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, 1998 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 (973) 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 -- 1,343,671 shares as of November
9, 1998.
<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, 1998 and December 31, 1997. . . . . . . . 3
Condensed Consolidated Statements of
Income - Three and Nine Months ended September 30,
1998 and September 30, 1997 . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1998 and
September 30, 1997 . . . . . . . . . . . . . . . . . . . 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 SHEETS
(Amounts in thousands)
September 30, December 31,
1998 1997
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<TABLE>
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 262 $ 848
Accounts receivable - net 9,549 9,325
Inventories:
Materials 721 536
Work in process 245 254
Finished products 3,153 3,920
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4,119 4,710
Prepaid expenses 666 497
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Total current assets 14,596 15,380
Other assets 6 16
Property, plant & equipment - net 5,373 5,328
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$19,975 $ 20,724
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LIABILITIES
Current Liabilities:
Short-term borrowings $ 3,224 $ 4,179
Current portion of long-term debt 575 515
Accounts payable 6,016 5,176
Accrued expenses 2,049 1,293
Income taxes payable 37 108
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Total current liabilities 11,901 11,271
Long-term debt 2,294 2,524
Deferred Grants 826 796
Deferred foreign income taxes 156 147
Postretirement benefit liabilities 554 574
Sundry liabilities 121 149
Stockholders' equity:
Common stock 1,226 1,223
Additional paid-in capital 2,258 2,228
Retained earnings 1,557 3,030
Accumulated other comprehensive loss (918) (1,218)
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Stockholders' equity 4,123 5,263
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$19,975 $ 20,724
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</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Dollar amounts in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
---- ---- ---- ----
<TABLE>
<S> <C> <C> <C> <C>
Net sales $10,972 $ 9,411 $30,082 $30,725
Other revenues 37 23 134 237
------ ----- ----- ------
Total Revenues 11,009 9,434 30,216 30,962
Cost of sales 9,720 8,571 27,003 26,769
------ ------ ------ ------
1,289 863 3,213 4,193
Selling, general and
administrative expenses 1,491 1,437 4,186 4,712
------ ------ ------ ------
(202) (574) (973) (519)
Other charges (credits):
Interest 178 202 541 502
Foreign exchange (gain) loss (12) 17 (41) (231)
Gain on sale of interest in
Australian subsidiary (128) (128)
----- ----- ----- -----
Loss before income taxes (368) (665) (1,473) (662)
Income taxes (credit) - (60) - 21
----- ----- ----- -----
NET LOSS $ (368) $ (605) $(1,473) $ (683)
===== ===== ===== =====
BASIC NET LOSS PER SHARE $(.28) $(.45) $(1.10) $(.51)
==== ==== ==== ====
DILUTED NET LOSS PER SHARE $(.27) $(.45) $(1.09) $(.51)
==== ==== ==== ====
Basic earnings per share-
weighted average shares 1,343,671 1,340,421 1,342,046 1,340,421
Diluted earnings per share-
weighted average shares 1,349,044 1,353,817 1,355,220 1,349,880
</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
NINE MONTHS ENDED
September 30
----------------
1998 1997
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<TABLE>
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(1,473) $ (683)
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 411 441
Receivables (224) (1,096)
Inventories 895 (1,196)
Accounts payable and accrued expenses 1,198 2,531
Sundry (28) 158
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CASH PROVIDED BY(USED IN) OPERATING ACTIVITIES 779 155
INVESTING ACTIVITIES
Capital expenditures (208) (1,287)
Sundry 16 34
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CASH USED IN INVESTING ACTIVITIES (192) (1,253)
FINANCING ACTIVITIES
Change in deferred grants (33) 140
Change in short-term debt (1,095) 333
Issuance of long-term debt 31 1,039
Reduction of long-term debt (326) (206)
Sundry 34 30
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CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (1,389) 1,336
Effect of exchange rate changes on cash 216 9
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Net change in cash (586) 247
Cash at beginning of year 848 402
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CASH AT END OF PERIOD $ 262 $ 649
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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, 1997. 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"),
located in Ireland and the U.K. The Company also owns 50% of
Harrison Alloys Inc. ("Harrison") which is carried at zero value
on its balance sheet. Although Harrison is required to pay to the
Company license fees and commissions totaling $500,000 per year to
2003, no payments have been received since December 1996. Income
from Harrison will not be recorded until amounts are received.
3 - Comprehensive Income
As of January 1, 1998, the Company adopted Financial
Accounting Standard 130, Reporting Comprehensive Income.
Statement 130 establishes new rules for the reporting and display
of comprehensive income and its components; however, the adoption
of this Statement had no impact on the Companys net (loss) income
or stockholders equity. Statement 130 requires foreign currency
translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other
comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
The components of comprehensive income for the nine month
periods ended September 30, 1998 and 1997 are as follows:
<TABLE>
1998 1997
<S> <C> <C>
Net loss $(1,473) $ (683)
Foreign currency translation adjustment 300 (1,134)
----- -----
Comprehensive loss $(1,173) $(1,817)
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Harrison continues to restructure its operations and as
such, the Company does not contemplate that amounts due under the
license agreements will be paid in the near future. The Company
believes it has adequate cash and other options available in the
foreseeable future should these amounts ultimately not be fully
collected.
Results of Operations
Although net sales to customers decreased by 2.1% during the
first nine months of 1998 compared to the same period in 1997,
1997 included $1,060,000 in sales from the Australian subsidiary,
which was sold in the third quarter of 1997. Net sales for the
quarter increased by 16.6% compared to 1997. Also, the foreign
rate impact of the value of the Irish Punt to the U.S. Dollar
resulted in a 5.5% decrease in translated sales for the nine
months of 1998 compared to 1997. Units shipped increased by 12.9%
over the same period in 1997 while the gross profit percentage
increased to 11.4% compared to 8.9% in 1997. Pressure on selling
prices from aggressive competition within the cable industry,
particularly in the U.K., the Company's primary market, continues
to impact margins for the nine months of 1998. Since no fees from
Harrison have been recorded since the first quarter of 1997, other
revenues for the nine months are down. Selling, general and
administrative expenses decreased to 13.9% of net sales in 1998
compared to 15.2% in the nine months of 1997. These expenses were
high in 1997 due to start-up costs at a new production facility in
Ireland and restructuring costs at the U.K. distribution company.
Income taxes for 1997 result from foreign taxable income at
the Company's Irish subsidiary. 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.
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 12, 1998 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 September 30, 1998 and
the Company's Condensed Consolidated Statement of Operations for the
nine months ended September 30, 1998, 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-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 262
<SECURITIES> 0
<RECEIVABLES> 9853
<ALLOWANCES> 304
<INVENTORY> 4119
<CURRENT-ASSETS> 14596
<PP&E> 7857
<DEPRECIATION> 2484
<TOTAL-ASSETS> 19975
<CURRENT-LIABILITIES> 11901
<BONDS> 2294
0
0
<COMMON> 1226
<OTHER-SE> 2897
<TOTAL-LIABILITY-AND-EQUITY> 19975
<SALES> 30082
<TOTAL-REVENUES> 30216
<CGS> 27003
<TOTAL-COSTS> 27003
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 541
<INCOME-PRETAX> (1473)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1473)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.09)
</TABLE>
