<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
|_X_| Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
__
|__| Transition report pursuant to Section 13 or 15(d) of the
Securities 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, NJ 07029
- ---------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201)483-4802
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
-------------------- ---------------------
Common stock - par
value $0.83 1/3 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ]
The aggregate market value of the voting stock held by non-affiliates
and the total number of common shares outstanding as of March 20, 1995:
Market Value - $6,472,695 Common Stock - 1,294,539 shares
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the annual proxy statement dated May 3, 1995 are
incorporated into Part III.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
The Company, directly and through its subsidiaries, has been
engaged in the business of manufacturing and marketing non-ferrous metal
products, principally electrical resistance wire and insulated
electrical wire and cable. The Company has incurred significant losses
since 1991 primarily as a result of losses sustained by its Italian
subsidiary.
On April 7, 1994 (effective March 18, 1994), the Company
restructured its operations (the "Restructure") in order to solve its
liquidity problems and strengthen its competitive position in the
industry. Pursuant to the Restructure, the Company combined its
overseas resistance wire operations with Harrison Alloys Inc. (Harrison)
by (i) forming a holding company, HAI Holding Company Inc. (Holding),
owned fifty percent by the Company and fifty percent by a corporation
organized by the former common shareholders of Harrison; (ii)
contributing the Company's overseas resistance wire manufacturing
subsidiaries (subject to liens under existing bank loans) and its
approximately 24% shareholding in Harrison to Holding; and (iii) causing
Harrison to assume significant obligations of the Company as explained
below. In conjunction with the Restructure, Harrison became a wholly
owned subsidiary of Holding, which in turn transferred the Driver-Harris
subsidiaries to Harrison. As a result of the Restructure, Harrison
will conduct all of its operations located in Harrison and Somerset, NJ
and Spartanburg, SC and the Driver-Harris operations located in Italy,
France, the U.K., Spain and Australia.
As part of the foregoing transaction, Harrison assumed certain
obligations of the Company and its U.S. operating subsidiary, Driver-
Harris Alloys Inc. (Alloys), including approximately $1.8 million of
debt incurred for investment in the Company's Italian subsidiary,
$1,489,000 of loans of Alloys, all potential environmental obligations
with respect to Alloys' U.S. manufacturing facilities, and the Company's
commitment to share with Harrison the cost of health care and life
insurance benefits for certain retirees. As additional consideration to
Driver-Harris, Harrison was required to make aggregate cash payments of
$300,000; it is also required to pay license fees and commissions
totaling $500,000 per year from 1994 to 2003.
For further details of this transaction, reference is made to Note
3 to the consolidated financial statements.
On November 29, 1994, effective September 30, 1994, Alloys
transferred substantially all of its assets to Harrison in exchange for
the assumption by Harrison of an equivalent amount of liabilities (all
assets and liabilities were taken into account at net book value). This
transaction was the result of the exercise by Harrison on June 14, 1994
of an option granted in 1987. The transferred assets consist
principally of inventory and equipment located at the Harrison and
<PAGE>
Item 1. Business (Continued)
Somerset, NJ and Spartanburg, SC plants of Alloys as well as the land
and factory building in Somerset, NJ. These assets constituted the U.S.
portion of the Company's electrical resistance wire manufacturing
business; the foreign portion had been transferred to Harrison in the
foregoing restructuring.
After the transactions described above, the Company, in addition to
its 50% ownership of Harrison, continues to own 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.
(b) Financial Information About Industry Segments
For the three years ended December 31, 1994, the Registrant
operated in a single industry segment, metal products.
(c) Narrative Description of Business
(i) After giving effect to the transactions described in item
1(a), the principal products manufactured by the Registrant and its
subsidiaries are insulated electrical wire and cable. These products
are sold principally to the construction, appliance, and electrical
equipment industries and are distributed through the Company's own sales
staff. The Registrant also owns 50% of Harrison, which manufactures
electrical resistance wire products.
The following represents a breakdown of the Registrant's
total net sales for the last three fiscal years (in thousands):
<TABLE>
Electrical
Resistance Wire(a)
Insulated ------------------------
Electrical Foreign
Wire & Cable Alloys Subsidiaries Other
------------ ------ ------------ -----
<S> <C> <C> <C> <C>
1992 $19,871 $27,596 $38,272 $1,644
1993 21,488 27,295 32,297 2,382
1994 25,413 23,196 8,250 2,688
</TABLE>
(a) All of these companies were divested in 1994 - see 1(a).
(ii) No significant new products were introduced during the past
fiscal year.
(iii) The principal sources of raw material for insulated
electrical wire and cable products - copper wire conductor and PVC
insulating materials - are refining and chemical companies,
respectively. During the past fiscal year, availability of raw materials
was satisfactory, although copper prices rose to some extent.
<PAGE>
Item 1. Business (Continued)
(iv) The Company owns certain trademarks which are maintained
internationally. As part of the March 1994 restructuring described in
item 1(a), the Company granted Harrison an exclusive license to use
certain trademarks in consideration for specified license fees.
There are no patents, licenses, franchises or concessions
held that are material to the business of the Registrant or its
subsidiaries.
(v) The business of the Registrant is not of a seasonal nature.
(vi) Following industry practice, the Registrant and its
subsidiaries grant payment terms to their customers ranging from 60 days
to 150 days depending on the countries where the companies do business.
Inventory turn of insulated electrical wire and cable products is
relatively rapid because of the Company's ability to respond quickly to
customers' orders.
(vii) The Registrant and its subsidiaries are not dependent upon
a single customer or very few customers for a material part of their
business.
(viii) The following amounts represent the backlog of orders
believed to be firm as of the end of each fiscal year; all were expected
to be filled within the following fiscal year:
<TABLE>
Irish Driver-Harris Co.Ltd.,
and Quality Heat Electrical Resistance
Treatment Pty. Ltd. Wire Subsidiaries
----------------------- --------------------
<S> <C> <C>
December 31, 1993 $ 400,000 $4,600,000
December 31, 1994 450,000 -
</TABLE>
(ix) No material portion of the business of the Registrant and its
subsidiaries is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the U.S. government.
(x) The Registrant's insulated wire and cable products are
marketed primarily in Ireland, the U.K., the European continent, and the
Mid and Far East. Such products are essentially similar to those of its
competitors of which there are many, some substantially larger than the
Company. The principal methods of competition are price, quality, and
fast response to customers' orders.
(xi) The Registrant believes that the cost of research and
development activities was not material during the past three fiscal
years. No employees were engaged in such activities on a full-time
basis during that period. All research and development projects are
performed by engineering and production personnel in conjunction with
other functions without separate accounting therefor.
<PAGE>
Item 1. Business (Continued)
(xii) Pursuant to the agreement with Harrison described in item
1(a), the latter company has assumed all environmental obligations with
respect to the Company's former U.S. plant facilities. Such obligations
are estimated at approximately $200,000.
(xiii) The number of persons employed by the Registrant and its
subsidiaries at the end of the last fiscal year was 131.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales
(1) Information regarding foreign and domestic operations is
provided in Note 12 to the consolidated financial statements.
(2) The Registrant depends heavily on foreign operations for the
generation of earnings. The insulated wire and cable operations are
located in Ireland and the U.K., while Harrison has facilities in
Western Europe and Australia in addition to its U.S. operations. All of
the foreign locations are in countries with relatively stable
governments and present minimum political risk; nonetheless there is
exposure to fluctuations in currency exchange rates and normal business
risk.
(e) Executive Officers of the Registrant
Name Age Position
Frank L. Driver III 64 Chairman and Chief Executive
Officer
Frank L. Driver IV 34 President and Chief Financial
Officer
Lavinia Z. Emery 50 Secretary and Assistant
Treasurer
Officers are elected annually by the Board of Directors for
one-year terms expiring in June.
Mr. Frank L. Driver III joined the Company in 1951 as a
research engineer. In 1954 he became Assistant to the factory manager
of the Harrison, N.J. plant and in 1957 he was elected Corporate Vice
President Administration. In 1960 he became Executive Vice President,
in 1962 he was elected President and in 1982 he was also elected
Chairman of the Board. In September 1994 Mr. Driver resigned as
President. Mr. Driver is the brother of Mr. David A. Driver, a Director
of the Company, and the father of Mr. Frank L. Driver IV, the current
President.
Mr. Frank L. Driver IV joined the Company in 1989 as Assistant
Controller; in 1991 he was elected Vice President-Marketing and in 1993
he also became Vice President-Finance. In September 1994, he was
elected President. Prior to joining the Company, he was a senior
<PAGE>
Item 1. Business (Continued)
financial analyst with General Motors Corp. Mr. Driver is the son of
Mr. Frank L. Driver III and the nephew of Mr. David A. Driver, a
Director of the Company.
Mrs. Lavinia Z. Emery joined the Company in 1982 in an
administrative capacity. In 1985 she was elected Assistant Secretary
and Assistant Treasurer. In 1988 she was elected Secretary and
Assistant Treasurer.
Item 2. Properties
After the divestitures described in item 1(a), the principal
property of the Registrant and its subsidiaries is a wire insulating
plant in Ireland. It was constructed in 1990 and is deemed adequate for
the enterprise. It is owned by the Irish subsidiary and is subject to
liens by a lender.
Item 3. Legal Proceedings
None of material nature.
Item 4. Submission of Matters to a Vote of Security Holders.
None in the fourth quarter of 1994.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
(a) The Company's common stock is traded on the American Stock
Exchange. The high and low sales prices for the stock were as follows:
<TABLE>
1994 1993
Quarter High Low High Low
<S> <C> <C> <C> <C>
First 7 1/4 6 7 1/8 4 7/8
Second 6 5 8 1/8 6 3/8
Third 6 5 1/4 7 3/4 7 1/4
Fourth 6 1/8 5 7 3/8 7
</TABLE>
(b) The approximate number of common shareholders as of March 20,
1995 was 300. This figure represents the sum of the number of
shareholders of record, plus an estimate of the number of individual
shareholders whose shares are held collectively by stockbrokers.
(c) The Company has not paid cash dividends during 1993 and 1994.
The note payable to the Pension Benefit Guaranty Corporation (PBGC)
prohibits the payment of cash dividends without permission of the PBGC
(reference is made to Note 8 to the consolidated financial statements).
Item 6. Selected Financial Data
<TABLE>
Y e a r E n d e d D e c e m b e r 3 1
1994 1993 1992 1991 1990
(Dollar amounts in thousands, except per share data)
<S>
Net Sales and other
<S> <C> <C> <C> <C> <C>
revenues $60,558 $83,997 $87,702 $87,885 $93,547
(Loss) Income before
extraordinary item (976) (1,992) (4,490) (4,143) 141
Extraordinary item - - - 167 238
------ ------ ------ ------ ------
Net (Loss) Income (976) (1,992) (4,490) (3,976) 379
Total assets 15,893 38,609 42,676 48,168 53,572
Long-term debt 2,734 4,098 3,664 2,500 6,278
Per Common Share:
(Loss) Income before
extraordinary item $ (.75) $(1.54) $(3.50) $(3.23) $ .11
Extraordinary item - - - .13 .18
----- ----- ----- ----- ----
Net (Loss) Income $ (.75) $(1.54) $(3.50) $(3.10) $ .29
===== ===== ===== ===== ====
</TABLE>
In 1994, the Company restructured its foreign electrical
resistance wire operations and divested its U.S. operating company. See
item 1(a) for a description of these transactions.
In 1993, the Company adopted SFAS 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions". This change increased
the 1993 net loss by $180,000 ($.14 per share).
In 1992, the Company adopted SFAS 109 "Accounting for Income
Taxes". This change had no effect on operating results.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition:
The Company, directly and through its subsidiaries, has been
engaged in the business of manufacturing and marketing non-ferrous metal
products, principally electrical resistance wire and insulated
electrical wire and cable. The Company has incurred significant losses
since 1991 primarily as a result of losses sustained by its Italian
subsidiary.
Effective March 18, 1994, the Company restructured its operations
(the "Restructure") in order to solve its liquidity problems and
strengthen its competitive position in the industry. Pursuant to the
Restructure, the Company combined its overseas resistance wire
operations with Harrison Alloys Inc. (Harrison) by (i) forming a holding
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
company, HAI Holding Company Inc. (Holding), owned fifty percent by the
Company and fifty percent by a corporation organized by the former
common shareholders of Harrison; (ii) contributing the Company's
overseas resistance wire manufacturing subsidiaries (subject to liens
under existing bank loans) and its approximately 24% shareholding in
Harrison to Holding; and (iii) causing Harrison to assume significant
obligations of the Company as explained below. In conjunction with the
Restructure, Harrison became a wholly owned subsidiary of Holding, which
in turn transferred the Driver-Harris subsidiaries to Harrison.
As part of the foregoing transaction, Harrison assumed certain
obligations of the Company and its wholly-owned subsidiary, Driver-
Harris Alloys Inc. (Alloys), including $1.8 million of debt incurred for
investment in the Company's Italian subsidiary, $1,489,000 of loans of
Alloys, all potential environmental obligations with respect to Alloys'
U.S. manufacturing facilities, and the Company's commitment to share
with Harrison the cost of health care and life insurance benefits for
certain retirees. As additional consideration to the Company, Harrison
was required to make aggregate cash payments of $300,000; it is also
required to pay license fees and commissions totaling $500,000 per year
from 1994 to 2003.
For further details of this transaction reference is made to Note
3 to the financial statements.
In consummating the Restructure, Driver-Harris and Harrison expect
the unified organization to benefit from economies and efficiencies in
marketing, production, and product design available through a
combination of the two businesses and from a potentially greater
worldwide market share derived from a stronger market presence.
However, these benefits are accompanied by certain risks, which are
concentrated primarily on the highly leveraged debt structure of
Harrison, a portion of which the Company is directly or contingently
liable for. Harrison may also be exposed to major expenditures if it
decides to rationalize certain manufacturing operations. Additionally,
the Company will be dependent on Harrison for the major portion of its
U.S. cash flow and the discharge of the aforementioned U.S. obligations
or potential obligations.
Effective September 30, 1994, Alloys transferred substantially all
of its assets to Harrison in exchange for the assumption by Harrison of
an equivalent amount of liabilities (all assets and liabilities were
transferred at net book value). This transaction was the result of the
exercise by Harrison on June 14, 1994 of an option granted in 1987. The
transferred assets consist principally of inventory and equipment
located at the Harrison and Somerset, NJ and Spartanburg, SC plants of
Alloys as well as the land and factory building in Somerset, NJ. These
assets constituted the U.S. portion of the Company's resistance wire
manufacturing business; the foreign portion had been transferred to
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Harrison in the March 1994 restructuring. No gain or loss resulted from
this transaction. Since Alloys contractually operated at a break-even
level, the foregoing asset transfer has no effect on future operating
results.
As part of the Alloys divestiture, all agreements between Harrison,
Alloys, and the Company, relating to the manufacture, financing, and
distribution of products in the U.S., were terminated effective
September 30, 1994.
Under the New Jersey Industrial Site Recovery Act certain clean-up
procedures must be completed with respect to the New Jersey locations.
Harrison has assumed all of the obligations and liabilities of the
Registrant and Alloys under any federal and state environmental laws
pursuant to the March 1994 restructuring.
After the foregoing transactions, the Company, in addition to its
50% ownership of Harrison, continues to own Irish Driver-Harris Co.
Ltd., a producer of insulated electrical wire and cable, and Quality
Heat Treatment Pty. Ltd., a company in the furnace manufacturing and
heat treating business.
At December 31, 1994, the Company and its subsidiaries had
available bank lines of credit of approximately $2,900,000, of which
$1,762,000 was in use.
Results of Operations
The accompanying consolidated statements of operations for 1994,
include the operations of subsidiaries which were divested during the
year, to the approximate dates of their disposal. These are March 31,
1994 for the overseas resistance wire manufacturing companies and
September 30, 1994 for Alloys. The pro-forma consolidated data for 1994
give effect to the aforementioned restructuring and the divestiture of
the assets of Alloys, as if both transactions had occurred on January 1,
1994.
For 1994, net sales of operating units continuing as part of the
Company throughout the entire year, rose 17.7% compared with the
preceding year. This increase reflects principally higher unit volume.
Prices on average were slightly higher than last year and foreign
currency rates moved up somewhat.
Basic raw material costs of continuing companies rose during 1994.
Selling prices, however, could not be raised in step with the higher
costs. As a result, the gross profit was 3.0 percentage points lower
than in 1993. Selling, general and administrative expenses of these
units increased 6.6% in absolute terms; relative to sales, however, they
decreased 1.6 percentage points. In addition, there were currency
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
exchange losses of $29,000 in 1994, compared with gains of $133,000 in
1993.
Sales to related company are to Harrison, a 50%-owned affiliate.
Pursuant to an agreement with Alloys, selling prices are equal to the
subsidiary's costs and expenses.
The Company's relationship with Harrison dates back to 1985 when
Alloys was reorganized by transferring certain of its assets to the
newly organized Harrison, in consideration for the assumption by the
latter of a large portion of Alloys' bank debt which the Company
guaranteed, and the issuance of certain non-voting Harrison capital
stock to Alloys. Since then Harrison has provided the predominant share
of debt service. While the combined Harrison and Alloys bank borrowings
have been significantly reduced since 1985, Harrison and Driver-Harris
Company have a common interest in managing the U.S. operations to
maximize the cash flow available for debt service.
In 1993, net sales to unaffiliated customers dropped by 6.1% from
the prior year's level. This change is a composite of higher unit
volume, which was more than offset by (i) the effect of a stronger
dollar on the translation of foreign financial data, and (ii) lower
average selling prices.
During 1993 the price of nickel declined. This was reflected in
lower average selling prices for the Company's products. However, the
operating companies were able to lower production costs by more than the
proportionate drop in sales prices. In addition, cost of sales was
reduced $304,000 by virtue of a settlement with the Pension Benefit
Guaranty Corporation of the Company's employer liability under three
defined benefit pension plans terminated in 1985. As a result, the 1993
gross profit from sales to unaffiliated customers was 2.3 percentage
points higher relative to net sales than in 1992. Selling, general and
administrative expenses were lower in 1993 than in 1992, mainly due to
the effect of a stronger U.S. dollar on the translation of foreign
financial data. Also, in 1992 there were severance and other employment
costs of $210,000 in connection with organizational changes. The large
currency exchange loss in 1992 reflects primarily the impact of the
European currency realignment in September 1992 on those foreign
assets and liabilities which were denominated in other than the local
currency of the respective operating units.
The Company generally incurs income taxes in operating units which
generate earnings, while no tax benefits are available or can be
anticipated in units experiencing losses. This is the principal reason
for the disproportionate income tax provisions for the years 1992
through 1994.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The 1994, 1993, and 1992 operating results include utilization of
approximately $14,000, $340,000 and $244,000, respectively of net
operating loss carryforwards. The related tax benefits of $5,000,
$128,000, and $88,000 have been netted against the provision for income
taxes.
During the years 1994, 1993, and 1992 the Company's equity in the
operating results of Harrison consisted of losses of $1,097,000,
$359,000, and $265,000, respectively. The recognition of these losses
has reduced the carrying amount of the Company's investment in Harrison
to a negative balance (liability) of $1,701,000 at December 31, 1994.
This amount combined with a deferred credit of $1,266,000 which
originated from the March 1994 restructuring described above, is equal
to the balance of a bank loan of Harrison ($2,967,000) which the Company
has guaranteed (see Note 8). Under the Company's policy, losses from
its investment in Harrison will be recognized only to the extent of the
bank loan guaranty.
Item 8. Financial Statements and Supplementary Data
This information is submitted in a separate section of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
The Company's Irish subsidiary, Irish Driver-Harris Co. Ltd.
changed its independent accountants during 1993. This matter has been
reported on Form 8-K dated December 6, 1993.
PART III
Item 10. Directors and Executive Officers of the Registrant
The table listing this information with respect to directors of the
Company, and the statement of compliance with Sec. 16(a) of the Exchange
Act, included in the proxy statement dated May 3, 1995, is herein
incorporated by reference. The information with respect to executive
officers is included in Part I of this Form 10-K.
Item 11. Executive Compensation
The information with respect to officers and directors of the
Company, included in the proxy statement dated May 3, 1995, is herein
incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item, included in the proxy
statement dated May 3, 1995, is herein incorporated by reference.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The information required by this item, included in the proxy
statement dated May 3, 1995, is herein incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)(1) and (2) - This portion of Item 14 is submitted in a separate
section of this report.
(3) Listing of Exhibits
Exhibit 3. Certificate of Incorporation and By-Laws
Exhibit 10. Material contracts
Exhibit 21. Subsidiaries of the Registrant
Exhibit 23. Consent of Independent Accountants
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K.
None filed in the fourth quarter of 1994.
(c) Exhibits
Incorporated by
Reference to SEC
Form
----------------
Exhibit 3. Articles of Incorporation 8-K dated November
and By-Laws 1, 1982
Amendments thereto 8-K dated June 17,
1987
Exhibit 10. Material Contracts:
Third Amended and Restated Loan
Agreement with several banks, dated
November 12, 1992; loan agreement
with Textron Financial Corporation
dated October 29, 1992, and related 10-Q dated
Mortgage and Promissory Note dated September 30, 1992
November 12, 1992
Settlement Agreement with Pension 8-K dated
Benefit Guaranty Corporation dated December 22,
December 22, 1993 1993
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. (Continued)
Amended and Restated Agreement between
Harrison Alloys Inc., Driver-Harris
Company, HAI Industries Inc., and
HAI Holding Company Inc., dated 8-K dated
March 18, 1994 April 7, 1994
Letter agreement amending the Third
Amended and Restated Loan Agreement
with several banks, dated as of 8-K dated
March 18, 1994 April 7, 1994
Note Modification Agreement, Loan and
Security Agreement Modification
Agreement, and Release of Guaranty
between Driver-Harris Alloys Inc.,
Harrison Alloys Inc., and Textron
Financial Corporation, all dated 8-K dated
February 25, 1994 April 7, 1994
Exhibit 21. Subsidiaries of the Registrant as of December 31,
1994
SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction of Incorporation
Driver-Harris Alloys Inc. New Jersey (Inactive
corporation)
Irish Driver-Harris Co. Ltd. Ireland
Kingston Cable Distributors Ltd. United Kingdom
(subsidiary of Irish Driver-Harris
Co. Ltd.)
Quality Heat Treatment Pty. Ltd. Australia
Exhibit 23. Consent of Independent Accountants
This exhibit is filed as an attachment to this report.
(d) Financial Statement Schedules -- This portion of Item 14
is submitted in a separate section of this report.
Financial Statements of HAI Holding Company Inc. -
December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DRIVER-HARRIS COMPANY
April 13, 1995 Frank L. Driver IV
- -------------------------- --------------------------------
Date Frank L. Driver IV
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Ralph T. Bartlett David A. Driver
- -------------------------------- --------------------------------
Ralph T. Bartlett David A. Driver
Director Director
Date: April 13, 1995 Date: April 13, 1995
H. L. Biggerstaff Frank L. Driver III
- -------------------------------- --------------------------------
H. L. Biggerstaff Frank L. Driver III
Director Director, Chairman of Board
Date: April 13, 1995 Chief Executive Officer
Date: April 13, 1995
Frank L. Driver IV
- ----------------------------------
Frank L. Driver IV
Director, President and
Chief Financial Officer
Date: April 13, 1995
<PAGE>
Annual Report on Form 10-K Item 8,
Item 14(a)(1) and (2), (c) and (d)
List of Financial Statements and
Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
Driver-Harris Company and Subsidiaries
December 31, 1994<PAGE>
<PAGE>
Driver-Harris Company and Subsidiaries
Form 10-K-Item 14(a)(1) and (2)
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Driver-Harris Company
and subsidiaries are included in Item 8:
Consolidated Balance Sheets-December 31, 1994 and 1993 Page 19
Consolidated Statements of Operations-Years ended December 31,
1994, 1993 and 1992 Page 21
Consolidated Statements of Stockholders' Equity-Years ended
December 31, 1994, 1993 and 1992 Page 22
Consolidated Statements of Cash Flows-Years ended December 31,
1994, 1993 and 1992 Page 23
Notes to Consolidated Financial Statements Page 24
The following consolidated financial statement schedules of Driver-
Harris Company and subsidiaries and financial statements of HAI
Holding Company Inc. and subsidiaries are included in Item 14(d):
Schedule I-Condensed Financial Information of Registrant 39
Schedule II-Valuation and Qualifying Accounts 43
Financial Statements of HAI Holding Company Inc. and
subsidiaries 44
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
<PAGE>
Report of Independent Auditors
Board of Directors
Driver-Harris Company
We have audited the accompanying consolidated balance sheets of Driver-
Harris Company and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December
31, 1994. Our audits also included the financial statement schedules
listed as Item 14(a). These financial statements and financial
statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements and schedules based on our audits. We did not audit the
financial statements of certain foreign consolidated subsidiaries which
statements reflect total assets constituting 14% in 1994 and 4% in 1993,
and total revenues constituting 7% in 1994, 4% in 1993 and 23% in 1992
of the related consolidated totals. Those statements were audited by
other auditors whose reports have been furnished to us, and our opinion,
insofar as it relates to data included for such subsidiaries, is based
solely on the reports of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. 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 and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based upon our audits and the reports of other auditors,
the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Driver-
Harris Company and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in
all material respects, the information set forth herein.
As discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed it method of accounting for postretirement benefits
other than pensions.
March 10, 1995 ERNST & YOUNG LLP
<PAGE>
AUDITORS' REPORT TO THE MEMBERS
OF
KINGSTON CABLE DISTRIBUTORS LIMITED
We have audited the accompanying balance sheet of Kingston Cable
Distributors Limited as of 31 December 1994, and the related statements
of profit and loss and cash flows for the thirteen months then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material mis-statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Kingston
Cable Distributors Limited as of 31 December 1994, and the results of
its operations and its cash flows for the thirteen months then ended in
conformity with generally accepted accounting principles.
15 March 1995 Signed: James, Stanley & Co.
-----------------------------
Registered Auditor
Chartered Accountants
1733 Coventry Road
South Yardley
Birmingham
B26 1DT
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Balance Sheets
Dollar Amounts in Thousands
<TABLE>
December 31
1994 1993
------------------
Assets
Current assets:
<S> <C> <C>
Cash $ 461 $ 600
Receivables,less allowances of $376
and $533 7,494 13,938
Inventories (Notes 1,2,3,4 and 8):
Materials 658 2,705
In process 226 5,955
Finished 2,160 4,216
------ ------
3,044 12,876
Prepaid expenses 227 533
------ ------
Total current assets 11,226 27,947
Other assets 369 421
Property, plant and equipment, at cost
(Notes 3,4,7 and 8):
Land and buildings 2,738 5,356
Machinery and equipment 2,701 24,396
Office equipment 419 1,795
------ ------
5,858 31,547
Less accumulated depreciation and
amortization 1,560 21,306
------ ------
4,298 10,241
------ ------
$15,893 $38,609
====== ======
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings (Note 8) $ 1,762 $ 8,005
Current portion of long-term debt 512 1,581
Accounts payable 5,295 12,867
Accrued expenses 843 3,855
Due to related company (Note 2) 1,326
Income taxes payable 86 220
------ ------
Total current liabilities 8,498 27,854
Long-term debt (Note 8) 2,734 4,098
Deferred foreign income taxes 110 385
Postretirement benefit liabilities (Note 9) 417 538
Investment in related company (Note 2) 1,701 1,459
Due to related company (Note 2) 1,200
Deferred credit-related company (Note 3) 1,266
Sundry liabilities 259 1,854
Stockholders' equity (Notes 6,8 and 11):
Common stock--par value $0.83 1/3 per share:
Authorized 3,000,000 shares; issued 1,624,928
shares (including 130,389 and 130,608 treasury
shares and 200,000 pledged shares) 1,187 1,187
Additional paid-in capital 1,982 1,981
Retained earnings (deficit) (189) 894
Equity adjustment from translation (2,072) (2,841)
------ ------
908 1,221
Commitments and contingencies (Notes 7,8,9)
------ ------
$15,893 $38,609
====== ======
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Operations
Dollar Amounts in Thousands, Except per Share Data
<TABLE>
Year ended December 31 Pro Forma
1994 1993 1992 1994
---- ---- ---- ----
(Unaudited
Note 5)
Revenues:
Net sales:
<S> <C> <C> <C> <C>
Customers $36,351 $56,167 $59,787 $28,101
Related company (Note 2) 23,196 27,295 27,596
Other revenues 1,011 535 319 959
------ ------ ------ ------
60,558 83,997 87,702 29,060
Costs and expenses:
Cost of sales:
Customers 30,156 45,597 49,914 23,540
Related company 23,196 27,295 27,594
Selling, general and
administrative 6,102 10,604 11,435 4,263
Interest expense 855 1,696 1,736 575
Foreign exchange loss and sundry 52 320 1,150 15
Equity in net loss of related
company 1,097 359 265 1,097
----- ------ ------ ------
61,458 85,871 92,094 29,490
------ ------ ------ ------
Loss before income taxes (900) (1,874) (4,392) (430)
Income taxes (Note 11) 76 118 98 60
------ ------ ------ ------
Net loss $ (976)$(1,992)$(4,490) $ (490)
====== ====== ====== ======
Net loss per share (Note 1) $(.75) $(1.54) $(3.50) $(.38)
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the three years ended December 31, 1994
Dollar Amounts in Thousands
<TABLE>
Equity
Additional Retained Adjustment
Common Paid-In Earnings from Trans-
Stock Capital (Deficit) lation Total
------ -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $1,187 $1,913 $ 7,376 $(1,172) $ 9,304
Sale of 9,999 treasury
shares 53 53
Net loss (4,490) (4,490)
Adjustments from exchange
rate changes (952) (952)
-------------------------------------------
Balance at December 31, 1992 1,187 1,966 2,886 (2,124) 3,915
Sale of 2,349 treasury
shares 15 15
Net loss (1,992) (1,992)
Adjustments from exchange
rate changes (717) (717)
-------------------------------------------
Balance at December 31, 1993 1,187 1,981 894 (2,841) 1,221
Sale of 219 treasury
shares 1 1
Net loss (976) (976)
Loss for December 1993 of
subsidiary which changed
its fiscal year (Note 1) (107) (107)
Adjustments from exchange
rate changes 769 769
--------------------------------------------
Balance at December 31, 1994 $1,187 $1,982 $ (189) $(2,072) $ 908
============================================
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Cash Flows
Dollar Amounts in Thousands
<TABLE>
Year ended December 31
1994 1993 1992
------------------------
Operating activities
<S> <C> <C> <C>
Net loss $ (976) $(1,992) $(4,490)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 966 1,643 2,017
Provision for doubtful accounts 225 182 298
Settlement of pension liability (304)
Deferred credit and other (249) 74 7
Equity in net loss of related company 1,097 359 265
Account with related company (308) 1,304 1,222
Receivables (1,084) 155 (2,031)
Inventories (2,487) 909 987
Accounts payable and accrued expenses 2,623 2,413 254
Sundry (100) 225 (234)
---------------------------
Net cash (used in) provided by operating
activities (293) 4,968 (1,705)
Investing activities
Capital expenditures (1,301) (2,668) (1,076)
Sundry (37) (33) 90
---------------------------
Net cash used in investing activities (1,338) (2,701) (986)
Financing activities
Change in short-term debt 260 (2,256) 4,192
Proceeds from issuance of long-term debt 1,342 997 2,084
Reduction of long-term debt (1,458) (1,139) (3,739)
Cash of companies included in
restructuring (Note 3) (503)
Loans from related company (Note 3) 1,800
Sundry 2 102 (66)
--------------------------
Net cash provided by (used in)
financing activities 1,443 (2,296) 2,471
Effect of exchange rate changes on cash 49 (47) (17)
---------------------------
Net change in cash (139) (76) (237)
Cash at beginning of year 600 676 913
--------------------------
Cash at end of year $ 461 $ 600 $ 676
==========================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 743 $ 1,525 $ 1,653
Income taxes 17 61 76
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994 and 1993
1. Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Driver-
Harris company (the "Company") and its majority controlled subsidiaries.
Intercompany accounts, transactions and profits have been eliminated in
consolidation. The financial statements of Irish Driver-Harris Company
Ltd. and its subsidiary are included in consolidation for their years
ended November 30, 1992 and 1993. During 1994, these subsidiaries
changed to the calendar year. The net loss for the month of December
1993 ($107,000), was charged directly to retained earnings.
Harrison Alloys Inc. ("Harrison"), a fifty percent owned company, is
recorded on the equity method of accounting. Transactions with, and the
investment in Harrison are shown separately in the accompanying
financial statements (see Note 3). The recognition of losses has
reduced the carrying amount of the Company's investment in Harrison to
a negative balance (liability) of $1,701,000 at December 31, 1994. This
amount, combined with a deferred credit of $1,266,000 which originated
from the March 1994 restructuring described in Note 3, is equal to the
balance of a bank loan of Harrison ($2,967,000) which the Company has
guaranteed (see Note 8). Under the Company's policy, losses from its
investment in Harrison will be recognized only to the extent of the bank
loan guaranty.
Inventories
Inventories are stated at the lower of cost or market. At December 31,
1994, cost was determined by the first-in, first-out (FIFO) method for
all inventories. At December 31, 1993, a number of subsidiaries, which
were subsequently divested, used the last-in, first-out (LIFO) method
for certain inventories, which aggregated 47% of the consolidated total.
Had the FIFO method of valuation been used in place of LIFO, inventories
would have been $2,703,000 higher at December 31, 1993.
Property, Plant and Equipment
Depreciation has been provided principally by the straight-line method
based upon estimated useful lives of the depreciable assets.
Income Taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
<PAGE>
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
Revenue Recognition
Sales revenues are recognized at the time products are shipped. Sales
returns are recognized generally upon the receipt of merchandise returns
or the granting of price allowances.
Earnings per Common Share
Earnings per share of common stock are based on the average number of
common shares and common share equivalents outstanding during each year
(1,294,430 in 1994, 1,294,320 in 1993 and 1,284,472 in 1992). Common
stock options are considered common share equivalents.
Financial Instruments
In the normal course of business, the Company may enter into forward
contracts in order to limit its exposure to fluctuations in currency
exchange rates or metals prices. As currency exchange rates or metals
prices fluctuate, gains and losses on these contracts serve as hedges to
the extent that they offset transactional losses and gains which would
otherwise impact the Company's financial results. To the extent gains
or losses on open forward contracts are covered by firm or anticipated
sales or purchase commitments, the Company follows the practice of
recognizing neither gains nor losses.
The predominant portion of the Company's customers are engaged in the
construction, appliance and electrical equipment industries in Ireland
and Great Britain. The Company grants credit to its customers on open
account. One customer's outstanding balance represents 10.3% of
consolidated receivables.
Foreign Currency Translation
Assets and liabilities of foreign operations with a functional currency
other than the U.S. dollar are translated into U.S. dollars at year-end
exchange rates. Revenues and expenses are translated at the average
exchange rates in effect during the year. Translation adjustments are
recorded as a separate component of equity. Changes in the equity
account during 1994 and 1993 primarily resulted from such translation
adjustments.
Change in Accounting Principle
Effective January 1, 1993, the Company adopted Statement of Financial
<PAGE>
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". This standard requires
companies to accrue for estimated future postretirement benefit expenses
during the years employees are working and earning benefits for
retirement. Previously, the Company expensed the costs of these
benefits as current payments were made. This change had the effect of
increasing the postretirement benefit expense of the Company for 1993 by
approximately $180,000.
Pending Accounting Pronouncements
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure of the fair value of financial instruments,
including the methods and significant assumptions used to estimate these
fair values. The standard is effective for the Company no later than
1995.
2. U.S. Manufacturing Operations
During 1985, the Company reorganized its U.S. operating subsidiary,
Driver-Harris Alloys Inc. ("Alloys"), by transferring its accounts
receivable and finished goods inventory to a newly-formed company,
Harrison Alloys Inc. ("Harrison") in consideration for Harrison's
assumption of a portion of Alloys' bank debt and the issuance to Alloys
of shares of Harrison's (non-voting) common stock. Harrison is referred
to herein as a "related company". Effective March 18, 1994, the Company
and the shareholders of Harrison formed a holding company, consisting of
the Harrison operations and the Company's overseas resistance wire
manufacturing subsidiaries as more fully described in Note 3. Also,
effective September 30, 1994, Alloys transferred substantially all of
its assets to Harrison, as more fully described in Note. 4.
Until the September 30, 1994 divestiture of Alloys, under agreements
between the parties, (i) Harrison was required to perform certain
manufacturing and administrative functions for Alloys at an agreed
pricing formula, (ii) Harrison was granted certain distribution rights
for Alloys' products in the United States and Mexico, (iii) Harrison was
required to purchase all of Alloys' production at prices equal to all of
Alloys' costs, expenses and interest and (iv) Harrison provided certain
financing to Alloys.
For the years ended December 31, 1994, 1993 and 1992, Harrison purchased
$23,196,000, $27,295,000 and $27,594,000, respectively, of products from
Alloys and billed Alloys $8,123,000, $9,427,000 and $8,308,000,
respectively, for production and administrative functions.
3. Restructuring of Resistance Wire Operations
The Company, directly and through its subsidiaries, has been engaged in
the business of manufacturing and marketing non-ferrous metal products,
principally electrical resistance wire and insulated electrical wire and
cable. The Company has incurred significant losses since 1991 primarily
<PAGE>
as a result of losses sustained by its Italian subsidiary.
On April 7, 1994, effective March 18, 1994, the Company restructured its
operations (the Restructure) in order to solve its liquidity problems
and strengthen its competitive position in the industry. Pursuant to
the Restructure, the Company combined its overseas resistance wire
operations with Harrison Alloys Inc. (Harrison) by (i) forming a holding
company, HAI Holding Company Inc. (Holding), owned fifty percent by the
Company and fifty percent by a corporation organized by the former
common shareholders of Harrison; (ii) contributing the Company's
overseas resistance wire manufacturing subsidiaries located in Italy,
France, the U.K., Spain and Australia (subject to liens under existing
bank loans [see Note 8]) and its approximately 24% shareholding in
Harrison to Holding; and (iii) causing Harrison to assume significant
obligations of the Company as explained below. In conjunction with the
Restructure, Harrison became a wholly-owned subsidiary of Holding, which
in turn transferred the Driver-Harris subsidiaries to Harrison. The
latter and Holding are referred to as "related company" or as "Harrison"
in the accompanying consolidated financial statements.
As part of the foregoing transaction, Harrison assumed certain
obligations of the Company and its U.S. subsidiary, Driver-Harris
Alloys Inc. (Alloys), including approximately $1.8 million of debt
incurred for investment in the Company's Italian subsidiary, $1,489,000
of loans of Alloys, all potential environmental obligations with respect
to Alloys' U.S. manufacturing facilities, and the Company's commitment
to share with Harrison the cost of health care and life insurance
benefits for certain retirees. As additional consideration to the
Company, Harrison was required to make aggregate cash payments of
$300,000; it is also required to pay license fees and commissions
totaling $500,000 per year from 1994 through 2003.
The foregoing transaction did not result in recognition of any immediate
gain or loss. For financial reporting purposes, the restructuring was
effected as of March 31, 1994. Deferred credits aggregating $1,489,000
arising from the restructure will be amortized over 5 years.
Accordingly, $223,000 has been credited to operations for the year ended
December 31, 1994.
4. Divestiture of Assets of Driver-Harris Alloys Inc.
On November 29, 1994, effective September 30, 1994, Driver-Harris Alloys
Inc. (Alloys), a wholly-owned subsidiary of the Company, transferred
substantially all of its assets to Harrison Alloys Inc. (Harrison), a
corporation in which the Company indirectly owns a 50% interest (see
Note 3), in exchange for the assumption by Harrison of an equivalent
amount of liabilities (all assets were transferred at net book value).
This transaction was the result of the exercise by Harrison on June 14,
1994 of an option granted in 1987. The transferred assets consist
principally of inventory and equipment located at the Harrison and
Somerset, New Jersey and Spartanburg, South Carolina plants of Alloys as
well as the land and factory building in Somerset, New Jersey. These
<PAGE>
assets constituted the U.S. portion of the Company's resistance wire
manufacturing business; the foreign portion had been transferred to
Harrison in the March 18, 1994 restructuring described in Note 3. The
Alloys assets had an aggregate net book value of $7,424,000 and the
liabilities assumed by Harrison consisted of $5,807,000 accounts
payables and other current liabilities and a $1,617,000 obligation to
Harrison. No gain or loss resulted from this transaction which was
recorded as of September 30, 1994. Since Alloys contractually operated
at a break-even level, the foregoing asset transfer has no effect on
future operating results.
As part of the foregoing transaction, all agreements between Harrison,
Alloys, and the Company, relating to the manufacture, financing, and
distribution of products in the U.S., were terminated effective
September 30, 1994.
Under the New Jersey Industrial Site Recovery Act certain clean-up
procedures must be completed with respect to the New Jersey locations.
Harrison has assumed all of the obligations and liabilities of the
Company and Alloys under any federal and state environmental laws
pursuant to the March 1994 restructuring.
After the Restructure described in Note 3 and the divestiture of the
assets of Alloys, the Company, in addition to its 50% ownership of
Harrison, continues to own Irish Driver-Harris Co. Ltd., a producer of
insulated electrical wire and cable, and Quality Heat Treatment Pty.
Ltd., a company in the furnace manufacturing and heat treating business.
5. Pro Forma Financial Information
The accompanying financial statements include a consolidated pro forma
statement of operations for the year ended December 31, 1994, which
gives effect to the restructure on March 18, 1994 (see Note 3) and the
Alloys divestiture (see Note 4) as if both transactions had occurred on
January 1, 1994.
6. Foreign Operations
Net assets which are located outside the United States and are included
in the consolidated balance sheets are as follows (in thousands):
<TABLE>
December 31
1994 1993
---------------
Assets
<S> <C> <C>
Inventories $ 3,044 $ 9,318
Other current assets 8,065 15,026
Property, plant and equipment--net 4,298 7,803
Other assets 166 317
-----------------
15,573 32,464
Liabilities
Current liabilities 8,033 20,794
Long-term debt 1,748 2,094
Other long-term liabilities 299 1,854
Deferred income taxes 110 385
-----------------
10,190 25,127
-----------------
Net assets outside the United States $ 5,383 $ 7,337
=================
</TABLE>
Net loss of the Company's foreign subsidiaries included in the
accompanying financial statements amounted to approximately $144,000 in
1994, $1,407,000 in 1993 and $3,698,000 in 1992.
Because (i) the Company plans to continue to finance foreign expansion
and operating requirements by reinvesting a substantial portion of the
undistributed earnings of its foreign subsidiaries, and (ii) the
availability of U.S. tax loss carryovers (see Note 10) to offset
dividends from these subsidiaries, United States income taxes have not
been provided on such earnings. Unremitted earnings of foreign
subsidiaries at December 31, 1994 amounted to approximately $5,656,000.
7. Leases
Property, plant and equipment includes the following amounts related to
capital leases (in thousands):
<TABLE>
December 31
1994 1993
---------------
<S> <C> <C>
Machinery and equipment $1,239 $1,515
Less accumulated amortization 269 390
---------------
$ 970 $1,125
===============
</TABLE>
Amortization of the assets recorded under capital leases is included in
depreciation expense.
The future minimum rental commitments for all operating leases as of
December 31, 1994 are as follows (in thousands):
<TABLE>
<S> <C>
1995 $106
1996 61
1997 54
1998 46
1999 45
2000-2004 76
----
$388
====
</TABLE>
Total rent expense under operating leases for 1994, 1993 and 1992 was
$483,000, $755,000 and $740,000, respectively.
8. Long-Term Debt and Lines of Credit
Long-term debt was as follows(in thousands):
<TABLE>
December 31
1994 1993
---------------
<S> <C> <C>
U.S. mortgage loan $1,339
U.S. bank loan $ 242 350
Note payable to Pension Benefit
Guaranty Corporation 852 795
Other mortgage loans 763 878
Capitalized lease obligations 779 783
Sundry 610 1,534
---------------
3,246 5,679
Less current portion 512 1,581
---------------
$2,734 $4,098
===============
</TABLE>
In addition to the foregoing direct obligations at December 31, 1994,
Driver-Harris Alloys Inc. ("Alloys") was jointly and severally liable
with Harrison Alloys Inc. ("Harrison") (see Note 2) for a U.S. bank loan
with an unpaid principal balance of $2,967,000 and a U.S. mortgage loan
with an unpaid principal balance of $1,267,000. Both of these
obligations are being reported as direct liabilities of Harrison.
The bank loan is guaranteed by the Company, which has pledged as
collateral its shares of the capital stock of its Irish subsidiary as
well as 200,000 shares of its own capital stock. No accounting
recognition has been given to the issuance of these 200,000 shares since
they can be disposed of only in the case of a default. The bank loan
bears interest at the floating prime rate. Principal and accrued
interest are due in 34 monthly payments of $77,000 until September 30,
1997, three annual payments of $50,000 from 1995 through 1997, and a
final payment of the remaining balance on October 31, 1997.
The U.S. mortgage loan, as amended, is payable in monthly installments
of varying amounts, with a final payment on December 1, 1995. With the
lender's consent, the mortgaged assets were conveyed by Alloys to
Harrison as part of the asset transfer effective September 30, 1994 (see
Note 4).
The Company is obligated under a U.S. bank loan with an unpaid principal
balance of $242,000 at December 31, 1994. This loan matures in monthly
installments until March 31, 1997 with interest at 1 3/4% above the
bank's prime rate. The loan is collateralized by the capital stock of
the Irish subsidiary and that of the Company pledged under the foregoing
bank loan guaranty.
The note payable to the Pension Benefit Guaranty Corporation (PBGC) is
due September 30, 2000. Interest accrues at the rate of 7% per year
compounded quarterly and is payable at maturity. The note and accrued
interest may be prepaid at the Company's option. The PBGC has the right
to convert the entire unpaid principal and accrued interest into common
stock of the Company at a price of $7.875 per share, at any time after
September 30, 1996 until maturity. Until the note is paid in full, the
Company may not pay cash dividends on its capital stock without
permission from the PBGC.
The Other Mortgage Loans, which are the liability of a subsidiary, bear
interest at 10% per year and are due in monthly installments through
2000. These loans and the subsidiary's $2,300,000 general credit line
are jointly collateralized by all of its assets with a net book value of
$13,549,000.
Maturities of long-term debt at December 31, 1994 are as follows (in
thousands):
<TABLE>
Capitalized
Leases Other
---------------------
<S> <C> <C>
1995 $191 $ 321
1996 161 339
1997 172 225
1998 189 289
1999 66 16
Thereafter - 1,277
---------------------
$779 $2,467
=====================
</TABLE>
At December 31, 1994, the Company and its subsidiaries had available
short-term bank lines of credit in the aggregate amount of approximately
$2,900,000, of which $1,762,000 was in use.
The weighted average interest rate on the short-term borrowings of the
Company and its subsidiaries was 10.4% at December 31, 1994.
9. Postretirement Benefits - Pensions and Health Care
Pensions
Prior to the March 1994 restructuring (see Note 3), the Company had
several defined benefit pension plans covering employees of certain
foreign subsidiaries. In the aggregate, these plans were not considered
significant. The cost thereof was $277,000 in 1993 and $287,000 in
1992.
After the restructuring, the Company's only defined benefit pension
plans are those of a subsidiary. These cover substantially all of the
latter's employees, who must contribute to the plan cost. Benefits are
based on employees' years of service and generally final compensation.
The subsidiary makes contributions to the plans in amounts that are
intended to provide for current service and to fund past service
liability.
The actuarial assumptions used for the pension plans of the continuing
subsidiary for 1994 were as follows:
Discount rate 8%
Annual rate of compensation increase 6
Long-term rate of return on plan assets 8
The funded status of the pension plans at December 31, 1994 was (in
thousands):
<TABLE>
<S>
Actuarial present value of accumulated benefit
<C>
obligation, all vested $829
====
Projected benefit obligation (PBO) $1,318
Fair value of plan assets, invested in pooled
separate accounts of an insurance company 813
-----
Plan assets less than PBO (505)
Unrecognized initial net gain (127)
Unrecognized prior service cost 632
-----
Accrued net pension liability $ ---
=====
</TABLE>
Net pension expense for the Company's defined benefit pension plans for
1994 included the following components (in thousands):
<TABLE>
Plans of continuing subsidiary:
<S> <C>
Service cost for benefits earned during the year $ 96
Interest cost on projected benefit obligation 92
Actual net gains on plan assets (64)
Net amortization 30
---
154
Less employee contributions 29
---
Net pension expense-continuing subsidiary 125
Pension expense of divested companies (Note 3) 28
---
Total net pension expense $153
===
</TABLE>
In 1993, the Company settled a claim by the Pension Benefit Guaranty
Corporation for employer liability under three defined benefit pension
plans which were terminated in 1985. The settlement is in the form of
a $781,000 note, due September 30,2000. The Company had previously made
a $1,085,000 provision for this obligation and recorded a $304,000 gain
from the settlement in 1993.
Health Care and Life Insurance
Postretirement health care and life insurance benefits are provided to
certain U.S. employees and retirees. These benefits are provided
through an insurance company whose premiums are based on benefits paid.
Pursuant to the March 1994 restructuring (see Note 3) Harrison Alloys
Inc. (Harrison) has assumed the cost for the pre-1986 retirees,
effective January 1, 1994. Prior thereto, the cost was shared equally
by the Company and Harrison. The accumulated postretirement benefit
obligation for the foregoing retirees was $2,492,000 at December 31,
1994.
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This
standard requires companies to accrue for estimated future
postretirement benefit expenses during the years employees are working
and earning benefits for retirement. Previously, the Company expensed
the costs of these benefits as current payments were made. The Company
elected to amortize the estimated liability for postretirement benefits
at January 1, 1993, over 14 years. For 1994, 1993 and 1992, the
Company's portion of postretirement benefit costs aggregated $50,000,
$293,000 and $141,000, respectively. The 1993 amount includes $180,000
as a result of the adoption of SFAS 106.
The following table sets forth the status of the plans, which are
unfunded, reconciled with the accrued postretirement benefit cost
included in the Company's consolidated balance sheet at December 31,
1994 (in thousands):
<TABLE>
Accumulated postretirement benefit obligation:
<S> <C>
Fully eligible active plan participants $124
Other active plan participants 76
---
200
Unrecognized transition obligation 136
Unrecognized net loss from past experience
different from that assumed and from changes
in assumptions 17
----
Accrued postretirement benefit cost $ 47
====
</TABLE>
Postretirement benefit cost for 1994 included the following components
(in thousands):
<TABLE>
<S> <C>
Service cost for benefits earned during the year $23
Interest cost on accumulated postretirement
benefit obligation 14
Amortization of transition obligation 13
---
$50
===
</TABLE>
The following assumptions were used at December 31, 1994: a discount
rate of 7.25% and a 1995 assumed health care cost trend rate of 12%,
declining gradually to an ultimate cost trend rate of 5% for years after
2002.
A one percentage point increase in the assumed health care cost trend
rate would have increased the accumulated postretirement benefit
obligation at December 31, 1994 by $31,000 and the aggregate service and
interest cost components of postretirement benefit cost for 1994 by
$6,000.
10. Income Taxes
Income tax expense (credit) is composed of the following (in thousands):
<TABLE>
1994 1993 1992
--------------------
United States:
<S> <C> <C> <C>
Current $ (8)
Foreign:
Current $102 $ 172 187
Deferred (21) 74 7
Benefits of operating loss carryovers (5) (128) (88)
----------------------
$ 76 $ 118 $ 98
======================
</TABLE>
Pretax loss attributable to domestic and foreign operations is as
follows (in thousands):
<TABLE>
1994 1993 1992
--------------------
<S> <C> <C> <C>
United States $(832) $ (563) $ (647)
Foreign (68) (1,311) (3,745)
-----------------------
$(900) $(1,874) $(4,392)
=======================
</TABLE>
Following is a reconciliation of income tax expense (credit) to the
amount based on the U.S. statutory rate of 35% (1994) and 34% (1993 and
1992) (in thousands):
<TABLE>
1994 1993 1992
--------------------
Income taxes based on U.S.
<S> <C> <C> <C>
statutory rate $(315) $ (637) $(1,493)
Increase resulting from losses which
provided no current tax benefit
(including equity in related company) 477 1,048 1,851
Taxes of foreign subsidiaries at rates
different than U.S. statutory rate (86) (289) (260)
Other (net) (4)
----------------------
$ 76 $ 118 $ 98
=====================
</TABLE>
In 1992, the Company implemented SFAS 109, "Accounting for Income
Taxes", which requires companies to change the method of accounting for
income taxes from the deferred method to the liability method. This
change had no effect on the accompanying financial statements.
The components of deferred tax assets and liabilities at December 31,
1994 and 1993, were as follows (in thousands):
<TABLE>
1994 1993
-----------------------------------------
Assets Liabilities Assets Liabilities
------------------------------------------
<S> <C> <C> <C> <C>
Inventories $ 53 $ 335 $265
Depreciation $209 276 186
Investment in related
company 105
Accrued expenses 247 241
Tax loss carryforwards 2,160 6,503
Tax credits 148 180
Sundry 41 60
---------------------------------------
2,713 250 7,595 451
Valuation allowance 2,573 7,529
---------------------------------------
Total $ 140 $250 $ 66 $451
========================================
</TABLE>
During 1994, the total valuation allowance and deferred assets decreased
approximately $4,900,000. This amount is principally due to the
companies divested in the March 1994 restructuring (see Note 3).
At December 31, 1994, the Company had approximately $6,000,000 of loss
carryforwards available to offset future U.S. taxable income. Such
carryforwards expire beginning in 1999. The Company also has investment
tax credit carryforwards of approximately $148,000 expiring through
2000.
11. Employee Stock Options
The 1983 Driver-Harris Employee Incentive Stock Option Plan provided for
the grant of stock options at 100% of market value on date of grant
which are intended to qualify as "incentive stock options" under Section
422A of the Internal Revenue Code. Under this plan, which expired
during 1993, 82,500 shares of stock were reserved for issuance at
December 31, 1994. The following table summarizes the activity in the
Plan:
Number
of Shares Price Per Share
------------------------------
Outstanding January 1, 1992 67,500 4.00 to 8.50
Granted during 1992 34,000 5.25 and 5.775
Expired during 1992 (30,000) 4.40 and 6.875
-------
Outstanding December 31, 1992 71,500 4.00 to 8.50
Granted during 1993 11,000 5.775
-------
Outstanding December 31, 1993
and 1994 82,500 4.00 to 8.50
=======
12. Industry Segments and Geographic Areas
The Company and its subsidiaries operate in a single industry segment,
the manufacture and sale of wrought non-ferrous metal products,
principally insulated electrical wire and cable, and until the March 18,
1994 restructuring (see Note 3) electrical resistance wire, strip and
ribbon.
Geographic Areas
<TABLE>
United Western Elimin- Consol-
States Europe Other ations idated
--------------------------------------------
(In Thousands)
1994
Sales to outside
<S> <C> <C> <C> <C>
customers $23,196 $32,499 $3,852 $59,547
Transfers between
geographic areas 504 10 $(514) -
Other revenues 755 97 159 1,011
--------------------------------------------
Total revenues $23,951 $33,100 $4,021 $(514) $60,558
============================================
Operating profit $ 761 $ 878 $ 65 $ 1,704
Less:
Loss of related
company 1,097
Corporate expenses 652
Interest expense 855
------
Loss before income taxes $ (900)
======
Identifiable assets $ 320 $14,182 $1,391 $15,893
====================== ======
1993
Sales to outside
customers $27,295 $48,869 $7,298 $83,462
Transfers between
geographic areas 2,096 18 $(2,114) -
Other revenues 136 193 206 535
--------------------------------------------
Total revenues $27,431 $51,158 $7,522 $(2,114) $83,997
============================================
Operating profit $ 332 $ 535 $ 337 $ 1,204
Less:
Loss of related
company 359
Corporate expenses 1,023
Interest expense 1,696
------
Loss before income taxes $(1,874)
======
Identifiable assets $ 6,145 $28,736 $3,728 $38,609
====================== ======
1992
Sales to outside
customers $27,596 $53,216 $6,571 $87,383
Transfers between
geographic areas 2,692 $(2,692) -
Other revenues 7 202 110 319
--------------------------------------------
Total revenues $27,603 $56,110 $6,681 $(2,692) $87,702
============================================
Operating (loss)
profit $ (110)$(1,471) $ 9 $(1,572)
Less:
Loss of related
company 265
Corporate expenses 819
Interest expense 1,736
------
Loss before income taxes $(4,392)
======
Identifiable assets $ 6,227 $32,731 $3,718 $42,676
====================== ======
</TABLE>
Driver-Harris Company
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheets
Dollar Amounts in Thousands
<TABLE>
December 31
1994 1993
------------------
Assets
Current assets:
<S> <C> <C>
Cash $ 95
Accounts receivable from subsidiaries 627 $1,073
----- -----
Total current assets 722 1,073
Investments in subsidiaries 4,554 4,776
Due from related company 203
Other assets 22 50
------ ------
$ 5,501 $ 5,899
====== ======
Liabilities and stockholders' equity
Current liabilities:
Notes payable $ 10 $ 705
Accounts payable 52 110
Accrued expenses 295 684
Due to related company 66
------ ------
Total current liabilities 357 1,565
Long-term debt 852 795
Non-current liability due to subsidiary 1,801
Postretirement benefit liabilities 417 517
Investment in related company 1,701
Deferred credit-related company 1,266
------ -----
Total liabilities 4,593 4,678
Stockholders' equity
Common stock 1,187 1,187
Additional paid-in capital 1,982 1,981
Retained earnings (deficit) (189) 894
Equity adjustment from translation (2,072) (2,841)
------ ------
908 1,221
Commitments (Note 1)
------ ------
$ 5,501 $ 5,899
====== ======
</TABLE>
Driver-Harris Company
Schedule I - Condensed Financial Information of Registrant
Condensed Statements of Operations
Dollar Amounts in Thousands
<TABLE>
Year ended December 31
1994 1993 1992
----------------------
<S> <C> <C> <C>
Fees from subsidiaries $ 238 $ 742 $ 635
Fees from related company 500
Dividend income from subsidiaries 105
Other income 255 136 33
---------------------
993 878 773
Selling, general and administrative expenses 646 719 839
Interest and financing expenses 82 169
Equity in net loss of related company 1,097
----------------------
Loss before equity in net loss of subsidiaries
and income taxes (832) (10) (66)
Equity in net loss of subsidiaries (144) (1,960) (4,397)
-----------------------
Loss before income taxes (976) (1,970) (4,463)
Income taxes 22 27
----------------------
Net loss $ (976) $(1,992)$(4,490)
=======================
</TABLE>
Driver-Harris Company
Schedule I-Condensed Financial Information of Registrant
Condensed Statements of Cash Flows
<TABLE>
Year ended December 31
1994 1993 1992
----------------------
Operating activities
<S> <C> <C> <C>
Net loss $ (976) $(1,992) $(4,490)
Adjustments to reconcile net loss to net
cash used in operating activities:
Undistributed net loss of subsidiaries 144 1,960 4,397
Settlement of pension liability (259)
Receivables from subsidiaries 446 (229) (95)
Accounts payable and accrued expenses (421) 159 (7)
Deferred credit, etc. (249)
Equity in net loss of related company 1,097
Account with related company (194) 66
Sundry 43 180
-------------------------
Net cash used in operating activities (110) (115) (195)
Investing activities
Investment in subsidiary (1,100) (700)
Sundry 199 109 (2)
--------------------------
Net cash used in investing activities (901) (591) (2)
Financing activities
Change in short-term debt (695) 705
Loans from related company (Note 3) 1,800
Change in non-current liability to subsidiary (30) 62
Sundry 1 15 53
----------------------
Net cash provided by financing activities 1,106 690 115
------------------------
Net change in cash 95 (16) (82)
Cash at beginning of year - 16 98
-------------------------
Cash at end of year $ 95 $ - $ 16
=========================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 124
=====
Income taxes $ 23
====
</TABLE>
Driver-Harris Company
Schedule I-Condensed Financial Information of Registrant
Note to Condensed Financial Statements
1. Guarantees and Commitments
The Registrant has guaranteed borrowings of Harrison Alloys Inc. in the
amount of $2,967,000 and an inactive U.S. subsidiary in the amount of
$242,000.
<TABLE>
Driver-Harris Company and Subsidiaries
Schedule II-Valuation and Qualifying Accounts
Dollar Amounts in Thousands
Col.A Col.B Col.C Col.D Col.E
- ------------------------------------------------------------------------
Additions
---------
(1)
Balance at Charged to Balance
Beginning Costs and Deductions- at End
Description of Period Expenses Describe(1) of Period
- -----------------------------------------------------------------------
Year ended December 31, 1994:
Deducted from related asset:
<S> <C> <C> <C> <C>
Allowances for doubtful $406 (2)
trade accounts $533 $225 (24)(3) $376
=========================================
Year ended December 31, 1993:
Deducted from related asset:
Allowances for doubtful
trade accounts $581 $182 $230 $533
=========================================
Year ended December 31, 1992:
Deducted from related asset:
Allowances for doubtful
trade accounts $784 $298 $501 $581
========================================
<FN>
(1) - Accounts charged off during the year and adjustments due to
currency fluctuations.
(2) - Reserves of companies divested in March 1994 restructuring (see
Note 3).
(3) - Amount is net of currency gain of $34,000.
</TABLE>
HAI Holding Company Inc. and Subsidiaries
Form 10-K-Item 14(a) (1) and (2)
Consolidated Financial Statements
December 31, 1994
Contents
Report of Independent Auditors Page 45
Consolidated Balance Sheets Page 46
Consolidated Statements of Operations Page 48
Consolidated Statements of Stockholders' Equity Page 49
Consolidated Statements of Cash Flows Page 50
Notes to Consolidated Financial Statements Page 52<PAGE>
<PAGE>
Report of Independent Auditors
Board of Directors
HAI Holding Company Inc.
We have audited the accompanying consolidated balance sheets of HAI
Holding Company Inc. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of
HAI Holding Company Inc. and subsidiaries at December 31, 1994 and 1993,
and the consolidated results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
April 11, 1995 ERNST & YOUNG LLP
<PAGE>
HAI Holding Company Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
December 31
1994 1993
-------------------
Assets
Current Assets:
<S> <C> <C>
Cash $ 275,000 $ 1,000
Accounts receivable, less allowance of
$727,000 in 1994 and $74,000 in 1993
(Notes 2 and 4) 12,742,000 4,316,000
Inventories (Notes 2 and 4):
Raw materials 2,506,000
In process 7,363,000
Finished 6,480,000 3,246,000
-----------------------
16,349,000 3,246,000
Prepaid expenses and other current assets 1,036,000 436,000
Due from affiliated company (Note 2) 1,325,000
-----------------------
Total current assets 30,402,000 9,324,000
Property, plant and equipment, at cost (Note 4):
Land and buildings 3,136,000
Machinery and equipment 25,352,000 302,000
Office equipment 1,637,000 251,000
-----------------------
30,125,000 553,000
Less accumulated depreciation 22,258,000 342,000
-----------------------
7,867,000 211,000
Due from affiliated company (Note 2) 1,135,000
Deferred financing charges (Note 4) 597,000 332,000
Other assets 97,000 5,000
-----------------------
$38,963,000 $11,007,000
=======================
Liabilities and stockholders' equity
Current liabilities:
Notes payable (Note 4) $14,173,000 $ 3,901,000
Accounts payable 10,655,000 454,000
Accrued expenses 5,416,000 1,108,000
Income taxes payable 77,000
Current portion of long-term debt 2,539,000 553,000
-----------------------
Total current liabilities 32,860,000 6,016,000
Long-term debt, less current portion (Note 4) 3,476,000 2,874,000
Deferred foreign income taxes 129,000
Postretirement benefit liabilities (Note 7) 885,000
Employee termination liability 1,820,000
Other non-current liabilities 148,000
Preferred stock of a subsidiary (Note 9) 9,680,000 8,198,000
Stockholders' equity (Notes 4 and 8):
Common stock 8,000 5,000
Accumulated deficit (10,266,000) (6,063,000)
Equity adjustment from translation 223,000 (23,000)
-----------------------
(10,035,000) (6,081,000)
Commitments (Notes 7 and 11)
-----------------------
$38,963,000 $11,007,000
=======================
</TABLE>
See accompanying notes
<PAGE>
HAI Holding Company Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
Year ended December 31
1994 1993
-----------------------
<S> <C> <C>
Net sales $64,437,000 $33,940,000
Other income 113,000
------------------------
64,550,000 33,940,000
Costs and expenses (Note 10):
Cost of sales 52,417,000 28,360,000
Selling, general and administrative expenses 11,492,000 4,834,000
Cost related to postretirement benefits 1,176,000
Exchange (gain) loss (96,000) 98,000
Interest expense 2,152,000 876,000
Expenses associated with acquisition of
foreign subsidiaries 778,000
Minority interest (4,000)
------------------------
67,915,000 34,168,000
------------------------
Loss before income tax benefit (3,365,000) (228,000)
Income tax benefit (33,000)
-----------------------
Net loss $(3,332,000) $ (228,000)
=======================
</TABLE>
See accompanying notes
<PAGE>
HAI Holding Company Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
Equity
Adjustment
From
Common Accumulated Trans-
Stock Deficit lation
-----------------------------------
<S> <C> <C> <C>
Balance at January 1, 1993 $5,000 $(5,074,000) $ 12,000
Net loss (228,000)
Preferred stock dividends of the
subsidiary issued in the form
of preferred stock of a subsidiary (761,000)
Adjustments from exchange rate
changes (35,000)
-----------------------------------
Balance at December 31, 1993 5,000 (6,063,000) (23,000)
Net loss (3,332,000)
Preferred stock dividends of the
subsidiary issued in the form
of preferred stock of a subsidiary (868,000)
Adjustments from exchange rate
changes 246,000
Issuance of 282,083 shares of
common stock 3,000 (3,000)
----------------------------------
Balance at December 31, 1994 $8,000 $(10,266,000) $223,000
=================================
</TABLE>
See accompanying notes
<PAGE>
HAI Holding Company Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
Year ended December 31
1994 1993
-----------------------
Operating activities
<S> <C> <C>
Net loss $(3,332,000) $(228,000)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 802,000 64,000
Amortization of deferred financial charges 289,000 176,000
Provision for postretirement benefits 885,000
Gain on sale of equipment (25,000)
Provision for foreign employee termination
allowance 211,000
Deferred foreign income taxes (159,000)
Minority interest (4,000)
Issuance of preferred stock of a subsidiary
in connection with employee benefit plan 757,000 651,000
Changes in operating assets and liabilities:
Increase in accounts receivable (283,000) (593,000)
Decrease (increase) in due from affiliated
company 691,000 (1,238,000)
Decrease in inventories and other current
assets 754,000 981,000
(Decrease) increase in accounts payable
and accrued expenses (186,000) 233,000
Increase in income taxes payable 45,000
---------------------
Net cash provided by operating activities 445,000 46,000
Investing activities
Purchases of machinery and equipment (987,000) (27,000)
Sales proceeds from sale of equipment 97,000
Investment in foreign subsidiaries (362,000)
Sundry 131,000
---------------------
Net cash used in investing activities (1,121,000) (27,000)
Financial activities
Proceeds from issuance of notes payable 710,000
Proceeds from issuance of long-term debt 1,058,000
Increase in short-term borrowings 2,873,000
Cash from foreign subsidiaries 503,000
Advances to affiliated company (1,800,000)
Deferred financing charges (503,000)
Principal payments on debt (1,056,000) (488,000)
Issuance of preferred stock of a subsidiary 100,000 19,000
Repurchase of preferred stock of a subsidiary (243,000) (404,000)
-----------------------
Net cash provided by (used in) financing
activities 932,000 (163,000)
Effect of exchange rate changes on cash 18,000 74,000
-----------------------
Increase (decrease) in cash 274,000 (70,000)
Cash at beginning of year 1,000 71,000
----------------------
Cash at end of year $ 275,000 $ 1,000
======================
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 2,164,000 $ 941,000
======================
</TABLE>
See accompanying notes
<PAGE>
HAI Holding Company Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
1. Transaction with Driver-Harris Company
On April 7, 1994, HAI Holding Company Inc. (Holding or the Company) was
formed. Holding is owned fifty percent by Driver-Harris Company (DHCO)
and fifty percent by a corporation organized by the former common
shareholders of Harrison Alloys Inc. (Harrison). Simultaneously,
effective March 18, 1994, Harrison signed various agreements with DHCO
to combine its operations with DHCO's overseas resistance wire
operations. DHCO contributed their overseas resistance wire
manufacturing subsidiaries and its apprximately 24% shareholding in
Harrison to Holding and Harrison assumed significant obligations of DHCO
as explained below. In conjunction with this transaction, Harrison
became a wholly-owned subsidiary of Holding, which in turn transferred
the DHCO subsidiaries to Harrison. As a result of the transaction,
Harrison will conduct all of its operations located in Harrison and
Somerset, New Jersey and Spartanburg, South Carolina and DHCO operations
located in Italy, France, the U.K., Spain and Australia. All of these
businesses manufacture wrought non-ferrous metal products.
As part of the foregoing transaction, Harrison assumed certain
obligations of DHCO and DHCO's wholly-owned U.S. subsidiary, Driver-
Harris Alloys Inc. (Alloys) (see Note 3), including approximately $1.8
million of additional debt incurred for investment in DHCO's Italian
subsidiary, $1,489,000 of loans of Alloys, all potential environmental
obligations with respect to Alloys' U.S. manufacturing facilities, and
DHCO's commitment to share with Harrison the cost of health care and
life insurance benefits for certain retirees. As additional
consideration to DHCO, Harrison was required to make aggregate cash
payments of $300,000 during 1994; it is also required to pay license
fees and commissions totaling $500,000 per year from 1994 to 2003.
For financial reporting purposes, DHCO's contributed overseas resistance
wire manufacturing subsidiaries were accounted for as a purchase. The
assets acquired and liabilities assumed were recorded at amounts
approximating their net book value, with no goodwill arising from this
transaction. The results of operations of these subsidiaries have been
included since April 1, 1994. If this transaction would have occurred
January 1, 1994, Holding's revenue and net loss for the twelve months
ended December 31, 1994 would have been $72,687,000 and $3,698,000,
respectively. Harrison, becoming a wholly-owned subsidiary of Holding,
has been accounted for as a recapitalization which is similiar to the
treatment of a pooling of interests. Their results of operations are
included for all periods presented.
Outside financing for this transaction was derived essentially from two
sources: (i) an increase of $1,100,000 in an asset-based revolving
credit facility of Harrison; and (ii) an addition of $640,000 to a
mortgage loan under which Harrison and Alloys are jointly and severally
liable, discussed in Note 4. As collateral for these loans, Alloys
granted to the lenders liens on its inventories and machinery and
equipment with varying priorities (see Note 3); furthermore, two
officers/directors of DHCO pledged their personal holdings of DHCO's
capital stock.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of HAI
Holding Company, Inc. and its majority-controlled subsidiaries.
Intercompany accounts and transactions have been eliminated in
consolidation.
Inventories
Inventories are stated at the lower of cost or market. At December 31,
1994 and 1993, cost was determined by the last-in, first-out (LIFO)
method for 76% and 87%, respectively, of the consolidated inventories
shown on the balance sheet, with the remainder generally determined by
the first-in, first-out (FIFO) method. Had the FIFO method of valuation
been used in place of LIFO, inventories would have been $2,537,000
higher at December 31, 1994 and $430,000 lower at December 31, 1993.
The LIFO method is used because it generally provides a better matching
of current costs with current revenues.
Property, Plant and Equipment
Depreciation has been provided principally by the straight-line method
based upon estimated useful lives of the depreciable assets.
Income Taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets
to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
Financial Instruments
In the normal course of business, the Company may enter into forward
contracts in order to limit its exposure to fluctuations in currency
exchange rates or metal prices. As currency exchange rates or metal
prices fluctuate, gains and losses on these contracts serve as hedges to
the extent that they offset transactional losses and gains which would
otherwise impact the Company's financial results. To the extent gains
or losses on forward contracts are covered by firm or anticipated sales
or purchase commitments, the Company follows the practice of recognizing
neither gains nor losses.
The Company's customers are engaged in the home appliance, automotive,
electric heating and industrial controls industries within North
America, Europe, Asia, South America and Australia. Because of the
diversified nature and geographic dispersion of its customer base, the
Company believes that credit risk on trade receivables is minimized.
At December 31, 1994, Harrison had entered into fixed price purchase
commitments for nickel aggregating $10,284,000 through 1996 and fixed
price sales commitments relating to the nickel content of inventory
aggregating $11,582,000 through 1996.
Foreign Currency Translation
Assets and liabilities of foreign operations with a functional currency
other than the U.S. dollar are translated into U.S. dollars at year-end
exchange rates. Revenues and expenses are translated at the average
exchange rates in effect during the year. Translation adjustments are
recorded as a separate component of equity. Changes in the equity
account during 1994 and 1993 primarily resulted from such translation
adjustments.
3. Acquisition of Assets of Driver-Harris Alloys Inc.
On November 29, 1994, effective September 30, 1994, Driver-Harris Alloys
Inc. (Alloys) a wholly-owned subsidiary of DHCO, transferred
substantially all of its assets to Harrison, in exchange for the
assumption by Harrison of an equivalent amount of liabilities (all
assets were transferred at net book value). This transaction was the
result of the exercise by Harrison on June 14, 1994 of an option granted
in 1987. The transferred assets consist principally of raw material and
in-process inventory and equipment located at the Harrison and Somerset,
New Jersey and Spartanburg, South Carolina plants of Alloys as well as
the land and factory building in Somerset, New Jersey. The Alloys
assets had an aggregate net book value of $7,424,000 and the liabilities
assumed by Harrison consisted of $5,807,000 accounts payables and other
current liabilities and a $1,617,000 obligation to Harrison, which was
netted against Harrison's receivable from Alloys. No gain or loss
resulted from this transaction which was recorded as of September 30,
1994, and the results of operations of Alloys have been included since
October 1, 1994.
Under the New Jersey Industrial Site Recovery Act certain clean-up
procedures must be completed with respect to the New Jersey locations.
Harrison has assumed all of the obligations and liabilities under any
federal and state environmental laws pursuant to the March 1994
transaction with DHCO (see Note 1). The expected cost is $200,000 which
has been fully accrued at December 31, 1994.
4. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
December 31
1994 1993
--------------------
<S> <C> <C>
Credit agreement $2,967,000 $3,427,000
Mortgage loans 1,627,000
Term loan 686,000
Capitalized lease obligations 409,000
Other 326,000
----------------------
6,015,000 3,427,000
Less current portion 2,539,000 553,000
---------------------
$3,476,000 $2,874,000
=====================
</TABLE>
The following is the debt repayment schedule:
<TABLE>
<S> <C>
1995 $2,539,000
1996 1,132,000
1997 1,783,000
1998 296,000
1999 140,000
Thereafter 125,000
----------
$6,015,000
==========
</TABLE>
U. S. Loans
Harrison and Alloys are jointly and severally liable for the bank
agreement (credit agreement) which is $2,967,000 at December 31, 1994.
This indebtedness is payable by Harrison in monthly installments of
$59,000 through October 1994 and $77,000 from November 1994 through
October 1997, when the balance is due. The payments include principal
and interest at the prime rate. This credit agreement is also
guaranteed by DHCO. In addition, Alloys entered into a mortgage loan
for $1,900,000 with a lender in 1992. Alloys and Harrison are jointly
and severally liable for this loan. In February 1994, Harrison recast
this mortgage loan resulting in an addition of $640,000 and an increase
in its monthly interest and principal payments to $85,000 (previously
$50,000). In November 1994, this loan was modified to require eleven
monthly interest and principal payments (including interest calculated
at 12.36%) of $85,000 beginning January 1, 1995 and a final balloon
payment of $261,000 due on December 1, 1995. The balance remaining at
December 31, 1994 is $1,267,000.
In December 1994, Harrison refinanced its asset-based loan with a new
lender whereby it can borrow up to $12,000,000 based on eligible
accounts receivable, inventory and certain fixed assets as defined in
the agreement. At December 31, 1994, $7,937,000 was outstanding under
this agreement which expires December 1996. A portion of this loan
($686,000 as of December 31, 1994) is a term loan which has been
classified as long-term debt. Monthly principal payments of $11,000 for
the term loan are required under the terms of this loan. At December
31, 1994, the balance of the asset-based loan ($7,251,000) is included
in notes payable on the consolidated balance sheets. The interest rate
for this facility is prime plus 2.25%. The initial proceeds of this
asset-based loan were used to repay the previous asset-based loan and
for working capital.
The deferred financing charges relate to the debt restructuring and
refinancing and are being amortized over the terms of the debt.
The agreements with the lenders contain certain covenants including
those that require Harrison to maintain minimum amounts of working
capital, prohibit the payment of common stock cash dividends and a
limitation as to incurring indebtedness and creating liens. At December
31, 1994, Harrison was not in compliance with a certain loan covenant.
The lender has waived this violation to January 1, 1996.
Substantially all of the Company's U.S. assets have been pledged as
collateral for the above debt.
In addition, four officers of Harrison guarantee the $1,267,000 mortgage
loan and each officer guarantees $1,250,000 of the asset-based loan
noted above.
Foreign Loans
One foreign subsidiary has a mortgage loan with a balance of $227,000 at
December 31, 1994, which is collateralized by its plant, machinery and
inventories with a net book value of $2,743,000.
One foreign subsidiary has various loans with a total principal balance
of $133,000 at December 31, 1994, which are collateralized by certain
machinery and equipment with a total net book value of $142,000.
5. Foreign Operations
The net assets which are located outside the United States and are
included in the consolidated balance sheets are as follows:
<TABLE>
December 31
1994 1993
--------------------
Assets
<S> <C> <C>
Inventories $ 7,386,000 $421,000
Other current assets 9,851,000 316,000
Property, plant and equipment-net 5,183,000 105,000
Other assets 94,000 2,000
--------------------
22,514,000 844,000
Liabilities
Current liabilities 16,531,000 567,000
Long-term debt 681,000
Other long-term liabilities 1,959,000
Deferred income taxes 129,000
---------------------
19,300,000 567,000
----------------------
Net assets outside the United States $ 3,214,000 $277,000
=====================
</TABLE>
The net loss of the Company's foreign subsidiaries included in the
accompanying financial statements amounted to approximately $1,831,000
in 1994 and $233,000 in 1993.
Because (i) the Company plans to continue to finance foreign expansion
and operating requirements by reinvesting a substantial portion of the
undistributed earnings of its foreign subsidiaries, and (ii) the
availability of U.S. tax loss carryovers (see Note 12) to offset
dividends from these subsidiaries, United States income taxes have not
been provided on such earnings. Unremitted earnings of foreign
subsidiaries at December 31, 1994 amounted to approximately $3,300,000.
6. Employee Benefit Plans
U.S. Defined Contribution Plan
Substantially all U.S. employees are participants in a defined
contribution plan. Under the plan, Harrison contributes an amount equal
to 5% of salaries and matches employee contributions up to an additional
5%. Harrison's contributions consist of preferred stock, while employee
contributions may be invested in a guaranteed interest contract with an
insurance company, an equity fund, a balanced acccount or preferred
stock. The total expense recorded under this plan was $757,000 and
$651,000 for the years ended December 31, 1994 and 1993, respectively.
Foreign Pension Plans
The Company maintains employee pension plans covering certain foreign
employees. Total pension cost for all foreign plans was $109,000 in
1994.
7. Postretirement Benefits - Healthcare and Life Insurance
Harrison provides certain health care and life insurance benefits for
retired employees. A substantial number of Harrison's employees may
become eligible if they reach normal retirement age while still working
for Harrison. Those benefits are provided through an insurance company
whose premiums are based on the benefits paid during the year.
During 1989, Harrison, DHCO and Alloys entered into discussions
regarding the payment of health care and life insurance benefits for
employees of DHCO who retired prior to a reorganization in 1985. A
settlement agreement was reached effective December 31, 1989, whereby
DHCO agreed to assume one-half of the future costs regarding these
benefits and Harrison agreed to assume the remaining one-half. In
conjunction with this agreement, Harrison agreed to repurchase 70,000 of
the 200,000 non-voting common shares owned by Alloys for $350,000. As
a result of Harrison's transaction with DHCO (see Note 1) effective
March 18, 1994, Harrison has agreed to assume all the costs regarding
these benefits effective January 1, 1994. During 1993, Harrison and
DHCO equally shared costs totaling $306,000 for these benefits. Total
cost for these benefits for 1994 was $383,000, which reflects the
adoption, effective January 1, 1994, of SFAS 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions".
Effective January 1, 1994, Harrison adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This
standard requires companies to accrue for estimated future
postretirement benefit expenses during the years employees are working
and earning benefits for retirement. Previously, Harrison expensed the
costs of these benefits as current payments were made.
The following table sets forth the status of the Harrison and DHCO
plans, which are unfunded, reconciled with the accrued postretirement
benefit cost included in the Company's consolidated balance seet at
December 31, 1994:
<TABLE>
Accumulated postretirement benefit obligation:
<S> <C>
Retirees $3,566,000
Fully eligible active plan participants 417,000
Other active plan participants 2,544,000
---------
6,527,000
Unrecognized transition obligation 5,642,000
---------
Accrued postretirement benefit cost $ 885,000
=========
</TABLE>
Postretirement benefit cost for 1994 included the following components:
<TABLE>
Service cost for benefits earning during
<S> <C>
the year $ 273,000
Interest cost on accumulated postretirement
benefit obligation 510,000
Amortization of transition obligation 393,000
---------
$1,176,000
=========
</TABLE>
The following assumptions were used at December 31, 1994: a discount
rate of 8.0% and a 1995 assumed health care cost trend rate of 5%. The
Company elected to amortize the estimated liabilities for postretirement
benefits at January 1, 1994 over periods of 15 to 20 years.
A one percentage point increase in the assumed health care cost trend
rate would have increased the accumulated postretirement benefit
obligation at December 31, 1994 by $576,000 and the aggregate service
and interest cost components of postretirement benefit cost for 1994 by
$50,000.
8. Common Stock
Common stock is comprised of the following:
Class A voting common stock - $.01 par value, 1,000,000 shares
authorized; 412,083 shares issued and outstanding at December 31, 1994
and 1993, respectively.
Class B common stock - $.01 par value, 1,000,000 shares authorized;
412,083 voting shares issued and outstanding at December 31, 1994 and
130,000 non-voting shares issued and outstanding at December 31, 1993.
9. Preferred Stock of a Subsidiary
The preferred stock of a subsidiary is comprised of the following:
Class C 8% non-voting cumulative preferred stock - $1.00 par value,
10,000,000 shares authorized; 6,321,074 and 5,054,000 shares issued and
outstanding at December 31, 1994 and 1993, respectively.
Class D 13% non-voting cumulative preferred stock - $1.00 par value,
5,000,000 shares authorized; 3,357,920 and 3,144,000 shares issued and
outstanding at December 31, 1994 and 1993, respectively.
All outstanding shares of preferred stock have been issued pursuant to
an employee benefit plan of a subsidiary and, in most cases, are to be
redeemed by the subsidiary within 60 days of each participant's
termination of employment. During 1994 and 1993, respectively, 857,257
and 669,991 shares of preferred stock were issued. In addition, 242,990
and 403,767 shares were repurchased by the subsidiary in 1994 and 1993,
respectively. Under certain circumstances, preferred stock representing
contributions by the participants may be redeemed prior to termination
of employment. Dividends on the preferred stock have been paid in the
form of additional shares of preferred stock. During 1994 and 1993,
respectively, 868,000 and 761,000 shares of preferred stock were issued
as dividends.
10. Related Party Transaction
For the years ended December 31, 1994 (up to September 30) and 1993,
Harrison purchased $23,196,000 and $27,295,000, respectively, of
products from Alloys and billed Alloys $8,123,000 and $9,427,000,
respectively, for production and administrative functions. Harrison
also paid $204,000 of interest on indebtedness of Alloys during the year
ended December 31, 1993.
As explained in Note 1, Harrison included in its 1994 expenses, $500,000
of license fees and commissions to DHCO.
At December 31, 1994, Harrison had non interest bearing loans payable
and loans receivable with officers of Harrison totaling $124,000 and
$200,000, respectively.
11. Commitments and Contingencies
Property, plant and equipment includes the following amounts related to
capital leases at December 31, 1994:
<TABLE>
<S> <C>
Machinery and equipment $439,000
Less accumulated amortization 63,000
-------
$376,000
=======
</TABLE>
Amortization of the assets recorded under capital leases is included in
depreciation expense.
The future minimum rental commitments for all operating leases as of
December 31, 1994 are as follows:
<TABLE>
<S> <C>
1995 $ 707,000
1996 703,000
1997 666,000
1998 434,000
1999 181,000
2000-2004 900,000
Thereafter 1,800,000
---------
$5,391,000
=========
</TABLE>
Total rent expense under operating leases for 1994 and 1993 was $385,000
and $27,000, respectively.
In August 1991, Harrison acquired certain machinery and equipment in the
amount of $830,000 and secured financing from the seller. This
equipment note was collateralized by a first lien on certain machinery
and equipment. The note was payable in thirty monthly installments of
$30,000 as to principal and interest with a balloon payment of the
remaining principal balance which was to be paid on March 1, 1994.
As of April 1, 1992, Harrison stopped making the monthly installments on
the remaining balance of $650,000 because they believed the lender, who
was responsible for providing technical and other assistance, had not
fulfilled its obligation. The lender, in response, instituted a lawsuit
in May 1993 for recovery of the outstanding note plus accrued interest
and/or return of the equipment. During 1993, the equipment was returned
to the lender. Harrison and its legal counsel believe it has
meritorious defenses. Although the litigation is still in process,
Harrison believes the final resolution will not result in a material
adverse impact to the Company's financial position. During 1992,
Harrison wrote down the related machinery and equipment by $500,000 due
to its nonperformance. At December 31, 1993, machinery and equipment
and debt have been reduced by $650,000 to reflect the return of the
equipment.
12. Income Taxes
Income tax benefit for 1994 is $33,000 which is comprised of a current
foreign tax provision of $126,000 and a deferred foreign tax benefit of
($159,000). There was no income tax expense or benefit for 1993.
Pretax loss attributable to domestic and foreign operations is as
follows:
<TABLE>
1994 1993
---------------------
<S> <C> <C>
United States $(1,534,000) $ 5,000
Foreign (1,831,000) (233,000)
----------------------
$(3,365,000) $(228,000)
=====================
</TABLE>
The following is a reconciliation of income tax expense (credit) to the
amount based on the U.S. statutory rate of 34%:
<TABLE>
1994 1993
-----------------------
Income taxes based on U.S. statutory
<S> <C> <C>
rate $(1,144,000) $ (78,000)
Increase resulting from losses which
provided no current tax benefit 1,139,000 78,000
Taxes of foreign subsidiaries at
rates different than U.S. statutory
rate (28,000)
----------------------
$ (33,000) $ -
======================
</TABLE>
In 1993, the Company implemented SFAS 109 "Accounting for Income Taxes",
which requires companies to change the method of accounting for income
taxes from the deferred method to the liability method. This change had
no effect on the accompanying financial statements.
The components of deferred tax assets and liabilities as of December 31,
1994 and 1993 were as follows:
<TABLE>
1994 Deferred Tax 1993 Deferred Tax
Assets Liabilities Assets Liabilities
--------------------- --------------------
<S> <C> <C> <C> <C>
Inventories $ 501,000 $129,000 $ 9,000
Depreciation 93,000
Fixed asset cost 417,000
Accrued expenses 69,000 16,000
Postretirement benefit 301,000
Tax loss carry-
forwards 6,101,000 1,190,000
Sundry 23,000 12,000
-------------------- --------------------
7,412,000 222,000 1,227,000
Valuation allowance 7,319,000 1,227,000
-------------------- --------------------
Total $ 93,000 $222,000 $ - $ -
==================== ====================
</TABLE>
The increase in the total deferred taxes and valuation allowance is
primarily due to the acquisition of DHCO's overseas resistance wire
operations (see Note 1).
At December 31, 1994, Harrison had approximately $4,000,000 of loss
carryforwards available to offset future U.S. taxable income. Such
carryforwards expire from 2005 to 2009.
Loss carryforwards of approximately $13,000,000 are available to offset
future taxable income of certain foreign subsidiaries, primarily in the
U.K., Italy and Spain. These carryforwards expire beginning in 1995.
<PAGE>
Exhibit (23)
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 2-95134) pertaining to the Driver-Harris
Employee Incentive Stock Option Plan of our report dated March 10, 1995,
with respect to the consolidated financial statements and schedules of
Driver-Harris Company included in this Annual Report (Form 10-K) for the
year ended December 31, 1994 and to the reference made to us under the
caption "Experts" in the aforementioned Registration Statement insofar
as that reference relates to our report for the year ended December 31,
1994.
ERNST & YOUNG LLP
MetroPark, New Jersey
April 11, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at December 31, 1994 and the Company's
Consolidated Statement of Operations for the year ended December 31, 1994,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 461
<SECURITIES> 0
<RECEIVABLES> 7870
<ALLOWANCES> 376
<INVENTORY> 3044
<CURRENT-ASSETS> 11226
<PP&E> 5858
<DEPRECIATION> 1560
<TOTAL-ASSETS> 15893
<CURRENT-LIABILITIES> 8498
<BONDS> 2734
<COMMON> 1187
0
0
<OTHER-SE> (279)
<TOTAL-LIABILITY-AND-EQUITY> 15893
<SALES> 59547
<TOTAL-REVENUES> 60558
<CGS> 53352
<TOTAL-COSTS> 53352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 225
<INTEREST-EXPENSE> 855
<INCOME-PRETAX> 197
<INCOME-TAX> 76
<INCOME-CONTINUING> (976)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (976)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> (.75)
</TABLE>
