SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
_____
/_X__/ Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1995 or
------------------------
_____
/____/ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 1-1212
--------------------------------------------
Driver-Harris Company
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0870220
- ------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
308 Middlesex Street, Harrison, New Jersey 07029
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (201) 483-4802
------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ____X____ No ________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $0.83 1/3 par value -- 1,296,349 shares as of
October 31, 1995.
DRIVER-HARRIS COMPANY
I N D E X
PART I FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1995 and December 31, 1994. . . . . . . . . 3
Condensed Consolidated Statements of
Operations - Three and Nine Months ended
September 30, 1995 and September 30, 1994 . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1995 and
September 30, 1994 . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .7
PART II OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None filed in quarter
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 8
- ----------
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
September 30, December 31,
1995 1994
-------- ------------
<TABLE>
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash $ 50 $ 461
Accounts receivable - net 8,006 7,494
Inventories:
Materials 750 658
Work in process 552 226
Finished products 2,470 2,160
----- -----
3,772 3,044
Prepaid expenses 256 227
------ -----
Total current assets 12,084 11,226
Other assets 70 369
Property, plant & equipment - net 4,458 4,298
------ ------
$16,612 $15,893
====== ======
LIABILITIES
Current Liabilities:
Short-term borrowings $ 1,455 $ 1,762
Current portion of long-term debt 538 512
Accounts payable 5,451 5,295
Accrued expenses 1,487 843
Income taxes payable 84 86
------ -------
Total current liabilities 9,015 8,498
Long-term debt 2,560 2,734
Deferred income taxes 115 110
Postretirement benefit liabilities 464 417
Investment in related company 1,488 1,701
Sundry liabilities 231 259
Deferred credit - related company 1,042 1,266
Stockholders' equity:
Common stock 1,187 1,187
Additional paid-in capital 1,992 1,981
Retained earnings/(deficit) 332 (189)
Equity adjustment from translation (1,814) (2,072)
------- -------
Stockholders' equity 1,697 908
------- -------
$16,612 $15,893
====== ======
</TABLE>
See accompanying notes.
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED SEPT.30
September 30 Historical Pro-Forma
------------------- ---------- --------
1995 1994 1995 1994 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales-customers $8,081 $ 6,770 $25,312 $27,790 $19,540
-related company 6,884 23,196
Other income - net 210 270 739 701 723
------ ----- ----- ------ ------
Total Revenues 8,291 13,924 26,051 51,687 20,263
Cost of sales-customers 6,881 5,802 21,930 23,186 16,570
-related co. 6,884 23,196
----- ----- ----- ------ ------
1,410 1,238 4,121 5,305 3,693
Selling, general and
administrative exps. 952 1,080 3,201 4,917 3,078
------ ----- ----- ------ ------
458 158 920 388 615
Other charges (credits):
Interest expense 190 146 592 670 390
Foreign exchange loss
(gain), etc. 7 6 (12) 62 25
Equity in related co. 8 248 (213) 674 1,006
----- ---- ----- ----- ------
Income (loss) before income
taxes 253 (242) 553 (1,018) (806)
Income taxes 11 4 32 58 42
----- ---- ----- ----- ------
NET INCOME/(LOSS) $ 242 $ (246) $ 521 $(1,076) $ (848)
===== ==== ==== ===== ======
NET INCOME/(LOSS)
PER SHARE $ .19 $ (.19) $ .40 $(.83) $ (.66)
==== ==== ==== ==== ====
Average common shares outstanding 1,295,849 1,294,393
</TABLE>
See notes to financial statements.
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
NINE MONTHS ENDED
September 30
----------------
1995 1994
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income/(loss) $ 521 $(1,076)
Adjustments to reconcile net income/(loss)
to net cash provided:
Depreciation and amortization 332 826
Equity in related company (213) 674
Deferred credit (223)
Due from related company 203 (546)
Receivables 20 (477)
Inventories (618) (2,659)
Accounts payable and accrued expenses 608 2,813
Sundry (212) (110)
------ ------
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 418 (555)
INVESTING ACTIVITIES
Capital expenditures (314) (1,010)
Sundry 94 33
---- ----
CASH USED IN INVESTING ACTIVITIES (218) (977)
FINANCING ACTIVITIES
Change in short-term debt (366) 293
Issuance of long-term debt 162 1,111
Reduction of long-term debt (431) (1,504)
Loans from related company 1,875
Sale of capital stock 11
Cash of companies included
in restructuring (503)
------ ------
CASH PROVIDED BY(USED IN)FINANCING ACTIVITIES (626) 1,272
Effect of exchange rate changes on cash 15 33
----- -----
Net change in cash (411) (227)
Cash at beginning of year 461 600
----- -----
CASH AT END OF PERIOD $ 50 $ 373
====== ====
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1 - Basis of Presentation
These financial statements have been prepared in accordance with
the instructions to Form 10-Q and therefore do not include all
information, disclosures, and notes necessary for a fair presentation
of financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles. Reference
should be made to the financial statements contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
These financial statements include all adjustments which are, in the
opinion of management, necessary to a fair presentation of the
results for the interim period.
2 - Restructuring during 1994
In March 1994, the Company restructured its operations by
combining its overseas resistance wire operations with Harrison
Alloys Inc. (Harrison). The latter is referred to herein as "related
company". Effective September 30, 1994, the Company transferred
substantially all the assets of its U.S. operating subsidiary,
Driver-Harris Alloys (Alloys), to Harrison in exchange for the
assumption by Harrison of an equivalent amount of liabilities.
Harrison is required to pay to the Company license fees and
commissions totalling $500,000 per year from 1994 to 2003, which is
recorded in other income. For details of these transactions, see
Part I, Item 1, "Business" in the Company's Annual Report on Form
10-K for the year ended December 31, 1994 and Notes 3 and 4 to the
1994 consolidated financial statements.
The unaudited pro-forma consolidated data for the nine months
ended September 30, 1994 gives effect to the foregoing transactions
as if they had occurred on January 1, 1994.
3 - Investment in Related Company
Harrison Alloys Inc.("Harrison"), a fifty percent owned company,
is recorded on the equity method of accounting. The recognition of
past losses has reduced the carrying amount of the Company's
investment in Harrison to a negative balance (liability) of
$1,488,000 at September 30, 1995. This amount, combined with a
deferred credit of $1,042,000 which originated from the March 1994
restructuring referred to in Note 2, is equal to the balance of a
bank loan of Harrison ($2,530,000) which the Company has guaranteed.
Accordingly, for the nine months ended September 30, 1995,
Driver-Harris Company recorded income from its equity in Harrison of
$213,000 and amortization of the deferred credit of $223,000 (which
is included in other income).
The Company, in addition to its 50% ownership of Harrison, owns
Irish Driver-Harris Co. Ltd., a producer of insulated electrical wire
and cable, located in Ireland and the U.K., and Quality Heat
Treatment Pty. Ltd., a company in the furnace manufacturing and heat
treating business, located in Australia.
4 - Waiver of Non-Compliance with Loan Covenant
The U.S. banks have waived non-compliance with a loan covenant
until January 1, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
After consummating the 1994 restructuring referred to in Note 2
to the Financial Statements, the Company has continued to reduce its
contingent obligations and stabilize its cash flow requirements. The
Company continues to be partially dependent upon Harrison Alloys Inc.
(Harrison) for its cash flow. Harrison, a 50% owned company, has a
highly leveraged debt structure, a portion of which the Company is
contingently liable for. Harrison may be subject to significant
additional cash requirements should it proceed with the restructuring
of certain manufacturing operations and/or redemptions of preferred
stock.
Results of Operations (Pro-Forma for 1994)
Net sales to customers increased by almost thirty percent during
the first nine months of 1995 and 19.4% for the latest quarter
compared to the same period last year. This was principally due to
increased sales prices and the impact of higher exchange rates. The
increases in sales prices were caused by the higher cost of raw
materials, principally copper and PVC. Because increases in sales
prices lagged such higher costs, the gross profit percentage dropped
from 15.2% in 1994 to 13.3% in 1995 for the nine-month period but
increased from 14.3% to 14.9% in the latest quarter. Selling,
general and administrative expense in 1995 continued to remain
relatively constant and therefore decreased as a percentage of net
sales from 15.7% to 12.6% for the nine months and from 15.9% to 13.8%
for the last quarter. Higher average borrowings throughout 1995
resulted in increased interest and finance expenses.
In 1994, the Company recorded a charge of $674,000 representing
its equity in the investment in Harrison. For the nine months ended
September 30, 1995, the Company recorded income of $213,000 from its
equity in this investment. The recognition of past losses has
reduced the carrying amount of the Company's investment in Harrison
to a negative balance (liability), which combined with a deferred
credit resulting from the March 1994 restructuring equaled the
balance of a bank loan of Harrison which the Company has guaranteed.
Losses from the Company's investment in Harrison are recognized only
to the extent of the bank loan guaranty.
During the nine months ended September 30, 1995, Harrison made
aggregate principal payments of $436,000 under the bank loan.
Accordingly, Driver-Harris recorded income from its equity in
Harrison of $213,000 and amortization of the deferred credit of
$223,000 (which is included in other income).
The disproportionate income tax provision in 1995 is primarily
because $213,000 recorded as income from equity in Harrison is not
taxable income to the Company. In 1994, no tax benefits were
available for subsidiaries experiencing losses. The utilization of
tax loss carryforwards provided tax benefits of $85,000 and $75,000
in the 1995 and 1994 periods, respectively.
SIGNATURES
Pursuant to the requirements 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.
DRIVER-HARRIS COMPANY
Date: November 13, 1995 By Thomas J. Carey
----------------------- ---------------------------
Thomas J. Carey
Vice President Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Company's Condensed Consolidated Balance Sheet at September 30, 1995 and
the Company's Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1995, and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 50
<SECURITIES> 0
<RECEIVABLES> 8374
<ALLOWANCES> 368
<INVENTORY> 3772
<CURRENT-ASSETS> 12084
<PP&E> 6220
<DEPRECIATION> 1762
<TOTAL-ASSETS> 16612
<CURRENT-LIABILITIES> 9015
<BONDS> 2560
<COMMON> 1187
0
0
<OTHER-SE> 510
<TOTAL-LIABILITY-AND-EQUITY> 16612
<SALES> 25312
<TOTAL-REVENUES> 26051
<CGS> 21930
<TOTAL-COSTS> 21930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> 553
<INCOME-TAX> 32
<INCOME-CONTINUING> 521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
