
              N/A
              
              
              
              N/A
              
              
              
              N/A





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





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





The
Company’s Pension Plans’ weighted-average asset allocations at December 31, 2007
and 2006, by asset category, are as follows:




WHX
      Plan
              
              
              Bairnco
      Plan2007
              
              
              2006
              
              
              2007Asset
      CategoryEquity
      Securities
              
              
              34
              %
              
              
              24
              %
              
              
              54
              %United
      States Government Securities
              
              
              -
              
              
              
              6
              %
              
              
              45
              %Debt
      Securities
              
              
              5
              %
              
              
              5
              %
              
              
              -Convertible
      Securities
              
              
              7
              %
              
              
              8
              %
              
              
              -Cash
              
              
              1
              %
              
              
              5
              %
              
              
              1
              %Other
      (Hedge Funds)
              
              
              53
              %
              
              
              52
              %
              
              
              -Total
              
              
              100
              %
              
              
              100
              %
              
              
              100
              %





Contributions





Employer
contributions consist of funds paid from employer assets into a qualified
pension trust account.





The
estimated minimum funding requirements for the qualified defined benefit plans
in 2008, 2009, 2010, 2011, and 2012 are $0.0 million, $2.6 million, $2.8
million, $0.9 million and $0.1 million respectively.  Cash funding
requirements are developed annually from actuarial valuations in accordance with
ERISA.  Inherent in these valuations are assumptions including
discount rates, mortality, retirement, turnover and expected long-term rates of
return on plan assets.  Material changes in cash funding requirements
may occur in the future due to changes in these assumptions or if certain
assumptions are not realized.




57
 Table of Contents


Benefit
Payments


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




Years
              
              WHX
      Plan
              
              
              Bairnco
      Plans
              
              
              Total2008
              
              $
              33,081
              
              
              $
              2,472
              
              
              $
              35,5532009
              
              
              32,913
              
              
              
              2,522
              
              
              
              35,4352010
              
              
              32,780
              
              
              
              2,599
              
              
              
              35,3792011
              
              
              32,478
              
              
              
              2,652
              
              
              
              35,1302012
              
              
              32,278
              
              
              
              2,728
              
              
              
              35,0062013
      - 2017
              
              
              156,847
              
              
              
              14,686
              
              
              
              171,533




Non-Qualified Pension
Plans





In
addition to the aforementioned benefit plans, H&H has a non-qualified
pension plan for certain current and retired employees. Such plan adopted an
amendment effective January 1, 2006, to freeze benefits under the
plan.   On March 4, 2005, WHX adopted the WHX Corporation
Supplemental Executive Retirement Plan, effective as of February 1, 2004, which
provides for specified benefits to be paid to certain of its employees. The WHX
Corporate Supplemental Executive Retirement Plan (SERP) benefits were settled as
of August 5, 2005, in accordance with SFAS 88 and this plan was terminated on
December 29, 2005.





The measurement date for plan
obligations is December 31.





Summarized
information regarding the non qualified defined benefit pension plans of WHX
Corporation is as follows:





2007
              
              
              
              
              
              2006Components
      of net periodic benefit cost:
              
              (in
      thousands)Service
      cost
              
              $
              -
              
              
              
              
              
              $
              -Interest
      cost
              
              
              12
              
              
              
              
              
              
              11Amortization
      of prior service cost
              
              
              -
              
              
              
              
              
              
              -Amortization
      of actuarial gain (loss)
              
              
              -
              
              
              
              
              
              
              -Curtailment
      -net
              
              
              
              
              
              
              
              
              
              
              (531
              )(a)$
              12
              
              
              
              
              
              
              $
              (520
              )





(a)
Effective January 1, 2006, the H&H non-qualified pension plan adopted an
amendment under the plan to freeze benefits for all
participants.  This resulted in a curtailment credit of $0.5 million,
which was recorded in the first quarter of 2006.





58
 Table of Contents





2007
              
              
              2006(in
      thousands)Change
      in benefit obligation:Benefit
      obligation at January 1
              
              $
              213
              
              
              $
              939Service
      cost
              
              
              -
              
              
              
              -Interest
      cost
              
              
              12
              
              
              
              11Actuarial
      (gain) loss
              
              
              (19
              )
              
              
              (82
              )Amendments
              
              
              -
              
              
              
              (382
              )Benefits
      paid
              
              
              (6
              )
              
              
              (6
              )Curtailment
              
              
              -
              
              
              
              (267
              )Benefit
      obligation at December 31
              
              $
              200
              
              
              $
              213Funded
      status
              
              $
              (200
              )
              
              $
              (213
              )The
      amounts recognized in the consolidatedbalance
      sheets:Accrued
      pension liability
              
              $
              (200
              )
              
              $
              (215
              )The
      pre tax amounts recognized inaccumulated
      other comprehensive income:Net
      actuarial (gain) loss
              
              $
              (20
              )
              
              $
              (2
              )Accumulated
      benefit obligation for qualifieddefined
      benefit pension plans :Accumulated
      benefit obligation at January 1
              
              $
              213
              
              
              $
              627Accumulated
      benefit obligation at December 31
              
              
              200
              
              
              
              213




The
weighted average assumptions used in the valuations of these pension benefits
were as follows:







2007
              
              
              2006Assumptions
      used to determine benefitobligations
      at December 31:Discount
      rate
              
              
              6.05
              %
              
              
              5.80
              %H&H
      rate of compensation increase
              
              
              -
              
              
              
              -WHX
      rate of compensation increase
              
              
              -
              
              
              
              -Assumptions
      used to determine netperiodic
      benefit cost (credit) for the periodending
      December 31:Discount
      rate
              
              
              5.80
              %
              
              
              5.50
              %H&H
      rate of compensation increase
              
              
              -
              
              
              
              -WHX
      rate of compensation increase
              
              
              -
              
              
              
              -




Contributions





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








59
 Table of Contents




Benefit
Payments
 
 There are
no future benefits to be paid from the WHX non-qualified pension
plan.  Estimated future benefit payments for the Handy & Harman
non-qualified plan over the next ten years are as
follows:


Year
              
              Amount(in
      thousands)2008
              
              $
              62009
              
              
              62010
              
              
              52011
              
              
              52012
              
              
              52013
      - 2017
              
              
              148





401(k)
Plans





Certain
H&H employees participate in an H&H sponsored savings plan, which
qualifies under Section 401(k) of the Internal Revenue Code.  This
savings plan allows eligible employees to contribute from 1% to 15% of their
income on a pretax basis.  H&H matches 50% of the first 3% of the
employee's contribution.  The charge to operations for the Company's
matching contribution amounted to $0.8 million for both 2007 and 2006,
respectively.  In addition, in 2007 and 2006, the Company accrued an
additional contribution to the 401(k) Plan of $0.7 million and $0.8 million,
respectively, due to the freezing of benefits under the pension
plan.





Certain
Bairnco employees participate in a Bairnco sponsored savings plan, which
qualifies under Section 401(k) of the Internal Revenue Code.  Bairnco
contributes 1% of pay to each participant’s account, plus Bairnco matches 50% of
the first 4% of the employee’s contribution. Employer contributions to this
401(k) plan were $0.6 million for the period from April 13, 2007 to December 31,
2007.





Other Postretirement
Benefits





Certain
current and retired employees of H&H are covered by postretirement medical
benefit plans.  The benefits provided are for medical and prescription
drugs.  Contributions from a majority of the participants are
required, and for those retirees and spouses the Company’s payments are
capped.





The measurement date for plan
obligations is December 31.





Summarized
information regarding the postretirement medical benefit plans of H&H is as
follows:






2007
              
              
              2006Components
      of net periodic benefit cost:
              
              (in
      thousands)Service
      cost
              
              $
              34
              
              
              $
              72Interest
      cost
              
              
              385
              
              
              
              368Amortization
      of prior service cost (credit)
              
              
              (229
              )
              
              
              (158
              )Amortization
      of actuarial loss
              
              
              177
              
              
              
              123Charge
      due to plan redesign
              
              
              727
              
              
              
              -$
              1,094
              
              
              $
              405




60
 Table of Contents





2007
              
              
              2006Change
      in benefit obligation:
              
              (in
      thousands)Benefit
      obligation at January 1
              
              $
              7,342
              
              
              $
              7,454Service
      cost
              
              
              35
              
              
              
              72Interest
      cost
              
              
              385
              
              
              
              368Actuarial
      loss (gain)
              
              
              (89
              )
              
              
              360Participant
      contributions
              
              
              115
              
              
              
              97Benefits
      paid
              
              
              (758
              )
              
              
              (1,009
              )Curtailment
              
              
              (619
              )
              
              
              -Benefit
      obligation at December 31
              
              $
              6,411
              
              
              $
              7,342Funded
      Status
              
              $
              (6,411
              )
              
              $
              (7,342
              )The
      pre tax amounts recognized inaccumulated
      other comprehensive income:Net
      actuarial loss
              
              $
              944
              
              
              
              1,829Prior
      service cost (credit)
              
              
              (1,598
              )
              
              
              (1,100
              )Total
              
              $
              (654
              )
              
              $
              729




The
weighted average assumptions used in the valuations of these other
postretirement benefits were as follows:





2007
              
              
              2006Assumptions
      used to determine benefitobligations
      at December 31:Discount
      rate
              
              
              6.05
              %
              
              
              5.80
              %Health
      care cost trend rate - initial
              
              
              8.00
              %
              
              
              9.00
              %Health
      care cost trend rate - ultimate
              
              
              5.00
              %
              
              
              5.00
              %Year
      ultimate is reached
              
              2014
              
              
              2011Assumptions
      used to determine netperiodic
      benefit cost for the periodDiscount
      rate
              
              
              5.80
              %
              
              
              5.50
              %Health
      care cost trend rate - initial
              
              
              9.00
              %
              
              
              9.00
              %Health
      care cost trend rate - ultimate
              
              
              5.00
              %
              
              
              5.00
              %Year
      ultimate is reached
              
              2011
              
              
              2010




At
December 31, 2007, the health care cost trend rate was 8.0% decreasing to an
ultimate rate of 5.0% by the year 2014.  A one percentage point
increase in healthcare cost trend rates in each year would increase the
accumulated postretirement benefit obligation as of December 31, 2007 by $0.5
million and the aggregate of the service cost and interest cost components of
2007 annual expense by $18,000.  A one percentage point decrease in
healthcare cost trend rates in each year would decrease the accumulated
postretirement benefit obligation as of December 31, 2007 by $0.5 million and
the aggregate of the service cost and interest cost components of 2007 annual
expense by $14,000.





Contributions





Employer contributions are expected to
be $0.7 million for the 2008 plan year.




61
 Table of Contents


Benefit
Payments
  Expected benefit payments over the next
ten years are as follows:


Year
              
              Amount(in
      thousands)2008
              
              $
              6602009
              
              
              5942010
              
              
              5782011
              
              
              5592012
              
              
              5292013
      - 2017
              
              
              2,518





One of
the Company's postretirement welfare plans is affected by The Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the
"Act").  Beginning in 2006, the Act provides a federal subsidy payment
to companies providing benefit plans that meet certain criteria regarding their
generosity.  The Company expects to receive those subsidy payments.
The Company has accounted for the Act in accordance with FASB Staff Position No.
FAS 106-2, which required, in the Company's case, recognition on July 1,
2004.  The adoption of FSP 106-2 on July 1, 2004 did not have a
material impact on the Company’s financial statements.  The effect of
the Medicare Part D subsidy is expected to reduce the Company’s future
contributions by approximately 14%.





The
Company has an Executive Post-Retirement Life Insurance Program which provides
for life insurance benefits equal to three and one half times payroll, as
defined for certain Company executives upon their
retirement.    Under SFAS 106, the Company is required to
recognize in its financial statements an annual cost and benefit obligation
related to estimated future benefit payments to be made to its current and
retired executives. Funding for these obligations is made by the
Company.





Summarized
information regarding the Executive Post-Retirement Life Insurance Program is as
follows:





2007
              
              
              2006Components
      of net periodic benefit cost:
              
              (in
      thousands)Service
      Cost
              
              $
              67
              
              
              $
              71Interest
      Cost
              
              
              68
              
              
              
              53Amortization
      of Actuarial Loss
              
              
              -
              
              
              
              -$
              135
              
              
              $
              124




2007
              
              
              2006Change
      in benefit obligation:
              
              (in
      thousands)Benefit
      obligation at January 1
              
              $
              1,111
              
              
              $
              899Service
      cost
              
              
              67
              
              
              
              71Interest
      cost
              
              
              68
              
              
              
              54Actuarial  loss
      (gain)
              
              
              (62
              )
              
              
              87Benefit
      obligation at December 31
              
              $
              1,184
              
              
              $
              1,111Funded
      Status
              
              $
              (1,184
              )
              
              $
              (1,111
              )The
      pre tax amounts recognized inaccumulated
      other comprehensive income:Net
      actuarial (gain) loss
              
              $
              25
              
              
              $
              87




62
 Table of Contents


The
weighted average assumptions used in the valuations of Executive Post-Retirement
Life Insurance Program were as follows:


2007
              
              
              2006Assumptions
      used to determine benefitobligations
      at December 31:Discount
      rate
              
              
              6.05
              %
              
              
              5.80
              %Assumptions
      used to determine netperiodic
      benefit cost for the periodending
      December 31:Discount
      rate
              
              
              5.80
              %
              
              
              5.50
              %Rate
      of compensation increase
              
              
              4.00
              %
              
              
              4.00
              %




Contributions




Employer contributions are expected to
be $0.7 million for the 2008 plan year.





Benefit
Payments




Expected benefit payments over the next
ten years are as follows:





Year
              
              Amount(in
      thousands)2008
              
              $
              6752009
              
              
              202010
              
              
              202011
              
              
              192012
              
              
              182013
      - 2017
              
              
              78




Note
7 - Income Taxes





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





2007
              
              
              2006(in
      thousands)Income
      TaxesCurrentDomestic
              
              $
              1,028
              
              
              $
              (1,152
              )Foreign
              
              
              1,276
              
              
              
              890Total
      income taxes, current
              
              $
              2,304
              
              
              $
              (262
              )DeferredDomestic
              
              $
              (407
              )
              
              $
              293Foreign
              
              
              (59
              )
              
              
              -Total
      income taxes, deferred
              
              $
              (466
              )
              
              $
              293Income
      tax provision
              
              $
              1,838
              
              
              $
              31Components
      of Total Income TaxesContinuing
      operations
              
              $
              1,838
              
              
              $
              31Discontinued
      operations
              
              
              -
              
              
              
              1,640Income
      tax provision
              
              $
              1,838
              
              
              $
              1,671









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





Deferred
      Income Tax Sources2007
              
              
              2006(in
      thousands)Current
      Deferred Tax Items:Inventory
              
              $
              4,569
              
              
              $
              3,740Environmental
      Costs
              
              
              4,804
              
              
              
              4,493Accrued
      Expenses
              
              
              1,182
              
              
              
              1,483Miscellaneous
      Other
              
              
              601
              
              
              
              536Current
      deferred income tax asset before valuation allowance
              
              
              11,156
              
              
              
              10,252Valuation
      allowance
              
              
              (7,817
              )
              
              
              (9,913
              )Current
      deferred tax asset
              
              $
              3,339
              
              
              $
              339Other-
      net
              
              $
              (142
              )
              
              $
              (123
              )Current
      deferred tax liability
              
              $
              (142
              )
              
              $
              (123
              )Non-Current
      Deferred Tax Items:Postretirement
      and postemployment employee benefits
              
              $
              3,105
              
              
              $
              2,465Net
      operating loss carryforwards
              
              
              77,032
              
              
              
              61,910Capital
      loss carryforward
              
              
              871
              
              
              
              1,588Additional
      minimum pension liability
              
              
              21,920
              
              
              
              21,920California
      tax credits
              
              
              350
              
              
              
              -Foreign
      tax credits
              
              
              272
              
              
              
              -Minimum
      tax credit carryforwards
              
              
              1,850
              
              
              
              1,850Non
      current deferred tax asset before valuation allowance
              
              
              105,400
              
              
              
              89,733Valuation
      allowance
              
              
              (73,851
              )
              
              
              (86,760
              )Non
      current deferred tax asset
              
              
              31,549
              
              
              
              2,973Property
      plant and equipment
              
              
              (10,135
              )
              
              
              (3,082
              )Pension
              
              
              (15,701
              )
              
              
              (609
              )Intangible
      assets
              
              
              (11,736
              )
              
              
              (2,150
              )Undistributed
      foreign earnings
              
              
              (1,492
              )
              
              
              -Other-net
              
              
              (702
              )
              
              
              -Non
      current deferred tax liability
              
              
              (39,766
              )
              
              
              (5,841
              )Net
      non current deferred tax liability
              
              $
              (8,217
              )
              
              $
              (2,868
              )


Net
deferred tax assets amounting to $81.7 million have been fully reserved since in
the opinion of management, it is more likely than not such tax benefits will not
be realized in future periods. Included in deferred tax assets at December 31,
2007 are federal net operating loss carryforwards (“NOLs”) of $205.8
million.  These NOLs expire between 2008 and 2027.  In 2007,
NOLs of $2.9 million expired. Management performs a periodic evaluation of
deferred tax assets and will adjust the valuation allowance as circumstances
warrant. Also, included in deferred income tax assets is a capital loss
carryforward of $2.2 million related principally to the sale of the WPC $10.0
million note. The net current deferred tax asset is expected to be realizable
from the reversal of offsetting temporary differences.





Upon its
emergence from bankruptcy on July 29, 2005, the Company experienced an ownership
change as defined by Section 382 of the Internal Revenue Code, which imposes
annual limitations on the utilization of net operating carryforwards post
ownership change. The Company believes it qualifies for the bankruptcy exception
to the general Section 382 limitations.  Under this exception, the
annual limitation imposed by Section 382 resulting from an ownership change will
not apply, instead the net operating loss carryforwards must be reduced by
certain interest expense paid creditors who became stockholders as a result of
the bankruptcy reorganization. Thus, the Company's net operating losses of
$205.8 million as of December 31, 2007 include a reduction of $31.0 million
($10.8 million tax-effect).





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As of
December 31, 2007, the Company has provided deferred income taxes on $4.4
million of undistributed earnings of foreign subsidiaries.  In
addition, there were approximately $7.8 million of undistributed earnings of
foreign subsidiaries that are deemed to be permanently reinvested, and thus, no
deferred income taxes have been provided on these earnings.





Total
state and foreign income taxes paid in 2007and 2006 by continuing operations
were $3.2 million and $2.0 million, respectively.





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






Year
      Ended December 312007
              
              
              2006(in
      thousands)Loss from
      continuing operations before taxes
              
              $
              (18,933
              )
              
              $
              (20,832
              )Tax
      benefit at statutory rate
              
              $
              (6,627
              )
              
              $
              (7,291
              )Increase
      (decrease)  in tax due to:Equity
      earnings on foreign affiliates
              
              
              -
              
              
              
              (57
              )Sale
      of foreign affiliates
              
              
              -
              
              
              
              470Foreign
      dividend income
              
              
              510
              
              
              
              -Incentive
      stock options granted
              
              
              427
              
              
              
              -State
      income tax, net of federal effect
              
              
              232
              
              
              
              317Increase
      in valuation allowance
              
              
              6,517
              
              
              
              6,298Net
      effect of foreign tax rate
              
              
              144
              
              
              
              112Other,
      net
              
              
              635
              
              
              
              182Tax
      provision
              
              $
              1,838
              
              
              $
              31




In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” an Interpretation of FASB Statement 109 (“FIN 48”), which
clarifies the accounting for uncertainty in tax positions.  FIN 48
provides that the tax effects from an uncertain tax position can be recognized
in the financial statements, only if the position is more likely than not of
being sustained on audit, based on the technical merits of the position. The
Company adopted the provisions of FIN 48 on January 1, 2007. As a result of the
implementation of FIN 48, an increase in the liability for unrecognized income
tax benefits of $1.2 million was recognized, and accordingly, an adjustment to
opening retained earnings was recorded. At the adoption date of January 1, 2007,
the Company had $2.7 million of unrecognized tax benefits, all of which would
affect its effective tax rate if recognized. At December 31, 2007, the Company
has $3.1 million of unrecognized tax benefits. The change in the amount of
unrecognized tax benefits in 2007 was as follows:






Year
      Ended December 312007(in
      thousands)Adoption
      of FIN 48 on January 1, 2007
              
              $
              2,735Acquisitions
              
              
              313Additions
      for tax positions related to current year
              
              
              366Additions
      due to interest accrued
              
              
              166Reductions
      for tax positions of prior years due to lapsed statutes of
      limitations
              
              
              (498
              )Balance
      at December 31, 2007
              
              $
              3,082




The
Company recognizes interest and penalties related to uncertain tax positions in
income tax expense. As of December 31, 2007, approximately $0.5 million of
interest related to uncertain tax positions is accrued. It is reasonably
possible that the total amount of unrecognized tax benefits will decrease by as
much as $0.6 million during the next twelve months as a result of the lapse of
the applicable statutes of limitations in certain taxing jurisdictions. 
In
addition, the Company expects to recognize approximately $0.3 million of
previously unrecognized tax benefits in the first quarter of 2008 due to the
settlement of a foreign tax audit during March 2008.For federal
income tax purposes, the statute of limitations for audit by the Internal
Revenue Service (“IRS”) is open for years 2004 through 2007. In addition, net
operating losses generated in prior years are subject to examination and
potential adjustment by the IRS upon their utilization in future years’ tax
returns.





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Note
8- Inventories




December
      312007
              
              
              2006(in
      thousands)Finished
      products
              
              $
              38,468
              
              
              $
              16,162In-process
              
              
              15,547
              
              
              
              5,743Raw
      materials
              
              
              25,257
              
              
              
              25,423Fine
      and fabricated precious metal in various stages of
    completion
              
              
              9,486
              
              
              
              17,70288,758
              
              
              
              65,030LIFO
      reserve
              
              
              (5,049
              )
              
              
              (7,853
              )$
              83,709
              
              
              $
              57,177




Inventory
increased in 2007 primarily resulting from the Bairnco acquisition. Bairnco
inventory balance at December 31, 2007 was $30.5 million; $14.4 million for
finished goods, $8.4 million for in-process, and $7.7 million for raw
materials.





Fine and Fabricated Precious
Metal Inventory





In order
to produce certain of its products, the Company purchases, maintains and
utilizes precious metal inventory. H&H enters into commodity futures and
forwards contracts on precious metal that are subject to market fluctuations in
order to economically hedge its precious metal inventory against price
fluctuations.  As these derivatives are not designated as accounting
hedges under SFAS No. 133, they are accounted for as derivatives with no hedge
designation.  Accordingly, the Company recognizes realized and
unrealized gains and losses on the derivative instruments related to precious
metal.  Such realized and unrealized gains and losses are recorded
incurrent period
earnings as other income or expense in the Company's consolidated statement of
operations. Realized and unrealized gains and losses for derivatives in 2007 and
2006 were losses of $1.9 million and $8.0 million, respectively.  In
addition, the Company records its precious metal inventory at LIFO cost, subject
to lower of cost or market with any adjustments recorded through cost of goods
sold.  The market value of the precious metal inventory exceeded LIFO
value cost by $5.0 million and $7.9 million at December 31, 2007 and December
31, 2006, respectively.





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.  In the first quarter of 2007, the Company received 400,000
troy ounces of silver from a customer under an unallocated pool account
agreement. Such agreement is cancelable by the customer upon six months notice.
Because of a reduction in its operating needs as well as a result of this
agreement, the quantity of silver owned by the Company declined by 690,186 troy
ounces as of December 31, 2007.  The Company recorded $4.7 million of
profit arising from this liquidation of LIFO inventory.




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The
following table summarizes customer toll and owned precious metal
quantities:





December
      312007
              
              
              2006Silver
      ounces:Customer
      metal
              
              
              795,336
              
              
              
              137,711H&H
      owned metal (a)
              
              
              367,714
              
              
              
              1,057,900Gold
      ounces:Customer
      metal
              
              
              779
              
              
              
              907H&H
      owned metal (a)
              
              
              4,616
              
              
              
              5,800Palladium
      ounces:Customer
      metal
              
              
              1,346
              
              
              
              1,338H&H
      owned metal (a)
              
              
              520
              
              
              
              1,535Supplemental
      inventory information:
              
              December
      312007
              
              
              2006(in
      thousands, except per ounce)Precious
      metals stated at LIFO cost (a)
              
              $
              4,436
              
              
              $
              9,849Market
      value per ounce:Silver
              
              $
              14.805
              
              
              $
              12.852Gold
              
              $
              834.70
              
              
              $
              635.99Palladium
              
              $
              364.00
              
              
              $
              323.50





(a)
During 2006, the Company’s precious metal inventory was reduced principally by
the wind-down of its HHEM operation and the sale of its Singapore
operation.  Accordingly, the Company experienced a liquidation of its
precious metal inventory which is accounted for under the LIFO
method.  Operating income for 2006 includes a $5.3 million credit to
cost of goods sold from the liquidation of precious metal inventories valued at
LIFO.





Note 9- Property, Plant and Equipment December
      312007
              
              
              2006(in
      thousands)Land
              
              $
              14,209
              
              
              $
              4,047Buildings,
      machinery and equipment
              
              
              186,411
              
              
              
              134,510Construction
      in progress
              
              
              3,189
              
              
              
              6,196203,809
              
              
              
              144,753Accumulated
      depreciation and amortization
              
              
              79,473
              
              
              
              66,633$
              124,336
              
              
              $
              78,120




The
increase in the amount of Property, Plant and Equipment during 2007 was
principally due to the acquisitions of Bairnco and Omni. Acquired fixed assets
for both acquisitions were $51.4 million (see Note 5).




Depreciation
expense for continuing operations for the years 2007 and 2006 was $15.9 million
and $12.3 million,  respectively.




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Note
10 - Goodwill and Other Intangibles





The
changes in the carrying amount of goodwill by reportable segment for the year
ended December 31, 2007 were as follows:




ArlonPrecious
              
              
              
              
              
              Engineered
              
              
              ElectronicMetal
              
              
              Tubing
              
              
              Materials
              
              
              Materials
              
              
              Total(in
      thousands)Balance
      as of January 1, 2007
              
              $
              -
              
              
              $
              1,895
              
              
              $
              51,135
              
              
              $
              -
              
              
              $
              53,030Acquisitions
              
              
              1,005
              
              
              
              -
              
              
              
              97
              
              
              
              10,185
              
              
              
              11,287Balance
      at December 31, 2007
              
              $
              1,005
              
              
              $
              1,895
              
              
              $
              51,232
              
              
              $
              10,185
              
              
              $
              64,317




The
changes in the carrying amount of goodwill by reportable segment for the year
ended December 31, 2006 were as follows:




Precious
              
              
              
              
              
              EngineeredMetal
              
              
              Tubing
              
              
              Materials
              
              
              Total(in
      thousands)Balance
      as of January 1, 2006
              
              $
              -
              
              
              $
              1,895
              
              
              $
              47,551
              
              
              $
              49,446Acquisition
              
              
              -
              
              
              
              -
              
              
              
              3,584
              
              
              
              3,584Balance
      at December 31, 2006
              
              $
              -
              
              
              $
              1,895
              
              
              $
              51,135
              
              
              $
              53,030




The
Company conducted the required annual goodwill impairment reviews in 2007 and
2006, and computed updated valuations for each reporting unit using a discounted
cash flow approach and market approach.  Based on the results of these
reviews, there was no goodwill impairment in 2007 or 2006.





Other
intangible assets as of December 31, 2007 and 2006 consisted of:




December
      31,2007
              
              
              2006(in
      thousands)Products
      and customer relationships
              
              $
              34,082
              
              
              $
              11,500Trademark/Brand
      name
              
              
              3,958
              
              
              
              1,200Patents
      and patent applications
              
              
              2,296
              
              
              
              1,423Non-compete
      agreements
              
              
              756
              
              
              
              400Other
              
              
              1,548
              
              
              
              1,12342,640
              
              
              
              15,646Accumulated
      amortization
              
              
              2,748
              
              
              
              404Intangible
      assets, net
              
              $
              39,892
              
              
              $
              15,242


The
increase in intangible assets principally related to the acquisition of Bairnco
by WHX in April 2007 and the acquisition of Omni by H&H in November
2007.  See Note 5 for the details of the
acquisitions.  Amortization of intangibles totaled $2.3 million in
2007 and $0.1 million in 2006.







68
 Table of Contents





The
estimated amortization expense for each of the five succeeding years and
thereafter is as follows:




Products
      and
              
              
              
              
              
              Patents
      andCustomer
              
              
              
              
              
              Patent
              
              
              Non-CompeteRelationships
              
              
              Trademarks
              
              
              Applications
              
              
              Agreements
              
              
              Other
              
              
              Total(in
      thousands)2008
              
              $
              2,168
              
              
              $
              254
              
              
              $
              183
              
              
              $
              114
              
              
              $
              233
              
              
              $
              2,9522009
              
              
              2,168
              
              
              
              254
              
              
              
              183
              
              
              
              114
              
              
              
              233
              
              
              
              2,9522010
              
              
              2,168
              
              
              
              254
              
              
              
              183
              
              
              
              114
              
              
              
              233
              
              
              
              2,9522011
              
              
              2,168
              
              
              
              254
              
              
              
              183
              
              
              
              108
              
              
              
              233
              
              
              
              2,9462012
              
              
              2,168
              
              
              
              254
              
              
              
              167
              
              
              
              73
              
              
              
              111
              
              
              
              2,773Thereafter
              
              
              21,485
              
              
              
              2,359
              
              
              
              1,087
              
              
              
              159
              
              
              
              116
              
              
              
              25,20632,325
              
              
              
              3,629
              
              
              
              1,986
              
              
              
              682
              
              
              
              1,159
              
              
              
              39,781Indefinite
      life
              
              
              
              
              
              
              111
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              111$
              32,325
              
              
              $
              3,740
              
              
              $
              1,986
              
              
              $
              682
              
              
              $
              1,159
              
              
              $
              39,892




Note
11 – Debt




Long-term
debt at December 31, 2007 and 2006 is as follows:




Year
      Ended December 312007
              
              
              2006(in
      thousands)Long-term Debt-Non
      Related Party:H&H
      Credit Facility - Term Loan A
              
              $
              9,742
              
              
              $
              14,453H&H
      Term Loan
              
              
              42,000
              
              
              
              42,000H&H
      Supplemental Term Loan
              
              
              5,277
              
              
              
              6,883Other
      H&H debt-domestic
              
              
              6,724
              
              
              
              6,868Other
      H&H debt-foreign
              
              
              5,420
              
              
              
              5,475Bairnco
      Term Loans
              
              
              75,067
              
              
              
              -Bairnco
      China foreign loan facility
              
              
              4,961
              
              
              
              -Total
      debt-non related party
              
              
              149,191
              
              
              
              75,679Less
      portion due within one year
              
              
              7,513
              
              
              
              4,778Long-term
      debt-non related party
              
              $
              141,678
              
              
              $
              70,901Long-term Debt-Related
      Party:H&H
      Term B Loan - related party
              
              $
              104,165
              
              
              $
              89,627Bairnco
      Subordinated Loan-related party
              
              
              33,957
              
              
              
              -WHX
      Subordinated Loan-related party
              
              
              16,779
              
              
              
              -Long-term
      debt to related party
              
              $
              154,901
              
              
              $
              89,627Total
      long-term debt
              
              $
              296,579
              
              
              $
              160,528




Long term
debt as of December 31, 2007 matures in each of the next five years as
follows:




Long-term
      Debt Maturity
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2013
      and(in
      thousands)
              
              Total
              
              
              2008
              
              
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              
              afterLong-term
      debt-non-related party
              
              $
              149,191
              
              
              $
              7,513
              
              
              $
              56,508
              
              
              $
              8,471
              
              
              $
              9,661
              
              
              $
              64,440
              
              
              $
              2,598Long
      term debt to related party
              
              
              154,901
              
              
              
              -
              
              
              
              120,944
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              33,957Total
      Debt
              
              $
              304,092
              
              
              $
              7,513
              
              
              $
              177,452
              
              
              $
              8,471
              
              
              $
              9,661
              
              
              $
              64,440
              
              
              $
              36,555







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Short
Term Debt and Preferred Stock





Short
term debt at December 31, 2007 and 2006 was as follows:




Year
      Ended December 312007
              
              
              2006(in
      thousands)H&H
      Revolving Credit Facility
              
              $
              42,344
              
              
              $
              35,221Bairnco
      Revolving Credit Facility
              
              
              7,170
              
              
              
              -Foreign
      Revolving Credit Facility
              
              
              666
              
              
              
              -Mandatorily
      Redeemable Preferred Stock - related party
              
              
              5,100
              
              
              
              5,100$
              55,280
              
              
              $
              40,321




SFAS No.
150 (As Amended), “Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity”, requires an issuer to classify
a financial instrument issued in the form of shares that are mandatorily
redeemable as a liability in its balance sheet.




Credit
Facilities





Handy &
Harman





H&H’s
financing agreements include a revolving credit and term loan facility with
Wachovia, and a Term B Loan with Steel Partners.





The
Wachovia Facilities currently provide for maximum borrowings of $129 million,
consisting of a revolving credit facility of up to $83 million of borrowings
dependent on the levels of and collateralized by eligible accounts receivable
and inventory, and reduced by the amount of certain term loans outstanding to
Wachovia. In addition, the Wachovia Facilities also include term loans funded by
Ableco ($42 million as of December 31, 2007 and $46 million as of February 28,
2008). The term loans are collateralized by eligible equipment and real estate.
The revolving credit facility and the term loans payable to Wachovia bear
interest at LIBOR plus applicable margins of between 2.00% and 2.50%, or the
U.S. Base rate (prime rate) plus .25% to .75%. The Wachovia Facilities also
include a provision for Supplemental Term Loans, which currently total
approximately $5 million, and bear interest at LIBOR plus applicable margins of
between 4.00% and 4.50%, or the U.S. Base rate (prime rate) plus 2.25% to 2.75%.
The applicable margin for the revolving credit facility and the term loans
payable to Wachovia is dependent on H&H’s Quarterly Average Excess
Availability for the prior quarter, as that term is defined in the agreement.
The term loans payable to Ableco bear interest at LIBOR plus applicable margins
of between 4.75% and 5.50%, or the U.S. Base rate (prime rate) plus 2.00% to
2.75%. The applicable margin for the term loans payable to Ableco is dependent
on H&H’s Senior Leverage Ratio for the prior quarter, as that term is
defined in the agreement. Borrowings under the Wachovia Facilities are
collateralized by first priority security interests in and liens upon all
present and future stock and assets of H&H and its subsidiaries, including
all contract rights, deposit accounts, investment property, inventory,
equipment, real property, and all products and proceeds
thereof.  Principal payments for the term loans under the Wachovia
Facilities are due in monthly installments of $0.3 million (rising to $0.7
million per month for one year beginning May 2008). The Wachovia Facilities
contain affirmative, negative, and financial covenants (including, EBITDA shall
not be less than $30.0 million, the Senior Leverage Ratio shall not be greater
than 4.125:1.0, Capital Expenditures shall not be made in excess of $12.0
million in any 12 month period, as such terms are defined therein), and cash
distributions that can be made to WHX are restricted.  The Wachovia
Facilities mature on June 30, 2009. The revolving and term loans under the
Wachovia Facilities bore interest at rates ranging from 7.0% to 8.6% as of
December 31, 2007.





The Term
B Loan with Steel Partners matures on June 30, 2009 and provides for annual
payments based on 40% of excess cash flow as defined in the agreement (no
principal payments are currently payable).  Interest accrues monthly
at the Prime Rate plus 6%, and at no time shall the Prime Rate (as that term is
defined in the agreement) be below 4.0%. Pursuant to the terms of a
subordination agreement between Steel Partners and Wachovia, H&H’s interest
payable to Steel is accrued but not paid.  The Term B Loan has a
second priority security interest in and lien on all assets of H&H, subject
to the prior lien of the Wachovia Facilities and H&H’s $10 million guaranty
and security interest for the benefit of Ableco as agent of the Bairnco
indebtedness. In addition, H&H has pledged a portion of all outstanding
stock of Indiana Tube Danmark A/S, a Danish corporation, and Protechno, S.A., a
French corporation, both of which are indirect wholly-owned subsidiaries of
H&H. The Term B Loan contains affirmative, negative, and financial covenants
(including, EBITDA shall not be less than $30.0 million, the Senior Leverage
Ratio shall not be greater than 4.125:1.0, Capital Expenditures shall not be
made in excess of $12.0 million in any 12 month period, as such terms are
defined therein), and cash
distributions that can be made to WHX are restricted. The Term B Loan also
contains cross-default provisions with the Wachovia Facilities.  The
Term B Loan bore interest at 13.5% as of December 31, 2007.







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On March
29, 2007, all such credit facilities, including the term loans, were amended to
(i) redefine EBITDA, (ii) reset the levels and amend certain of the
financial covenants, (iii) extend the termination date of the credit
facilities from March 31, 2007 to June 30, 2008, (iv) permit the extension
by H&H to WHX of an unsecured loan for required payments to the WHX Pension
Plan, under certain conditions, and (v) permit the extension by H&H to
WHX of an unsecured loan for other uses in the aggregate principal amount not to
exceed $3.5 million under certain conditions.  The amendments also
provided for the pledge of 65% of all outstanding securities of Indiana Tube
Danmark A/S, a Danish corporation and a wholly-owned indirect subsidiary of
H&H., and Protechno, a French corporation and a wholly-owned indirect
subsidiary of H&H.  Finally, the amendments also provided for
waivers of certain events of default existing as of March 29, 2007.




On June
15, 2007, the lenders under H&H’s credit facilities granted a waiver to the
events of default arising as a result of the Order of Prejudgment Attachment
entered by the Superior Court, Stamford, Connecticut on December 18, 2006 in
connection with the litigation known as HH East Parcel v. Handy & Harman
currently pending in the Superior Court, Stamford, Connecticut in the amount of
approximately $3.5 million and the Notice of Bank Attachment/Garnishment dated
May 21, 2007 by the State Marshal of Fairfield County, Connecticut to JPMorgan
Chase Bank in the amount of approximately $3.5 million, and related
matters.




On July
27, 2007, H&H and certain of its subsidiaries amended its credit facilities,
effective as of July 20, 2007 to, among other things, (i) change the
definition of EBITDA, (ii) permit additional loans by Steel Partners to
H&H in an aggregate amount not to exceed approximately $7.4 million, and
(iii) permit the loan, distribution or other advances by H&H to WHX of
up to approximately $7.4 million, subject to certain limitations, to the extent
loaned by Steel Partners to H&H as permitted by these
amendments.  On July 31, 2007, Steel Partners loaned H&H
approximately $5.7 million.




On
September 10, 2007, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, (i) provide for an additional term loan by
Steel Partners of $8.0 million to H&H and its subsidiaries, and (ii) permit
a loan by H&H to WHX of up to $13.1 million to be used by WHX solely to make
a contribution to the WHX Pension Plan.  On September 12, 2007, the
Company made a payment to the WHX Pension Plan of $13.0 million, which exceeded
the minimum required contribution under ERISA.  As a result of such
accelerated contribution, the Company’s required contributions to the WHX
Pension Plan over the next five years are expected to decline and the Company
believes that the full amount of the IRS Waiver has been repaid, and that all
liens granted to the PBGC pursuant to the PBGC Settlement Agreement have been
released.




On
October 31, 2007, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, make Omni Technologies Corporation, a company
acquired by H&H in 2007, a borrower under such facilities.




On
January 22, 2008, H&H and certain of its subsidiaries amended its credit
facilities to, effective January 11, 2008, among other things, (i) provide for a
temporary reduction in the reserves required under the Wachovia Facilities from
$2.5 million to $1.0 million until April 15, 2008, and (ii) revise the criteria
of Foreign Accounts, as that term is defined in the agreement, to be included in
the calculation of availability.




On
February 14, 2008, H&H and certain of its subsidiaries amended its credit
facilities to, among other things, (i) reset the levels of certain financial
covenants, (ii) allow for the prepayment of the Term B Loan with Steel Partners
in the amount of and upon receipt by H&H of a capital or debt infusion from
the Company from proceeds of the rights offering, less $5 million which shall be
used to pay down the revolver under the Wachovia Facilities, (iii) extend the
maturity date to June 30, 2009, (iv) consent to the terms and conditions of the
H&H Security Agreement and the H&H Guaranty,  both terms as
defined below in the description of the February 14, 2008 amendment by Bairnco
to its credit agreements, and (v) amend applicable interest rates.  In
addition, the Wachovia Facilities were also amended to provide for an additional
term loan of $4,000,000 to H&H and its subsidiaries.







Other Handy & Harman
Debt





On
January 24, 2006, H&H’s wholly-owned subsidiary, OMG, Inc., entered into an
$8.0 million five-year loan and security agreement with Sovereign
Bank.  The loan is collateralized by a mortgage on OMG, Inc.’s real
property.  Principal is payable monthly in installments of $12
thousand.  The loan bears interest at a variable rate equal to Libor
plus 2.25% (7.57% as of December 31, 2007). The Company has a $1.0 million
restricted cash deposit with Sovereign Bank that further collateralizes the
outstanding liability.





In March
2004, H&H’s wholly owned Danish subsidiary entered into a financing
agreement with a Danish bank that includes a revolving credit facility and term
loans.  At December 31, 2007 and 2006, there was approximately
$5.4 million and $5.5 million, respectively, outstanding under the term loans.
At December 31, 2007 and 2006, there was no debt outstanding under the revolving
credit facility.  The
Danish subsidiary economically hedges its exposure on this variable interest
rate debt.





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Bairnco





In
connection with the Bairnco Acquisition, initial financing was provided by Steel
Partners through two credit facilities.  Steel Partners extended to
BZA bridge loans in the aggregate principal amount of approximately $86.5
million pursuant to the Bridge Loan Agreement between BZA and Bairnco, as
borrowers, and Steel Partners, as lender.  In addition, Steel Partners
extended to WHX a $15.0 million subordinated loan, which is unsecured at the WHX
level, pursuant to the Subordinated Loan Agreement, between WHX, as borrower,
and Steel Partners, as lender.  WHX contributed the $15.0 million
proceeds of the Subordinated Loan Agreement to BZA as a capital
contribution.




On July
18, 2007, Bairnco completed the refinancing of: (i) all  of its
existing indebtedness under its prior debt agreement, the Bairnco Senior Secured
Credit Facility, and (ii) a portion (approximately $56.7 million) of its
existing indebtedness under the Bridge Loan Agreement, as follows:





On July
18, 2007, Bairnco and certain of its subsidiaries entered into the First Lien
Credit Agreement with Wells Fargo,, which provides for a revolving credit
facility to the borrowers in an aggregate principal amount not to exceed $30.0
million and a term loan facility of $28.0 million, (ii) the Second Lien
Credit Agreement with Ableco, which provides for a term loan facility to the
borrowers of $48.0 million, and (iii) the Subordinated Debt Credit
Agreement with Steel Partners,  providing for a term loan of
approximately $31.8 million.  The Subordinated Debt Credit Agreement
amended and restated the Bridge Loan Agreement.




The First
Lien Credit Agreement provides for a revolving credit facility in an aggregate
principal amount not to exceed $30.0 million and a term loan facility to the
Borrowers of $28.0 million.  Borrowings under the First Lien Credit
Agreement bear interest, (A) in the case of base rate loans, at 0.25% above the
Wells Fargo prime rate, (B) in the case of LIBOR rate loans, at rates of 2.00%
or 2.50%, as applicable, above the LIBOR rate, and (C) otherwise, at a rate
equal to the Wells Fargo prime rate minus 0.25%. The revolving and term loans
under the First Lien Credit Agreement bore interest at rates ranging from 6.87%
to 7.58% as of December 31, 2007  Obligations under the First Lien
Credit Agreement are guaranteed by certain of Bairnco’s subsidiaries, and
secured by a first priority lien on all assets of Bairnco and such subsidiaries.
Principal payments for the term loans under the First Lien Credit Agreement are
due in monthly installments of $0.2 million. The scheduled maturity date of the
indebtedness under the First Lien Credit Agreement is July 17,
2012.





The
Second Lien Credit Agreement provides for a term loan facility of $48.0
million.  Borrowings under the Second Lien Credit Agreement bear
interest, in the case of base rate loans, at 3.50% above the rate of interest
publicly announced by JPMorgan Chase Bank in New York, New York as its reference
rate, base rate or prime rate, and, in the case of LIBOR rate loans, at 6.00 %
above the LIBOR rate. The Second Lien Credit Agreement bore interest at 11.2% as
of December 31, 2007. Obligations under the Second Lien Credit Agreement are
guaranteed by Bairnco and certain of its subsidiaries, and secured by a second
priority lien on all of their assets. Principal payments for the term loans
under the Second Lien Credit Agreement are due on the maturity date, which is
July 17, 2012.




The First
Lien Credit Agreement and Second Lien Credit Agreement contain affirmative,
negative, and financial covenants (including, for the applicable periods set
forth therein, permitting TTM EBITDA to be less than $14.0 million to $18.0
million, having a Leverage Ratio of more than 6.74:1.0 to 5.0:1.0, having a
Fixed Charge Coverage Ratio of less than 0.75:1.0 to 1.0:1.0 and making Capital
Expenditures in excess of $9.0 million in any fiscal year, as such terms are
defined therein).




The
Subordinated Debt Credit Agreement with Steel Partners provides for a term loan
facility in the amount of approximately $31.8 million.  All borrowings
under the Subordinated Debt Credit Agreement bear interest at 6.75% above the
rate of interest publicly announced by JPMorgan Chase Bank in New York, New York
as its reference rate, base rate or prime rate. The interest rate under the
Subordinated Debt Credit Agreement as of December 31, 2007 was 14.0%. Principal,
interest and all fees payable under the Subordinated Debt Credit Agreement are
due and payable on the scheduled maturity date, January 17, 2013. Obligations
under the Subordinated Debt Credit Agreement are guaranteed by Bairnco and
certain of its subsidiaries, and secured by a subordinated priority lien on
their assets.  The Subordinated Debt Credit Agreement contains
customary representations, warranties, affirmative and negative covenants,
events of default and indemnification provisions.




H&H
and Bairnco have not been in compliance with certain of their bank covenants and
have been required to obtain waivers from their lenders related to such
covenants.  Upon receipt of such waivers, the Company has been in
compliance.




On
February 14, 2008, Bairnco and certain of its subsidiaries amended the First
Lien Credit Agreement and the Second Lien Credit Agreement to, among other
things, reset the levels of certain financial covenants.  The Second
Lien Credit Agreement was also amended to provide for, among other things, a
limited guaranty by H&H of up to $10 million, secured by a second lien on
all of the assets of H&H pursuant to the terms and conditions of the H&H
Security Agreement and the H&H Guaranty.   In addition, each
of the First Lien Credit Agreement and the Second Lien Credit Agreement was also
amended to, among other things, provide for either (i) the





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Company
to invest $10 million from the proceeds of the rights offering by March 31, 2008
in Bairnco and for such  proceeds to be used to prepay at least $10
million under the Wells Fargo term loan, (ii) Steel Partners to issue a limited
$10 million guaranty, or (iii) a capital or debt infusion of $10 million by
either Steel Partners or WHX into Bairnco, or any combination of the
foregoing.





The
Subordinated Loan Agreement provided for a subordinated term loan of $15 million
from Steel Partners to WHX, which is unsecured at the WHX
level.  Borrowings under the Subordinated Loan Agreement bear
pay-in-kind interest at a rate per annum equal to the prime rate of JP Morgan
Chase plus 7.75%, with a minimum interest rate of 16% per annum and a maximum
interest rate of 19% per annum. The interest rate under the Subordinated Loan
Agreement as of December 31, 2007 was 16.0%. Obligations under the Subordinated
Loan Agreement are guaranteed by Bairnco and certain of its subsidiaries and
secured by a junior lien on the assets of Bairnco and certain of its
subsidiaries and capital stock of certain of Bairnco’s subsidiaries. Principal
and interest due under the Subordinated Loan Agreement matures April
2009.




Approximately
$7.9 million of irrevocable standby letters of credit were outstanding under the
First Lien Credit Agreement, which are not reflected in the accompanying
consolidated financial statements. $2.3 million of the letters of credit
guarantee various insurance activities and $5.6 million represents letters of
credit securing borrowings for the China foreign loan facility. These letters of
credit mature at various dates and have automatic renewal provisions subject to
prior notice of cancellation.





The China
foreign loan facility reflects borrowing by Bairnco’s Chinese facilities through
Bank of America, Shanghai, China, which is secured by US dollar denominated
letters of credit. Interest rates on amounts borrowed under the China foreign
loan facility averaged 5.8% at December 31, 2007.




Mandatorily
Redeemable Preferred Stock




On
October 26, 2005, WHX CS Corp. (“CS”), a wholly-owned subsidiary of the Company,
entered into a Stock Purchase Agreement with Steel. Pursuant to this agreement,
CS sold 1,000 shares of Series A Preferred Stock, par value $0.01 per share (the
“Steel Shares”), to Steel. Steel paid a purchase price of $5,100 per share or an
aggregate purchase price of $5.1 million.  The Steel Shares accrue
dividends at 6.0% ($306,000) per annum. The Steel Shares were required to be
redeemed by CS for $5.1 million plus all accrued and unpaid dividends on October
26, 2006 or, at the sole option of the Board of Directors of CS, on any earlier
date. However, there was no such redemption on that date. The proceeds of the
sale were used by CS to purchase 1,898,337 shares of Cosine Communications,
Inc.





Interest
Cost





Cash
interest paid in 2007 and 2006 was $23.2 million and $11.1million, respectively.
The Company has not capitalized any interest costs in 2007 or 2006. Weighted
average interest rates for the years ended December 31, 2007 and 2006 were
11.86% and 10.79%, respectively.





Note
12- Earnings Per Share





The
computation of basic earnings or loss per common share is based upon the
weighted average number of shares of Common Stock
outstanding.  Diluted earnings per share gives effect to dilutive
potential common shares outstanding during the period.  The Company
has potentially dilutive common share equivalents including warrants and stock
options and other stock-based incentive compensation
arrangements  (See Note 14-Stock-Based Compensation).





No common
share equivalents were dilutive in 2007 or 2006, because the Company reported a
net loss and therefore, any outstanding warrants and stock options would have
had an anti-dilutive effect. As of
December 31, 2007, stock options for an aggregate of 591,000 shares of common
stock, and warrants for an aggregate of 753,155 shares of common stock are
excluded from the calculation of net loss per share.




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




Year
      ended December 31, 2007Income
      (loss)
              
              Shares
              
              Per-Share(Numerator)
              
              (Denominator)
              
              Amount(Dollars
      and shares in thousands)Net
      loss
              
              $
              (20,771
              )Basic
      EPS and Diluted EPSLoss
      applicable to common stockholders
              
              $
              (20,771
              )
              10,000
              
              $
              (2.08
              )


Year
      ended December 31, 2006Income
      (loss)
              
              Shares
              
              Per-Share(Numerator)
              
              (Denominator)
              
              Amount(Dollars
      and shares in thousands)Net
      loss
              
              $
              (18,150
              )Basic
      EPS and Diluted EPSLoss
      applicable to common stockholders
              
              $
              (18,150
              )
              10,000
              
              $
              (1.82
              )




Note
13 - Stockholders' (Deficit) Equity





The
authorized capital stock of WHX consisted of 40,000,000 shares of Common Stock,
$0.01 par value, and 5,000,000 shares of Preferred Stock as of December 31,
2006. A proposal to increase authorized Common Stock from 40,000,000 shares to
50,000,000 shares was approved by the Company’s stockholders in June
2007.   On January 31, 2008, WHX’s stockholders approved a
proposal to further increase the Company’s authorized capital stock to a total
of 100,000,000 shares, consisting of 95,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock.




Of the
authorized shares, no shares of Preferred Stock have been issued, and 10,000,498
shares of Common Stock were issued and outstanding as of December 31, 2007 and
2006.





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








Warrants




As part
of the Plan of Reorganization, on July 29, 2005 in exchange for the
extinguishment and cancellation of their stock, the Series A preferred
stockholders and Series B preferred stockholders received their pro rata share
of 800,000 shares of the new common stock of the reorganized WHX and their pro
rata share of 752,688 warrants to purchase common stock of the reorganized
company, exercisable at $11.20 per share.  The warrants expired
February 28, 2008.  As of the Effective Date, the warrants were valued
at $1.3 million using the Black-Scholes valuation method at $1.71 per
warrant.




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Accumulated
Other Comprehensive Income (Loss)





Accumulated
other comprehensive income (loss) balances as of December 31, 2007 and 2006 were
comprised as follows:





2007
              
              
              2006(in
      thousands)Net
      actuarial losses and prior service costs andcredits
      (net of tax of $5,262)
              
              $
              (38,378
              )
              
              $
              (50,525
              )Foreign
      currency translation adjustment
              
              
              5,819
              
              
              
              3,190$
              (32,559
              )
              
              $
              (47,335
              )




Note
14- Stock-Based Compensation





Stock-based
compensation expense is recorded based on the grant-date fair value estimated in
accordance with the provisions of Revised SFAS No. 123, “Accounting for
Stock-Based Compensation,” (“SFAS 123(R)”). The Company measures stock-based
compensation cost at the grant date, based on the fair value of the award, and
recognizes the expense on a straight-line basis over the employee’s requisite
service (vesting) period.





The
Company had agreed to grant stock options upon adoption of a stock option plan
by the Board of Directors and registration thereof with the SEC, or in lieu
thereof, phantom stock options or equivalent other consideration (at the sole
discretion of the Company), to various officers and employees of the Company, on
or as of the following effective dates (in the case of December 31, 2006, on or
before) and in the following respective amounts, with strike prices or
equivalent values as if granted on the dates set forth:




June
      30, 2006
              25,000
              sharesSeptember
      30, 2006
              130,000
              sharesDecember
      31, 2006
              205,000
              sharesSeptember
      30, 2007
              60,000
              shares


The
trading price per share of the Company's common stock as of June 30, 2006 and
September 30, 2006 was $9.20 and $9.00, respectively and as of December 31, 2006
the trading price was $8.45 per share.





At the
Company's Annual Meeting of Shareholders on June 21, 2007, the Company's
shareholders approved a proposal to adopt WHX Corporation’s 2007 Incentive Stock
Plan (the “2007 Plan”), and reserved 800,000 shares of common stock under the
2007 Plan. The 2007 Plan permits options to be granted up to a maximum
contractual term of 10 years.  On July 6, 2007, stock options for an
aggregate of 620,000 shares of common stock were granted under the 2007 Plan to
employees and to two outside directors of the Company, at an exercise price of
$9.00 per share.    The options are exercisable in
installments as follows: half of the options granted were exercisable
immediately, one-quarter of the options granted become exercisable on July 6,
2008 and the balance become exercisable on July 6, 2009. The options will expire
on July 6, 2015.





The
Company satisfied the obligation for the phantom stock options by granting
actual stock options to various members of management on July 6,
2007.





The
Company estimated the fair value of the stock options in accordance with SFAS
No.123(R) using a Black-Scholes option-pricing model.  The expected average
risk-free rate is based on U.S. treasury yield curve. The expected average life
represents the period of time that options granted are expected to be
outstanding.  Expected volatility is based on historical volatilities
of WHX’s post-bankruptcy common stock. The expected dividend yield is based on
historical information and management’s plan.





Assumptions
              2007Risk-free interest rate
              5.08%Expected dividend yield
              0.00%Expected life (in years)
              4.5
      yearsVolatility
              49.1%Forfeiture rate
              3.0%





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The
Company has recorded $1.4 million of non-cash stock-based compensation expense
related to these stock options in 2007.





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





Options
              
              Shares
      (000's)
              
              
              Weighted-Average
      Exercise Price
              
              
              Weighted-Average
      Remaining Contractual Term (Years)
              
              
              Aggregate
      Intrinsic Value (000)Outstanding
      at January 1, 2007
              
              
              -Granted
              
              
              620
              
              
              $
              9.00
              
              
              
              
              
              
              -Exercised
              
              
              -
              
              
              $
              -
              
              
              
              
              
              
              -Forfeited
      or expired
              
              
              (29
              )
              
              $
              9.00
              
              
              
              
              
              
              -Outstanding
      at December 31, 2007
              
              
              591
              
              
              $
              9.00
              
              
              
              7.52
              
              
              
              -Exercisable
      at December 31, 2007
              
              
              296
              
              
              $
              9.00
              
              
              
              7.52
              
              
              
              -




The
weighted average grant-date fair value of options granted during the year was
$3.78 per share.







Nonvested
      Shares
              
              Shares
      (000's)
              
              
              Fair
      ValueNonvested
      at January 1, 2007
              
              
              -Granted
              
              
              620
              
              
              $
              3.78Vested
              
              
              310
              
              
              $
              3.78Forfeited
              
              
              (14
              )
              
              $
              3.78Nonvested
      at December 31, 2007
              
              
              296
              
              
              $
              3.78




As of
December 31, 2007 there was $0.8 million of total unrecognized compensation cost
related to non-vested share based compensation arrangements granted under the
2007 Plan. That cost is expected to be recognized over a weighted-average period
of 1.52 years. The total fair value of shares vested as of December 31, 2007 was
$1.2 million.





On July
6, 2007, the Compensation Committee of the Board of Directors of the Company
adopted incentive arrangements for two members of the Board of Directors who are
related parties to the Company. These arrangements provide, among other things,
for each to receive a bonus equal to 100,000 multiplied by the difference of the
fair market value of the Company’s stock price and $9.00 per share.  The
bonus is payable upon the sending of a notice by either board member,
respectively.  The notice can be sent with respect to one-half the bonus
immediately, with respect to one quarter, at any time after July 6, 2008 and
with respect to the remainder, at any time after July 6, 2009.  The
incentive arrangements terminate July 6, 2015, to the extent not previously
received. Under SFAS 123(R), the Company is required to adjust its obligation
for the fair value of such incentive arrangements from the date of actual grant
to the latest balance sheet date and to record such incentive arrangements as
liabilities in the consolidated balance sheet. The Company has recorded $0.2
million of non-cash compensation expense related to these incentive arrangements
in 2007.





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Note
15- Commitments and Contingencies





Operating Lease
Commitments:





The
Company leases certain facilities under non-cancelable operating lease
arrangements.  Rent expense for the Company in 2007 and 2006 was $5.9
million and $2.8 million, respectively.  Future minimum operating
lease and rental commitments under non-cancelable operating leases are as
follows (in thousands):





Year
              
              Amount2008
              
              $
              5,9352009
              
              
              4,5202010
              
              
              3,4962011
              
              
              3,0802012
              
              
              2,7242013
      and thereafter
              
              
              994$
              20,749





Legal Matters:





Sumco Inc. v. Underwriters
at Lloyd’s, London, Lexington Insurance Company, Hartford Fire Insurance
Company, and Wurttembergische Versicherung AG





On July
7, 2004, Sumco Inc. (“Sumco”), a wholly-owned subsidiary of H&H, filed suit
in the Marion County Superior Court of Indiana against certain underwriters
affiliated with Lloyd’s, London, Lexington Insurance Company, Hartford Fire
Insurance Company, and Wurttembergische Versicherung AG (the
defendants).  Sumco sought to recover monies from these insurance
carriers for losses incurred as a result of a January 20, 2002 fire at its metal
plating facility in Indianapolis, Indiana.  At the time of the fire,
Sumco’s parent corporation, WHX, had in place layered fire insurance policies
with combined limits of $25 million and a deductible of $100,000.  The
defendants represent carriers who provided $15 million in insurance coverage in
excess of two underlying policies of $5 million each.  Defendants had
previously paid $5 million in claims.  Sumco contended that its losses
were in excess of the policy limits, defendants acted in bad faith, and that it
was entitled to the payment of the remaining approximate $10 million in
insurance coverage provided by the defendants.  The parties settled
their claims in May 2007 for an aggregate payment to WHX of $5,689,276 from the
defendants (which proceeds were paid to Steel Partners in partial satisfaction
of its loan), and an assignment to WHX of defendants’ interest in an
interest-bearing escrow account with approximately $1.7 million in proceeds
resulting from the settlement of subrogation claims against various third
parties.  On August 29, 2007, Sumco filed a Declaratory Judgment
action in the Marion County Superior Court of Indiana against Royal Indemnity
Company and U.S. Fire Insurance Company, requesting a declaration that Sumco is
entitled to the funds in the escrow account.  Steel Partners has a
first lien on any additional proceeds recovered.  In December 2007,
the defendants agreed to a partial disbursement of the escrow funds, pursuant to
which the Company received approximately $849,000.  Sumco continues to
seek the balance of the escrow funds.




HH East Parcel,
LLC.  V. Handy & Harman




This
action arises out of a purchase and sale agreement entered into in 2003 whereby
H&H agreed to sell a portion of a commercial site in Connecticut (“Sold
Parcel”) to HH East Parcel, LLC (“HH East”).  On or about April 5,
2005, HH East filed a Demand for Arbitration with the American Arbitration
Association seeking legal and equitable relief including completion of the
remediation of environmental conditions at the site in accordance with the terms
of the agreement.  An arbitration hearing was held in October 2005 in
Connecticut, pursuant to which HH East was awarded, among other things, an
amount equal to $5,000 per day from January 1, 2005 through the date on which
remediation is completed.  This award amounts to approximately $4.0
million through the completion date of April 6, 2007.  H&H applied
to the Connecticut Superior Court to have the arbitration award
vacated.  On June 26, 2006, the court issued a decision denying
H&H’s application and granting HH East’s motion to confirm the arbitration
award.  H&H appealed that decision.  Oral argument on
H&H’s appeal took place before the Connecticut Supreme Court in February
2008.  On March 28, 2008, the Supreme Court requested that the parties
submit supplemental briefs no later than April 9, 2008.  The Court is
expected to issue its ruling on the appeal between approximately April and June
2008.




On May
22, 2007, HH East served an Order for a Prejudgment Attachment in the amount of
approximately $3.5 million, issued by the Superior Court, Stamford, Connecticut
in December 2006, against certain Connecticut property of H&H and against
certain bank accounts maintained by H&H at banks in New
York.  H&H has brought proceedings in the Superior Court,
Stamford, Connecticut, and in the Supreme Court, State of New York, to oppose
the attachment of such bank accounts and to have it lifted.  The New
York proceeding has been discontinued.  The Connecticut proceeding is
pending.  The parties have engaged from time to time in settlement
discussions
to resolve the open issues and proceedings between them. On June 14, 2007, HH
East temporarily withdrew its attachment/garnishment against certain bank
accounts of H&H after the posting of other satisfactory collateral by
H&H and while settlement discussions were continuing.  On June 29,
2007, and again on several other dates, HH East re-served the Order against
various bank accounts of H&H.







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H&H
has been working cooperatively with the Connecticut Department of Environmental
Protection (“CTDEP”) with respect to its obligations under a consent order
entered into in 1989 that applies to both parcels of the commercial
site.  H&H has been conducting an investigation of the remaining
parcel, and is continuing the process of evaluating various options for its
remediation.  The sale of the Sold Parcel, which is the subject of the
above-referenced litigation, triggered statutory obligations under Connecticut
law to investigate and remediate pollution at or emanating from Sold
Parcel.  Remediation of all soil conditions on site was completed on
April 6, 2007, although H&H has since performed limited additional work on
site, solely in furtherance of ongoing settlement discussions between the
parties.  Although no groundwater remediation is required, there will
be monitoring of same for several years.  Approximately $28.9 million
had been expended through December 31, 2007, and the remaining remediation and
monitoring costs are expected to approximate $0.3 million.  H&H
received reimbursement of $2.0 million from its carrier under a cost-cap
insurance policy and is pursuing its potential entitlement to additional
coverage.




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




Two
former officers of H&H filed a Statement of Claim with the American
Arbitration Association (“Arbitration”) on or about January 3,
2006.  The Claimants were employees of H&H until September 2005,
when their employment was terminated by H&H.  Their claims
included seeking payments allegedly due under employment contracts and allegedly
arising from their terminations, and seeking recovery of benefits under what
they allege was the Handy & Harman Supplemental Executive Retirement
Plan.




In the
Arbitration, Claimants sought an award in excess of $4 million each, plus
interest, costs and attorneys’ fees.  Claimants also sought
indemnification for certain matters and an injunction against H&H with
regard to life insurance policies.  H&H brought a special
proceeding on February 15, 2006 in the Supreme Court of the State of New York,
County of Westchester, for a judgment staying the arbitration of three of the
four claims.  On March 10, 2006, all of the parties filed a
stipulation with the court, discontinuing the court proceeding and agreeing
therein, among other things, that all claims asserted by the Claimants in the
Arbitration (which was also discontinued at that time) would be asserted in
Supreme Court, Westchester County.




In April
2006, Claimants served a request for benefits, severance and other amounts,
similar to those described above, on H&H and various plan administrators and
fiduciaries thereof.  The request was reviewed in accordance with the
procedures of the plans at issue and by letter dated September 27, 2006,
claimants were notified that their request was largely denied.  They
filed an appeal on December 11, 2006 with the Plan Administrator, which appeal
was denied on February 9, 2007.




In
January 2008, Kelly filed a lawsuit against WHX Corporation, Handy & Harman
and various benefit plans in the United States District Court for the Southern
District of New York.  Dixon did not join in this lawsuit, and his
counsel has not indicated whether Dixon intends to file his own
lawsuit.  Kelly’s claims in this lawsuit are essentially the same
claims that he asserted in the above-described arbitration and request for
benefits.  Kelly’s Complaint seeks approximately $4.0 million in money
damages plus unspecified punitive damages.  The defendants are
vigorously defending this lawsuit.  Nevertheless, there can be no
assurance that the defendants will be successful in defending against Kelly’s
claims, or that the defendants will not have any liability on account of Kelly’s
claims.  Such liability, if any, cannot be reasonably estimated at
this time, and accordingly, there can be no assurance that the resolution of
this matter will not be material to the financial position, results of
operations and cash flow of the Company.




Arista Development LLC V.
Handy & Harman Electronic Materials Corporation




In 2004,
a subsidiary of H&H, HHEM, entered into an agreement to sell a
commercial/industrial property in Massachusetts.  Disputes between the
parties led to suit being brought in Bristol Superior Court in
Massachusetts.  The plaintiff alleges that HHEM is liable for breach
of contract relating to HHEM’s alleged breach of the agreement, unfair and
deceptive acts and practices, and certain consequential and treble damages as a
result of HHEM’s termination of the agreement in 2005, although HHEM
subsequently revoked its notice of termination.  HHEM has denied
liability and has been vigorously defending the case.  The court
entered a preliminary injunction enjoining HHEM from conveying the property to
anyone other than the plaintiff during the pendency of the
case.  Discovery on liability and damages has been in abeyance while
the parties are actively engaged in settlement discussions. Since discovery is
not completed, it cannot be known at this time whether it is foreseeable or
probable that plaintiff would prevail in the litigation or whether H&H would
have any liability to the plaintiff.







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Environmental
Matters
  In
connection with the Sold Parcel, the Company was responsible for demolition and
environmental remediation of the site, the estimated cost of which was included
in the loss on sale recorded in 2003.  In 2004, H&H determined
that an increase in the reserve for




H&H
entered into an administrative consent order (the “ACO”) in 1986 with the New
Jersey Department of Environmental Protection (“NJDEP”) with regard to certain
property that it purchased in 1984 in New Jersey.  The ACO involves
investigation and remediation activities to be performed with regard to soil and
groundwater contamination.  H&H settled a case brought by the
local municipality in regard to this site in 1998 and also settled with certain
of its insurance carriers.  H&H is actively remediating the
property and continuing to investigate the most effective methods for achieving
compliance with the ACO.  A remedial investigation report was filed
with the NJDEP in December of 2007.  Once the investigation has been
completed, it will be followed by a feasibility study and a remedial action work
plan that will be submitted to NJDEP.  H&H anticipates entering
into discussions in the near future with NJDEP to address that agency’s natural
resource damage claims, the ultimate scope and cost of which cannot be estimated
at this time.  The ongoing cost of remediation is presently estimated
at approximately $750,000.  Pursuant to a settlement agreement with
the former owner/operator of the site, the responsibility for site investigation
and remediation costs are allocated 75% to the former owner/operator and 25% to
H&H after the first $1 million.  The $1 million was paid solely by
the former owner/operator.  To date, over and above the $1 million,
total investigation and remediation costs of $731,000 and $244,000 have been
expended by the former owner/operator and H&H, respectively, in accordance
with the settlement agreement.  Additionally, H&H is currently
being reimbursed through insurance coverage for a portion of the investigation
and remediation costs for which the company is responsible.  H&H
believes that there is additional excess insurance coverage which it intends to
pursue as necessary.




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




In a case
entitled Agere Systems, Inc., et al. v. Advanced Environmental Technology Corp.,
et al. (U.S. District Court, EDPA), five companies, all of which are PRPs for
the Boarhead Farm site in Bucks County, Pennsylvania, brought CERCLA
contribution and similar claims under Pennsylvania’s environmental laws against
a number of companies in 2002.  A subsidiary of H&H, H&H Tube,
is one of the defendants that the plaintiffs claim contributed to the
contamination of the Boarhead Farm site.  A number of the plaintiffs
have entered into consent decrees with the EPA regarding the remediation of
groundwater and soil contamination at the Boarhead Farm site.  In
addition, plaintiffs have settled with a number of the
defendants.  There are currently six non-settling defendants,
including H&H Tube, against which the plaintiffs are pursuing their
claims.  Fact and expert discovery has been
concluded.  H&H Tube filed a motion for summary judgment in July
2007 seeking a dismissal of all claims against H&H Tube.  The
court denied that motion. Plaintiffs were granted to leave to file a fifth
amended complaint which adds a claim against the non-settling defendants for
joint and several liability  The plaintiffs have already made
substantial payments to the EPA in past response costs and have themselves
incurred costs for groundwater and soil remediation.  Remediation is
continuing.  Plaintiffs are seeking reimbursement of a portion of
amounts incurred and an allocation of future amounts from H&H Tube and the
other non-settling defendants.  Based upon expert testimony in the
litigation, H&H Tube’s  responsibility for this site, if any,
should be minimal.  This matter is expected to go to trial in late
Spring or early Summer of 2008.  It is not possible to accurately
estimate the cost of remediation or H&H Tube’s share, if any, of the
liability at this time.  In December 2007, H&H Tube and H&H
filed a lawsuit against The Chubb Group of Insurance Companies and several
related entities seeking a declaration that the defendants are obligated to
defend and indemnify H&H Tube with respect to the Boarhead Farm
lawsuit.  The parties are currently engaged in settlement
discussions.




H&H
received a notice letter from the EPA in August 2006 formally naming H&H as
a PRP at a superfund landfill site in Massachusetts (the “Superfund
site”).  H&H then voluntarily joined a group of ten (10) other
PRPs (which group has since increased to thirteen (13)) to work cooperatively
regarding remediation of this site.  Investigative work is ongoing to
determine whether there are other parties that sent hazardous substances to the
Superfund site but that have not received notice letters or been named as PRPs
to date.  The PRP group submitted its good faith offer to the EPA in
late October 2006.  The offer is contingent on the group arriving at
an acceptable allocation amongst the PRPs.  All of the PRPs have
reached proposed allocations as to percentages of responsibility for
investigation and remediation costs at the Superfund site.  It is
anticipated that there will be a “shortfall” in the overall allocation that will
then be shared, on a pro rata basis, among all of the participating
PRPs.  The EPA has currently agreed to an orphan share for the past
response costs incurred through September 30, 2007 and the PRPs continue to
negotiate with the EPA to have all future response and oversight costs included
in the orphan share.  The EPA seeks to have the consent decree lodged
as soon as practicable.  The consent decree will then be subject to a
public comment period of no less than 30 days.  After the expiration
of the 30 days (or such other time period), the court, in its discretion, can
enter the consent decree.  There are some PRPs who have not
participated to date in the consent decree negotiations and allocation







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process.  Any
non-participating PRPs may be sued later under CERCLA.  That is a
decision that will be made in the future by the participating
PRPs.  It is anticipated that PRP remedial activities at the site will
not begin until 2009.  The remediation of a significant amount of the
contamination at the site is the responsibility of the Department of Energy
(“DOE”).  That remediation is being accomplished by the U.S. Army
Corps of Engineers (the “ACOE”).  The DOE portion of the work has
begun but is not expected to be completed until 2009, at which time the
remaining work will be more clearly defined.  The ACOE recently
informed one of the radiological PRPs that it will seek contribution from that
PRP for the portion of the remediation performed by the ACOE.  The
radiological PRP in turn wishes to preserve its rights to sue the chemical PRPs
in the event any portion of the ACOE's claim relates to chemical
waste.  The PRPs are currently investigating the nature of the ACOE's
potential claim to determine if there is any realistic potential that the ACOE's
claim can legally or factually result in a contribution claim against the
chemical PRPs.  The Company has recorded a reserve of $3.6 million in
connection with this matter.




H&H
is continuing to comply with a 1987 consent order from the Massachusetts
Department of Environmental Protection (“MADEP”) to investigate and remediate
the soil and groundwater conditions at the property that is the subject of the
Arista Development litigation discussed above.  H&H is in
discussions with the EPA, the MADEP and the plaintiff in the Arista case in
connection with the remedial activities.  In addition, H&H has
engaged in discussions or received comments regarding its remedial plans from
abutters.  Discussions with some abutters are ongoing and, although no
formal claims have been asserted, it is possible that claims will be
asserted.  Since discussions regarding these matters are not complete
and since no claims have been asserted, it cannot be known what, if any,
liability H&H will have with respect to the abutters.




As
discussed above, H&H and Bairnco have existing and contingent liabilities
relating to environmental matters, including capital expenditures, costs of
remediation and potential fines and penalties relating to possible violations of
national and state environmental laws.  H&H and Bairnco have
substantial remediation expenses on an ongoing basis, although such costs are
continually being readjusted based upon the emergence of new techniques and
alternative methods.  In addition, WHX has insurance coverage
available for several of these matters.  The
Company has accrued $7.8 million related to estimated environmental remediation
costs as of December 31, 2007.Based upon information currently
available, including H&H and Bairnco’s prior capital expenditures,
anticipated capital expenditures, and information available to H&H and
Bairnco on pending judicial and administrative proceedings, H&H and Bairnco
do not expect their respective environmental compliance costs, including the
incurrence of additional fines and penalties, if any, relating to the operation
of their respective facilities to have a material adverse effect on their
financial position, but there can be no such assurances.  Such costs
could be material to H&H and Bairnco’s results of operations and cash
flows.  We anticipate that H&H and Bairnco will pay such amounts
out of their respective working capital, although there is no assurance that
H&H and Bairnco will have sufficient funds to pay such
amounts.  In the event that H&H and Bairnco are unable to fund
these liabilities, claims could be made against WHX for payment of such
liabilities.  As further information comes into the Company’s
possession, it will continue to reassess such evaluations.




Other
Litigation




We or
certain of our subsidiaries are a defendant in numerous cases pending in a
variety of jurisdictions relating to welding emissions.  Generally,
the factual underpinning of the plaintiffs’ claims is that the use of welding
products for their ordinary and intended purposes in the welding process causes
emissions of fumes that contain manganese, which is toxic to the human central
nervous system.  The plaintiffs assert that they were over-exposed to
welding fumes emitted by welding products manufactured and supplied by us and
other co-defendants. We have various levels of exposure in the different cases,
from being the primary or sole defendant to being one of many
defendants.  We deny liability and are defending these actions. The
first of such cases is scheduled for trial in June 2008.  It is not
possible to reasonably estimate our exposure or share, if any, of the liability
at this time.




In
addition to the foregoing cases, there are a number of other product liability,
exposure, accident, casualty and other claims against us or certain of our
subsidiaries in connection with a variety of products sold by our subsidiaries
over several years, as well as litigation related to employment matters,
contract matters, sales and purchase transactions and general liability claims,
many of which arise in the ordinary course of business.  It is not
possible to reasonably estimate our exposure or share, if any, of the liability
at this time.




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




Pension
Plan Contingency Arising from the WPC Group Bankruptcy




Wheeling-Pittsburgh
Corporation (“WPC”) and six of its subsidiaries (collectively referred to as the
"WPC Group"), including Wheeling-Pittsburgh Steel Corporation (“WPSC”), a
vertically integrated manufacturer of value-added and flat rolled steel
products, was a wholly owned subsidiary of WHX.  On November 16, 2000,
the WPC Group filed a petition seeking reorganization under Chapter 11 of Title
11 of the United States Bankruptcy Code.  A Chapter 11 Plan of
Reorganization for the WPC Group (the "WPC POR") was consummated on August 1,
2003, pursuant to which, among other things, the WPC Group ceased to be a
subsidiary of WHX effective August 1, 2003, and from that date forward has been
an independent company.





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As part
of the WPC POR, the Company agreed to make certain contributions (the “WHX
Contributions”) to the reorganized company. Under the WHX Contributions, the
Company forgave the repayment of its claims against the WPC Group of
approximately $39.0 million and, additionally, contributed to the reorganized
company $20.0 million of cash, for which the Company received a note in the
amount of $10.0 million.  The note was fully reserved upon
receipt.




On March
6, 2003, the PBGC published its Notice of Determination (“Notice”) and on March
7, 2003 filed a Summons and Complaint (“Complaint”) in United States District
Court for the Southern District of New York seeking the involuntary termination
of the WHX Pension Plan (the “WHX Plan”), a defined benefit pension plan
sponsored by the Company that provides pension benefits to active and retired
employees of WHX and H&H and certain benefits to active and retired
employees of members of the WPC Group. WHX filed an answer to this complaint on
March 27, 2003, contesting the PBGC’s action.  On July 24, 2003, the
Company entered into an agreement among the PBGC, WPC, WPSC, and the United
Steelworkers of America, AFL-CIO-CLC (“USWA”) in settlement of matters relating
to the PBGC v. WHX
Corporation, Civil Action No. 03-CV-1553, in the United States District
Court for the Southern District of New York (“Termination Litigation”), in which
the PBGC was seeking to terminate the WHX Plan.  Under the settlement,
among other things, WHX agreed (a) that the WHX  Plan, as it is
currently constituted, is a single employer pension plan, (b) to contribute
funds to the WHX Plan equal to moneys spent (if any) by WHX or its affiliates to
purchase WHX 10.5% Senior Notes (“Senior Notes”) in future open market
transactions, and (c) to grant to the PBGC a pari passu security interest of up
to $50.0 million in the event WHX obtains any future financing on a secured
basis or provides any security or collateral for the Senior Notes.




Also
under the settlement, all parties agreed  that as of the effective
date of the WPC POR, (a) no shutdowns had occurred at any WPC Group facility,
(b) no member of the WPC Group is a  participating employer under the
WHX Plan, (c) continuous service for WPC Group employees was  broken,
(d) no WPC Group employees will become entitled to “Rule of 65” or “70/80”
Retirement Benefits (collectively, “Shutdown Benefits”) by reason of events
occurring after the effective date of the WPC POR, and (e) the WHX Plan would
provide for a limited early retirement option to allow up to 650 WPSC
USWA-represented employees the right to receive retirement benefits based on the
employee’s years of service as of July 31, 2003 with a  monthly
benefit equal to $40 multiplied by the employee’s years of service.





Finally,
under the settlement, the PBGC agreed (a) that, after the effective date of the
WPC POR, if it terminates the WHX Plan at least one day prior to a WPC Group
facility shutdown, WHX shall be released from any additional liability to PBGC
resulting from the shutdown, (b) to withdraw its claims in the WPC Bankruptcy
Proceedings, and (c) to dismiss the Termination Litigation.





The
agreement with the PBGC also contains the provision that WHX will not contest a
future action by the PBGC to terminate the WHX Plan in connection with a future
WPC Group facility shutdown. In the event that such a plan termination occurs,
the PBGC has agreed to release WHX from any claims relating to the shutdown.
However, there may be PBGC claims related to unfunded liabilities that may exist
as a result of a termination of the WHX Plan.





Note
16 - Related Party Transactions





Steel
Partners is the beneficial holder of 5,029,793 shares of the Company’s common
stock, representing approximately 50.3% of the outstanding shares.  On
September 8, 2005, H&H completed the assignment of its approximately $70.6
million Term B Loan from Canpartners, to Steel Partners, as agent and lender.
Substantially all of the terms and conditions of the Term B Loan continued
without amendment. During 2007, in connection with the Bairnco Acquisition,
Steel Partners entered into the Subordinated Loan Agreement with WHX and the
Subordinated Debt Credit Agreement with Bairnco.  (See Note
11).  As of December 31, 2007, $18.9 million of accrued interest was
owed to Steel Partners.  Interest is not expected to be paid in cash
to Steel pursuant to the terms of a Subordination Agreement between Steel and
Wachovia.  Mr. Warren Lichtenstein, the sole executive officer and
managing member of Steel Partners, L.L.C., the general partner of Steel
Partners, is the Chairman of the Board of the Company.





Mr. Glen
Kassan, an Executive Vice President with Steel Partners, was appointed Chief
Executive Officer of WHX on October 7, 2005.  In 2006, the
Compensation Committee approved a salary of $600,000 per annum for Mr. Kassan,
effective January 1, 2006.





On
October 26, 2005, WHX CS Corp. (“CS”), a wholly-owned subsidiary of the Company,
entered into a Stock Purchase Agreement with Steel Partners.  Pursuant
to that agreement, CS sold 1,000 shares of Series A Preferred Stock, par value
$0.01 per share (the “Steel Shares”) to Steel Partners.  Steel
Partners paid a purchase price of $5,100 per share or an aggregate purchase
price of $5.1 million.  The Steel Shares accrue dividends at 6.0%
($306,000) per annum. The Steel Shares were required to be redeemed by CS for
$5.1 million plus all accrued and unpaid dividends on October 26, 2006 or, at
the sole option of the Board of Directors of CS, on any earlier date. However,
there was no such redemption on that date. The proceeds of this sale were used
by CS to purchase 1,898,337 shares of CoSine Communications, Inc.  As
of December 31, 2007, $0.7 million was due to Steel Partners for accrued
dividends on the Steel Shares.





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The
Company had two investments accounted for under the equity method: 18.8%
ownership of the outstanding common stock of CoSine Communications Inc. (CoSine)
and 50% of the outstanding common stock of H&H Mfg.
(Singapore).  These investments are presented in other non–current
assets.  The Company accounts for CoSine under the equity method
because a related party (Steel Partners) owns an additional 30% of the
outstanding common stock and indirectly has the ability to exercise
control.  The investment balance of CoSine Communications at December
31, 2007 was $4.3 million and as of December 31, 2006, was $4.2
million.  As of December 31, 2006, the Company wrote down the carrying
value of its investment in CoSine by $0.8 million to equal 18.8% of the net
assets of CoSine as of that date. At December 31, 2007 CoSine had total assets
of $23.2 million, including cash, cash equivalents, and short term investments
of $23.1 million, current liabilities of $0.3 million and stockholders’ equity
of $22.9 million.  CoSine reported net income of $0.4 million for the
year ended December 31, 2007.  The market value of the Company’s
investment in CoSine as of December 31, 2007 was $4.3 million. During 2006, the
Company sold its investment in H&H Mfg. (Singapore) for proceeds of $0.6
million in cash and settlement of intercompany liabilities, and recorded a gain
on the sale of $0.2 million.





On July
6, 2007, the Compensation Committee of the Board of Directors of the Company
adopted incentive arrangements for Mr. Kassan and Mr. Lichtenstein. These
arrangements provide, among other things, for each to receive a bonus equal to
100,000 multiplied by the difference of the fair market value of the Company’s
stock price and $9.00 per share.  The bonus is payable upon the sending of
a notice by either Mr. Kassan or Mr. Lichtenstein, respectively.  The
notice can be sent with respect to one-half the bonus immediately, with respect
to one quarter, at any time after July 6, 2008 and with respect to the
remainder, at any time after July 6, 2009.  The incentive arrangements
terminate July 6, 2015, to the extent not previously received. Under SFAS
123(R), the Company is required to adjust its obligation for the fair value of
such incentive arrangements from the date of actual grant to the latest balance
sheet date and to record such incentive arrangements as liabilities in the
consolidated balance sheet. The Company has recorded $0.2 million of non-cash
compensation expense related to these incentive arrangements for
2007.





On
October 18, 2007, WHX filed a registration statement on Form S-1 with the
Securities and Exchange Commission (“SEC”) for a rights offering to its existing
stockholders, and subsequently filed Amendments thereto dated November 30, 2007
and December 21, 2007.  The rights offering will be made through the
distribution of non-transferable subscription rights to purchase shares of the
Company’s common stock, par value $0.01 per share, at a subscription price to be
determined.  Assuming the rights offering is fully subscribed, WHX
could receive gross proceeds of approximately $200 million, less expenses of the
rights offering.





The
rights offering includes an oversubscription privilege which permits each rights
holder, that exercises its rights in full, to purchase additional shares of
common stock that remain unsubscribed at the expiration of the
offering.  This oversubscription privilege is subject to (i) the
availability and allocation of shares among persons exercising this
oversubscription privilege and (ii) a maximum number of shares for which
stockholders can oversubscribe for without endangering the availability of the
Company’s NOLs under Section 382 of the Internal Revenue Code, in each case as
further described in the rights offering documents.





Steel
Partners has indicated that it intends to exercise all of its rights and to
oversubscribe for the maximum number of shares it can oversubscribe for without
(i) endangering the availability of WHX’s NOLs or (ii) increasing its ownership
to in excess of 75% of the outstanding shares of WHX’s common
stock.





A
registration statement relating to these securities has been filed with the SEC
but has not yet become effective. The purpose of this rights offering is to
raise equity capital in a cost-effective manner that gives all WHX’s
stockholders the opportunity to participate.  The net proceeds will be
used to (i) make partial payments to certain senior lenders to certain
wholly-owned subsidiaries of WHX and/or to contribute to the working capital of
such subsidiaries, (ii) redeem preferred stock which is held by Steel Partners,
and was issued by a wholly-owned subsidiary of WHX, (iii) to purchase shares of
common stock of CoSine Communications, Inc. from Steel Partners, (iv) to repay
WHX indebtedness to Steel Partners, and (v) to repay indebtedness
of  wholly-owned subsidiaries of WHX to Steel Partners.





WHX has
an agreement in principle with Steel Partners to acquire 2,631,384 shares of
common stock of CoSine Communications, Inc. for an aggregate purchase price of
approximately $5.9 million.  The transaction is anticipated to close
immediately following the closing of the rights offering discussed
above.




The
former Chairman of the Board of the Company, Mr. Ronald Labow, is the president
and sole shareholder of WPN Corp. (“WPN”).  On February 1, 2004, WPN
entered into an Investment Consulting Agreement with the Company on behalf of
the WHX Pension Plan Trust pursuant to which WPN would manage the assets of the
WHX Pension Plan Trust.  Under the Agreement, WPN is paid by the WHX
Pension Plan Trust 0.525% per year of the amount of the assets under management.
The WHX Pension Plan Trust Agreement was negotiated by a board committee
composed of independent directors, which committee recommended the approval of
such Investment Consulting Agreement to the full board, which approved such
agreement.





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Note 17 - Other Income (Expense)


Year
      Ended December 31,2007
              
              
              2006(in
      thousands)Interest
      and investment income
              
              $
              6
              
              
              $
              39Equity
      income in affiliated companies
              
              
              65
              
              
              
              163Foreign
      currency transaction loss
              
              
              (392
              )
              
              
              (376
              )Investment
      loss - CoSine
              
              
              -
              
              
              
              (820
              )Gain
      on sale of H&H Mfg.Singapore
              
              
              -
              
              
              
              187Other,
      net
              
              
              49
              
              
              
              (27
              )$
              (272
              )
              
              $
              (834
              )





Note
18 - Reportable Segments





WHX is a
holding company that invests in and manages a group of businesses on a
decentralized basis.  WHX owns H&H, which is a diversified
manufacturing company whose strategic business units encompass three reportable
segments: Precious Metal, Tubing, and Engineered Materials. In April 2007, WHX
acquired Bairnco, which operates business units in three reportable
segments:  Arlon EM, Arlon CM and Kasco.  H&H
and Bairnco principally operate in North America.




The
Company has six reportable segments:





(1)
            Precious
      Metal. This segment is engaged in the fabrication of precious metal and
      their alloys into brazing alloys and the utilization of precious metal in
      precision electroplating. The Company’s brazing alloys are used to join
      most common metals as well as specialty metals with strong, hermetic
      joints.  The Company offers a wide variety of these metal
      joining products, including gold, silver, palladium, copper, nickel, and
      aluminum based materials.  These brazing alloys are fabricated
      into a variety of engineered forms and are used in many industries
      including automotive, air conditioning, general industrial and other
      metal-joining industries. Precision electroplating (often using gold,
      silver, palladium and various base metals) is performed on electronic and
      electrical components primarily for use in the automotive
      industry.


(2)
            Tubing.
      This segment manufactures a wide variety of steel tubing
      products.  The Stainless Steel Tubing Group manufactures
      small-diameter precision-drawn seamless tubing both in straight lengths
      and coils.  The Group’s capabilities in long continuous drawing
      of seamless stainless steel coils allow the Group to serve the
      petrochemical infrastructure and shipbuilding markets. The Stainless Steel
      Tubing Group also produces products for use in the medical, semiconductor
      fabrication, aerospace and instrumentation
      industries.   The Specialty Tubing Group manufactures
      welded carbon steel tubing in straight lengths and coils with a primary
      focus on products for the refrigeration and automotive
      industries.  In addition to producing bulk tubing, the Specialty
      Tubing Group also produces value added products for the appliance market
      by fabricating tubing into condensers for refrigerators and
      freezers.


(3)
            Engineered
      Materials. This segment supplies products to the construction and building
      industries. H&H manufactures fasteners and fastening systems for the
      commercial flat roofing industry.  Products are sold to building
      and roofing distributors and as private labels to roofing systems
      manufacturers. A line of specialty fasteners is produced for the building
      products industry for fastening applications in log homes, landscaping,
      masonry, and wood decks.  This segment also manufactures plastic
      and steel fittings and connectors for natural gas and water distribution
      service lines along with exothermic welding products for electrical
      grounding, cathodic protection, and lightning
      protection.   In addition, the segment manufactures
      electro-galvanized steel products primarily for the construction
      industry.


(4)
            Arlon
      EM segment designs, manufactures, markets and sells high performance
      laminate materials and bonding films utilized in the military/aerospace,
      wireless communications, automotive, oil drilling, and semiconductor
      markets.. Among the products included in the Arlon EM segment are high
      technology materials for the printed circuit board industry and silicone
      rubber products for insulating tapes and flexible
  heaters.


(5)
            Arlon
      CM segment designs, manufactures, markets and sells laminated and coated
      products to the electronic, industrial and commercial markets under the
      Arlon and Calon brand names.  Among the products included in the
      Arlon CM segment are vinyl films for graphics art applications, foam tapes
      used in window glazing, and electrical and thermal insulation
      products.


(6)
            Kasco
      segment is a leading provider of meat-room products (principally
      replacement band saw blades) and on site maintenance services principally
      to retail food stores, meat and deli operations, and meat, poultry and
      fish processing
      plants throughout the United States, Canada and Europe. In Canada and
      France, in addition to providing its replacement products, Kasco also
      sells equipment to the supermarket and food processing
      industries.





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Management
has determined that certain operating segments should be aggregated and
presented within a single reporting segment on the basis that such operating
segments have similar economic characteristics and share other qualitative
characteristics. Management reviews gross profit and operating income to
evaluate segment performance. Operating income for the reportable segments
excludes unallocated general corporate expenses. Other income and expense,
interest expense, and income taxes are not presented by segment since they are
excluded from the measure of segment profitability reviewed by the Company’s
management.





The
following tables present information about reportable segments for the years
ending December 31:




2007
              
              
              2006(in
      thousands)Net
      SalesPrecious
      Metal
              
              $
              150,484
              
              
              $
              146,014Tubing
              
              
              117,627
              
              
              
              120,873Engineered
      Materials
              
              
              228,248
              
              
              
              194,076Arlon
      Electronic Materials (c)
              
              
              45,576
              
              
              
              -Arlon
      Coated Materials  (c)
              
              
              47,647
              
              
              
              -Kasco  (c)
              
              
              48,284
              
              
              
              -Net
      sales
              
              $
              637,866
              
              
              $
              460,963Segment
      operating income (loss)Precious
      Metal (a)
              
              $
              8,203
              
              
              $
              5,122Tubing
      (b)
              
              
              138
              
              
              
              (8,916
              )Engineered
      Materials
              
              
              17,216
              
              
              
              15,855Arlon
      Electronic Materials (c), (d), (f)
              
              
              (118
              )
              
              
              -Arlon
      Coated Materials (c), (d)
              
              
              (3,522
              )
              
              
              -Kasco
      (c), (d)
              
              
              1,007
              
              
              
              -Subtotal
              
              
              22,924
              
              
              
              12,061Unallocated
      pension expense (credit)
              
              
              (4,963
              )
              
              
              (4,785
              )Unallocated
      corporate expenses
              
              
              6,749
              
              
              
              4,069Insurance
      proceeds
              
              
              (6,538
              )
              
              
              (811
              )Environmental
      remediation expenses (e)
              
              
              4,678
              
              
              
              2,909Fairfield
      East penalty (e)
              
              
              -
              
              
              
              180Loss
      (gain) on disposal of assets
              
              
              283
              
              
              
              (31
              )Income
      from operations
              
              
              22,715
              
              
              
              10,530Interest
      expense
              
              
              39,488
              
              
              
              22,535Realized
      and unrealized loss on derivatives
              
              
              1,888
              
              
              
              7,993Other
      (income) expense
              
              
              272
              
              
              
              834Loss
      from continuing operations before taxes
              
              $
              (18,933
              )
              
              $
              (20,832
              )


(a)
              Includes
      an asset impairment charge of $3.4 million in
  2006.
 (b)
              Includes
      an asset impairment charge of $1.8 million and restructuring charges of
      $2.4 million in 2006.
 (c)
              Bairnco
      segment information includes the period April 14, 2007 through December
      31, 2007.
 (d)
              The
      following non-recurring charges relating to the purchase accounting for
      the Bairnco Acquisition are included in the 2007 results above: Arlon EM
      $3,509, Arlon CM $2,409, and Kasco
$1,460.
 (e)
              Environmental
      remediation expenses have not been allocated to the reporting segments
      since the related facilities have been closed for several years and are
      not indicative of current operating
results.
 (f)
              Arlon
      EM operating loss includes $1,151 of amortization of intangible assets
      arising from the Bairnco
Acquisition.




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2007
              
              
              
              
              2006Capital
      Expenditures
              
              (in
      thousands)Precious
      Metal
              
              $
              2,502
              
              
              
              
              $
              2,019Tubing
              
              
              1,569
              
              
              
              
              
              3,781Engineered
      Materials
              
              
              2,700
              
              
              
              
              
              1,756Arlon
      Electronic Materials
              
              
              802
              
              
              
              
              
              -Arlon
      Coated Materials
              
              
              551
              
              
              
              
              
              -Kasco
              
              
              1,656
              
              
              
              
              
              -Corporate
      and other
              
              
              446
              
              
              
              
              
              139$
              10,226
              
              
              
              
              $
              7,695
  December
      31,2007
              
              
              
              
              2006Total
      Assets
              
              
              (in
      thousands)Precious
      Metal
              
              $
              57,249
              
              
              
              
              $
              60,562Tubing
              
              
              66,232
              
              
              
              
              
              68,038Engineered
      Materials
              
              
              142,177
              
              
              
              
              
              145,845Arlon
      Electronic Materials
              
              
              78,029
              
              
              
              
              
              -Arlon
      Coated Materials
              
              
              27,398
              
              
              
              
              
              -Kasco
              
              
              41,440
              
              
              
              
              
              -Corporate
      and other
              
              
              29,064
              
              
              
              
              
              19,420Total
              
              $
              441,589
              
              
              
              
              $
              293,865





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





Geographic
      InformationRevenue
              
              
              Long-Lived
      Assets2007
              
              
              2006
              
              
              2007
              
              
              2006(in
      thousands)
              
              
              (in
      thousands)United
      States
              
              $
              562,562
              
              
              $
              417,866
              
              
              $
              118,474
              
              
              $
              76,686Foreign
              
              
              75,304
              
              
              
              43,097
              
              
              
              13,143
              
              
              
              8,309$
              637,866
              
              
              $
              460,963
              
              
              $
              131,617
              
              
              $
              84,995





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





In 2007
and 2006, no customer accounted for more than 5% of consolidated net sales. In
2007, the 15 largest customers accounted for approximately 25% of consolidated
net sales.








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Item
9.   Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures





On
January 17, 2007, WHX dismissed PricewaterhouseCoopers LLP (“PwC”) as its
independent registered public accounting firm, effective upon the completion by
PwC of its procedures regarding: (i) the Company's 2004 Annual Report on Form
10-K; and (ii) the financial statements of the Company as of March 31, 2005 and
for the quarter then ended, the financial statements of the Company as of June
30, 2005 and for the quarter and six-month periods then ended and the financial
statements of the Company as of  September 30, 2005 and for the
quarter and nine-month periods then ended and the Forms 10-Q for 2005 in which
each of the above described financial statements will be included. The decision
to dismiss PwC was approved by the Company’s Audit Committee.





The
reports of PwC on the financial statements of the Company for the fiscal years
ended December 31, 2005 and 2004, and the reports of PwC on the financial
statements did not contain any adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principle, except for an explanatory paragraph disclosing substantial doubt
about the Company's ability to continue as a going concern.





During
the fiscal years ended December 31, 2005, 2004 and 2003, and through the date of
this filing, there were no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure which, if not resolved to the satisfaction of PwC, would have caused
them to make reference thereto in their reports on the financial statements for
such years.





During
the fiscal years ended December 31, 2005, 2004 and 2003, and through the date of
this filing, there were no "reportable events" as that term is described in Item
304(a)(1)(v) of Regulation S-K, other than as reported in Item 9A of its 2005
Annual Report on Form 10-K.





On
January 22, 2007, the Company engaged Grant Thornton LLP (“GT”) as the Company’s
independent registered public accountant.  The engagement of GT was
approved by the Audit Committee of the Company’s Board of
Directors.  During the years ended December 31, 2005, 2004 and 2003
and through January 22, 2007, the Company did not consult with GT with respect
to either (i) the application of accounting principles to a specified
transaction, either completed or proposed; (ii) the type of audit opinion that
might be rendered on the Company’s financial statements; or (iii) any matter
that was either the subject of disagreement (as defined in Item 304(a)(1)(iv) of
Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of
Regulation S-K).





Item 9A.  Controls and Procedures





Disclosure Controls and
Procedures





As
required by Rule 13a-15(b) under the Exchange Act
we  conducted  an evaluation under  the
supervision and with  the participation of our management, including
the Chief Executive  Officer and the Chief
Financial  Officer, of the effectiveness of our
disclosure  controls and procedures as of the end of the
period  covered by this  report.  Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that as of December 31, 2007 our disclosure controls and procedures
are effective in ensuring that all  information  required to
be  disclosed  in  reports that we file
or  submit  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the
time periods specified in the
SEC  rules  and  forms  and
that  such  information  is  accumulated  and
communicated to our management,  including our Chief Executive Officer
and Chief Financial Officer,  in a manner that allows timely decisions
regarding required disclosure.




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Item 9A(T).  Controls and Procedures




Management’s
Report on Internal Control Over Financial Reporting





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f)
under the Exchange Act. Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the Company’s financial statements
for external reporting purposes in accordance with US generally accepted
accounting principles. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
misstatements.





Under the
supervision and with the participation of the Company’s management, including
the Company’s Chief Executive Officer and Chief Financial Officer, the Company
conducted an evaluation of the effectiveness of the internal control over
financial reporting of the Company as referred to above as of December 31,
2007 as required by Rule 13a-15(c) under the Exchange Act. In making this
assessment, the Company used the criteria set forth in the framework in Internal Control — Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on its evaluation under the framework in Internal Control — Integrated
Framework, management concluded that the Company’s internal control over
financial reporting was effective as of December 31, 2007.
  Our
evaluation for the year ended December 31, 2006 described material weaknesses in
our internal control over financial reporting which have been remediated as of
December 31, 2007, including effective controls over (1) maintaining active
supervision over the accounting functions at certain of our operating
subsidiaries, and (2) maintaining a sufficient  number
of  personnel  with an appropriate  level
of  knowledge,  experience  and  training  in
the application of generally accepted accounting principles commensurate with
the Company's global financial  reporting  requirements and
the complexity of our operations and transactions.
  These
material weaknesses in our disclosure controls and procedures continued to exist
as of the first three quarters of 2007.  In the fourth quarter of
2007, these material weaknesses were remediated as a result
of the following actions taken during the year:
  ·
                Increased
      the Company's accounting and financial resources by hiring a Senior Vice
      President, an Assistant Controller, a Treasurer and a
      Director  of  Budgeting  and Financial
      Analysis, and retaining a regional accounting firm of certified public
      accountants to assist  financial management in addressing
      various accounting matters;
 
 ·
                Increased  the  level  of  review  and  discussion  on  complex  and
      judgmental accounting matters;
 ·
                Improved
      controls regarding timely communication of all significant events to
      management and the Board of
Directors;
 
 ·
                Enhanced
      the monthly financial  reporting to senior management and the
      Board.
 
 ·
                Developed  processes  and  procedures
      to
      better  document  employee  responsibilities,
      including transaction review and monitoring
  activities;
 
 ·
                Engaged
      a third  party  resource to support our review,
      documentation  and  testing  of
      the  effectiveness  of our  internal control
      over financial reporting under the Section 404 provisions of the
      Sarbanes-Oxley Act; and
 
 ·
                Reviewed
      and modified the nature and scope of internal audit
      activities.


This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the company to provide only management’s report
in this annual report.





Inherent Limitations Over
Controls




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.








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PART
III





Item
10.  Directors and Executive Officers of the
Company





Set forth
below are the names and ages of the directors and executive officers of the
Company and their principal occupations at present and for the past five
years.  There are, to the knowledge of the Company, no agreements or
understandings by which these individuals were so selected.  No family
relationships exist between any directors or executive officers, as such term is
defined in Item 402 of Regulation S-K promulgated under Exchange
Act.  The Board has adopted independence standards for directors that
conform to the standards required by the Nasdaq Stock Market (“Nasdaq”) for
listed companies.  Based on the Company’s director independence
standards, the Board has affirmatively determined that Louis Klein, Jr. and
Garen W. Smith are independent.





Name
            Age
            All
      Offices with the Company
            Director
      and/or
                Executive
      Officer SinceWarren
      G. Lichtenstein
            42
            Chairman
      of the Board
            2005Jack
      L. Howard
            46
            Director
            2005Robert
      K. Hynes
            53
            Vice
      President and Chief Financial Officer
            2001Glen
      M. Kassan
            64
            Vice
      Chairman and Chief Executive Officer
            2005Louis
      Klein, Jr.*
            72
            Director
            2002James
      F. McCabe, Jr.
            45
            Senior
      Vice President
            2007Daniel
      P. Murphy, Jr.
            46
            Director
      and Senior Vice President of Corporate Development
            2003John
      J. Quicke
            58
            Director
      and Vice President
            2005John
      H. McNamara, Jr.
            44
            Director
            2008Garen
      W. Smith*
            65
            Director
            2002Jeffrey
      A. Svoboda
            56
            President
      and Chief Executive Officer of H&H
            2008


________________


*Member
of the Compensation Committee and the Audit Committee


Business
Background


The following is a summary of the
business background and experience of each of the persons named
above:




Warren G.
Lichtenstein.  Chairman of the Board of Directors.




Warren G.
Lichtenstein has served as Chairman of the Board of WHX since July
2005.  He has been the Chairman of the Board, Secretary and the
Managing Member of Steel Partners II GP LLC (“Steel GP LLC”), the general
partner of Steel Partners, a private investment partnership, since January 1,
1996 and the President, Chief Executive Officer and a director of Steel
Partners, Ltd. (“SPL”), a management and advisory company that provides
management services to Steel Partners  and its affiliates, since June
1999. Additionally, he serves as President and Chief Executive Officer of SP
Acquisitions Holdings, Inc.,(“SP Acquisitions”), an affiliate of Steel Partners.
He is also a co-founder of Steel Partners Japan Strategic Fund (Offshore), L.P.,
a private investment partnership investing in Japan, and Steel Partners China
Access Fund I LP, a private equity partnership investing in
China.  Mr. Lichtenstein has been Chairman of the Board of SL
Industries, Inc. (“SL Industries”), a designer and manufacturer of power
electronics, power motion equipment, power protection equipment, and
teleprotection and specialized communication equipment, since January 24, 2002
and served as Chief Executive Officer from February 4, 2002 to August 10,
2005.  He had previously served as a director of SL Industries from
1993 to 1997.  Mr. Lichtenstein has been a director of KT&G
Corporation, South Korea’s largest tobacco company, since March
2006.  Mr. Lichtenstein was a director of Layne Christensen
Company  (“Layne Christensen”), a provider of products and services
for the water, mineral, construction and energy markets, from January 2004 to
October 2006.  Mr. Lichtenstein served as a director of WebFinancial
Corporation (“WebFinancial”), a consumer and commercial lender, from 1996 to
June 2005, as Chairman and Chief Executive Officer from December 1997 to June
2005 and as President from December 1997 to December 2003.




Jack L. Howard.Director.




Jack
L. Howard has been a director of WHX since July 2005.  He has been a
registered principal of Mutual Securities, Inc., a registered broker-dealer,
since 1989.  He serves as President of Steel Partners LLC (“Partners
LLC”) and has served as Vice Chairman of SPL since December 2003.  Mr.
Howard has served as Chairman of the Board of WebFinancial since June 2005, as a
director of WebFinancial since 1996, and as its Vice President since
1997.  From 1997 to May 2000, he also served as Secretary, Treasurer
and Chief Financial Officer of WebFinancial.  He served as Chairman of
the Board and Chief Executive Officer of Gateway Industries, Inc.,







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a
provider of database development and web site design and development services,
from February 2004 to April 2007, as Vice President of Gateway from December
2001 to April 2007.  He has also been the Chief Operating Officer of
SP Acquisitions since June 2007 and its Secretary since February
2007.  He served as a director of SP Acquisitions from February 2007
to June 2007 and was its Vice-Chairman from February 2007 to August
2007.  Mr. Howard also serves as a director of Adaptec,
Inc.  He has been a director of CoSine Communications, Inc., a global
telecommunications equipment supplier, since July 2005.  He has been a
director of BNS Holding, Inc., a holding company that owns the majority of
Collins Industries, Inc., a manufacturer of school buses, ambulances and
terminal trucks, since June 2004.  Mr. Howard presently serves as a
director of NOVT Corporation (“NOVT”), a former developer of advanced medical
treatments for coronary and vascular disease.




Robert K.
Hynes. Vice President and
Chief Financial Officer.




Robert
K. Hynes has been the Vice President and Chief Financial Officer of the Company
since January 2003 and was Vice-President-Finance from June 2001 through January
2003.  Mr. Hynes has been Vice-President of H&H since March
2000.




Glen M.
Kassan. Vice Chairman
of the Board of Directors,  Chief Executive Officer and
Secretary.




Glen
M. Kassan has served as a director of the Company since July 2005 and as the
Company’s Vice Chairman of the Board of Directors, Chief Executive Officer and
Secretary since October 2005.  He has been a managing director of
Partners LLC, and an Operating Partner of SPL since August 1999 and an Operating
Partner of its predecessor from October 1999 to May 2001.  He has
served as the Vice President and Secretary of WebFinancial since June 2000 and
as Chief Financial Officer from June 2000 through 2007.  He has served
as a director of SL Industries since January 24, 2002, its Vice Chairman since
August 10, 2005 and served as its President from February 4, 2002 to August 10,
2005.




Louis Klein, Jr.Director.




Louis
Klein, Jr. has served as a director of WHX since 2002.  He has been
trustee of Manville Personal Injury Settlement Trust since 1991, trustee of WT
Mutual Fund and WT Investment Trust I (Wilmington Trust) since 1998 and trustee
of the CRM Mutual Fund since 2005.  He has also been a director of
Bulwark Corporation since 1998, a private company engaged in real estate
investment.




James F. McCabe,
Jr. Senior Vice
President.




James F.
McCabe, Jr. has been Senior Vice President of each of the Company and H&H
since March 1, 2007.  As Mr. McCabe’s employment did not commence
until March 1, 2007, Mr. McCabe is not a named executive officer of the Company
for the fiscal year ended December 31, 2006.  From 2004 to 2006, Mr.
McCabe served as Vice President of Finance and Treasurer of American Water, NE
Region, a division of RWE which is a public utility based in Essen,
Germany.  Previously, he served as President of Teleflex Aerospace
from 2002 to 2003, which manufactures and services turbine components and
aircraft cargo systems.  Mr. McCabe previously served as Chief
Operating Officer of Sermatech International, a surface-engineering/specialty
coatings business, from 2000 to 2001, and as its President from 2001 to
2002.




Daniel P. Murphy,
Jr. Director and Senior
Vice President of Corporate Development.




Daniel
P. Murphy, Jr. has served as a director of WHX since July 2005 and as the Senior
Vice President of Corporate Development since February 2008.  He was
President of H&H from February 2003 through February 2008 and was Vice
President of HHEM from January 2002 through February 2003.  He was
also President of OMG, Inc., a subsidiary of H&H, from February 1994 through
December 2001.




John J.
Quicke.Director and Vice President.




John
J. Quicke has served as a director of WHX since July 2005 and as a Vice
President since October 2005.  He has served as a managing director of
Partners LLC, and an Operating Partner of SPL since September
2005.  Mr. Quicke served as Chairman of the Board of NOVT from April
2006 to January 2008, and served as President and Chief Executive Officer of
NOVT from April 2006 to November 2006.  Mr. Quicke currently serves as
a director of Collins Industries, Adaptec, Inc., and Angelica Corporation, a
provider of healthcare linen management services.  Mr. Quicke also
served as a director of Layne Christensen from October 2006 to June
2007.  He served as a director, President and Chief Operating Officer
of Sequa Corporation (“Sequa”), a diversified industrial company, from 1993 to
March 2004, and Vice Chairman and Executive Officer of Sequa from March 2004 to
March 2005.  As Vice Chairman and Executive Officer of Sequa, Mr.
Quicke was responsible for the Automotive, Metal Coating, Specialty Chemicals,
Industrial Machinery and Other Product operating segments of the
company.  From March 2005 to August 2005, Mr. Quicke occasionally
served as a consultant to Steel Partners and explored other business
opportunities.





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John H. McNamara Jr.
Director.




John
H. McNamara Jr. has served as a director of WHX since February
2008.  He has been an investment professional at SPL since May
2006.  SPL is an affiliate of Steel Partners, which owns approximately
50.3% of the Company’s outstanding common stock.  Mr. McNamara also
serves as a director of SL Industries.  Prior to working at SPL, Mr.
McNamara was a Managing Director and Partner at Imperial Capital LLC, an
investment banking firm, which he joined in 1995. As a member of its Corporate
Finance Group he provided advisory services for middle market companies in the
areas of mergers and acquisitions, restructurings and financings. Mr. McNamara
began his career at Bay Banks, Inc., a commercial bank, where he served in
lending and work-out capacities.  Mr. McNamara graduated from Ithaca
College with a B.S. in Economics.




Garen W.
Smith.  Director.




Garen W. Smith has
served as a director of WHX since 2002.  He was Chairman of the Board
of H&H from 2003 through September 2005.  Mr. Smith was Vice
President, Secretary and Treasurer of Abundance Corp., a consulting company that
provides services to the Company, from 2002 to February 2005.  In
addition, he was President and Chief Executive Officer of Unimast Incorporated
from 1991 to 2002.  Mr. Smith also serves as a director of Phillips
Manufacturing Company.




Jeffrey A. Svoboda. President
and Chief Executive Officer of H&H.




Jeffrey
A. Svoboda has served as the President and Chief Executive Officer of H&H
since January 2008.  He previously served as the Group Executive and
Corporate Vice President of Danaher Corporation from 2001 through
2007.




Section
16(A) Beneficial Ownership Reporting Compliance





Section
16(a) of the Exchange Act requires the Company’s directors and officers, and
persons who own more than 10% of a registered class of its equity securities, to
file reports of ownership and changes in ownership (typically, Forms 3, 4 and/or
5) of such equity securities with the SEC and Nasdaq.  Such entities
are also required by SEC regulations to furnish the Company with copies of all
such Section 16(a) reports.





Based
solely on a review of Forms 3 and 4 and amendments thereto furnished to the
Company and written representations that no Form 5 or amendments thereto were
required, the Company believes that during the fiscal year ended December 31,
2006, its directors and officers, and greater than 10% beneficial owners, have
complied with all Section 16(a) filing requirements except for the following
reports that were inadvertently reported late: (1) Ellen T. Harmon failed to
file one timely report on Form 3 required by section 16(a) and (2) James F.
McCabe, Jr. failed to file one timely report on Form 3 required by section
16(a).





Code
of Ethics





The
Company has adopted a code of ethics that applies to its principal executive
officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions.  The text of the
code of ethics is as set forth in the attachment to Exhibit 14.1 to the
Company’s Annual Report on Form 10-K filed April 14, 2004.





Audit
Committee





The
Company has a separately standing Audit Committee established in accordance with
Section 3(a) (58) (A) of the Exchange Act.  The Audit Committee has a
charter, a current copy of which is available on the Company’s website,
www.whxcorp.com.  The members of the Audit Committee are Louis Klein,
Jr. and Garen W. Smith.  Each of Messrs. Klein and Smith are
non-employee members of the Board.  After reviewing the qualifications
of the current members of the Audit Committee, and any relationships they may
have with the Company that might affect their independence from the Company, the
Board has determined that (1) all current Audit Committee members are
“independent” as that concept is defined in Section 10A of the Exchange Act, (2)
all current Audit Committee members are financially literate, and (3) Mr. Klein
qualifies as an “audit committee financial expert” under the applicable rules
promulgated pursuant to the Exchange Act.  The Audit Committee met
nine times and took action by unanimous written consent one time during the
fiscal year ended December 31, 2007.





Item
11.  Executive Compensation




Summary
Compensation Table





The
following table sets forth all compensation awarded to, paid to or earned by the
following type of executive officers for each of the Company’s last two
completed fiscal years: (i) individuals who served as, or acted in the
capacity of, the Company’s principal executive officer for the fiscal year ended
December 31, 2007; (ii) the Company’s two most highly compensated executive
officers, other than the chief executive, who were serving as executive officers
at the end of the fiscal year ended December 31, 2007; and (iii) up to two
additional individuals for whom disclosure would have been provided but for the
fact that the individual was not serving
as an executive officer of the Company at the end of the fiscal year ended
December 31, 2007 (of which there was only one). We refer to these individuals
collectively as our named executive officers.







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Name
      and Principal Position
            Year
            
            Salary
                ($)
            
            Bonus
                ($)
            
            Option
      Awards
                ($)
            
            Non-qualified
      Deferred Compensation Earnings
                ($)
            
            All
      Other Compensation
                ($)
            
            Total
      Compensation
                ($)(a)
            (b)
            
            (c)
            
            (d)
            
            (f)(1)
            
            (h)
            
            (i)
            
            (j)




Glen
      M. Kassan
              Chief
      Executive Officer
            2007
            
            600,000
            
            
            --
            
            
            --
            
            
            --
            
            
            100,208
            (2)
            
            700,2082006
            
            600,000
            
            
            --
            
            
            --
            
            
            --
            
            
            5,544
            
            
            605,544




Daniel
      P. Murphy, Jr.
              Senior Vice President of
      Corporate Development(3)
            2007
            
            467,692
            
            
            --
            
            
            234,395
            
            
            --
            
            
            46,080
            (4)
            
            748,1672006
            
            450,000
            
            
            225,000
            
            
            --
            
            
            --
            
            
            32,555
            (5)
            
            707,555




James
      F. McCabe, Jr.
              Senior Vice President(3)
            2007
            
            244,615
            
            
            --
            
            
            117,197
            
            
            --
            
            
            42,686
            (6)
            
            404,4982006
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --




Ellen
      T. Harmon
              Vice President, General
      Counsel and Secretary(8)
            2007
            
            253,077
            
            
            --
            
            
            44,643
            
            
            --
            
            
            426,935
            (7)
            
            724,6552006
            
            235,000
            
            
            130,000
            
            
            --
            
            
            --
            
            
            8,876
            
            
            373,876







(1)
            Amounts
      reflect the dollar amount recognized for financial statement reporting
      purposes for the fiscal year in accordance with FAS
      123(R).  Assumptions used in the calculation of these amounts
      are included in Note 14 to the Company’s Consolidated Financial
      Statements.




(2)
            Includes
      payments for life insurance, discretionary 401(k) payments, and the amount
      recognized for financial statement reporting purposes for the fiscal year
      in accordance with FAS 123(R) for the “Arrangement” (defined
      below).




(3)
            2007
      bonus has not yet been determined.




(4)
            Includes
      payments for reimbursement of financial services, life insurance, car
      allowance, club dues, 401(k) matching and discretionary
      payments.




(5)
            Includes
      payments for reimbursement of financial services, supplemental healthcare,
      life insurance, car allowance, club dues, and 401(k) matching
      payments.




(6)
            Includes
      payments for life insurance, car allowance, temporary living allowance,
      and 401(k) matching payments.




(7)
            Includes
      payments for life insurance, car allowance, and 401(k) matching and
      discretionary payments, as well as payments in connection with her
      resignation in November 2007.




(8)
            Ms.
      Harmon resigned from her positions with the Company and its subsidiaries
      effective November 9, 2007.







Narrative
Disclosure to Summary Compensation Table





The
compensation paid to the named executive officers includes salary, stock
options, and non-equity incentive compensation.  In addition, each
named executive officer is eligible to receive contributions to his or her
401(k) plan under our matching contribution program.




In 2007,
salaries and bonuses accounted for approximately 86% of total compensation for
our principal executive officer and 51.6% on average for our other named
executive officers.




On July
6, 2007, the Compensation Committee of the Board of Directors of the Company
adopted certain arrangements (the “Arrangements”) for each of Warren G.
Lichtenstein, the Chairman of the Board of Directors of the Company and the
Managing Member of Steel GP LLC, the general partner of Steel Partners (which
owns 50.3 % of the outstanding shares of common stock of the Company), and Glen
Kassan, the Chief Executive Officer of the Company and an Operating Partner of
SPL, an affiliate of Steel Partners, to







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provide
incentives for Messrs. Lichtenstein and Kassan.  The Arrangements
provide, among other things, for each of Messrs. Lichtenstein and Kassan to
receive a bonus equal to 100,000 multiplied by the difference of the fair market
value of the Company’s stock price and $9.00.  The Arrangements are
not based on specified targets or objectives, other than the Company’s stock
price.  The bonus is payable upon the sending of a notice by Mr.
Lichtenstein or Mr. Kassan, respectively.  The notice can be sent with
respect to one-half the bonus immediately, with respect to one quarter, at any
time after July 6, 2008 and with respect to the remainder, at any time after
July 6, 2009.  The Arrangements terminate July 6, 2015, to the extent
not previously received.




Bonus Plan.On
July 6, 2007, the Compensation Committee of the Board of Directors of the
Company formally adopted the 2007 Bonus Plan (the “Bonus Plan”) to provide
incentives to officers and members of management of the Company and its
subsidiaries, including certain of the Company’s executive officers, in the form
of cash bonus payments for achieving certain performance goals established for
them.  Participants in the Bonus Plan who are named executive officers
of the Company include Daniel P. Murphy, Jr., President of H&H, and James F.
McCabe, Jr., the Corporate Senior Vice President.




The Bonus
Plan includes two components.  The first component is the Short Term
Incentive Plan (“STIP”), and the second component is a Long Term Incentive Plan
(“LTIP”).  The structure of the Bonus Plan is designed to provide
short-term incentives to participants for achieving annual targets, while also
motivating and rewarding eligible participants for achieving longer term growth
goals.




Short Term Incentive
Plan.  The Compensation Committee has established two
components for the STIP, a return on invested capital (“ROIC”) based component
and a component based on the achievement of pre-determined individual
objectives.  The ROIC component, is calculated by dividing pre-bonus
earnings before interest, taxes, depreciation and amortization (“PBEBITDA”) by
average invested capital (“AIC”). The component based on the achievement of
individual objectives is based on personal objectives set by the President,
Chief Executive Officer of H&H and the Board of Directors of WHX for each
individual.  Based on the determination of the objectives under the
two components, the maximum percentage of base salary that may be earned by the
participants ranges from 40% to 80%.  STIP bonuses earned will be paid
annually.  No STIP bonus will be paid if either component is below a
predetermined threshold.




Long Term Incentive
Plan.  The LTIP component of the  Bonus Plan is based
on a combination of the achievement of certain sales targets and ROIC targets
over the three fiscal years beginning in 2007.  The sales target is
based on the combined budgeted sales for 2007, 2008, and 2009.  The
ROIC is calculated using total PBEBITDA for the three year cycle and the AIC for
these 3 years.  Based on the determination of these objectives, the
maximum percentage of base salary that may be earned by the participants ranges
from 10% to 20%.  LTIP bonuses earned will be paid following the
conclusion of the 2009 fiscal year.  A bonus payout under the LTIP
will not occur if either the ROIC or sales component is below 80% of the
respective target.




Under the
Bonus Plan, the total maximum percentage of base salary that may be earned by
the President of H&H, Jeffrey A. Svoboda, is 100% and the total maximum
percentage of base salary that may be earned by the Senior Vice President, James
F. McCabe, Jr., is 75%.




Grant
of Options




On July
6, 2007, options were granted pursuant to WHX Corporation’s 2007 Incentive Stock
Plan as follows: (i) 100,000 options were granted to Daniel P. Murphy, Jr.,
(ii) 50,000 options were granted to James F. McCabe, Jr., and
(iii) 25,000 options were granted to Ellen T. Harmon, who resigned from the
Company and its subsidiaries, effective November 9, 2007.  The options
have an exercise price of $9.00 per share and are exercisable in installments as
follows: half of the options granted are exercisable immediately, one-quarter of
the options granted become exercisable on July 7, 2008 and the balance become
exercisable on July 6, 2009.  The options will expire on July 6,
2015.  On January 28, 2008, 100,000 options were granted to
Jeffrey A. Svoboda pursuant to WHX Corporation’s 2007 Incentive Stock
Plan.  The options have an exercise price of $9.00 per share and are
exercisable in installments as follows: one-third of the options granted are
exercisable immediately, one-third of the options granted become exercisable on
January 28, 2009 and the balance become exercisable on January 28,
2010.




Employment
Agreements




Glen M.
Kassan.  Glen M. Kassan was appointed Chief Executive Officer
on October 7, 2005.  In 2006, our Compensation Committee approved a
salary of $600,000 per annum for Mr. Kassan effective January 1,
2006.  There is no employment agreement between the Company and Mr.
Kassan regarding Mr. Kassan’s employment with the Company.




Daniel P. Murphy,
Jr.  Mr. Murphy is party to a two-year employment agreement
with H&H dated February 11, 2004, whose initial term ended on February 11,
2006 and which by the terms of the employment agreement will automatically
extend for successive one-year terms unless earlier terminated pursuant to its
terms.  Mr. Murphy’s employment agreement provides for an annual
salary of no less than
$350,000 and an annual bonus to be awarded at H&H’s sole discretion, as
ratified by WHX’s Board.  Mr. Murphy received a bonus of $225,000
in July 2007 on account of his performance in 2006.  In July 2007, Mr.
Murphy’s annual salary was increased to $470,000 per annum, effective as of
February 1, 2007.






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Effective
January 28, 2008, the Company and Mr. Murphy entered into an amendment to the
Murphy Employment Agreement, which (i) makes conforming changes to his
employment agreement in light of Mr. Murphy’s new position as the Senior Vice
President of Corporate Development at the Company, (ii) provides for severance
payments as originally set forth in his employment agreement, if Mr. Murphy
elects to terminate his position on or before July 28, 2008, and (iii) provides
for the continuation of all compensation and benefits previously provided under
his employment agreement.




In
addition, Mr. Murphy, pursuant to his employment agreement, is entitled to
receive health insurance coverage (if and to the extent provided to all other
employees of H&H), four weeks paid vacation, a Company car or car allowance
not to exceed $1,000 per month, annual dues at a golf club of his selection
which is reasonably acceptable to the Company, non-exclusive use of a
two-bedroom apartment in the Rye, New York area and a reasonable relocation
allowance, as determined by H&H.




Murphy Acknowledgement and Release
Agreement.  In November 2005, Mr. Murphy entered into an
Acknowledgement and Release Agreement with the Company pursuant to which the
executive agreed to remain with the Company in the period after the Company’s
emergence from bankruptcy in July 2005.  Mr.  Murphy agreed
to remain an employee of the Company through at least March 31, 2006 in
consideration for (i) a cash bonus of $250,000 paid on March 31, 2006,
(ii) an increase in the life insurance levels provided in the H&H
Post-Retirement Life Insurance Program, and (iii) the grant to Mr. Murphy
of 100,000 options to purchase Common Stock upon our adoption of a stock option
plan. In addition, the Acknowledgement and Release Agreement provided a release
to the Company.  The proposed stock options described above which were
required in the Acknowledgement and Release Agreements entered into with Mr.
Murphy was required to be granted by a certain date (December 31, 2006), or
“phantom” options were to have been issued.  The Company satisfied
this obligation by granting options to Mr. Murphy on July 6, 2007 and no
“phantom” options were issued.




James F. McCabe,
Jr.  On February 1, 2007, James F. McCabe, Jr. entered into a
one-year employment agreement with each of the Company and H&H effective on
March 1, 2007, and which by the terms of the employment agreement, will
automatically extend for successive one-year periods unless earlier terminated
pursuant to its terms.  The employment agreement provides for an
annual salary of no less than $300,000 and an annual bonus to be awarded at the
Company’s sole discretion, provided that McCabe’s bonus for 2007 will not be
less than $100,000 as long as his employment has not been terminated for cause
and as long as he has not voluntarily terminated his employment prior to April
1, 2008.  In addition, the employment agreement provides for the grant
of 50,000 options to purchase Company Common Stock upon the Company’s adoption
of a stock option plan and registration of underlying shares by September 30,
2007, or alternatively 50,000 “phantom” options in lieu of such options if such
a plan has not been adopted by such date.  The Company satisfied this
obligation by granting options to Mr. McCabe on July 6,
2007.




In
addition, pursuant to Mr. McCabe’s employment agreement, he is entitled to four
weeks paid vacation, health insurance coverage (if and to the extent provided to
all other employees of the Company), a temporary living allowance of $3,400 per
month through February 2009, a car allowance of $600 per month, and life
insurance, disability insurance and 401(k) benefits, if and to the extent
provided to executives of either WHX or H&H.




As Mr.
McCabe’s employment did not commence until March 1, 2007, Mr. McCabe was not a
named executive officer of the Company for the fiscal year ended December 31,
2006.




Jeffrey A.
Svoboda.  Effective January 28, 2008, Jeffrey A. Svoboda
entered into an employment agreement, pursuant to which Mr. Svoboda agreed to
become the President and Chief Executive Officer of H&H.  His
employment agreement provides for an initial two-year term, which will
automatically extend for successive one-year periods unless earlier terminated
pursuant to its terms. The employment agreement also provides to Mr. Svoboda,
among other things, (i) an
annual salary of $500,000,(ii) an annual bonus with a target of 100% of
base salary under the Company’s STIP and LTIP; (iii) a grant of 100,000 options
to purchase shares of the Company’s Common Stock pursuant to the terms and
conditions of the Company’s 2007 Incentive Stock Plan at an exercise price equal
to $9.00, one third of which will vest on the grant date, one third of which
will vest on the first anniversary of the grant date, and the final one third of
which will vest on the second anniversary of the grant date; and (iv) other
benefits.




See “—
Potential Payments upon Termination or Change-in-Control” for further discussion
on termination, retirement and change-in-control provisions of the employment
agreements.





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Outstanding
Equity Awards at Fiscal Year-End




The
following table sets forth certain information regarding equity awards held by
the named executive officers as of December 31, 2007.




Name
            Option
      AwardsNumber
      of Securities Underlying Unexercised Options
                (#)Exercisable
            Number
      of Securities Underlying Unexercised Options
                (#)Unexercisable
            Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options
                (#)
            Option
      Exercise Price ($)
            Option
      Expiration
                Date(a)
            (b)
            (c)
            (d)
            (e)
            (f)Glen
      M. Kassan
              Chief
      Executive Officer
            --
            --
            --
            --
            --Daniel
      P. Murphy, Jr.
              Senior Vice President of
      Corporate Development
            50,000
            50,000(1)
            --
            $
      9.00
            July
      6, 2015James
      F. McCabe, Jr.
              Senior Vice
      President
            25,000
            25,000(1)
            --
            $
      9.00
            July
      6, 2015Ellen
      T. Harmon
              Vice President, General
      Counsel and Secretary(2)
            --
            --
            --
            --
            --





(1)
            The
      options vest as follows: one-quarter of the options granted become
      exercisable on July 7, 2008 and the balance becomes exercisable on July 6,
      2009.




(2)
            Ms.
      Harmon resigned from her positions with the Company and its subsidiaries
      effective November 9, 2007.




Pension
Benefits




The WHX
Pension Plan, a defined benefit plan, provides benefits to certain current and
former employees of the Company and its current and former subsidiaries, H&H
and Wheeling-Pittsburgh Steel Corporation.




In 2005,
the WHX Pension Plan was amended to freeze benefit accruals for all hourly
non-bargained and salaried H&H plan participants and to close the Plan to
future entrants.  The only participants who continue to receive
benefit accruals are approximately 260 active employees who are covered by
collective bargaining agreements.




The WHX
Pension Plan provides for annual benefits following normal retirement at various
normal retirement ages, under a variety of benefit formulas depending on the
covered group.  The bargained participants earn benefits under a
service multiplier arrangement that varies based on collective bargaining
agreements.  For all other participants, the frozen benefits are based
on either multiplier arrangements for hourly-paid participants or a percentage
of final average earnings formula for salaried participants.




The WHX
Pension Plan provides benefits to one of the named executive officers, Mr.
Murphy.  For purposes of H&H salaried participants, such as Mr.
Murphy, “compensation” includes base salary earned prior to December 31,
2005.  The WHX Pension Plan does not include any amount payable as a
bonus, commission, overtime premium, shift differential, reward, prize or any
type of compensation other than regular fixed salary or wage.  The
annual limit on compensation has been adjusted in accordance with the Internal
Revenue Code of 1986, as amended (the “Code”) Section 401(a)(17)(B) which
allowed for maximum compensation of $210,000 in plan year 2005, earnings in
years thereafter are not included in the calculation of benefits under the WHX
Pension Plan.  Prior to January 1, 2006, certain H&H executives,
including Mr. Murphy, earned benefits under the H&H Supplemental Executive
Retirement Plan (the “SERP”).  The SERP restored benefits lost due to
the 401(a)(17) compensation limit and included into the definition of
compensation, 25% of annual Management Incentive Plan awards.




The WHX
Pension Plan provides for early retirement under a variety of eligibility rules
pertinent to each covered group.  Early retirement benefits are the
retirement income that would be applicable at normal retirement, reduced either
by a fixed factor per month or on an actuarial equivalence basis, depending on
the covered group.  The normal form of payment under the WHX Pension
Plan also varies, but is a straight life annuity for most participants and a
ten-year certain and life annuity for others.  The WPSC bargained
participants earn a straight life annuity under a 414(k) arrangement and have
the option to take up to $10,000 of their defined contribution plan assets as a
lump sum.




We are
not aware of any payments made during 2007 for any of the Company’s named
executive officers.  The valuation method and material assumptions
applied in quantifying the present value of accumulated benefit are set forth in
Note 6 to the Company’s 2007 Consolidated Financial Statements.







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Potential
Payments Upon Termination or a Change in Control




Daniel P. Murphy,
Jr.  In the event that either of the following occurs, Mr.
Murphy will receive a payment of two years’ base salary at the base salary in
effect at the time of termination: (i) Mr. Murphy’s employment agreement is
terminated by H&H other than with cause and other than due to Mr. Murphy’s
death or disability, or (ii) Mr. Murphy elects termination following a
material diminution in his position or a relocation of H&H’s headquarters
more than 50 miles from Rye, New York and Agawam, Massachusetts and H&H
fails to cure such diminution or relocation within ten days of receipt of
written notice of termination from Mr. Murphy. In the event that Mr. Murphy’s
employment is terminated due to his death or disability or with cause, which
includes conduct that is materially injurious to H&H, any act that
constitutes fraud, misappropriation, embezzlement or a felony, or Mr. Murphy’s
material breach of his employment agreement, H&H will have no further
obligation to Mr. Murphy.




Following
a change in control of H&H, Mr. Murphy will be entitled to terminate his
employment and receive a payment of two years’ base salary at the base salary in
effect at the time of termination.  In the event of a change of
control, H&H has ten days from the receipt of any notice of termination from
Mr. Murphy to request Mr. Murphy to continue his employment at his then present
base salary on a pro rata basis for 60 days from such request.




James F. McCabe,
Jr.  In the event that either of the following occurs, Mr.
McCabe will receive a payment of one year’s base salary at the base salary in
effect at the time of termination, monthly COBRA payments of any health-related
benefits (medical, dental, and vision) as are then in effect for a period of
twelve months following such termination or until such time as he becomes
eligible to receive coverage from a subsequent employer, if earlier, and a car
(not living) allowance for a one year period after termination: (i) Mr.
McCabe’s employment agreement is terminated by the Company other than with cause
or other than due to Mr. McCabe’s death or disability, or (ii) Mr. McCabe
elects termination following a material diminution in his position or a
relocation of the Company’s headquarters and the Company fails to cure such
diminution or relocation within ten days of receipt of written notice of
termination from Mr. McCabe.




In the
event that Mr. McCabe’s employment is terminated due to death or disability or
with cause, which includes conduct that is materially injurious to the Company,
any act that constitutes fraud, misappropriation, embezzlement or a felony or
sexual or other harassment of any employee of either WHX or H&H, the willful
or continued failure by Mr. McCabe to substantially perform his duties, or Mr.
McCabe’s material violation or breach of his employment agreement, he will be
entitled to receive the aggregate of any due but unpaid compensation through the
date of termination. In the event that Mr. McCabe is terminated due to his death
or due to his disability, his estate will be paid all life insurance proceeds to
which it is entitled and he will be paid any disability insurance proceeds to
which he is entitled, respectively.




Jeffrey A.
Svoboda.In the event that H&H terminates the Mr.
Svoboda’s employment agreement without cause or gives notice not to extend the
term of the employment agreement, H&H will pay to Mr. Svoboda, as aggregate
compensation, (i) a lump-sum cash payment equal to the greater of the balance of
his base salary due for the remaining term of his contract, or, one (1) year of
his then current annual base salary, (ii) the continuation of certain
health-related benefits and (iii) a bonus payment equal to the cash portion of
the most recent bonus paid to Mr. Svoboda.  Mr. Svoboda will also
receive the same compensation set forth in the preceding sentence if he
terminates the employment agreement due to the material diminution of duties or
H&H relocates more than 50 miles from White Plains, as more specifically
described in the employment agreement.




Separation
Agreement




Effective
November 9, 2007, Ms. Harmon resigned as Vice President, Secretary and General
Counsel of WHX and H&H.  Pursuant to a Separation Agreement and
Release, dated as of November 5, 2007, Ms. Harmon received a payment equal to
$410,000 and the continuation of certain benefits.




Deferred
Compensation Agreements




Except as
described with respect to the employment agreements of Mr. Murphy, no plan or
arrangement exists which results in compensation to a named executive officer in
excess of $100,000 upon such officer’s future termination of employment or upon
a change-of-control.







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Director
Compensation
  The
following table sets forth information with respect to compensation earned by or
awarded to each non-employee director who served on our board of directors
during the year ended December 31, 2007.




Name
            Fees
      Earned or Paid in Cash
                ($)
            Option
      Awards
                ($)
            All
      Other Compensation
                ($)
            Total
                ($)(a)
            (b)
            (d)
            (g)
            (h)Warren
      G. LichtensteinJack
      L. HowardGlen
      M. KassanLouis
      Klein, Jr.
            72,083
            23,439(1)(2)
            
            95,522Daniel
      P. Murphy, Jr.John
      H. McNamara Jr.Garen
      W. Smith
            71,667
            23,439(1)(2)
            
            95,106(3)John
      J. Quicke





(1)
            Option
      awards consist of 10,000 options issued to each of Messrs. Klein and Smith
      on July 6, 2007 that are exercisable as follows: one-half of the options
      granted were exercisable immediately, one-fourth of the options granted
      become exercisable on July 7, 2008 and the balance becomes exercisable on
      July 6, 2009.




(2)
            Amounts
      reflect the dollar amount recognized for financial statement reporting
      purposes for the fiscal year in accordance with FAS
      123(R).  Assumptions used in the calculation of these amounts
      are included in Note 14 to the Company’s Consolidated Financial
      Statements.




(3)
            In
      addition, Mr. Smith and his wife also receive medical benefits pursuant to
      an agreement entered into as of June 19, 2002 by and between the Company,
      Unimast Incorporated (“Unimast”) and Mr. Smith in connection with the sale
      by the Company of Unimast, its wholly-owned subsidiary, and the
      termination of Mr. Smith’s employment as President and Chief Executive
      Officer of Unimast.




Effective
January 10, 2007, our Board of Directors adopted the following compensation
schedule for non-affiliated directors:




Annual
      Retainer for Directors:
            $
            25,000Board
      Meeting Fee:
            $
            1,500Annual
      Retainer for Committee Chair (other than Audit Committee
      Chair):
            $
            5,000Committee
      Meeting Fee (other than for Audit Committee):
            $
            1,000Special
      Committee Fee:
            $
            10,000Annual
      Retainer for Audit Committee Members:
            $
            5,000Annual
      Retainer for Audit Committee Chair:
            $
            10,000





In
addition, in July 2007, Messrs. Smith and Klein received options to acquire
10,000 shares of the Company’s common stock.  The exercise price is
$9.00 per share.  50% of the shares are immediately exercisable, 25%
are exercisable on the first anniversary of the date of grant and the balance is
exercisable on the second anniversary of the grant date.




On July
6, 2007, the Compensation Committee of the Board of Directors of the Company
adopted the Arrangements for each of Warren G. Lichtenstein, the Chairman of the
Board of Directors of the Company and the Managing Member of Partners GP LLC,
the general partner of Steel Partners (which owns 50.3 % of the outstanding
shares of common stock of the Company), and Glen Kassan, the Chief Executive
Officer of the Company and an operating partner of SPL, an affiliate of Steel
Partners, to provide incentives for Messrs. Lichtenstein and Kassan. The
Arrangements provide, among other things, for each of Mr. Lichtenstein and Mr.
Kassan to receive a bonus equal to 100,000 multiplied by the difference of the
fair market value of the Company’s stock price and $9.00.  The bonus
is payable upon the sending of a notice by Mr. Lichtenstein or Mr. Kassan,
respectively.  The notice can be sent with respect to one-half the
bonus immediately, with respect to one quarter, at any time after July 6, 2008
and with respect to the remainder, at any time after July 6,
2009.  The Arrangements terminate July 6, 2015, to the extent not
previously received.






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Item
12.  Security Ownership of Certain Beneficial Owners and
Management




Securities
Authorized for Issuance Under Equity Compensation Plans




The
following table details information regarding our existing equity compensation
plans as of December 31, 2007.




Equity
Compensation Plan Information




Plan
      category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            Weighted-average
      exercise price of outstanding options, warrants and
      rights
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            (b)
            (c)Equity
      compensation plans approved by security holders
            591,000
            
            $9.00
            
            209,000Equity
      compensation plans not approved by security holders
            --
            
            --
            
            --Total:
            591,000
            
            $9.00
            
            209,000





Security
Ownership of Certain Beneficial Owners and Management




The
following table shows the beneficial ownership of shares of our Common Stock as
of March 15, 2008, held by:




·
            Each
      person who beneficially owns 5% or more of the shares of Common Stock then
      outstanding;


·
            Each
      of our directors;


·
            Each
      of our named executive officers;


·
            All
      of our directors and executive officers as a
  group.





The
information in this table reflects “beneficial ownership” as defined in Rule
13d-3 of the Exchange Act.  In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options, if any, held by that person that were
exercisable on March 15, 2008 or would be exercisable within 60 days following
March 15, 2008 are considered outstanding.  Such shares, however, are
not considered outstanding for the purpose of computing the percentage ownership
of any other person.  To our knowledge and unless otherwise indicated,
each stockholder has sole voting power and investment power over the shares
listed as beneficially owned by such stockholder, subject to community property
laws where applicable.  Percentage ownership is based on 10,000,498
shares of Common Stock outstanding as of March 15, 2008.  Unless
otherwise listed in the table below, the address of each such beneficial owner
is c/o WHX Corporation, 1133 Westchester Avenue, Suite N222, White Plains,
NY.





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Name
      and Address of Beneficial Owner
            Shares
      Beneficially Owned
            Percentage
      of ClassSteel
      Partners II,
      L.P.  (1)
              590
      Madison Avenue
              New
      York, New York 10022
            5,029,793
            
            50.3%Wynnefield
      Capital Management, LLC
      (2)
              450
      Seventh Avenue, Suite 509
              New
      York, NY 10123
            853,695
            
            8.5%GAMCO
      Investors, Inc.
      (3)
              One
      Corporate Center
              Rye,
      New York 10580-1435
            620,270
            
            6.2%Warren
      G. Lichtenstein
      (1)
            5,029,793
            
            50.3%Ellen
      T. Harmon
      (4)
            0
            
            0Jack
      L.  Howard
            0
            
            0Glen
      M.  Kassan
            0
            
            0Louis
      Klein, Jr.
      (5)
            7,000
            
            *James
      F. McCabe, Jr.
      (6)
            25,000
            
            *Daniel
      P. Murphy, Jr.
      (7)
            50,000
            
            *John
      J.
      Quicke
            0
            
            0John
      H. McNamara,
      Jr.
            0
            
            0Garen
      W.  Smith
      (8)
            5,147
            
            *All
      Directors and Executive Officers as a Group
              (12
      persons)
      (9)
            5,162,774
            
            51.0%







*
      less than 1%




(1)
            Based
      upon Amendment No. 3 to Schedule 13D it filed on December 31, 2007, Steel
      Partners beneficially owns 5,029,793 shares of Common
      Stock.  Steel GP LLC, as the general partner of Steel Partners,
      may be deemed to beneficially own the shares of Common Stock owned by
      Steel Partners.  Mr. Lichtenstein, as the sole executive officer
      and managing member of Steel GP LLC, may be deemed to beneficially own the
      shares of Common Stock owned by Steel Partners.  Mr.
      Lichtenstein has sole voting and dispositive power with respect to the
      5,029,793 shares of Common Stock owned by Steel Partners by virtue of his
      authority to vote and dispose of such shares.  Mr. Lichtenstein
      disclaims beneficial ownership of the shares of Common Stock owned by
      Steel Partners except to the extent of his pecuniary interest
      therein.




(2)
            Based
      on a Schedule 13G/A it filed on February 14, 2008, a group including
      Wynnefield Capital Management, LLC beneficially owns 853,695 shares of
      Common Stock.




(3)
            Based
      on a Schedule 13D/A it filed on November 3, 2006, GAMCO Investors, Inc.
      beneficially owns 620,270 shares of Common
  Stock.




(4)
            Ms.
      Harmon resigned from her positions with the Company and its subsidiaries
      effective November 9, 2007.




(5)
            Includes
      5,000 shares of Common Stock issuable upon exercise of options within 60
      days hereof.






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(6)
            Consists
      of 25,000 shares of Common Stock issuable upon exercise of options within
      60 days hereof.




(7)
            Consists
      of 50,000 shares of Common Stock issuable upon exercise of options within
      60 days hereof.




(8)
            Includes
      5,000 shares of Common Stock issuable upon exercise of options within 60
      days hereof.




(9)
            Includes
      45,834 shares of Common Stock issuable upon exercise of options within 60
      days hereof held by executive officers not specifically identified in the
      table.




Item
      13.
              Certain Relationships and Related
      Transactions




Warren G.
Lichtenstein, Chairman of the Board of the Company, is also the sole executive
officer and managing member of Steel GP LLC, the general partner of Steel
Partners.  Mr. Lichtenstein is also the President, Chief Executive
Officer and a Director of SPL, a management and advisory company that provides
management services to Steel Partners and its affiliates.  Steel
Partners owns 5,029,793 shares of the Company’s Common Stock.  In
addition, Glen M. Kassan (Director and Chief Executive Officer of WHX), John J.
Quicke (Director and Vice President of WHX), Jack L. Howard (Director) and John
H. McNamara, Jr. (Director) are employees of SPL, an affiliate of Steel
Partners.




To our
knowledge, there are no transactions involving the Company and any related
person, as that term is used in applicable SEC regulations, in the fiscal year
ended December 31, 2007 which are required to be disclosed in this Annual Report
on Form 10-K which are not disclosed.  Our Board of Directors is
charged with monitoring and reviewing issues involving potential conflicts of
interest, and reviewing and approving all related party
transactions.




Item
      14.
            Principal Accountant Fees and
      Services




The Audit
Committee’s policy is to pre-approve services to be performed by the Company’s
independent public accountants in the categories of audit services,
audit-related services, tax services and other
services.  Additionally, the Audit Committee will consider on a
case-by-case basis and, if appropriate, approve specific engagements that are
not otherwise pre-approved.  The Audit Committee has approved all fees
and advised us that it has determined that the non-audit services rendered by
Grant Thornton during our most recent fiscal year are compatible with
maintaining the independence of such auditors.




The
following table sets forth the following: under “Audit Fees,” the aggregate
fees billed for each of the past two fiscal years for professional services
rendered by the principal accountant for the audit of the Company's financial
statements, review of financial statements included in the Company's quarterly
reports, and review of registration statements filed with the SEC; under “Audit-Related
Fees,” the
aggregate fees billed in 2007 by the principal accountant for services
pertaining to the audit of the financial statements of Bairnco's 401(k) Plan;
under "Tax Fees," the aggregate fees billed in 2007 for professional services
rendered by the principal accountant for tax compliance, advice and
planning.





2007
              
              2006Audit
      Fees
              2,533,565
              
              
              1,680,144Audit-Related
      Fees
              20,276
              
              
              -Tax
      fees
              44,057
              
              
              -All
      other fees
              -
              
              
              -





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PART
IV





Item
15.                 Exhibits and
Financial Statement Schedules





(a)
3.                 Exhibits




2
            .1
            First
      Amended Chapter 11 Plan of Reorganization of the Company, dated June 8,
      2005 (incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K
      filed July 28, 2005).2
            .2
            Third
      Amended Joint Plan of Reorganization of Wheeling-Pittsburgh Steel
      Corporation, dated May 19, 2003 (incorporated by reference to Exhibit 2.1
      to Wheeling-Pittsburgh Corporation’s Registration Statement on Form 10
      filed May 30, 2003).3
            .1
            Amended
      and Restated Certificate of Incorporation of WHX (incorporated by
      reference to Exhibit 3.1 to the Company’s Form 10-K, filed December 27,
      2006).3
            .2
            Amended
      and Restated By Laws of WHX (incorporated by reference to Exhibit 3.2 to
      the Company’s Form 10-K, filed December 27, 2006).4
            .1
            Loan
      and Security Agreement by and among Handy & Harman, certain of its
      affiliates and Congress Financial Corporation, dated March 31, 2004
      (incorporated by reference to Exhibit 4.2 to the Company’s Form 10-K filed
      April 14, 2004).4
            .2
            Consent
      and Amendment No. 1 to Loan and Security Agreement by and among Handy
      & Harman, certain of its affiliates and Congress Financial
      Corporation, dated as of August 31, 2004 (incorporated by reference to
      Exhibit 4.1 to the Company’s Form 10-Q filed November 15,
      2004).4
            .3
            Amendment
      No. 2 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Congress Financial Corporation, dated as of
      October 29, 2004 (incorporated by reference to Exhibit 4.2 to the
      Company’s Form 10-Q filed November 15, 2004).4
            .4
            Amendment
      No. 3 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Congress Financial Corporation, dated as of
      December 29, 2004 (incorporated by reference to Exhibit 4.4 to the
      Company’s Form 10-K filed December 27, 2006).4
            .5
            Amendment
      No. 4 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Wachovia Bank, National Association, a
      national banking association, successor by merger to Congress Financial
      Corporation, dated as of May 20, 2005 (incorporated by reference to
      Exhibit 4.5 to the Company’s Form 10-K filed December 27,
      2006).4
            .6
            Amendment
      No. 5 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Wachovia Bank, National Association, a
      national banking association, successor by merger to Congress Financial
      Corporation, dated as of September 8, 2005 (incorporated by reference to
      Exhibit 4.6 to the Company’s Form 10-K filed December 27,
      2006).4
            .7
            Amendment
      No. 6 and Waiver to Loan and Security Agreement by and among Handy &
      Harman, certain of its affiliates and Wachovia Bank, National Association,
      a national banking association, successor by merger to Congress Financial
      Corporation, dated as of December 29, 2005 (incorporated by reference to
      Exhibit 4.7 to the Company’s Form 10-K filed December 27,
      2006).4
            .8
            Consent
      and Amendment No. 7 to Loan and Security Agreement by and among Handy
      & Harman, certain of its affiliates and Wachovia Bank, National
      Association, a national banking association, successor by merger to
      Congress Financial Corporation, dated as of January 24, 2006(incorporated by
      reference to Exhibit 4.8 to the Company’s Form 10-K filed December 27,
      2006).4
            .9
            Amendment
      No. 8 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Wachovia Bank, National Association, a
      national banking association, successor by merger to Congress Financial
      Corporation, dated as of March 31, 2006 (incorporated by reference to
      Exhibit 4.1 to the Company’s Form 8-K filed April 6,
  2006).






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4
            .10
            Amendment
      No. 9 to the Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Wachovia Bank, National Association, a
      national banking association, successor by merger to Congress Financial
      Corporation, dated as of July 18, 2006 (incorporated by reference to
      Exhibit 99.1 to the Company’s Form 8-K filed July 24,
    2006).4
            .11
            Amendment
      No. 10 to the Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Wachovia Bank, National Association, a
      national banking association, successor by merger to Congress Financial
      Corporation, dated as of October 30, 2006 (incorporated by reference to
      Exhibit 99.1 to the Company’s Form 8-K filed November 03,
      2006).4
            .12
            Amendment
      No. 11 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated December 28, 2006 (incorporated by reference to Exhibit 99.1.3 to
      the Company’s Form 8-K filed January 4, 2007).4
            .13
            Amendment
      No. 12 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated December 28, 2006 (incorporated by reference to Exhibit 99.1.4 to
      the Company’s Form 8-K filed January 4, 2007).4
            .14
            Amendment
      No. 13 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated March 29, 2007 (incorporated by reference to Exhibit 99.1 to the
      Company’s Form 8-K filed March 30, 2007).4
            .15
            Amendment
      No. 14 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated July 20, 2007 (incorporated by reference to Exhibit 4.15 to
      Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed
      November 30, 2007).4
            .16
            Amendment
      No. 15 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated September 20, 2007 (incorporated by reference to Exhibit 4.16 to
      Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed
      November 30, 2007).*4
            .17
            Amendment
      No. 16 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated October 31, 2007.*4
            .18
            Amendment
      No. 17 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated January 11, 2008.*4
            .19
            Amendment
      No. 18 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated February 14, 2008.*4
            .20
            Amendment
      No. 19 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Wachovia Bank, National Association, as agent,
      dated February 14, 2008.4
            .21
            Certificate
      of Designations, Preferences and Other Rights and Qualifications of Series
      A Preferred Stock of WHX CS Corp. (incorporated by reference to Exhibit
      4.1 to the Company’s Form 8-K filed November 1, 2005).4
            .22
            Loan
      and Security Agreement by and among Handy & Harman, certain of its
      affiliates and Ableco Finance LLC, dated March 31, 2004 (incorporated by
      reference to Exhibit 4.3 to the Company’s Form 10-K filed April 14,
      2004).4
            .23
            Loan
      and Security Agreement Amendment by and among Handy & Harman, certain
      of its affiliates and Canpartners Investments IV, LLC, dated as of October
      29, 2004 (incorporated by reference to Exhibit 4.3 to the Company’s Form
      10-Q filed November 15, 2004).4
            .24
            Amendment
      No. 2 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Canpartners Investments IV, LLC, dated as of
      December 29, 2004 (incorporated by reference to Exhibit 4.15 to the
      Company’s Form 10-K filed December 27,
2006).






101
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4
            .25
            Amendment
      No. 3 and Waiver to Loan and Security Agreement  by and among
      Handy & Harman, certain of its affiliates and
      Steel  Partners II, L.P., successor by assignment from
      Canpartners Investments IV, LLC, dated as of December 29, 2005
      (incorporated by reference to Exhibit 4.16 to the Company’s Form 10-K
      filed December 27, 2006).4
            .26
            Consent
      and Amendment No. 4 to Loan and Security Agreement  by and among
      Handy & Harman, certain of its affiliates and
      Steel  Partners II, L.P., successor by assignment from
      Canpartners Investments IV, LLC, dated as of January 24, 2006
      (incorporated by reference to Exhibit 4.17 to the Company’s Form 10-K
      filed December 27, 2006).4
            .27
            Amendment
      No. 5 to Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Steel Partners II, L.P., successor by
      assignment from Canpartners Investments IV, LLC, dated as of March 31,
      2006 (incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K
      filed April 6, 2006).4
            .28
            Amendment
      No. 6 to the Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Steel Partners II, L.P., successor by
      assignment from Canpartners Investments IV, LLC, dated as of July 18, 2006
      (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K filed
      July 24, 2006).4
            .29
            Amendment
      No. 7 to the Loan and Security Agreement by and among Handy & Harman,
      certain of its affiliates and Steel Partners II, L.P., successor by
      assignment from Canpartners Investments IV, LLC, dated as of October 30,
      2006 (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K
      filed November 3, 2006).4
            .30
            Amendment
      No. 8 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P., dated December 28, 2006
      (incorporated by reference to Exhibit 99.1.5 to the Company’s Form 8-K
      filed January 4, 2007).4
            .31
            Amendment
      No. 9 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners, II, L.P. dated December 28, 2006
      (incorporated by reference to Exhibit 99.1.6 to the Company’s Form 8-K
      filed January 4, 2007).4
            .32
            Amendment
      No. 10 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners, II, L.P. dated March 29, 2007
      (incorporated by reference to Exhibit 99.2 to the Company’s Form 8-K filed
      March 30, 2007).4
            .33
            Amendment
      No. 11 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P. dated July 20, 2007
      (incorporated by reference to Exhibit 4.29 to Amendment No. 1 to the
      Company’s Registration Statement on Form S-1 filed November 30,
      2007).4
            .34
            Amendment
      No. 12 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P. dated September 10, 2007
      (incorporated by reference to Exhibit 4.30 to Amendment No. 1 to the
      Company’s Registration Statement on Form S-1 filed November 30,
      2007).*4
            .35
            Amendment
      No. 13 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P., dated November 5,
      2007.*4
            .36
            Amendment
      No. 14 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P., dated February 14,
      2008.*4
            .37
            Amendment
      No. 15 to the Loan and Security Agreement by and among Handy & Harman
      and its subsidiaries, and Steel Partners II, L.P., dated February 14,
      2008.4
            .38
            Loan
      and Security Agreement by and among BZ Acquisition Corp., Bairnco
      Corporation and Steel Partners II, L.P., dated April 17, 2007
      (incorporated by reference to Exhibit 99.3 to the Company’s Form 8-K filed
      April 12, 2007).4
            .39
            Subordinated
      Loan and Security Agreement between WHX Corporation and Steel Partners II,
      L.P., dated April 17, 2007 (incorporated by reference to Exhibit 99.4 to
      the Company’s Form 8-K filed April 12, 2007).4
            .40
            Loan
      and Security Agreement entered into by and among Bairnco Corporation,
      Arlon, Inc., Kasco Corporation, Bertram & Graf Gmbh, Atlantic Service
      Co. Ltd., Atlantic Service Co. (UK) Ltd. and Eurokasco S.A., as borrowers,
      and certain financial institutions, as lenders and Bank of America, N.A.,
      as agent, dated November 9, 2006 (incorporated by reference to Exhibit
      4.29 to the Company’s Form 10-K filed May 21, 2007).4
            .41
            Waiver
      and First Amendment to Loan and Security Agreement entered into by and
      between Bairnco Corporation and Bank of America, N.A., dated March 23,
      2007 (incorporated by reference to Exhibit 4.30 to the Company’s Form 10-K
      filed May 21, 2007).






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4
            .42
            Waiver,
      Consent and Second Amendment to Loan and Security Agreement entered into
      by and between Bairnco Corporation and Bank of America, N.A., dated April
      24, 2007 (incorporated by reference to Exhibit 4.31 to the Company’s Form
      10-K filed May 21, 2007).4
            .43
            Credit
      Agreement, dated as of July 17, 2007, by and among Bairnco, Arlon, Inc.,
      Arlon Viscor Ltd., Arlon Signtech, Ltd., Kasco Corporation, and Southern
      Saw Acquisition Corporation, as borrowers, and Wells Fargo Foothill, Inc.,
      as the arranger and administrative agent for the lenders thereunder
      (incorporated by reference to Exhibit 4.36 to Amendment No. 1 to the
      Company’s Registration Statement on Form S-1 filed November 30,
      2007).*4
            .44
            Amendment No. 1 to the Credit
      Agreement by and among Bairnco, Arlon, Inc., Arlon Viscor Ltd., Arlon
      Signtech, Ltd., Kasco Corporation, and Southern Saw Acquisition
      Corporation, as borrowers, and Wells Fargo Foothill, Inc., as the arranger
      and administrative agent for the lenders thereunder, dated February 14,
      2008.4
            .45
            Credit
      Agreement, dated as of July 17, 2007, by and among Bairnco, Arlon, Inc.,
      Arlon Viscor Ltd., Arlon Signtech, Ltd., Kasco Corporation, and Southern
      Saw Acquisition Corporation, as borrowers, and Ableco Finance LLC, as
      administrative agent for the lenders thereunder (incorporated by reference
      to Exhibit 4.37 to Amendment No. 1 to the Company’s Registration Statement
      on Form S-1 filed November 30, 2007).*4
            .46
            Amendment
      No. 1 to the Credit Agreement by and among Bairnco, Arlon, Inc., Arlon
      Viscor Ltd., Arlon Signtech, Ltd., Kasco Corporation, and Southern Saw
      Acquisition Corporation, as borrowers, and Ableco Finance LLC, as
      administrative agent for the lenders thereunder, dated February 14,
      2008.4
            .47
            Amended
      and Restated Credit Agreement, dated as of July 17, 2007, by and among
      Bairnco, Arlon, Inc., Arlon Viscor Ltd., Arlon Signtech, Ltd., Kasco
      Corporation, and Southern Saw Acquisition Corporation, as borrowers, and
      Steel Partners II, L.P., as lender (incorporated by reference to Exhibit
      4.38 to Amendment No. 1 to the Company’s Registration Statement on Form
      S-1 filed November 30, 2007).*4
            .48
            Limited
      General Continuing Guaranty, dated as of February 14, 2008, by and among
      H&H and certain of it subsidiaries, in favor of Ableco Finance LLC, as
      Agent.*4
            .49
            Security
      Agreement, dated as of February 14, 2008, by and among H&H and certain
      of it subsidiaries and Ableco Finance LLC, as Agent.10
            .1
            Settlement
      and Release Agreement by and among Wheeling-Pittsburgh Steel Corporation
      (“WPSC”) and Wheeling-Pittsburgh Corporation (“WPC”), the Company and
      certain affiliates of WPSC, WPC and the Company (incorporated by reference
      to Exhibit 99.1 to the Company’s Form 8-K filed May 30,
    2001).10
            .2
            Amended
      and Restated Employment Agreement by and among WHX, H&H and Robert K.
      Hynes, dated as of March 4, 2005 (incorporated by reference to Exhibit
      10.4 to the Company’s Form 8-K filed March 8, 2005).10
            .3
            Employment
      Agreement by and between H&H and Daniel P. Murphy, Jr., effective
      February 11, 2004 (incorporated by reference to Exhibit 10.1 to the
      Company’s Form 10-Q filed November 15, 2004).*10
            .4
            Amendment
      to Employment Agreement by and among WHX, Handy & Harman and Daniel P.
      Murphy, dated as of February 20, 2008.10
            .5
            Warrant
      Agreement by and between the Company and Equiserve Trust Company, N.A.,
      dated as of July 29, 2005(incorporated by
      reference to Exhibit 10.4 to the Company’s Form 10-K filed December 27,
      2006).10
            .6
            Acknowledgement
      and Release dated November 14, 2005, by and among WHX, H&H and Robert
      K. Hynes (incorporated by reference to Exhibit 10.2 to the Company’s Form
      8-K filed April 6, 2006).10
            .7
            Acknowledgement
      and Release dated November 10, 2005, by and between H&H and Daniel P.
      Murphy, Jr. (incorporated by reference to Exhibit 10.1 to the Company’s
      Form 8-K filed April 6, 2006).10
            .8
            Employment
      Agreement by and among WHX, H&H and Ellen T. Harmon, dated as of
      February 6, 2006) (incorporated by reference to Exhibit 10.7 to the
      Company’s Form 10-K filed December 27, 2006).10
            .9
            Stock
      Purchase Agreement by and between WHX CS Corp. and Steel Partners II,
      L.P., dated October 26, 2005 (incorporated by reference to Exhibit 10.1 to
      the Company’s Form 8-K filed November 1,
2005).






103
 Table of Contents




10
            .10
            Supplemental
      Executive Retirement Plan (as Amended and Restated as of January 1, 1998)
      (incorporated by reference to Exhibit 10.9 to the Company’s Form 10-K
      filed December 27, 2006).10
            .11
            Agreement
      by and among the Pension Benefit Guaranty Corporation, WHX Corporation,
      Wheeling-Pittsburgh Corporation, Wheeling-Pittsburgh Steel Corporation and
      the United Steel Workers of America, AFL-CIO-CLC, dated as of July 31,
      2003) (incorporated by reference to Exhibit 10.10 to the Company’s Form
      10-K filed December 27, 2006).10
            .12
            2006
      Bonus Plan of the Company (incorporated by reference to Exhibit 10.11 to
      the Company’s Form 10-K filed December 27, 2006).10
            .13
            2007
      Incentive Stock Plan (incorporated by reference to Exhibit B to the
      Company’s Schedule 14A filed May 25, 2007).10
            .14
            Settlement
      Agreement by and among WHX Corporation, Handy & Harman, and Pension
      Benefit Guaranty Corporation dated December 28, 2006 (incorporated by
      reference to Exhibit 10.12 to the Company’s Form 8-K filed January 4,
      200710
            .15
            Asset
      Purchase Agreement by and among Illinois Tool Works Inc., ITW Canada, OMG
      Roofing, Inc., and OMG, Inc., dated December 28, 2006 (incorporated by
      reference to Exhibit 10.12 to the Company’s Form 10-K filed March 9,
      2007).10
            .16
            Employment
      Agreement by and among WHX Corporation, Handy & Harman, and James
      McCabe dated as of February 1, 2007 (incorporated by reference to Exhibit
      10.14 to the Company’s Form 10-K filed May 21, 2007).*10
            .17
            Employment
      Agreement by and between Handy & Harman and Jeffrey A. Svoboda,
      effective January 28, 2008.14
            .1
            Code
      of Ethics of WHX Corporation (incorporated by reference to Exhibit 14.1 to
      the Company’s Form 10-K filed April 14, 2004).16
            .1
            Letter
      from PricewaterhouseCoopers LLP, dated as of January 17, 2007
      (incorporated by reference to Exhibit 16 to the Company’s Form 8-K filed
      January 23, 2007).*21
            
            Subsidiaries
      of Registrant*23
            .1
            Consent
      of Independent Registered Accounting Firm - Grant Thornton
  LLP.*31
            .1
            Certification
      by Principal Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*31
            .2
            Certification
      by Principal Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.*32
            
            Certification
      by Principal Executive Officer and Principal Financial Officer pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.






* - filed herewith.







(b)       Financial
Statements and Schedules:


1.  Audited
Financial Statements of WHX Corporation (Parent Only).   See
pages F-1 to F-8.


2.  Schedule II – Valuation and Qualifying Accounts and
Reserves.  See Page F-9







104
 Table of Contents





SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on March 31, 2008.


By:
              /s/ Glen M. KassanName:
              Glen
      M. KassanTitle:
              Chief
      Executive Officer





POWER OF
ATTORNEY




WHX
Corporation and each of the undersigned do hereby appoint Glen M. Kassan and
Robert K. Hynes, and each of them severally, its or his true and lawful attorney
to execute on behalf of WHX Corporation and the undersigned any and all
amendments to this Annual Report on Form 10-K and to file the same with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission; each of such attorneys shall have the power
to act hereunder with or without the other.




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the date indicated.





By:
              /s/
      Warren G. Lichtenstein
              
              March
      31, 2008Warren
      G. Lichtenstein, Chairman of the Board
              
              DateBy:
              /s/
      Glen M. Kassan
              
              March
      31, 2008Glen
      M. Kassan, Director and Chief Executive Officer
                (Principal
      Executive Officer)
              
              DateBy:
              /s/
      Robert K. Hynes
              
              March
      31, 2008Robert
      K. Hynes, Chief Financial Officer
                (Principal
      Accounting Officer)
              
              DateBy:
              /s/
      John H. McNamara, Jr.
              
              March
      31, 2008John
      H. McNamara, Jr., Director
              
              DateBy:
              /s/
      John J. Quicke
              
              March
      31, 2008John
      J. Quicke, Director
              
              DateBy:
              /s/
      Louis Klein, Jr.
              
              March
      31, 2008Louis
      Klein, Jr., Director
              
              DateBy:
              /s/
      Jack L. Howard
              
              March
      31, 2008Jack
      L. Howard, Director
              
              DateBy:
              /s/
      Daniel P. Murphy, Jr.
              
              March
      31, 2008Daniel
      P. Murphy, Jr., Director
              
              DateBy:
              /s/
      Garen W. Smith
              
              March
      31, 2008Garen
      W. Smith, Director
              
              Date





Table of Contents




WHX
CORPORATION (PARENT ONLY)


Statements
of Operations


Year
      ended December 31,2007
              
              
              2006(in
      thousands)Cost
      and expenses:Pension
      income
              
              $
              (4,963
              )
              
              $
              (4,785
              )Administrative
      and general expense
              
              
              6,750
              
              
              
              3,813Subtotal
      - expenses (income)
              
              
              1,787
              
              
              
              (972
              )Interest
      expense - H&H notes payable
              
              
              551
              
              
              
              -Interest
      on long-term debt - related party
              
              
              1,779
              
              
              
              -Interest
      income
              
              
              (18
              )
              
              
              (1,004
              )Equity
      in after tax losses of subsidiaries
              
              
              (16,721
              )
              
              
              (20,126
              )Other
      income (expense) - net
              
              
              49
              
              
              
              -Loss before
      taxes
              
              
              (20,771
              )
              
              
              (18,150
              )Tax
      provision (benefit)
              
              
              -
              
              
              
              -Net
      loss
              
              $
              (20,771
              )
              
              $
              (18,150
              )
   SEE NOTES
TO PARENT ONLY FINANCIAL STATEMENTS





F-1
 Table of Contents





WHX
CORPORATION (PARENT ONLY)


Balance
Sheets


December
      31,2007
              
              
              2006ASSETS
              
              (in
      thousands)Current
      assets:Cash
      and cash equivalents
              
              $
              590
              
              
              $
              102Other
      current assets
              
              
              688
              
              
              
              238Total
      current assets
              
              
              1,278
              
              
              
              340Investment
      in and advances to subsidiaries - net
              
              
              (15,199
              )
              
              
              (8,995
              )$
              (13,921
              )
              
              $
              (8,655
              )LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable
              
              $
              758
              
              
              $
              1,043Accrued
      interest-H&H
              
              
              551
              
              
              
              -Accrued
      expenses
              
              
              1,141
              
              
              
              620Total
      current liabilities
              
              
              2,450
              
              
              
              1,663Notes
      payable - H&H
              
              
              22,000
              
              
              
              -Accrued
      pension liability
              
              
              14,395
              
              
              
              53,445Subordinated
      note - related party
              
              
              16,779
              
              
              
              -55,624
              
              
              
              55,108Commitments
      and contingenciesStockholders'
      Equity:Preferred
      stock - $.01 par value; authorized 5,000 shares; issued and outstanding
      -0- shares
              
              
              -
              
              
              
              -Common
      stock -  $.01 par value; authorized 50,000 and 40,000 shares,
      respectively; issued and outstanding:10,000
      shares as of December 31, 2007 and 2006
              
              
              100
              
              
              
              100Accumulated
      other comprehensive  loss
              
              
              (32,559
              )
              
              
              (47,335
              )Additional
      paid-in capital
              
              
              395,748
              
              
              
              394,308Warrants
              
              
              1,287
              
              
              
              1,287Accumulated
      deficit
              
              
              (434,121
              )
              
              
              (412,123
              )(69,545
              )
              
              
              (63,763
              )$
              (13,921
              )
              
              $
              (8,655
              )


SEE NOTES
TO PARENT ONLY FINANCIAL STATEMENTS


F-2
 Table of Contents




WHX
CORPORATION (PARENT ONLY)
 Consolidated
Statements of Cash Flows


Year
      ended December 31,2007
              
              
              2006(in
      thousands)Cash
      Flows From Operating ActivitiesNet
      loss
              
              $
              (20,771
              )
              
              $
              (18,150
              )Non
      cash income and expensesAmortization
      of deferred financing fees
              
              
              -
              
              
              
              27Payment
      in kind interest - related party
              
              
              1,779
              
              
              
              -Payment
      in kind interest - H&H
              
              
              551
              
              
              
              -Equity
      in loss of subsidiaries-continuing
              
              
              16,721
              
              
              
              20,126Non-cash
      stock based compensation
              
              
              1,612
              
              
              
              -Interest
      accrued on H&H Subordinated Note
              
              
              -
              
              
              
              (1,004
              )Decrease/(increase)
      in working capital elementsAdvances
      from affiliates
              
              
              5,545
              
              
              
              11,125Pension
      payments-WHX plan
              
              
              (21,600
              )
              
              
              (13,087
              )Other
      current
              
              
              (5,349
              )
              
              
              (8,120
              )Other
      items (net)
              
              
              -
              
              
              
              179Net
      cash (used)/provided by operating activities
              
              
              (21,512
              )
              
              
              (8,904
              )Cash
      Flows from Investing ActivitiesInvestments
      in Bairnco
              
              
              (15,000
              )
              
              
              -H&H
      - Subordinated Note
              
              
              -
              
              
              
              9,000Net
      cash provided/(used) by investing activities
              
              
              (15,000
              )
              
              
              9,000Cash
      flows from financing activitiesNotes
      payable - H&H
              
              
              22,000
              
              
              
              -Long
      term debt - related party
              
              
              15,000
              
              
              
              -Net
      cash provided by financing activities
              
              
              37,000
              
              
              
              -Increase/(decrease)
      in cash and cash equivalents
              
              
              488
              
              
              
              96Cash
      and cash equivalents at beginning of period
              
              
              102
              
              
              
              6Cash
      and cash equivalents at end of period
              
              $
              590
              
              
              $
              102


SEE NOTES
TO PARENT ONLY FINANCIAL STATEMENTS







F-3
 Table of Contents





NOTES
TO WHX PARENT ONLY FINANCIAL STATEMENTS




Note
1 - Background





Basis of
Presentation:





The WHX
Corporation (Parent Only) ("WHX") financial statements include the accounts of
all subsidiary companies accounted for under the equity method of
accounting.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles ("GAAP") have been condensed or omitted.  These
WHX parent only financial statements are prepared on the same basis of
accounting as the WHX consolidated financial statements, except that the WHX
subsidiaries are accounted for under the equity method of
accounting.  For a complete description of the accounting policies and
other required GAAP disclosures, refer to the Company’s audited consolidated
financial statements for the year ended December 31, 2007 contained in Item 8 of
this Form 10-K (the "consolidated financial statements").





WHX is a
holding company that invests in and manages a group of businesses on a
decentralized basis.  WHX owns Handy & Harman (“H&H”), which
is a diversified manufacturing company whose strategic business units encompass
three reportable segments: Precious Metal, Tubing, and Engineered
Materials.  In April 2007, WHX acquired Bairnco Corporation
(“Bairnco”).  Bairnco operates business units in three reportable
segments: Arlon Electronic Materials, Arlon Coated Materials, and Kasco
Replacement Products and Services. H&H and Bairnco principally operate in
North America.  WHX, together with all of its subsidiaries, shall be
referred to herein as the “Company”.





Management’s Plans and
Liquidity:





The
Company incurred net losses of $20.8 million, $18.2 million and $34.7 million
for the years ended December 31, 2007, 2006 and 2005, respectively, and had
negative cash used in operating activities of $2.8 million, $17.7 million and
$4.5 million for the years ended December 31, 2007, 2006, and 2005,
respectively.  As of December 31, 2007, the Company had an accumulated
deficit of $434.1 million.  On February 14, 2008, H&H and certain
of its subsidiaries amended its Loan and Security Agreement with Wachovia Bank,
National Association (the “Wachovia Facilities”) and its Loan and Security
Agreement with Steel Partners (the “Term B Loan”) to, among other things, extend
the maturity date to June 30, 2009.  Bairnco’s bank debt was
refinanced in July 2007 with a new scheduled maturity of
2012.  H&H and Bairnco have not been in compliance with certain of
their bank covenants and have been required to obtain waivers from their lenders
related to such covenants.  Upon receipt of such waivers, the Company
was in compliance.





In recent
years, the Company experienced liquidity issues. On March 7, 2005, WHX filed a
voluntary petition (“Bankruptcy Filing”) to reorganize under Chapter 11 of the
United States Bankruptcy Code .  It emerged from protection under
Chapter 11 on July 29, 2005 (the "Effective Date").  WHX is a holding
company and has as its sole source of cash flow distributions from its operating
subsidiaries, H&H and Bairnco, or other discrete
transactions.  H&H’s credit facilities effectively do not permit
it to transfer any cash or other assets to WHX (with the exception of
(i) an unsecured loan for required payments to the WHX Pension Plan,
(ii) an unsecured loan for other uses in the aggregate principal amount not
to exceed $7.0 million, of which approximately $3.4 million has been
distributed, (iii) the loan, distribution or other advance of up to
approximately $7.4 million, subject to certain limitations, to the extent loaned
by Steel Partners II, L.P. (“Steel Partners”) to H&H, of which approximately
$3.2 million has already been distributed, and (iv) up to $13.1 million to be
used by WHX solely to make a contribution to the WHX Pension Plan, which
contribution of $13.0 million was made on September 12,
2007.  H&H’s credit facilities are collateralized by substantially
all of H&H’s assets.  Similarly, Bairnco’s bank credit facilities
and term loan do not permit it to make any distribution, pay any dividend or
transfer any cash or other assets to WHX other than common stock of
Bairnco.




WHX’s
ongoing operating cash flow requirements consist of funding the minimum
requirements of the WHX Pension Plan and paying administrative
costs.  On September 12, 2007, WHX made a payment to the WHX Pension
Plan of $13.0 million, which exceeded the minimum required contribution under
ERISA.  As a result of such accelerated contribution, the required
contributions to the WHX Pension Plan over the next five years are expected to
significantly decline, with no contribution required in 2008, and the Company
believes that the full amount of the IRS Waiver has been repaid, and all liens
granted to the PBGC pursuant to the PBGC Settlement Agreement have been
released.







F-4
 Table of Contents








Since
emerging from bankruptcy, due to covenant restrictions in their respective
credit facilities, there have been no dividends from H&H or Bairnco to WHX
and WHX’s sources of cash flow have consisted of:




·
            The
      issuance of $5.1 million in preferred stock by a newly created subsidiary
      in October 2005, which was invested in the equity of a public company
      (CoSine Communications Inc.);


·
            Partial
      payment by H&H of a subordinated debt to WHX of $9.0 million, which
      required the approval of the banks participating in the H&H credit
      facilities.  Subsequent to this transaction in 2006, the
      remaining intercompany loan balance of the subordinated debt of $44.2
      million was converted to equity;


·
            As
      permitted by the March 29, 2007 amendment and waiver to the H&H credit
      facilities, an unsecured loan from H&H for required payments to the
      WHX Pension Plan, and an unsecured loan for other uses in the aggregate
      principal amount not to exceed $3.5 million (subsequently amended on
      February 14, 2008 to $7.0 million), of which approximately $3.4 million
      has been distributed;


·
            A
      $15.0 million subordinated loan from Steel Partners pursuant to the
      Subordinated Loan Agreement which WHX used to fund a capital contribution
      to BZA to finance in part the Bairnco
  Acquisition;


·
            As
      permitted by the July 27, 2007 amendment to the H&H credit
      facilities, an unsecured loan, distribution or other advance from H&H
      to WHX of up to approximately $7.4 million, subject to certain
      limitations, to the extent loaned by Steel Partners to H&H, of which
      approximately $3.2 million has already been distributed;
    and


·
            As
      permitted by a September 10, 2007 amendment to the H&H credit
      facilities, an unsecured loan from H&H of $13.0 million which was used
      by WHX to make a payment to the WHX Pension Plan on September 12,
      2007.






We do not
anticipate that the Company will have any additional sources of cash flow other
than (i) as described above, (ii) from operations, (iii) from the sale of
non-core assets, and (iv) from the proceeds of a proposed rights offering (see
Note 16 to the consolidated financial statements).  In addition, the
proceeds of the proposed rights offering are expected to be used to redeem
preferred stock and to retire indebtedness, and accordingly will not be
available for general corporate purposes, except that $5 million of which shall
be used to pay down the revolver under the Wachovia Facilities pursuant to a
February 14, 2008 amendment to H&H’s credit facilities.




As of
December 31, 2007, WHX and its subsidiaries that are not restricted by loan
agreements or otherwise from transferring funds to WHX (collectively, its
“Unrestricted Subsidiaries”) had cash of approximately $0.7 million and current
liabilities of approximately $7.3 million, including $5.8 million of mandatorily
redeemable preferred shares plus accrued dividends payable to a related
party.




H&H’s
availability under its credit facilities as of December 31, 2007 was $12.3
million, and as of February 29, 2008, was approximately $18.6 million. See Note
11 to the consolidated financial statements for a description of H&H’s
credit facilities, including recent amendments.




In
connection with the closing of the Bairnco Acquisition (see Note 5 to the
consolidated financial statements) in April 2007, initial financing was provided
by Steel Partners II, L.P, a 50.3% stockholder of WHX (“Steel Partners”) through
two credit facilities.  Steel Partners extended bridge loans in the
aggregate principal amount of approximately $86.5 million pursuant to a Loan and
Security Agreement (the “Bridge Loan Agreement”), between BZA and Bairnco, as
borrowers, and Steel Partners, as lender.  In addition, Steel Partners
extended to WHX a $15.0 million subordinated loan, which is unsecured at the WHX
level, pursuant to a Subordinated Loan and Security Agreement, dated as of April
17, 2007 (the “Subordinated Loan Agreement”) between WHX, as borrower, and Steel
Partners, as lender.  WHX contributed the $15.0 million proceeds of
the subordinated loan to Bairnco as a capital contribution.




On July
18, 2007, Bairnco and certain of its subsidiaries entered into (i) the
First Lien Credit Agreement with Wells Fargo, which provides for a revolving
credit facility to the borrowers in an aggregate principal amount not to exceed
$30.0 million and a term loan facility of $28.0 million, (ii) the Second
Lien Credit Agreement with Ableco, which provides for a term loan facility to
the borrowers of $48.0 million., and (iii) the Subordinated Debt Credit
Agreement with Steel Partners as lender providing for a term loan of
approximately $31.8 million, and completed the refinancing of: (A) all
existing indebtedness of Bairnco and its subsidiaries under the Bairnco Senior
Secured Credit Facility and (B) approximately $56.7 million of the
indebtedness under the Bridge Loan Agreement.  The Subordinated Debt
Credit Agreement amended and restated the Bridge Loan Agreement.  The
scheduled maturity date of the indebtedness under each of the First Lien Credit
Agreement and Second Lien Credit Agreement is July 17, 2012, and the scheduled
maturity date of the indebtedness under the Subordinated Debt Credit Agreement
is January 17, 2013.







F-5
 Table of Contents




Bairnco’s
availability under its credit facilities as of December 31, 2007 was
approximately $5.3 million, and as of February 29, 2008, was approximately $6.1
million. See Note 11 to the consolidated financial statements for a description
of Bairnco’s credit facilities, including amendments.




In
addition to the obligations under the current credit facilities, the Company
also has significant cash flow obligations, including without limitation the
amounts due to the WHX Pension Plan (as amended by the IRS Waiver and PBGC
Settlement Agreement entered into December 28, 2006).  As a result of
the $13.0 million contribution to the WHX Pension Plan in September 2007,
however, the Company's required contributions to the WHX Pension Plan over the
next five years are expected to significantly decline, and the Company believes
that the full amount of the IRS Waiver has been repaid, and all liens granted to
the PBGC pursuant to the PBGC Settlement Agreement have been
released.




There can
be no assurance that the funds available from operations and under the Company’s
credit facilities will be sufficient to fund its debt service costs, working
capital demands, pension plan contributions, and environmental remediation
costs. However, as discussed further below, the Company believes that recent new
and amended financing arrangements, significant payments made in 2007 to the WHX
Pension Plan and the complete satisfaction of  the IRS Waiver,
acquisitions,  the sale of a non-essential operating unit, as well as
continuing improvements in its core operations and the substantial completion of
a major remediation of property relating to certain environmental liabilities
have permitted the Company to generate sufficient working capital to meet its
obligations as they mature for at least the next 12 months.  The
ability of the Company to meet its cash requirements over the next twelve months
is dependent, in part, on the Company’s ability to meet its business
plan.  Management believes that existing capital resources and sources
of credit, including the H&H credit facilities and the Bairnco credit
facilities, are adequate to meet its current and anticipated cash requirements.
The Company also continues to examine all of its options and strategies,
including acquisitions, divestitures, and other corporate transactions, to
increase cash flow and stockholder value, as well as considering the reduction
of certain discretionary expenses and sale of certain non-core
assets.   However, if the Company’s cash needs are greater than
anticipated or the Company does not materially satisfy its business plan, the
Company may be required to seek additional or alternative financing
sources.  There can be no assurance that such financing will be
available or available on terms acceptable to the Company.




As more
fully described in the specific notes to the consolidated financial statements,
the Company has taken the following actions which it believes will improve
liquidity and help provide for adequate liquidity to fund the Company’s capital
needs for the next twelve months:





·
            The
      Company requested and obtained, on December 20, 2006, a conditional waiver
      from the IRS of the $15.5 million minimum funding requirement for the WHX
      Pension Plan for the 2005 plan year.  On December 28, 2006, WHX,
      H&H, and the PBGC entered into the PBGC Settlement Agreement in
      connection with the IRS Waiver and certain other matters.  The
      Company made substantial payments to its WHX Pension Plan during 2006 and
      2007of $13.1 million and $21.6 million, respectively, including a payment
      on September 12, 2007 of $13.0 million, which exceeded minimum required
      contributions under ERISA.  As a result of such accelerated
      contribution, our required contributions to the WHX Pension Plan over the
      next five years are expected to significantly decline, and the Company
      believes that the full amount of the IRS Waiver has been repaid, and all
      liens granted to the PBGC pursuant to the PBGC Settlement Agreement have
      been released.  Our expected minimum funding requirements are
      $0.0, $2.5 million, $2.7 million, $0.8 million and $0.0 for 2008, 2009,
      2010, 2011 and 2012, respectively.  All minimum funding
      requirement calculations reflect the Pension Protection Act of 2006 as
      well as all other relevant rules.





·
            On
      various dates in 2007 and 2008, H&H and certain of its subsidiaries
      amended the Wachovia Facilities and the Term B Loan.  These
      agreements were each amended to, among other things, (i) extend the
      maturity date to June 30, 2009, (ii) grant a waiver to the events of
      default arising as a result of the attachment and garnishment of $3.5
      million in connection with certain litigation, (iii) permit additional
      loans by Steel Partners to H&H, (iv) permit loans or advances from
      H&H to WHX, subject to certain conditions, (v) allow for the
      acquisition of Omni Technologies Corporation, (vi) allow for the
      prepayment of the Term B Loan in the amount of and upon receipt by H&H
      of a capital or debt infusion from the Company from proceeds of the WHX
      rights offering, less $5 million to be used to pay down the revolver under
      the Wachovia Facilities, (vii) reset the levels of certain financial
      covenants, (viii) consent to the terms of the H&H Security Agreement
      and the H&H Guaranty which were granted in connection with amendments
      to Bairnco’s debt agreements, and (ix) amend applicable interest
      rates.  The Wachovia Facilities were also amended to permit an
      additional term loan to H&H of $4.0 million, funded by
      Ableco.








F-6
 Table of Contents








·
            On
      October 18, 2007, WHX filed a registration statement on Form S-1 with the
      Securities and Exchange Commission (“SEC”) for a proposed rights offering
      to its existing stockholders, and subsequently filed Amendments thereto
      dated November 30, 2007 and December 21, 2007.  The proposed
      rights offering will be made through the distribution of non-transferable
      subscription rights to purchase shares of WHX’s common stock, par value
      $0.01 per share, at a subscription price to be
      determined.  Assuming the proposed rights offering is fully
      subscribed, WHX could receive gross proceeds of approximately $200
      million, less expenses of the rights offering.  The proposed
      rights offering includes an oversubscription privilege which permits each
      rights holder, that exercises its rights in full, to purchase additional
      shares of common stock that remain unsubscribed at the expiration of the
      offering.  This oversubscription privilege is subject to (i) the
      availability and allocation of shares among persons exercising this
      oversubscription privilege and (ii) a maximum number of shares for which
      stockholders can oversubscribe for without endangering the availability of
      the Company’s NOLs under Section 382 of the Internal Revenue Code, in each
      case as further described in the rights offering
      documents.  Steel Partners has indicated that it intends to
      exercise all of its rights and to oversubscribe for the maximum number of
      shares it can oversubscribe for without (i) endangering the availability
      of the Company’s NOLs or (ii) increasing its ownership to in excess of 75%
      of the outstanding shares of WHX’s common stock.  A registration
      statement relating to these securities has been filed with the SEC but has
      not yet become effective. The purpose of this proposed rights offering is
      to raise equity capital in a cost-effective manner that gives all WHX’s
      stockholders the opportunity to participate. The net proceeds will be used
      to (i) make partial payments to certain senior lenders to certain
      wholly-owned subsidiaries of WHX and/or to contribute to the working
      capital of such subsidiaries, (ii) redeem preferred stock which is held by
      Steel Partners, and was issued by a wholly-owned subsidiary of WHX, (iii)
      to purchase shares of common stock of CoSine Communications, Inc. from
      Steel Partners, (iv) to repay WHX indebtedness to Steel Partners, and (v)
      to repay indebtedness of  wholly-owned subsidiaries of WHX to
      Steel Partners.





·
            The
      acquisition of Bairnco in April 2007 for approximately $101.5 million,
      which we believe will prove to be a valuable acquisition. On July 17,
      2007, Bairnco completed the refinancing of: (i) all of its indebtedness
      under its existing credit facility and (ii) approximately $56.7 million of
      indebtedness under the Bridge Loan Agreement with Steel Partners.
      Availability under Bairnco’s revolving credit facility as of December 31,
      2007 was $5.3 million, and as of February 29, 2008, was approximately $6.1
      million.  On February 14, 2008, Bairnco and certain of its
      subsidiaries amended its First Lien Credit Agreement with Wells Fargo and
      its Second Lien Credit Agreement with Ableco to, among other things, reset
      the levels of certain financial covenants.  The Second Lien
      Credit Agreement was also amended to provide for, among other things, a
      limited guaranty by H&H of up to $10 million, secured by a second lien
      on all of the assets of H&H pursuant to the H&H Security Agreement
      and the H&H Guaranty”. In addition, each of the First Lien Credit
      Agreement and the Second Lien Credit Agreement was also amended to, among
      other things, provide for either (i) the Company to invest $10 million
      from the proceeds of the proposed rights offering by March 31, 2008 in
      Bairnco and for such  proceeds to be used to prepay at least $10
      million under the First Lien Credit Agreement Term Loan, (ii) Steel
      Partners to issue a limited $10 million guaranty, or (iii) a capital or
      debt infusion of $10 million by either Steel Partners or WHX into Bairnco,
      or any combination of the
foregoing.





·
            The
      acquisition by a subsidiary of H&H of a mechanical roofing fastener
      business for approximately $26 million, on December 28, 2006, which we
      believe will prove to be a valuable acquisition which will solidify
      H&H’s position as a leading manufacturer and supplier of mechanical
      fasteners, accessories and components, and building products for the North
      American commercial and residential construction
      industry.  Also, in November 2007, H&H purchased all of the
      outstanding common stock of Omni Technologies Corporation of Danville, a
      manufacturer of flux cored brazing wire and metal powders used for brazing
      and soldering pastes.





·
            The
      sale in March 2007 of a non-core business which had generated operating
      losses in 2006.





·
            The
      substantial completion of remediation of property relating to certain
      environmental liabilities.





In view
of the matters described in the preceding paragraphs, management believes that
the Company has the ability to meet its financing requirements on a continuing
basis for at least the next twelve months.  However, if the Company’s
2008 planned cash flow projections are not met, management could consider the
reduction of certain discretionary expenses and sale of certain
assets.  In the event that these plans are not sufficient and the
Company’s credit facilities are not available, the Company’s ability to operate
could be materially adversely affected.







F-7





Note
2 - Investment in and Advances to Subsidiaries – Net





The
following table details the investments in and advances to associated companies,
accounted for under the equity method of accounting.




December
      312007
              
              
              2006(in
      thousands)Investment
      in:Handy
      & Harman
              
              $
              (15,080
              )
              
              $
              (8,436
              )Bairnco
              
              
              1,288
              
              
              $
              -WHX
      Aviation
              
              
              (5
              )
              
              
              (5
              )WHX
      CS
              
              
              (1,402
              )
              
              
              (1,166
              )Wheeling-Pittsburgh
      Capital Corporation
              
              
              -
              
              
              
              615WHX
      Metals
              
              
              -
              
              
              
              (3
              )Investment
      in and advances to subsidiaries - net
              
              $
              (15,199
              )
              
              $
              (8,995
              )








Note
3 – Equity in Earnings (Loss) of Subsidiaries




Year
      ended December 31,2007
              
              
              2006(in
      thousands)Handy
      & Harman
              
              $
              (4,070
              )
              
              $
              (19,016
              )Bairnco
              
              
              (12,419
              )
              
              
              -WHX
      CS
              
              
              (236
              )
              
              
              (1,150
              )Wheeling-Pittsburgh
      Capital Corporation
              
              
              4
              
              
              
              40$
              (16,721
              )
              
              $
              (20,126
              )




Note
4 - Related Party Transactions





In April
of 2007, in connection with the Bairnco Acquisition (see Note 2), Steel Partners
extended to WHX a $15.0 million subordinated loan, which is unsecured at the WHX
level, pursuant to a Subordinated Loan Agreement. Borrowings under the
Subordinated Loan Agreement bear pay-in-kind interest at a rate per annum equal
to the prime rate of JP Morgan Chase plus 7.75%, with a minimum interest rate of
16% per annum and a maximum interest rate of 19% per
annum.  Obligations under the Subordinated Loan Agreement are
guaranteed by Bairnco and certain of its subsidiaries and secured by a junior
lien on the assets of Bairnco and certain of its subsidiaries and capital stock
of certain of Bairnco’s subsidiaries. Principal and interest due under the
Subordinated Loan Agreement matures April 2009.  The balance due to
Steel Partners as of December 31, 2007 under the Subordinated Loan Agreement was
$16.8 million, including pay-in-kind interest.




On
various dates during 2007, H&H made unsecured loans totaling $22.0 million
to WHX, as permitted under H&H’s loan and security agreements, to make
payments to the WHX Pension Plan and for other general business
purposes.  These notes payable accrue interest at 6%.  As of
December 31, 2007 and 2006, the outstanding balance of these notes payable was
$22.0 million and $0, respectively.    Interest payable to
H&H as of December 31, 2007 and 2006 was $0.6 million and $0
respectively.







F-8
 Table of Contents




WHX
Corporation


Schedule
II –Valuation and Qualifying Accounts and Reserves




Description
              
              Balance
      at Beginning of Period
              
              
              Charged
      to Costs and Expenses
              
              
              Additions/ (Deductions) Describe
              
              
              Balance
      at End of of PeriodYear
      ended December 31, 2007Valuation
      allowance on state and local NOL's
              
              $
              5,198
              
              
              $
              -
              
              
              $
              -
              
              
              $
              5,198
              (1)Valuation
      allowance on federal NOL's
              
              
              56,711
              
              
              
              16,142
              
              
              
              (1,019
              )(3)
              
              
              71,834Valuation
      allowance on other net deferred tax assets
              
              
              34,764
              
              
              
              (20,872
              )
              
              
              (9,256
              )(2)
              
              
              4,63696,673
              
              
              
              (4,730
              )
              
              
              (10,275
              )
              
              
              81,668Allowance
      for Doubtful Accounts
              
              
              1,090
              
              
              
              536
              
              
              
              1,150
              
              
              
              2,776Total
              
              $
              97,763
              
              
              $
              (4,194
              )
              
              $
              (9,125
              )
              
              $
              84,444Year
      ended December 31, 2006Valuation
      allowance on state and local NOL's
              
              $
              4,120
              
              
              $
              1,078
              
              
              $
              -
              
              
              $
              5,198Valuation
      allowance on federal NOL's
              
              
              42,105
              
              
              
              17,800
              
              
              
              (3,194
              )(3)
              
              
              56,711Valuation
      allowance on other net deferred tax assets
              
              
              52,435
              
              
              
              (13,667
              )
              
              
              (4,004
              )(4)
              
              
              34,76498,660
              
              
              
              5,211
              
              
              
              (7,198
              )
              
              
              96,673Allowance
      for Doubtful Accounts
              
              
              1,087
              
              
              
              653
              
              
              
              (650
              )
              
              
              1,090Total
              
              $
              99,747
              
              
              $
              5,864
              
              
              $
              (7,848
              )
              
              $
              97,763





(1)
              The
      increase in deferred tax assets for 2007 state and local NOLs was offset
      by write-offs of past NOLs related to operations closed or sold by the
      Company.
 (2)
              Decrease
      in valuation allowance relates principally to the change in deferred taxes
      associated with miniumum pension liabilities recorded in other
      comprehensive income and acquisitions taking place during the
      year.
 (3)
              Reduction
      of NOLs (and related valuation allowance) due to expiration of
      carryforward period.
 (4)
              Increase
      (decrease) in valuation allowance relates principally to the change in
      deferred taxes associated with minimum pension liabilities recorded in
      other comprehensive income and the recognition of deferred tax assets for
      state and local taxes.







F-9