-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QmZFORbuGPNAyrLZOaNGMnoMwvi8sctuRxLptZIubGj8z4l2aEZF4klS/yua7YnU 054RPpx1Xl9FJFIIjC3j8g== 0000950152-01-503007.txt : 20010702 0000950152-01-503007.hdr.sgml : 20010702 ACCESSION NUMBER: 0000950152-01-503007 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWK CORP CENTRAL INDEX KEY: 0000849240 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC [3728] IRS NUMBER: 341608156 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-13797 FILM NUMBER: 1672174 BUSINESS ADDRESS: STREET 1: 200 PUBLIC SQ STE 30-5000 STREET 2: STE 29-2500 CITY: CLEVELAND STATE: OH ZIP: 44114 BUSINESS PHONE: 2168613553 MAIL ADDRESS: STREET 1: 200 PUBLIC SQUARE STREET 2: STE 29-2500 CITY: CLEVELAND STATE: OH ZIP: 44114-2301 FORMER COMPANY: FORMER CONFORMED NAME: HAWK GROUP OF COMPANIES INC DATE OF NAME CHANGE: 19950417 11-K 1 l89172ae11-k.txt HAWK CORPORATION FORM 11-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO ___________ COMMISSION FILE NUMBER: 333-68583 A. Full title of the plans and the addresses of the plans, if different from that of the issuer named below: Friction Products Co. Profit Sharing Plan S. K. Wellman Retirement Savings and Profit Sharing Plan Helsel, Inc. Employees' Retirement Plan Helsel, Inc. Employees' Savings and Investment Plan Sinterloy Corporation 401(k) Plan Hutchinson Products LLC Employees' 401(k) Plan Hawk Corporation 401(k) Savings and Retirement Plan Quarter Master Industries, Inc. Profit Sharing Plan and Trust B. Name of issuer of the securities held pursuant to the plans and the address of its principal executive office: Hawk Corporation 200 Public Square, Suite 30-5000 Cleveland, Ohio 44114 2 SIGNATURES The Plans. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plans) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Friction Products Co. Profit Sharing Plan S. K. Wellman Retirement Savings and Profit Sharing Plan Helsel, Inc. Employees' Retirement Plan Helsel, Inc. Employees' Savings and Investment Plan Sinterloy Corporation 401(k) Plan Hutchinson Products LLC Employees' 401(k) Plan Hawk Corporation 401(k) Savings and Retirement Plan Quarter Master Industries, Inc. Profit Sharing Plan and Trust Date: June 29, 2001 By: /s/ Thomas A. Gilbride ---------------------- Thomas A. Gilbride Plan Administrator 3 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Friction Products Co. Profit Sharing Plan December 31, 2000 with Report of Independent Auditors 4 Friction Products Co. Profit Sharing Plan Audited Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS Report of Independent Auditors ............................................ 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits............................ 2 Statement of Changes in Net Assets Available for Benefits.................. 3 Notes to Financial Statements.............................................. 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year).............. 8 5 Report of Independent Auditors Plan Administrator Friction Products Co. Profit Sharing Plan We have audited the accompanying statements of net assets available for benefits of the Friction Products Co. Profit Sharing Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio June 22, 2001 1 6 Friction Products Co. Profit Sharing Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 ------------------------- ASSETS Investments, at fair value: Pooled separate accounts $3,407,507 $2,778,338 Hawk Corporation Stock Fund 13,952 14,578 Guaranteed Income Fund, at contract value 2,249,864 2,309,282 ------------------------- Total investments 5,671,323 5,102,198 Contributions receivable: Employee 127,534 Employer 307,598 271,897 ------------------------- Total receivables 307,598 399,431 ------------------------- NET ASSETS AVAILABLE FOR BENEFITS $5,978,921 $5,501,629 ========================= See notes to financial statements. 2 7 Friction Products Co. Profit Sharing Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends $ 122,930 Contributions: Employer 307,598 Employee 336,784 ---------- 644,382 Transfers from other plans 313,276 ---------- Total additions 1,080,588 Deductions: Benefit payments 196,726 Fees and expenses 457 ---------- Total deductions 197,183 Net realized and unrealized depreciation in fair value of investments 406,113 Net increase 477,292 Net assets available for benefits at beginning of year 5,501,629 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $5,978,921 ========== See notes to financial statements. 3 8 Friction Products Co. Profit Sharing Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the Friction Products Co. Profit Sharing Plan (the "Plan") provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan was established August 1, 1981 as a defined contribution plan covering all non-union employees of Friction Products Co. (the "Company" and "Plan Sponsor") who have completed thirty days of service. Friction Products Co. is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may elect to contribute not less than 1% nor more than 15% of their pretax compensation to the Plan subject to maximum limitations set by the Internal Revenue Code. The Plan allows for discretionary contributions by the Plan Sponsor from available business profits. Employer contributions are allocated based on the proportion a participant's compensation bears to the total compensation paid to all eligible participants. During the first quarter of 2001, the Plan Sponsor made a discretionary profit sharing contribution of $307,598 for the 2000 Plan year. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. 4 9 Friction Products Co. Profit Sharing Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED VESTING AND DISTRIBUTIONS The Plan provides for 100% immediate vesting of a participant's account balance, including employer contributions. In the event of termination of the Plan, the assets of the Plan will be distributed to the participants based on the amounts in the respective participants' accounts. Withdrawals from a participant's account are limited to termination of employment, death, retirement or proven hardship. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options, including the Hawk Corporation Stock Fund. PAYMENT OF BENEFITS On the normal retirement date, a participant may elect to receive either a lump sum amount equal to the vested account balance or elect installment payments. Hardship withdrawals are available for withdrawal of the participant's voluntary contribution if certain specified conditions are met. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. 5 10 Friction Products Co. Profit Sharing Plan Notes to Financial Statements--Continued B. SUMMARY OF ACCOUNTING POLICIES--CONTINUED All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) appreciated (depreciated) in fair value as follows: Net Realized and Unrealized Appreciation (Depreciation) in Fair Value of Investments --------------- Pooled separate accounts $ (407,141) Hawk Corporation Stock Fund 1,028 --------------- $ (406,113) =============== The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 ------------------------- Guaranteed Income Fund $2,249,864 $2,309,282 Stock Market Index Fund 527,621 332,483 Fidelity Advisor Growth Opportunity Fund 367,738 509,072 Warburg Advisor Emerging Growth Fund 537,168 657,841 White Oak Growth Stock Fund 1,046,241 721,284 6 11 Friction Products Co. Profit Sharing Plan Notes to Financial Statements--Continued D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination all participant accounts will be distributed based upon the value of the participant's account on the termination date. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated May 30, 1996, stating that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and therefore believes that the Plan is qualified and the related trust is tax exempt. 7 12 Friction Products Co. Profit Sharing Plan Employer Identification Number: 34-1608009 Plan Number: 005 Schedule H, Line 4i--Schedule of Assets (Held At End of Year) December 31, 2000 Identity of Issue, Borrower, Current Lessor, or Similar Party/Description of Investment Value - ------------------------------------------------------------------------------ * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 2,249,864 Stock Market Index Fund 527,621 Fidelity Advisor Growth Opportunity Fund 367,738 Warburg Advisor Emerging Growth Fund 537,168 CIGNA Lifetime 20 Fund 36,354 CIGNA Lifetime 30 Fund 81,460 CIGNA Lifetime 40 Fund 137,045 CIGNA Lifetime 50 Fund 2,159 CIGNA Lifetime 60 Fund 351 Janus Worldwide Fund 287,637 Janus Fund 268,628 White Oak Growth Stock Fund 1,046,241 American Century Ultra Fund 115,105 Hawk Corporation Stock Fund 13,952 ----------- $ 5,671,323 =========== * Indicates a party-in-interest to the Plan. 8 13 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE S. K. Wellman Retirement Savings and Profit Sharing Plan December 31, 2000 with Report of Independent Auditors 14 S. K. Wellman Retirement Savings and Profit Sharing Plan Audited Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS Report of Independent Auditors .......................................... 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits.......................... 2 Statement of Changes in Net Assets Available for Benefits................ 3 Notes to Financial Statements............................................ 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)............ 8 15 Report of Independent Auditors Plan Administrator S. K. Wellman Retirement Savings and Profit Sharing Plan We have audited the accompanying statements of net assets available for benefits of the S.K. Wellman Retirement Savings and Profit Sharing Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio June 22, 2001 1 16 S. K. Wellman Retirement Savings and Profit Sharing Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 --------------------------- ASSETS Investments, at fair value: Pooled separate accounts $ 5,963,327 $ 6,631,315 Hawk Corporation Stock Fund 34,113 53,777 Guaranteed Income Fund, at contract value 1,685,952 3,211,161 --------------------------- Total investments 7,683,392 9,896,253 Employer contribution receivable 187,371 217,012 --------------------------- NET ASSETS AVAILABLE FOR BENEFITS $ 7,870,763 $10,113,265 =========================== See notes to financial statements. 2 17 S. K. Wellman Retirement Savings and Profit Sharing Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends $ 109,709 Contributions: Employer 205,581 Employee 407,981 ----------- 613,562 ----------- Total additions 723,271 Deductions: Benefit payments 1,778,717 Fees and expenses 907 ----------- Total deductions 1,779,624 Net realized and unrealized depreciation in fair value of investments 949,685 Transfers to other plans 236,464 ----------- Net decrease 2,242,502 Net assets available for benefits at beginning of year 10,113,265 ----------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 7,870,763 =========== See notes to financial statements. 3 18 S. K. Wellman Retirement Savings and Profit Sharing Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the S. K. Wellman Retirement Savings and Profit Sharing Plan (the "Plan") provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan is a defined contribution plan covering all non-union employees of the S. K. Wellman Corporation (the "Company" and "Plan Sponsor") who have at least 30 days of service. S. K. Wellman Corporation is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may contribute not less than 1% nor more than 15% of their pretax compensation subject to maximum limitations set by the Internal Revenue Code. The Plan Sponsor matches participant contributions at the rate of 10% of the first 6% of the employee's contribution. The Plan Sponsor may also contribute a profit sharing contribution at its discretion. During the first quarter of 2001, the Plan Sponsor made a discretionary profit sharing contribution of $187,371 for the 2000 Plan year. Forfeitures are used to reduce the amount of matching or profit sharing contributions by the Plan Sponsor. The balance of forfeited nonvested accounts was $808 and $1,990 as of December 31, 2000 and 1999, respectively. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. Forfeited balances of terminated participants' nonvested accounts are used to reduce future Plan Sponsor contributions. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. VESTING Participants are immediately vested in their contributions and in the Plan Sponsor's matching contributions. If the Plan were to terminate at some future time, each participant will become fully vested in his or her entire account balance. 4 19 S. K. Wellman Retirement Savings and Profit Sharing Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN--CONTINUED Participants become vested in their allocated share of any profit sharing contributions at the rate of 33-1/3% after two years of service and 33-1/3% per year thereafter, reaching 100% at the completion of four years of service. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options, including the Hawk Corporation Stock Fund. PAYMENT OF BENEFITS On the normal retirement date, a participant may elect to receive either a lump sum amount equal to the vested account balance or elect installment payments. Hardship withdrawals are available for withdrawal of the participant's voluntary contribution if certain specified conditions are met. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. 5 20 S. K. Wellman Retirement Savings and Profit Sharing Plan Notes to Financial Statements--Continued B. SUMMARY OF ACCOUNTING POLICIES--CONTINUED USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) appreciated (depreciated) in fair value as follows: Net Realized and Unrealized Appreciation (Depreciation) in Fair Value of Investments -------------- Pooled separate accounts $ (950,792) Hawk Corporation Stock Fund 1,107 -------------- $ (949,685) ============== The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 ------------------------- Guaranteed Income Fund $1,685,952 $3,211,161 CIGNA Lifetime 40 Fund 1,070,114 1,458,232 Janus Fund 854,218 602,085 Fidelity Advisor Growth Opportunity Fund 1,702,909 3,464,058 Janus Worldwide Fund 871,247 White Oak Growth Stock Fund 715,268 6 21 S. K. Wellman Retirement Savings and Profit Sharing Plan Notes to Financial Statements--Continued D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated January 24, 1994, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 7 22 S. K. Wellman Retirement Savings and Profit Sharing Plan Employer Identification Number 34-1804995 Plan Number 003 Schedule H, Line 4i--Schedule of Assets (Held At End of Year) December 31, 2000 Identity of Issue, Borrower, Current Lessor, or Similar Party/Description of Investment Value - ------------------------------------------------------------------------------- * Connecticut General Life Insurance Company: Guaranteed Income Fund $ 1,685,952 CIGNA Lifetime 20 Fund 59,333 CIGNA Lifetime 30 Fund 70,346 CIGNA Lifetime 40 Fund 1,070,114 CIGNA Lifetime 50 Fund 87,906 CIGNA Lifetime 60 Fund 106,593 CIGNA Stock Market Index Fund 96,740 Fidelity Advisor Growth Opportunity Fund 1,702,909 Warburg Pincus Emerging Growth Fund 181,420 American Century Ultra Fund 147,233 Janus Fund 854,218 Janus Worldwide Fund 871,247 White Oak Growth Stock Fund 715,268 Hawk Corporation Stock Fund 34,113 ------------- $ 7,683,392 ============= * Indicates party-in-interest to the Plan. 8 23 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Helsel, Inc. Employees' Retirement Plan December 31, 2000 with Report of Independent Auditors 24 Helsel, Inc. Employees' Retirement Plan Audited Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS Report of Independent Auditors........................................... 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits.......................... 2 Statement of Changes in Net Assets Available for Benefits................ 3 Notes to Financial Statements............................................ 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)............ 8 25 Report of Independent Auditors Plan Administrator Helsel, Inc. Employees' Retirement Plan We have audited the accompanying statements of net assets available for benefits of the Helsel, Inc. Employees' Retirement Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying schedule of assets (held at end of year) as of December 31, 2000, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio June 22, 2001 1 26 Helsel, Inc. Employees' Retirement Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 ------------------------- ASSETS Investments, at fair value: Pooled separate accounts $4,305,596 $4,748,539 Hawk Corporation Stock Fund 324 Guaranteed Income Fund, at contract value 229,605 349,927 ------------------------- Total investments 4,535,525 5,098,466 Employer contribution receivable 470,153 ------------------------- NET ASSETS AVAILABLE FOR BENEFITS $5,005,678 $5,098,466 ========================= See notes to financial statements. 2 27 Helsel, Inc. Employees' Retirement Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends $ 15,186 Employer contributions 470,153 ---------- Total additions 485,339 Deductions: Benefit payments 527,281 Fees and expenses 336 ---------- Total deductions 527,617 ---------- Net realized and unrealized depreciation in fair value of investments 50,510 Net decrease 92,788 Net assets available for benefits at beginning of year 5,098,466 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $5,005,678 ========== See notes to financial statements. 3 28 Helsel, Inc. Employees' Retirement Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF PLAN The following description of the Helsel, Inc. Employees' Retirement Plan (the "Plan") provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan is a money-purchase pension plan established by Helsel, Inc. (the "Company" and "Plan Sponsor") effective as of July 1, 1978, covering all non-union employees of the Company who have completed one year of service. Helsel, Inc. is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Each Plan year, the Company contributes to the Plan an amount equal to 7% of each eligible participant's compensation, as defined. Forfeited balances of terminated participants' non-vested accounts are used to reduce future Company contributions. Forfeitures available to reduce the Company's future contributions were $62,541 and $39,268 at December 31, 2000 and 1999, respectively. PARTICIPANT ACCOUNTS Each participant's account is credited with allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. VESTING Vesting of participant accounts is based upon years of service. A participant is 100% vested after five years of credited service based on a graded vesting schedule. 4 29 Helsel, Inc. Employees' Retirement Plan Notes to Financial Statements--Continued A. DESCRIPTION OF PLAN--CONTINUED INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct contributions in any of several investment options, including the Hawk Corporation Stock Fund. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or a lump sum. A participant may elect to defer payment of benefits until attainment of age 65. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 5 30 Helsel, Inc. Employees' Retirement Plan Notes to Financial Statements--Continued C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) depreciated in fair value as follows: Net Realized and Unrealized Depreciation in Fair Value of Investments -------------- Pooled separate accounts $ 50,484 Hawk Corporation Stock Fund 26 -------------- $ 50,510 ============== The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 ----------------------------- CIGNA Lifetime 40 Fund $ 594,733 $ 625,507 CIGNA Lifetime 50 Fund 2,817,288 3,213,977 CIGNA Lifetime 60 Fund 442,125 512,425 Guaranteed Income Fund 349,927 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. 6 31 Helsel, Inc. Employees' Retirement Plan Notes to Financial Statements--Continued E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated January 12, 1996, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 7 32 Helsel, Inc. Employees' Retirement Plan EIN--35-1957561 Plan--001 Schedule H, Line 4i--Schedule of Assets (Held At End of Year) December 31, 2000 Identity of Issue, Borrower, Current Lessor, or Similar Party/Description of Investment Value - ------------------------------------------------------------------------------ * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 229,605 Stock Market Index Fund 94,095 Fidelity Advisor Growth Opportunity Fund 338 CIGNA Lifetime 20 Fund 4,167 CIGNA Lifetime 30 Fund 168,139 CIGNA Lifetime 40 Fund 594,733 CIGNA Lifetime 50 Fund 2,817,288 CIGNA Lifetime 60 Fund 442,125 Janus Worldwide Fund 4,713 Janus Fund 175,138 White Oak Growth Stock Fund 4,339 American Century Ultra Fund 522 Hawk Corporation Stock Fund 324 ----------- $ 4,535,525 =========== * Indicates a party-in-interest to the Plan. 8 33 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Helsel, Inc. Employees' Savings and Investment Plan December 31, 2000 with Report of Independent Auditors 34 Helsel, Inc. Employees' Savings and Investment Plan Audited Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS Report of Independent Auditors.............................................. 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits ............................ 2 Statement of Changes in Net Assets Available for Benefits .................. 3 Notes to financial statements............................................... 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)............... 8 35 Report of Independent Auditors Plan Administrator Helsel, Inc. Employees' Savings and Investment Plan We have audited the accompanying statements of net assets available for benefits of the Helsel, Inc. Employees' Savings and Investment Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio June 22, 2001 1 36 Helsel, Inc. Employees' Savings and Investment Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 ------------------------- ASSETS Investments, at fair value: Pooled separate accounts $2,044,840 $1,822,670 Hawk Corporation Stock Fund 1,407 Guaranteed Income Fund, at contract value 185,003 242,744 Participant loans 112,674 102,624 ------------------------- Total investments 2,343,924 2,168,038 Contributions receivable: Employer 3,563 Employee 12,871 ------------------------- Total receivables 16,434 ------------------------- NET ASSETS AVAILABLE FOR BENEFITS $2,360,358 $2,168,038 ========================= See notes to financial statements. 2 37 Helsel, Inc. Employees' Savings and Investment Plan Statement of changes in Net Assets Available for Benefits For the Year Ended December 31, 2000 Additions: Investment income: Interest and dividends $ 19,300 Contributions: Employer 95,597 Employee 309,422 ---------- 405,019 ---------- Total additions 424,319 Deductions: Benefit payments 222,368 Fees and expenses 1,754 ---------- Total deductions 224,122 ---------- Net realized and unrealized depreciation in fair value of investments 39,602 Transfers from other plans 31,725 Net increase 192,320 Net assets available for benefits at beginning of year 2,168,038 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $2,360,358 ========== See notes to financial statements. 3 38 Helsel, Inc. Employees' Savings and Investment Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF PLAN The following description of the Helsel, Inc. Employees' Savings and Investment Plan (the "Plan") provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan is a defined contribution plan with a cash or deferred arrangement provision established by Helsel, Inc. (the "Company" and "Plan Sponsor") effective as of January 1, 1985, covering all non-union employees of the Company who have completed sixty days of service. Helsel, Inc. is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Eligible participants may make contributions in any amount up to 15% of their compensation for the Plan year. The Plan Sponsor makes a matching contribution equal to 50% of the participant's contribution up to 4% of the participant's compensation. Additional discretionary amounts may be contributed at the option of the Company's management. No additional discretionary amounts were contributed in 1999 and 2000. At December 31, 2000, $3,791 in forfeitures were available to reduce the Company's future contributions. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. VESTING Participants are immediately vested in their contributions. Vesting of employer matching contributions is based upon years of continuous service. A participant is 100% vested after five years of credited service based on a graded vesting schedule. 4 39 Helsel, Inc. Employees' Savings and Investment Plan Notes to Financial Statements--Continued A. DESCRIPTION OF PLAN--CONTINUED INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options. Effective January 1, 1999, the Plan was amended to allow participants to invest in the Hawk Corporation Stock Fund. PARTICIPANT LOANS Participants may borrow from their fund accounts up to the lesser of $50,000 or 50% of their vested balance. Loan terms range from 1 to 5 years except for the purchase of a primary residence. The terms of such a loan are determined by the Company based on maturity dates quoted by commercial banks for a similar loan. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates at the time of application. Principal and interest is paid through monthly payroll deductions. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or a lump sum. A participant may elect to defer payment of benefits until attainment of age 65. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. 5 40 Helsel, Inc. Employees' Savings and Investment Plan Notes to Financial Statements--Continued B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee on the last business day of the Plan year. The participant loans are valued at their outstanding balance, which approximates fair value. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold as well as held during the year) appreciated (depreciated) in fair value as follows: Net Realized and Unrealized Appreciation (Depreciation) in Fair Value of Investments Pooled separate accounts $ (44,144) Hawk Corporation Stock Fund 4,542 ----------- $ (39,602) =========== 6 41 Helsel, Inc. Employees' Savings and Investment Plan Notes to Financial Statements--Continued C. INVESTMENTS--CONTINUED The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 --------------------------- Guaranteed Income Fund $185,003 $242,744 CIGNA Lifetime 30 Fund 147,390 139,428 CIGNA Lifetime 40 Fund 554,565 482,196 CIGNA Lifetime 50 Fund 955,480 973,008 Janus Fund 142,713 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service, dated January 11, 1996, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and, therefore, believes that the Plan is qualified and the related trust is tax exempt. 7 42 Helsel, Inc. Employees' Savings and Investment Plan EIN--35-1957561 Plan--002 Schedule H, Line 4i--Schedule of Assets (Held at End of Year) December 31, 2000 Identity of Issue, Borrower, Current Lessor, or Similar Party/Description of Investment Value - ---------------------------------------------------------------------------- * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 185,003 CIGNA Lifetime 20 Fund 7,109 CIGNA Lifetime 30 Fund 147,390 CIGNA Lifetime 40 Fund 554,565 CIGNA Lifetime 50 Fund 955,480 CIGNA Lifetime 60 Fund 103,400 CIGNA Stock Market Index Fund 45,006 Fidelity Advisor Growth Opportunity Fund 1,977 Warburg Pincus Emerging Growth Fund 3,844 American Century Ultra Fund 8,607 Janus Fund 142,713 Janus Worldwide Fund 56,967 White Oak Growth Stock Fund 17,782 Hawk Corporation Stock Fund 1,407 * Participant Loans (Interest rates of 8.75% to 10.50%) 112,674 ----------- $ 2,343,924 =========== * Indicates a party-in-interest to the Plan. 8 43 FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Sinterloy Corporation 401(k) Plan December 31, 2000 44 Sinterloy Corporation 401(k) Plan Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits............................. 1 Statement of Changes in Net Assets Available for Benefits................... 2 Notes to Financial Statements............................................... 3 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)............... 7 45 Sinterloy Corporation 401(k) Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 ------------------------ ASSETS Investments, at fair value: Pooled separate accounts $287,856 $ 356,502 Hawk Corporation Stock Fund 29,146 22,410 Guaranteed Income Fund, at contract value 447,306 598,803 Participant loans 90,857 43,254 ------------------------ Total investments 855,165 1,020,969 Employer contribution receivable 20,000 20,000 NET ASSETS AVAILABLE FOR BENEFITS $875,165 $1,040,969 ======================== See notes to financial statements. 1 46 Sinterloy Corporation 401(k) Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends 35,104 Contributions: Employer 59,436 Employee 78,868 ---------- 138,304 ---------- Total additions 173,408 Deductions: Benefit payments 304,734 Fees and expenses 8,447 ---------- Total deductions 313,181 Net realized and unrealized depreciation in fair value of investments 26,031 Net decrease 165,804 Net assets available for benefits at beginning of year 1,040,969 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 875,165 ========== See notes to financial statements. 2 47 Sinterloy Corporation 401(k) Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the Sinterloy Corporation 401(k) Plan (the "Plan") provides only general information. Participants should refer to the summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan was established January 1, 1995 as a defined contribution plan covering all non-union employees of Sinterloy Corporation (the "Company" and "Plan Sponsor") who have completed one year of service, as defined. Sinterloy Corporation is a wholly owned subsidiary of Hawk Corporation. Effective January 1999, the Plan assets were transferred from Trust Company of Illinois to Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may elect to contribute not less than 1% nor more than 10% of their pretax compensation to the Plan subject to maximum limitations set by the Internal Revenue Code. The Plan Sponsor matches participant contributions at the rate of 50%. The Plan Sponsor may also make a discretionary profit sharing contribution. Employer discretionary contributions are allocated based on the proportion a participant's compensation bears to the total compensation paid to all eligible participants. During the second quarter of 2001, the Plan Sponsor made a discretionary profit sharing contribution of $20,000 for the 2000 Plan year. Forfeited balances of terminated participants' non-vested accounts are allocated to participants under the same manner as the employer discretionary contribution. At December 31, 2000, there were no forfeitures available to allocate to participants. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. 3 48 Sinterloy Corporation 401(k) Plan Notes to Financial Statements--Continued A. DESCRIPTION OF THE PLAN - CONTINUED VESTING AND DISTRIBUTIONS Participants are immediately vested in their contributions. Prior to January 1, 1999, participants were 100% vested in employer matching contributions. Beginning January 1, 1999, vesting of employer discretionary and matching contributions is based upon years of continuous service. A participant is 100% vested after six years of credited service based on a graded vesting schedule. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by CIGNA. A participant may direct employer and employee contributions in any of several investment options including the Hawk Corporation Stock Fund. PARTICIPANT LOANS Participants may borrow from their fund accounts up to the lesser of $50,000 or 50% of their vested balance. Loan terms range from 1 to 5 years. The terms of such a loan are determined by the Company based on maturity dates quoted by commercial banks for a similar loan. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates at the time of application. Principal and interest is paid through monthly payroll deductions. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or lump sum. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. 4 49 Sinterloy Corporation 401(k) Plan Notes to Financial Statements--Continued B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. The participant loans are valued at their outstanding balance, which approximates fair value. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) depreciated in fair value as follows: Net Realized and Unrealized Depreciation in Fair Value of Investments ---------------- Pooled separate accounts $ 24,329 Hawk Corporation Stock Fund 1,702 ----------- $ 26,031 =========== 5 50 Sinterloy Corporation 401(k) Plan Notes to Financial Statements--Continued The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 ------------------------- Guaranteed Income Fund $447,306 $598,803 White Oak Growth Stock Fund 60,340 52,931 Stock Market Index Fund 59,266 160,309 Participant Loans 90,857 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated March 28, 1995, stating that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Sponsor believes the Plan is being operated in compliance with the applicable requirements of the IRC and therefore believes that the Plan is qualified and the related trust is tax exempt. 6 51 Sinterloy Corporation 401(k) Plan Employer Identification Number: 31-1549254 Plan Number: 005 Schedule H, Line 4i--Schedule of Assets (Held at End of Year) December 31, 2000 Identity of Issue, Borrower, Lessor, or Current Similar Party/Description of Investment Value - -------------------------------------------------------------------------------- * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 447,306 Stock Market Index Fund 59,266 Fidelity Advisor Growth Opportunity Fund 5,892 Warburg Pincus Emerging Growth Fund 3,171 CIGNA Lifetime 20 Fund 9,516 CIGNA Lifetime 30 Fund 41,452 CIGNA Lifetime 40 Fund 16,546 CIGNA Lifetime 50 Fund 5,778 CIGNA Lifetime 60 Fund 1,381 Janus Worldwide Fund 30,020 Janus Fund 43,486 White Oak Growth Stock Fund 60,340 American Century Ultra Fund 11,008 Hawk Corporation Stock Fund 29,146 * Participant loans (Interest rates from 8.75% to 10.50%) 90,857 ---------- TOTAL ASSETS HELD FOR INVESTMENT PURPOSES $ 855,165 ========== * Indicates a party-in-interest to the Plan. 7 52 FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Hutchinson Products LLC Employees' 401(k) Plan December 31, 2000 53 Hutchinson Products LLC Employees' 401(k) Plan Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits............................. 1 Statement of Changes in Net Assets Available for Benefits................... 2 Notes to Financial Statements............................................... 3 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)................ 7 54 Hutchinson Products LLC Employees' 401(k) Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 ------------------------- ASSETS Investments, at fair value: Pooled separate accounts $2,569,550 $3,116,275 Hawk Corporation Stock Fund 30 Guaranteed Income Fund, at contract fund 463,689 600,844 ------------------------- Total investments 3,033,269 3,717,119 Employer contribution receivable: 5,000 5,000 ------------------------- NET ASSETS AVAILABLE FOR BENEFITS $3,038,269 $3,722,119 ========================= See notes to financial statements. 1 55 Hutchinson Products LLC Employees' 401(k) Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends $ 27,315 Contributions: Employer 5,000 Employee 112,072 ---------- 117,072 ---------- Total additions 144,387 Deductions: Benefit payments 294,562 Fees and expenses 534 ---------- Total deductions 295,096 Net realized and unrealized depreciation in fair value of investments 533,141 Net decrease 683,850 Net assets available for benefits at beginning of year 3,722,119 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $3,038,269 ========== See notes to financial statements. 2 56 Hutchinson Products LLC Employees' 401(k) Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the Hutchinson Products LLC Employees' 401(k) plan (the "Plan") provides only general information. Participants should refer to summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan was established January 1, 1993 as a defined contribution plan covering all full-time employees of Hutchinson Products LLC (the "Company" and "Plan Sponsor") who have completed three months of service, as defined. Hutchinson Products LLC is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may elect to contribute not less than 1% nor more than 15% of their pretax compensation to the Plan subject to maximum limitations set by the Internal Revenue Code. The Plan allows for discretionary contributions by the Plan Sponsor from available business profits. Employer contributions are allocated based on the proportion a participant's compensation bears to the total compensation paid to all eligible participants. During the first quarter of 2001, the Plan Sponsor made a discretionary profit sharing contribution of $5,000 for the 2000 Plan year. Forfeited balances of terminated participants' non-vested accounts are used to reduce future Company contributions. At December 31, 2000, $1,226 in forfeitures were available to reduce the Company's future contributions. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. 3 57 Hutchinson Products LLC Employees' 401(k) Plan Notes to Financial Statements (continued) A. DESCRIPTION OF THE PLAN - CONTINUED VESTING AND DISTRIBUTIONS Participants are immediately vested in their contributions. Vesting of employer discretionary contributions is based upon years of continuous service. A participant is 100% vested after six years of credited service based on a graded vesting schedule. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options, including the Hawk Corporation Stock Fund. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or a lump sum. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. 4 58 Hutchinson Products LLC Employees' 401(k) Plan Notes to Financial Statements (continued) B. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) depreciated in fair value as follows: NET REALIZED AND UNREALIZED DEPRECIATION IN FAIR VALUE OF INVESTMENTS -------------- Pooled separate accounts $ 531,231 Hawk Corporation Stock Fund 1,910 ---------- $ 533,141 ========== The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 ------------------------ Guaranteed Long-Term Fund $ 463,689 $ 600,844 Fidelity Advisor Growth Opportunity Fund 151,985 256,881 Janus Fund 545,312 754,424 American Century Ultra Fund 1,348,682 1,716,479 White Oak Growth Stock Fund 300,997 Janus Worldwide Fund 188,456 5 59 Hutchinson Products LLC Employees' 401(k) Plan Notes to Financial Statements December 31, 2000 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service dated September 23, 1994, stating that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and therefore believes that the Plan is qualified and the related trust is tax exempt. 6 60 Hutchinson Products LLC Employees' 401(k) Plan Employer Identification Number: 34-1608009 Plan Number: 005 Schedule H, Line 4i--Schedule of Assets (Held at End of Year) December 31, 2000 Identity of Issue, Borrower, Lessor or Current Similar Party/Description of Investment Value - ------------------------------------------------------------------------------- * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 463,689 Stock Market Index Fund 4,201 Fidelity Advisor Growth Opportunity Fund 151,985 Warburg Pincus Emerging Growth Fund 8,127 CIGNA Lifetime 20 Fund 2,248 CIGNA Lifetime 30 Fund 152 CIGNA Lifetime 40 Fund 66,660 Janus Worldwide Fund 141,186 Janus Fund 545,312 White Oak Growth Stock Fund 300,997 American Century Ultra Fund 1,348,682 Hawk Corporation Stock Fund 30 ----------- $ 3,033,269 =========== * Indicates a party-in-interest to the Plan. 7 61 AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Hawk Corporation 401(k) Savings and Retirement Plan December 31, 2000 with Report of Independent Auditors 62 Hawk Corporation 401(k) Savings and Retirement Plan Audited Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS Report of Independent Auditors............................................ 1 AUDITED FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits........................... 2 Statement of Changes in Net Assets Available for Benefits................. 3 Notes to Financial Statements............................................. 4 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)............. 8 63 Report of Independent Auditors Plan Administrator Hawk Corporation 401 (k) Savings and Retirement Plan We have audited the accompanying statements of net assets available for benefits of the Hawk Corporation 401 (k) Savings and Retirement Plan as of December 31, 2000 and 1999, and the related statement of changes in net assets available for benefits for the year ended December 31, 2000. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2000 and 1999, and the changes in its net assets available for benefits for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2000 is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Ernst & Young LLP Cleveland, Ohio June 22, 2001 1 64 Hawk Corporation 401(k) Savings and Retirement Plan Statements of Net Assets Available for Benefits DECEMBER 31 2000 1999 --------------------------- ASSETS Investments, at fair value: Pooled separate accounts $1,274,102 $1,123,486 Hawk Corporation Stock Fund 47,292 15,474 Guaranteed Income Fund, at contract value 101,017 41,075 Participant loans 73,357 44,306 --------------------------- Total investments 1,495,768 1,224,341 Contributions receivable: Employer 159,437 91,320 Employee 2,573 --------------------------- Total receivables 162,010 91,320 --------------------------- NET ASSETS AVAILABLE FOR BENEFITS $1,657,778 $1,315,661 =========================== See notes to financial statements. 2 65 Hawk Corporation 401(k) Savings and Retirement Plan Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Investment income: Interest and dividends $ 10,463 Contributions: Employer 245,199 Employee 251,660 ---------- 496,859 ---------- Total additions 507,322 Deductions: Benefit payments 96,853 Fees and expenses 2,116 ---------- Total deductions 98,969 Net realized and unrealized depreciation in fair value of investments 209,277 Transfers from other plans 143,041 ---------- Net increase 342,117 Net assets available for benefits at beginning of year 1,315,661 ---------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $1,657,778 ========== See notes to financial statements. 3 66 Hawk Corporation 401(k) Savings and Retirement Plan Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the Hawk Corporation 401(k) Savings and Retirement Plan (the "Plan") provides only general information. Participants should refer to summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan was established January 1, 1999 as a defined contribution plan. The participating employers of the Hawk Corporation 401(k) Savings and Retirement Plan are Clearfield Powdered Metals, Inc. ("Clearfield") and Allegheny Powder Metallurgy, Inc. ("Allegheny") (collectively the "Company" and "Plan Sponsor"). The Plan covers all non-union employees of the Company who have completed six months of service, as defined. Clearfield and Allegheny are wholly owned subsidiaries of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may elect to contribute not less than 1% nor more than 15% of their pretax compensation to the Plan subject to maximum limitations set by the Internal Revenue Code. The Company makes a matching contribution equal to 50% of the participant's contributions up to 4% of the participant's compensation, as defined. The Company also contributes to the Plan additional amounts equal to 2.5% of each eligible participants' compensation, as defined. Forfeited balances of terminated participants' non-vested accounts are used to reduce future Company contributions. At December 31, 2000, $1,644 in forfeitures were available to reduce the Company's future contributions. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. 4 67 Hawk Corporation 401(k) Savings and Retirement Plan Notes to Financial Statements (continued) A. DESCRIPTION OF THE PLAN (CONTINUED) VESTING Participants are immediately vested in their contributions. Vesting of employer contributions is based upon years of continuous service. A participant is 100% vested after five years of credited service based on a graded vesting schedule. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options, including the Hawk Corporation Stock Fund. PARTICIPANT LOANS Participants may borrow from their fund accounts up to the lesser of $50,000 or 50% of their vested balance attributable to employee pre-tax, employer matching and rollover contributions. Loan terms range from 1 to 5 years. The terms of such a loan are determined by the Company based on maturity dates quoted by commercial banks for a similar loan. The loans are secured by the balance in the participant's account and bear interest at a rate commensurate with local prevailing rates at the time of application. Principal and interest is paid through monthly payroll deductions. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or lump sum. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. 5 68 Hawk Corporation 401(k) Savings and Retirement Plan Notes to Financial Statements (continued) B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. The participant loans are valued at their outstanding balance, which approximates fair value. 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) depreciated in fair value as follows: Net Realized and Unrealized Depreciation in Fair Value of Investments --------------- Pooled separate accounts $ 207,001 Hawk Corporation Stock Fund 2,276 ----------- $ 209,277 =========== 6 69 Hawk Corporation 401(k) Savings and Retirement Plan Notes to Financial Statements (continued) C. INVESTMENTS (CONTINUED) The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31, 2000 1999 --------------------- American Century Ultra Fund $528,694 $712,513 Fidelity Advisor Growth Opportunity Fund 163,749 189,396 Janus Worldwide Fund 130,706 Guaranteed Income Fund 101,017 Janus Fund 93,963 CIGNA Lifetime 40 Fund 93,773 White Oak Growth Stock Fund 89,811 Stock Market Index Fund 86,637 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has not received a determination letter from the Internal Revenue Service stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (the "IRC"). However, the Plan Administrator believes that the Plan is qualified and therefore, the related trust is exempt from taxation. 7 70 Hawk Corporation 401(k) Savings and Retirement Plan Employer Identification Number: 34-1608156 Plan Number: 005 Schedule H, Line 4i--Schedule of Assets (Held at End of Year) December 31, 2000 Identity of Issue, Borrower, Lessor, or Current Similar Party/ Description of Investment Value - -------------------------------------------------------------------------- * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund $ 101,017 Stock Market Index Fund 86,637 Fidelity Advisor Growth Opportunity Fund 163,749 Warburg Pincus Emerging Growth Fund 6,536 CIGNA Lifetime 20 Fund 23,760 CIGNA Lifetime 30 Fund 37,902 CIGNA Lifetime 40 Fund 93,773 CIGNA Lifetime 50 Fund 10,794 CIGNA Lifetime 60 Fund 7,777 Janus Worldwide Fund 130,706 Janus Fund 93,963 White Oak Growth Stock Fund 89,811 American Century Ultra Fund 528,694 Hawk Corporation Stock Fund 47,292 * Participant Loans, (Interest rates from 9.25% to 10.50%) 73,357 ----------- $ 1,495,768 =========== * Indicates a party-in-interest to the Plan. 8 71 FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE Quarter Master Industries, Inc. Profit Sharing Plan and Trust December 31, 2000 72 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Financial Statements and Supplemental Schedule December 31, 2000 TABLE OF CONTENTS FINANCIAL STATEMENTS Statements of Net Assets Available for Benefits.............................1 Statement of Changes in Net Assets Available for Benefits...................2 Notes to Financial Statements...............................................3 SUPPLEMENTAL SCHEDULE Schedule H, Line 4i--Schedule of Assets (Held at End of Year)...............7 73 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Statements of Net Assets Available for Benefits
DECEMBER 31 2000 1999 -------------------------------------- ASSETS Investments, at fair value: Pooled separate accounts $ 1,667,751 Separate contract accounts 7,571 $ 1,774,397 Hawk Corporation Stock Fund 5 Guaranteed Income Fund, at contract fund 2,611 -------------------------------------- Total investments 1,677,938 1,774,397 Contribution receivable: Employer 103,224 25,357 Employee 6,709 -------------------------------------- NET ASSETS AVAILABLE FOR BENEFITS $ 1,787,871 $ 1,799,754 ======================================
See notes to financial statements. 1 74 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2000 Additions: Interest and dividends $ 298 Contributions: Employer 103,521 Employee 7,303 ----------- 110,824 ----------- Total additions 111,122 Deductions: Benefit payments 76,107 Fees and expenses 270 ----------- Total deductions 76,377 Net realized and unrealized depreciation in fair value of investments 46,628 Net decrease (11,883) Net assets available for benefits at beginning of year 1,799,754 ----------- ----------- NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 1,787,871 =========== See notes to financial statements. 2 75 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Notes to Financial Statements December 31, 2000 A. DESCRIPTION OF THE PLAN The following description of the Quarter Master Industries, Inc. Profit Sharing Plan and Trust (the "Plan") provides only general information. Participants should refer to summary plan description for a more complete description of the Plan's provisions. GENERAL The Plan was established January 1, 1985 as a profit sharing plan covering all full time employees of Quarter Master Industries, Inc. (the "Company" and "Plan Sponsor") who have completed one year of service, as defined. Effective November 1, 2000, the Plan was amended to include a 401(k) provision covering all full-time employees who have completed three months of service, as defined. Effective November 1, 2000, substantially all the Plan assets were transferred from Penn Mutual to Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). Quarter Master Industries, Inc. is a wholly owned subsidiary of Hawk Corporation. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). CONTRIBUTIONS Participants may elect to contribute not less than 1% nor more than 15% of their pretax compensation to the Plan subject to maximum limitations set by the Internal Revenue Code. The Plan Sponsor makes a matching contribution equal to 50% of the participant's contribution up to 4% of the participant's compensation. Additional discretionary amounts may be contributed at the option of the Company's management. During the first quarter of 2001, the Plan Sponsor made a discretionary profit sharing contribution of $100,900 for the 2000 Plan year. Forfeited balances of terminated participants' non-vested employer matching contributions are used to reduce future Company contributions. PARTICIPANT ACCOUNTS Each participant's account is credited with the participant's contributions and allocations of (a) the Plan Sponsor's contributions and (b) Plan earnings. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's account. 3 76 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Notes to Financial Statements (continued) A. DESCRIPTION OF THE PLAN - CONTINUED VESTING AND DISTRIBUTIONS Participants are immediately vested in their contributions and discretionary profit sharing contributions. Vesting of employer matching contributions is based upon years of continuous service. A participant is 100% vested after six years of credited service based on a graded vesting schedule. INVESTMENT OPTIONS The Plan's funds are primarily held in a group annuity contract issued by Connecticut General Life Insurance Company ("CIGNA" or the "Trustee"). A participant may direct employer and employee contributions in any of several investment options. Effective November 2000, the Plan was amended to allow participants to invest in the Hawk Corporation Stock Fund. PAYMENT OF BENEFITS In the case of normal retirement, death, permanent disability or termination prior to retirement, a participant may elect to receive the payout of his or her vested account balance in the form of installments, an annuity or a lump sum. EXPENSES The Plan Sponsor pays substantially all costs of Plan administration. B. SUMMARY OF ACCOUNTING POLICIES INVESTMENT VALUATION Investments in the Guaranteed Income Fund are stated at contract value as determined by CIGNA, which approximates fair value. CIGNA has the right to defer certain disbursements (excluding retirement, termination, and death or disability disbursements) or transfers from the Guaranteed Income Fund when total amounts disbursed from the pool in a given calendar year exceed 10% of the total assets in that pool on January 1 of that year. All other investments are stated at fair value based on quoted market prices, as determined by the Trustee, on the last business day of the Plan year. 4 77 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Notes to Financial Statements (continued) B. SUMMARY OF ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. C. INVESTMENTS During 2000, the Plan's investments (including investments purchased, sold, as well as held, during the year) appreciated (depreciated) in fair value as follows: NET REALIZED AND UNREALIZED APPRECIATION (DEPRECIATION) IN FAIR VALUE OF INVESTMENTS -------------- Pooled separate accounts (58,598) Separate contract accounts 11,970 ------- (46,628) ======= The fair value of individual investments that represent 5% or more of the Plan's net assets are as follows: DECEMBER 31 2000 1999 --------------------------- Stock Market Index Fund 750,993 Warburg Pincus Emerging Growth Fund 268,895 CIGNA Lifetime 50 Fund 378,771 Janus Worldwide Fund 224,634 Separate contract accounts 1,774,397 5 78 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Notes to Financial Statements December 31, 2000 D. PLAN TERMINATION Although it has not expressed any intent to do so, the Plan Sponsor has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. E. INCOME TAX STATUS The Plan has received a determination letter from the Internal Revenue Service stating that the Plan qualifies under Section 401(a) of the Internal Revenue Code (the "IRC") and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the IRC and therefore believes that the Plan is qualified and the related trust is tax exempt. 6 79 Quarter Master Industries, Inc. Profit Sharing Plan and Trust Employer Identification Number: 34-1608009 Plan Number: 005 Schedule H, Line 4i--Schedule of Assets (Held at End of Year) December 31, 2000 Identity of Issue, Borrower, Lessor or Current Similar Party/Description of Investment Value - ------------------------------------------------------------------------------- * Penn Mutual Separate contract accounts 7,571 * Connecticut General Life Insurance Company--Group Annuity Contract: Guaranteed Income Fund 2,611 Stock Market Index Fund 750,993 Fidelity Advisor Growth Opportunity Fund 157 Warburg Pincus Emerging Growth Fund 268,895 CIGNA Lifetime 20 Fund 180 CIGNA Lifetime 30 Fund 100 CIGNA Lifetime 40 Fund 28 CIGNA Lifetime 50 Fund 378,771 Janus Worldwide Fund 224,634 White Oak Growth Stock Fund 43,993 Hawk Corporation Stock Fund 5 ----------- $ 1,677,938 =========== * Indicates a party-in-interest to the Plan. 7 EX-23 2 l89172aex23.txt EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-68583) pertaining to the Friction Products Co. Profit Sharing Plan, the S.K. Wellman Retirement Savings and Profit Sharing Plan, the Helsel, Inc. Employees' Retirement Plan, the Helsel, Inc. Employees' Savings and Investment Plan and the Hawk Corporation 401(k) Savings and Retirement Plan of our reports dated June 22, 2001, with respect to the financial statements and schedule of the Friction Products Co. Profit Sharing Plan, the S.K. Wellman Retirement Savings and Profit Sharing Plan, the Helsel, Inc. Employees' Retirement Plan, the Helsel, Inc. Employees' Savings and Investment Plan and the Hawk Corporation 401(k) Savings and Retirement Plan included in this Annual Report (Form 11-K) for the year ended December 31, 2000. /s/ ERNST & YOUNG LLP Cleveland, Ohio June 22, 2001 -----END PRIVACY-ENHANCED MESSAGE-----