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 September 30, 1996 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 -- 1,337,171 shares as of October 31, 1996.
<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
September 30, 1996 and December 31, 1995. . . . . . . . . 3
Condensed Consolidated Statements of
Income - Three and Nine Months ended
September 30, 1996 and September 30, 1995 . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1996 and
September 30, 1995 . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .6
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands)
<TABLE>
September 30, December 31,
1996 1995
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ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 364 $ 479
Accounts receivable - net 8,123 7,816
Inventories:
Materials 791 598
Work in process 262 204
Finished products 2,547 2,328
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3,600 3,130
Prepaid expenses 310 386
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Total current assets 12,397 11,811
Other assets 54 65
Property, plant & equipment - net 4,943 4,379
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$17,394 $16,255
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LIABILITIES
Current Liabilities:
Short-term borrowings $ 626 $ 704
Current portion of long-term debt 356 522
Accounts payable 5,915 5,888
Accrued expenses 1,283 1,059
Income taxes payable 153 106
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Total current liabilities 8,333 8,279
Long-term debt 2,388 2,419
Deferred income taxes 157 157
Postretirement benefit liabilities 246 205
Investment in related company - 1,561
Sundry liabilities 195 222
Deferred credit-related company - 968
Stockholders' equity:
Common stock 1,187 1,187
Additional paid-in capital 2,234 1,997
Retained earnings 2,891 1,143
Equity adjustment from translation (237) (1,883)
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Stockholders' equity 6,075 2,444
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$17,394 $16,255
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</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales-customers $9,328 $ 8,081 $29,445 $25,312
Other income - net 166 210 525 739
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Total Revenues 9,494 8,291 29,970 26,051
Cost of sales-customers 7,862 6,881 24,715 21,930
----- ----- ------ ------
1,632 1,410 5,255 4,121
Selling, general and
administrative exps. 1,109 952 3,704 3,201
------ ----- ------ ------
523 458 1,551 920
Other charges (credits):
Interest expense 188 190 555 592
Foreign exchange loss (gain) 22 7 30 (12)
Equity in related company - 8 - (213)
Gain in connection with sale
of foreign operations by
related company - - (895) -
----- ---- ------ -----
Income before income taxes 313 253 1,861 553
Income taxes 22 11 113 32
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NET INCOME $ 291 $ 242 $ 1,748 $ 521
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NET INCOME
PER SHARE $ .22 $ .19 $ 1.33 $ .40
==== ==== ===== ====
Average common shares outstanding 1,314,462 1,295,849
</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
NINE MONTHS ENDED
September 30
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1996 1995
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OPERATING ACTIVITIES
<S> <C> <C>
Net income/(loss) $1,748 $ 521
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 370 332
Equity in related company (1,561) (213)
Deferred credit (968) (223)
Elimination of equity adjustment from
translation for foreign operations
sold by related company 1,634 -
Due from related company 250 203
Receivables (455) 20
Inventories (439) (618)
Accounts payable and accrued expenses 119 608
Sundry 144 (212)
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CASH PROVIDED BY OPERATING ACTIVITIES 842 418
INVESTING ACTIVITIES
Capital expenditures (878) (314)
Sundry (13) 96
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CASH USED IN INVESTING ACTIVITIES (891) (218)
FINANCING ACTIVITIES
Change in short-term debt (116) (368)
Issuance of long-term debt 307 162
Reduction of long-term debt (487) (431)
Issuance of Capital Stock 237 11
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CASH USED IN FINANCING ACTIVITIES (59) (626)
Effect of exchange rate changes on cash (7) 15
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Net change in cash (115) (411)
Cash at beginning of year 479 461
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CASH AT END OF PERIOD $ 364 $ 50
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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, 1995. 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 - Investment in Related Companies
Harrison Alloys Inc.("Harrison"), a fifty percent owned company, is
recorded on the equity method of accounting. The recognition of past losses
reduced the carrying amount of the Company's investment in Harrison to a
negative balance (liability) of $1,561,000 at December 31, 1995. This
amount, combined with a deferred credit of $968,000 which originated from
the restructuring in 1994, equaled the balance of a bank loan of Harrison at
December 31, 1995 ($2,529,000) which the Company has guaranteed.
Accordingly, Driver-Harris Company recorded income from its negative
investment in Harrison of $1,561,000 and amortization of the deferred credit
of $968,000, less the accumulated translation adjustment related to the
foreign operations sold by Harrison carried on the balance sheet of
$1,634,000 (included in "Other Credits" in the Statement of Income).
The Company also 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDIION AND RESULTS OF
OEPRATIONS
Financial Condition
As a result of the sale by Harrison Alloys Inc. ("Harrison"), a fifty
percent owned company, of its foreign subsidiaries in February 1996, the
Company repaid domestic bank debt and collected certain receivables from
Harrison. Also as a result of the sale, the Company may be required to make
certain payments or guarantee the debt of a subsidiary during 1996. The
Company was also relieved of a significant guarantee obligation when
Harrison's bank debt was repaid. The Company will continue, however, to be
dependent upon Harrison for its U.S. cash flow in the foreseeable future.
Since Harrison has experienced losses in recent years, its cash flow is
uncertain.
Results of Operations
Net sales to customers increased by 16.3% during the first nine months of
1996 compared to the same period in 1995. This was principally due to an
increase in units shipped, primarily cable products, partially offset by lower
exchange rates. The gross profit percentage improved to 16.1% in 1996
compared to 13.4% in 1995. The gross profit percentage had decreased in
early 1995 because of the higher cost of raw materials principally copper and
PVC. Selling prices were subsequently increased as a result of these higher
raw material costs, and overall gross profit percentage for the year 1995 was
14.4%. Selling, general and administrative expenses remained constant at
12.6% of net sales in 1996 and 1995. Interest expense decreased slightly due
to lower average borrowings in 1996 compared to 1995.
1996 includes an $895,000 gain in connection with the sale of Harrison's
foreign operations. This gain consists of a $1,561,000 elimination of
negative equity in Harrison plus a related $968,000 amortization of a
deferred credit, less the balance of the accumulated translation adjustment
of $1,634,000 (relating to the Harrison overseas subsidiaries transferred in
1994). This gain was recorded as income when Harrison paid off the bank loan
which the Company had guaranteed, upon Harrison's sale of its overseas
operations in February 1996.
The disproportionate income tax provision in both 1996 and 1995 is
primarily because the gain in connection with the sale of foreign operations
by a related company (Harrison) is not taxable income to the Company and
because of the benefits of operating loss carryovers available in the United
States. The utilization of tax loss carryforwards provided tax benefits of
$39,000 and $85,000 in the 1996 and 1995 periods, respectively.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DRIVER-HARRIS COMPANY
Date: November 13, 1996 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 September 30, 1996 and
the Company's Condensed Consolidated Statement of Income for the nine
months ended September 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 364
<SECURITIES> 0
<RECEIVABLES> 8451
<ALLOWANCES> 328
<INVENTORY> 3600
<CURRENT-ASSETS> 12397
<PP&E> 7018
<DEPRECIATION> 2075
<TOTAL-ASSETS> 17394
<CURRENT-LIABILITIES> 8333
<BONDS> 2388
0
0
<COMMON> 1187
<OTHER-SE> 4888
<TOTAL-LIABILITY-AND-EQUITY> 17394
<SALES> 29445
<TOTAL-REVENUES> 29970
<CGS> 24715
<TOTAL-COSTS> 24715
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 66
<INTEREST-EXPENSE> 555
<INCOME-PRETAX> 1861
<INCOME-TAX> 113
<INCOME-CONTINUING> 1748
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1748
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
