SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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/_X__/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995 or
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/____/ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 1-1212
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Driver-Harris Company
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(Exact name of registrant as specified in its charter)
New Jersey 22-0870220
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
308 Middlesex Street, Harrison, New Jersey 07029
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(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (201) 483-4802
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes ____X____ No ________
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $0.83 1/3 par value -- 1,294,539 shares as of June 30, 1995.
<PAGE>
DRIVER-HARRIS COMPANY
I N D E X
PART I FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 . . . . . . . . . . . 3
Condensed Consolidated Statements of
Operations - Six Months ended June 30,
1995 and June 30, 1994. . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1995 and June 30, 1994 . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .7
PART II OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None filed in quarter
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 8
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<PAGE>
<TABLE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
June 30, December 31,
1995 1994
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ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 575 $ 461
Accounts receivable - net 7,994 7,494
Inventories:
Materials 1,003 658
Work in process 350 226
Finished products 2,288 2,160
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3,641 3,044
Prepaid expenses 264 227
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Total current assets 12,474 11,226
Other assets 73 369
Property, plant & equipment - net 4,480 4,298
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$ 17,027 $ 15,893
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LIABILITIES
Current Liabilities:
Short-term borrowings $ 1,636 $ 1,762
Current portion of long-term debt 545 512
Accounts payable 5,833 5,295
Accrued expenses 1,248 843
Income taxes payable 80 86
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Total current liabilities 9,342 8,498
Long-term debt 2,728 2,734
Deferred income taxes 117 110
Postretirement benefit liabilities 450 417
Investment in related company 1,480 1,701
Sundry liabilities 250 259
Deferred credit - related company 1,117 1,266
Stockholders' equity:
Common stock 1,187 1,187
Additional paid-in capital 1,981 1,981
Retained earnings/(deficit) 90 (189)
Equity adjustment from translation (1,715) (2,072)
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Stockholders' equity 1,543 908
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$ 17,027 $ 15,893
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See accompanying notes
</TABLE>
<PAGE>
<TABLE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30
June 30 Historical Pro-Forma
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1995 1994 1995 1994 1995
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<S> <C> <C> <C> <C> <C>
Net sales-customers $8,340 $ 6,793 $17,231 $21,020 $12,770
-related company 8,775 16,312
Other income - net 291 230 529 431 453
------ ----- ----- ------ ------
Total Revenues 8,631 15,798 17,760 37,763 13,223
Cost of sales-customers 7,076 5,731 15,089 17,384 10,768
-related co. 8,775 16,312
----- ----- ----- ------ ------
1,555 1,292 2,671 4,067 2,455
Selling, general and
administrative exps. 1,247 1,078 2,209 3,837 1,998
------ ----- ----- ------ ------
308 214 462 230 457
Other charges (credits):
Interest expense 216 141 402 524 244
Foreign exchange loss
(gain), etc. (27) 21 (19) 56 19
Equity in related co. (64) 361 (221) 426 758
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Income (loss) before income
taxes 183 (309) 300 (776) (564)
Income taxes 11 14 21 54 38
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NET INCOME/(LOSS) $ 172 $ (323) $ 279 $ (830) $ (602)
===== ==== ==== ===== ======
NET INCOME/(LOSS)
PER SHARE $ .13 $ (.25) $ .21 $ (.64) $ (.47)
==== ==== ==== ==== ====
Average common shares outstanding 1,295,177 1,294,320
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
SIX MONTHS ENDED
June 30
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1995 1994
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OPERATING ACTIVITIES
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Net income/(loss) $ 279 $ (830)
Adjustments to reconcile net income/(loss)
to net cash provided:
Depreciation and amortization 217 614
Equity in related company (221) 426
Deferred credit (149)
Due from related company 15 (1,074)
Receivables 53 (438)
Inventories (469) (1,732)
Accounts payable and accrued expenses 811 2,217
Sundry 14 (143)
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CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 550 (960)
INVESTING ACTIVITIES
Capital expenditures (194) (719)
Sundry 93 23
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CASH USED IN INVESTING ACTIVITIES (101) (696)
FINANCING ACTIVITIES
Change in short-term debt (185) 402
Issuance of long-term debt 140 1,076
Reduction of long-term debt (314) (989)
Loans from related company 1,875
Cash of companies included
in restructuring (503)
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CASH PROVIDED BY(USED IN)FINANCING ACTIVITIES (359) 1,861
Effect of exchange rate changes on cash 24 61
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Net change in cash 114 266
Cash at beginning of year 461 600
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CASH AT END OF PERIOD $ 575 $ 866
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</TABLE>
See accompanying notes
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1 - Basis of Presentation
These financial statements have been prepared in accordance with
the instructions to Form 10-Q and therefore do not include all
information, disclosures, and notes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity
with generally accepted accounting principles. Reference should be made
to the financial statements contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994. These financial
statements include all adjustments which are, in the opinion of
management, necessary to a fair presentation of the results for the
interim period.
2 - Restructuring during 1994
In March 1994, the Company restructured its operations by combining
its overseas resistance wire operations with Harrison Alloys Inc.
(Harrison). The latter is referred to herein as "related company".
Effective September 30, 1994, the Company transferred substantially all
the assets of its U.S. operating subsidiary, Driver-Harris Alloys
(Alloys), to Harrison in exchange for the assumption by Harrison of an
equivalent amount of liabilities. Harrison is required to pay to the
Company license fees and commissions totalling $500,000 per year from
1994 to 2003. For details of these transaction, see Part I, Item 1,
"Business" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and Notes 3 and 4 to the 1994 consolidated
financial statements.
The unaudited pro-forma consolidated data for the six months ended
June 30, 1994 gives effect to the foregoing transactions as if they had
occurred on January 1, 1994.
3 - Investment in Related Company
Harrison Alloys Inc.("Harrison"), a fifty percent owned company, is
recorded on the equity method of accounting. The recognition of past
losses has reduced the carrying amount of the Company's investment in
Harrison to a negative balance (liability) of $1,480,000 at June 30,
1995. This amount, combined with a deferred credit of $1,117,000 which
originated from the March 1994 restructuring referred to in Note 2, is
equal to the balance of a bank loan of Harrison ($2,597,000) which the
Company has guaranteed. Accordingly, for the six months ended June 30,
1995, Driver-Harris Company recorded income from its equity in Harrison
of $221,000 and amortization of the deferred credit of $148,000 (which
is included in other income).
The Company, in addition to its 50% ownership of Harrison, owns
Irish Driver-Harris Co. Ltd., a producer of insulated electrical wire
and cable, located in Ireland and the U.K., and Quality Heat Treatment
Pty. Ltd., a company in the furnace manufacturing and heat treating
business, located in Australia.
4 - Waiver of Non-Compliance with Loan Covenant
The U.S. banks have waived non-compliance with a loan covenant
until January 1, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
After consummating the 1994 restructuring referred to in Note 2 to
the Financial Statements, the Company has reduced its liabilities and
contingent obligations and stabilized its cash flow requirements. The
Company continues to be partially dependent upon Harrison Alloys Inc.
(Harrison) for its cash flow. Harrison, a 50% owned company, has a
highly leveraged debt structure, a portion of which the Company is
contingently liable for.
Results of Operations (Pro-Forma for 1994)
Net sales to customers increased by about thirty-five percent
during the first six months of 1995 compared to the same period last
year. This was principally due to higher exchange rates and increased
selling prices. The latter were caused by the higher cost of raw
materials principally copper and PVC. However, since increases in
selling price lagged increased costs, the gross profit percentage
dropped from 15.7% in 1994 to 12.4% in the current period. Selling,
general and administrative expense remained relatively constant and
therefore decreased as a percentage of net sales, from 15.7% to 12.8%.
Higher average borrowings, primarily in the first quarter of 1995,
resulted in increased interest and finance expenses.
In 1994, the Company recorded a charge of $426,000 representing its
equity in the investment in Harrison. For the six months ended June 30,
1995, the Company recorded income of $221,000 from its equity in this
investment. The recognition of past losses has reduced the carrying
amount of the Company's investment in Harrison to a negative balance
(liability), which combined with a deferred credit resulting from the
March 1994 restructuring equaled the balance of a bank loan of Harrison
which the Company has guaranteed. Losses from the Company's investment
in Harrison are recognized only to the extent of the bank loan guaranty.
During the six months ended June 30, 1995, Harrison made aggregate
principal payments of $369,000 under the bank loan. Accordingly,
Driver-Harris recorded income from its equity in Harrison of $221,000
and amortization of the deferred credit of $148,000 (which is included
in other income).
The disproportionate income tax provision in 1995 is primarily
because $221,000 recorded as income from equity in Harrison is not
taxable income to the Company. In 1994, no tax benefits were available
for subsidiaries experiencing losses. The utilization of tax loss
carryforwards provided tax benefits of $42,000 and $41,000 in the 1995
and 1994 periods, respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DRIVER-HARRIS COMPANY
Date: August 14, 1995 By Thomas J. Carey
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Thomas J. Carey
Vice President Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Company's Condensed Consolidated Balance Sheet at June 30, 1995 and the
Company's Condensed Consolidated Statement of Operations for the six months
ended June 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 575
<SECURITIES> 0
<RECEIVABLES> 8,372
<ALLOWANCES> 378
<INVENTORY> 3,641
<CURRENT-ASSETS> 12,474
<PP&E> 6,133
<DEPRECIATION> 1,653
<TOTAL-ASSETS> 17,027
<CURRENT-LIABILITIES> 9,342
<BONDS> 2,728
<COMMON> 1,187
0
0
<OTHER-SE> 356
<TOTAL-LIABILITY-AND-EQUITY> 17,027
<SALES> 17,231
<TOTAL-REVENUES> 17,760
<CGS> 15,089
<TOTAL-COSTS> 15,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> 402
<INCOME-PRETAX> 300
<INCOME-TAX> 21
<INCOME-CONTINUING> 279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 279
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
