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 March 31, 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 April 28,
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
March 31, 1995 and December 31, 1994 . . . . . . . . . . 3
Condensed Consolidated Statements of
Operations - Three Months ended March 31,
1995 and March 31, 1994. . . . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 1995 and March 31, 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>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
March 31, December 31,
1995 1994
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ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 501 $ 461
Accounts receivable - net 8,405 7,494
Inventories:
Materials 957 658
Work in process 303 226
Finished products 2,180 2,160
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3,440 3,044
Prepaid expenses 312 227
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Total current assets 12,658 11,226
Other assets 131 369
Property, plant & equipment - net 4,475 4,298
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$ 17,264 $ 15,893
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LIABILITIES
Current Liabilities:
Short-term borrowings $ 1,353 $ 1,762
Current portion of long-term debt 534 512
Accounts payable 6,826 5,295
Accrued expenses 871 843
Income taxes payable 98 86
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Total current liabilities 9,682 8,498
Long-term debt 2,751 2,734
Deferred income taxes 115 110
Postretirement benefit liabilities 433 417
Investment in related company 1,544 1,701
Deferred credit - related company 1,192 1,266
Sundry liabilities 250 259
Stockholders' equity:
Common stock 1,187 1,187
Additional paid-in capital 1,982 1,982
Retained earnings (deficit) (82) (189)
Equity adjustment from translation (1,790) (2,072)
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Stockholders' equity 1,297 908
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$ 17,264 $ 15,893
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</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED MARCH 31
Historical Pro-Forma
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1995 1994 1994
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<S> <C> <C> <C>
Net sales - customers $ 8,891 $14,227 $ 5,977
- related company 7,537
Other revenues 238 201 223
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Total Revenues 9,129 21,965 6,200
Cost of sales - customers 8,013 11,653 5,037
- related company 7,537
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1,116 2,775 1,163
Selling, general and
administrative expenses 962 2,759 920
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154 16 243
Other charges (credits):
Interest and finance expenses 186 383 103
Foreign exchange loss (gain) 8 35 (2)
Equity in related company (157) 65 397
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Income(Loss) before income taxes 117 (467) (255)
Income taxes 10 40 24
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NET INCOME/(LOSS) $ 107 $ (507) $ (279)
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NET INCOME/(LOSS) PER SHARE $ .08 $ (.39) $ (.22)
==== ==== ====
Average common shares outstanding 1,294,539 1,294,320 1,294,320
</TABLE>
See notes to financial statements.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
THREE MONTHS ENDED
March 31
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1995 1994
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OPERATING ACTIVITIES
<S> <C> <C>
Net income/(loss) $ 107 $ (507)
Adjustments to reconcile net income/(loss)
to net cash provided:
Depreciation and amortization 108 439
Equity in related company (157) 65
Deferred credit (74)
Due from related company (35) (364)
Receivables (372) 284
Inventories (269) (1,691)
Accounts payable and accrued expenses 1,350 1,006
Sundry (51) 169
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CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 607 (599)
INVESTING ACTIVITIES
Capital expenditures (112) (362)
Sundry 41 11
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CASH USED IN INVESTING ACTIVITIES (71) (351)
FINANCING ACTIVITIES
Change in short-term debt (459) (510)
Issuance of long-term debt 106 675
Reduction of long-term debt (161) (416)
Loans from related company 1,785
Cash of companies included
in restructuring (503)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (514) 1,031
Effect of exchange rate changes on cash 18 16
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Net change in cash 40 97
Cash at beginning of year 461 600
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CASH AT END OF PERIOD $ 501 $ 697
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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
Effective March 18, 1994, the Company restructured its oper-
ations 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. As a result of the March transaction, Harrison is
required, among other things, to pay to the Company license fees
and commissions totalling $500,000 per year from 1994 to 2003. For
further details of these transactions, see Part I, Item 1,
"Business" in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and Notes 3 and 4 to the 1994 consolidated
financial statements.
After the above 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, 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.
The unaudited pro forma consolidated data for the three months
ended March 31, 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 $1,544,000 at March 31, 1995. This amount, combined with a
deferred credit of $1,192,000 which originated from the March 1994
restructuring described in Note 2, is equal to the balance of a
bank loan of Harrison ($2,736,000) which the Company has
guaranteed. During the three months ended March 31, 1995, Harrison
made aggregate principal payments of $231,000 under the bank loan.
Accordingly, Driver-Harris Company recorded income from its equity
in Harrison of $157,000 and amortization of the deferred credit of
$74,000 (which is included in other revenues).
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
In consummating the restructuring during 1994 described in
Note 2 to the Financial Statements, the Company has reduced its
liabilities and contingent obligations and stabilized its cash flow
requirements. The Company, however, is partially dependent upon
Harrison Alloys Inc. (Harrison) for its U.S. 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
Net sales to customers of continuing operating units (see Note
2 to the Financial Statements) increased by almost fifty percent
during the first quarter of 1995 compared to the same period last
year. This was principally due to an increase in units shipped,
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 9.9% in the current period. Selling, general and
administrative expense remained almost constant relative to 1994
and therefore decreased as a percentage of net sales. Higher
average borrowings in the first quarter of 1995 resulted in
increased interest and finance expenses.
In 1994, the Company recorded a charge of $65,000 ($397,000 on
a pro-forma basis) representing its equity in the investment in
Harrison. In the current year, the company recorded income of
$157,000 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 three months ended March 31, 1995, Harrison made
aggregate principal payments of $231,000 under the bank loan.
Accordingly, Driver-Harris recorded income from its equity in
Harrison of $157,000 and amortization of the deferred credit of
$74,000 (which is included in other revenues).
The disproportionate income tax provision in the 1995 period
is primarily because $157,000 recorded as income from equity in
Harrison is not taxable income to the Company. In 1994, no tax
benefits were available as to subsidiaries experiencing losses.
The utilization of tax loss carryforwards provided tax benefits of
$23,000 and $11,000 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: May 10, 1995 By Frank L. Driver IV
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President 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 March 31, 1995 and the
Company's Condensed Consolidated Statement of Operations for the three
months ended March 31, 1995, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 501
<SECURITIES> 0
<RECEIVABLES> 8685
<ALLOWANCES> 280
<INVENTORY> 3440
<CURRENT-ASSETS> 12658
<PP&E> 6019
<DEPRECIATION> 1544
<TOTAL-ASSETS> 17264
<CURRENT-LIABILITIES> 9682
<BONDS> 2751
<COMMON> 1187
0
0
<OTHER-SE> 110
<TOTAL-LIABILITY-AND-EQUITY> 17264
<SALES> 8891
<TOTAL-REVENUES> 9129
<CGS> 8013
<TOTAL-COSTS> 8013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (99)
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> (40)
<INCOME-TAX> 10
<INCOME-CONTINUING> 107
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
