SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
_____
/_X__/ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997 or
------------------------
_____
/____/ 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
--------------------------------------------
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, New Jersey 07029
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no., including area code (973) 483-4802
------------------
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 -- 1,340,421 shares as of August 4, 1997.
<PAGE>
DRIVER-HARRIS COMPANY
I N D E X
PART I FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996 . . . . . . . . . . 3
Condensed Consolidated Statements of
Income - Three and Six Months ended June 30,
1997 and June 30, 1996. . . . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1997 and June 30, 1996 . . . . 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
- ---------------------------
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
- ----------
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
June 30, December 31,
1997 1996
-------- ------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 357 $ 402
Accounts receivable - net 11,039 9,275
Inventories:
Materials 685 624
Work in process 496 413
Finished products 5,158 3,925
---- ------
6,339 4,962
Prepaid expenses 847 937
----- ------
Total current assets 18,582 15,576
Other assets 31 107
Property, plant & equipment - net 5,456 5,495
----- ------
$24,069 $ 21,178
====== ======
LIABILITIES
Current Liabilities:
Short-term borrowings $ 2,778 $ 2,664
Current portion of long-term debt 512 492
Accounts payable 8,381 5,594
Accrued expenses 2,152 1,572
Income taxes payable 125 263
------ ------
Total current liabilities 13,948 10,585
Long-term debt 2,283 2,023
Deferred Grants 711 812
Deferred foreign income taxes 158 174
Postretirement benefit liabilities 463 279
Sundry liabilities 196 185
Stockholders' equity:
Common stock 1,222 1,221
Additional paid-in capital 2,228 2,200
Retained earnings 3,517 3,595
Equity adjustment from translation (657) 104
------ -----
Stockholders' equity 6,310 7,120
----- -------
$24,069 $ 21,178
====== ======
</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 SIX MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $10,581 $ 9,966 $21,513 $20,117
Other revenues 89 183 214 350
------ ----- ----- ------
Total Revenues 10,670 10,149 21,727 20,467
Cost of sales 9,052 8,180 18,198 16,853
------ ------ ------ ------
1,618 1,969 3,529 3,614
Selling, general and
administrative expenses 1,664 1,308 3,275 2,586
------ ------ ------ ------
(46) 661 254 1,028
Other charges (credits):
Interest 229 202 499 367
Foreign exchange (gain) loss (178) (3) (248) 8
Gain in connection with sale of
foreign operations by related
company - - - (895)
----- ----- ----- -----
Income (loss) before
income taxes (97) 462 3 1,548
Income taxes 36 61 81 91
----- ----- ----- -----
NET (LOSS) INCOME $ (133) $ 401 $ (78) $1,457
===== ===== ===== =====
NET (LOSS) INCOME PER SHARE $(.10) $ .30 $(.06) $1.11
==== ==== ==== ====
Average common shares outstanding 1,349,297 1,314,346
</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
SIX MONTHS ENDED
June 30
----------------
1997 1996
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (78) $ 1,457
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 318 247
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 - 213
Receivables (2,473) (1,820)
Inventories (1,511) (881)
Accounts payable and accrued expenses 3,596 941
Sundry 88 (47)
------- ------
CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES (60) (785)
INVESTING ACTIVITIES
Capital expenditures (753) (522)
Sundry 43 42
------- -----
CASH USED IN INVESTING ACTIVITIES (710) (480)
FINANCING ACTIVITIES
Change in deferred grants 101 34
Change in short-term debt 317 1,332
Issuance of long-term debt 274 347
Reduction of long-term debt (14) (273)
Issuance of capital stock 33 237
Sundry 16 -
------ -----
CASH PROVIDED BY FINANCING ACTIVITIES 727 1,677
Effect of exchange rate changes on cash (2) -
------ -----
Net change in cash (45) 412
Cash at beginning of year 402 479
------ -----
CASH AT END OF PERIOD $ 357 $ 891
====== =====
</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
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 a restructuring in 1994, equaled the balance of a bank
loan of Harrison ($2,529,000) which the Company guaranteed. In February
1996, Harrison sold its foreign operations and repaid the bank loan.
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).
The Company 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 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 such amounts are received.
Results of Operations
Net sales to customers increased by 7% during the first six months of
1997 compared to the same period in 1996. Although units shipped
increased by 11% over the same period in 1996, the gross profit
percentage decreased to 15.4% from 16.2% because of lower selling prices
resulting from aggressive price cutting within the cable industry. 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 15.2% of net sales from 12.8% in
1996, due in part to start-up costs at a new production facility in
Ireland as well as restructuring costs incurred at the newly acquired
U.K. distribution company. Interest expense increased due to higher
average borrowings in 1997 compared to the same period in 1996. As a
result of the U.K. pound sterling strengthening against the Irish Pound,
the Company's Irish subsidiary recorded a foreign exchange gain of
$248,000 for the first six months of 1997. The Irish subsidiary
transacts 75% of its business in Sterling.
Income taxes for 1997 result from foreign taxable income at the
Company's Irish subsidiary. 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 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.
<PAGE>
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 11, 1997 By: Thomas J. Carey
----------------------- ---------------------------
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, 1997 and the
Company's Condensed Consolidated Statement of Operations for the three
and six months ended June 30, 1997, 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 357
<SECURITIES> 0
<RECEIVABLES> 11429
<ALLOWANCES> 390
<INVENTORY> 6339
<CURRENT-ASSETS> 18582
<PP&E> 7807
<DEPRECIATION> 2351
<TOTAL-ASSETS> 24069
<CURRENT-LIABILITIES> 13948
<BONDS> 2283
0
0
<COMMON> 1222
<OTHER-SE> 5088
<TOTAL-LIABILITY-AND-EQUITY> 24069
<SALES> 21513
<TOTAL-REVENUES> 21727
<CGS> 18198
<TOTAL-COSTS> 18198
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 43
<INTEREST-EXPENSE> 499
<INCOME-PRETAX> 3
<INCOME-TAX> 81
<INCOME-CONTINUING> (78)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
