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, 1997 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 -- 1,338,171 shares as of May 2, 1997.
<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, 1997 and December 31, 1996 . . . . . . . . . . 3
Condensed Consolidated Statements of
Income - Three Months ended March 31,
1997 and March 31, 1996. . . . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 1997 and March 31, 1996. . . 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,
1997 1996
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ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 365 $ 402
Accounts receivable - net 10,380 9,275
Inventories:
Materials 675 624
Work in process 585 413
Finished products 4,470 3,925
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5,730 4,962
Prepaid expenses 902 937
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Total current assets 17,377 15,576
Other assets 40 107
Property, plant & equipment - net 5,385 5,495
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$22,802 $ 21,178
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LIABILITIES
Current Liabilities:
Short-term borrowings $ 2,093 $ 2,664
Current portion of long-term debt 513 492
Accounts payable 6,875 5,594
Accrued expenses 2,643 1,572
Income taxes payable 294 263
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Total current liabilities 12,418 10,585
Long-term debt 2,224 2,023
Deferred Grants 752 812
Deferred foreign income taxes 164 174
Postretirement benefit liabilities 296 279
Sundry liabilities 218 185
Stockholders' equity:
Common stock 1,221 1,221
Additional paid-in capital 2,207 2,200
Retained earnings 3,650 3,595
Equity adjustment from translation (348) 104
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Stockholders' equity 6,730 7,120
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$22,802 $ 21,178
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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
MARCH 31
1997 1996
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<S> <C> <C>
Net sales $10,932 $10,151
Other revenues 15 167
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Total Revenues 10,947 10,318
Cost of sales 9,146 8,673
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1,801 1,645
Selling, general and
administrative expenses 1,501 1,278
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300 367
Other charges (credits):
Interest 270 165
Foreign exchange loss (gain) (70) 11
Gain in connection with sale of
foreign operations by related company (895)
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Income before income taxes 100 1,086
Income taxes 45 30
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NET INCOME $ 55 $1,056
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NET INCOME PER SHARE $ .04 $ .81
==== ====
Average common shares outstanding 1,347,575 1,303,789
</TABLE>
See accompanying notes.
<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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1997 1996
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OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 55 $ 1,056
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 163 112
Equity in related company (1,561)
Deferred credit (968)
Elimination of equity adjustment from
translation for foreign operations
sold by related company 1,634
Due from related company 253
Receivables (1,569) (910)
Inventories (957) (258)
Accounts payable and accrued expenses 1,993 1,180
Sundry 127 67
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CASH PROVIDED BY OPERATING ACTIVITIES (188) 605
INVESTING ACTIVITIES
Capital expenditures (350) (137)
Sundry 53 (9)
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CASH USED IN INVESTING ACTIVITIES (297) (146)
FINANCING ACTIVITIES
Change in deferred grants 60 17
Change in short-term debt 349 388
Issuance of long-term debt 81 93
Reduction of long-term debt (43) (257)
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 447 241
Effect of exchange rate changes on cash 1 (14)
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Net change in cash (37) 686
Cash at beginning of year 402 479
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CASH AT END OF PERIOD $ 365 $1,165
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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, 1996. 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 - Investments in Related Company and other subsidiaries
The Company owns Irish Driver-Harris Co. Ltd. ("IDH"), headquartered in
Ireland and 50% of Quality Heat Treatment Pty. Ltd., located in Australia.
In November 1996 the Company, through a holding company wholly owned by its
Irish subsidiary, purchased the assets, primarily inventory, of a distributor
in the U.K. for approximately $1,342,000. The acquisition was accounted for
as a purchase and no goodwill resulted from the transaction. The new company
distributes cable products and insulated wire products in the U.K. and Europe.
Harrison Alloys Inc. ("Harrison"),(referred to herein as a "related company")
a fifty percent owned company, is recorded on the equity method of accounting.
The recognition of 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 a restructuring in 1994, equaled the balance of a bank
loan of Harrison ($2,529,000) which the Company guaranteed. In the first
quarter of 1996, Harrison sold its foreign alloy companies and repaid the
debt guaranteed by the Company with a portion of the proceeds. Accordingly,
the Company recorded income from its negative investment in Harrison of
$1,561,000 and the elimination 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. 200,000 pledged shares
of the Company and the capital stock of the Irish subsidiary held as
collateral for the guaranty were also returned to the Company. The Company
will not recognize any income from its investment in Harrison until Harrison's
income exceeds Harrison's losses not recognized by the Company as the Company
previously had recorded losses from their investment in Harrison to the
extent of the Harrison bank debt guarantee which as noted above is no
longer in effect.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
In connection with the sale by Harrison of its foreign subsidiaries in
February 1996 and repayment by Harrison of bank debt guaranteed by the
Company, with a portion of the proceeds, the Company (i) collected certain
receivables from Harrison, (ii) repaid domestic bank debt and, (iii) was
relieved of the Harrison debt guarantee obligation. The Company expects to
continue to be dependent upon the license agreement with Harrison for its U.S.
operating cashflow. Since Harrison has experienced losses in recent years,
its cash flow is uncertain, however, the Company believes it has adequate
cash and other options available in the event the amounts due under the
license agreement become uncollectible.
In order to assist Harrison in obtaining financing and to strengthen this 50%
owned affiliate in its restructuring efforts, the Company revised its
licensing and commission fee schedule to defer payments until the last
quarter of 1997. Accordingly, such revenues will not be recorded in income
until this date.
Results of Operations
Net sales to customers increased by 7.7% in the first quarter of 1997
compared to the same period in 1996. Although units shipped at the Company's
Irish subsidiary increased by 15% over the same period in 1996, sales revenue
was relatively unchanged because of lower selling prices resulting from
decreasing copper prices and competition. Other revenues decreased as a
result of the deferral of license and commission fees from Harrison as
mentioned above. Selling, general and administrative expenses increased to
13.7% of net sales from 12.7% in 1996, due principally to administrative
expenses at the U.K. distribution company. Interest expense increased due to
higher average borrowings in 1997 compared to the first quarter of 1996.
The disproportionate income tax provision in 1996 is primarily because the
equity in 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 Company has tax loss carryforwards of approximately $6,400,000
available to offset future U.S. taxable income, which expire between 1999
and 2010.
Effects Of Change in Accounting Principles
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is required to be adopted for the
Company's year ending December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for calculating
primary earnings per share, the dilutive effect of stock options will be
excluded. The impact of the adoption is not expected to have a material
impact on the earnings per share calculation.
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 5, 1997 By Thomas J. Carey
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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, 1997 and the
Company's Condensed Consolidated Statement of Operations for the three
months ended march 31, 1997, 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 365
<SECURITIES> 0
<RECEIVABLES> 10747
<ALLOWANCES> 367
<INVENTORY> 5730
<CURRENT-ASSETS> 17377
<PP&E> 7589
<DEPRECIATION> 2204
<TOTAL-ASSETS> 22802
<CURRENT-LIABILITIES> 12418
<BONDS> 2224
0
0
<COMMON> 1221
<OTHER-SE> 5509
<TOTAL-LIABILITY-AND-EQUITY> 22802
<SALES> 10932
<TOTAL-REVENUES> 10947
<CGS> 9146
<TOTAL-COSTS> 9146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 270
<INCOME-PRETAX> 100
<INCOME-TAX> 45
<INCOME-CONTINUING> 55
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
