SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2000
[ ] 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.)
600 Essex Street
Harrison, New Jersey 07029
(Address of principal executive offices)
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 -- 1,372,333 shares as of August 2, 2000.
<PAGE>
DRIVER-HARRIS COMPANY
I N D E X
FOR THE QUARTER ENDED June 30, 2000
PART I FINANCIAL INFORMATION PAGE
----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 2000 and December 31, 1999. . . . . . . . . . . 3
Unaudited Condensed Consolidated Statements of Loss
- Three and Six Months ended June 30,
2000 and June 30, 1999. . . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements of Cash
Flows - Six Months ended June 30, 2000 and
June 30, 1999 . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements. . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .8
PART II OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . . . 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
June 30, December 31,
2000 1999
-------- ------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 394 $ 201
Accounts receivable - net 11,141 10,678
Inventories:
Materials 650 594
Work in process 208 181
Finished products 2,895 2,690
----- ------
3,753 3,465
Prepaid expenses 474 375
----- ------
Total current assets 15,762 14,719
Property, plant & equipment - net 4,013 4,283
----- ------
$19,775 $ 19,002
====== ======
LIABILITIES
Current Liabilities:
Short-term borrowings $ 5,144 $ 4,590
Current portion of long-term debt 1,551 392
Accounts payable 6,554 6,651
Accrued expenses 2,349 1,357
Income taxes payable 48 72
Loans payable - officer 48 -
------ ------
Total current liabilities 15,694 13,062
Long-term debt 562 1,914
Deferred Grants 574 629
Deferred foreign income taxes 150 158
Postretirement benefit liabilities 553 557
Sundry liabilities 5 74
Stockholders' equity:
Common stock 1,235 1,235
Additional paid-in capital 2,333 2,333
Retained earnings 631 801
Accumulated other comprehensive loss (2,013) (1,761)
------ -----
Stockholders' equity 2,186 2,608
----- -----
$19,775 $ 19,002
====== ======
See accompanying notes.
</TABLE>
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $10,107 $ 8,277 $21,188 $18,396
Other revenues 11 40 31 68
------ ----- ----- ------
Total Revenues 10,118 8,317 21,219 18,464
Cost of sales 8,841 7,336 18,674 15,899
------ ------ ------ ------
1,277 981 2,545 2,565
Selling, general and
administrative expenses 1,204 1,159 2,375 2,342
------ ------ ------ ------
73 (178) 170 223
Other charges (credits):
Interest 159 173 317 322
Foreign exchange (gain) loss (7) (93) 22 25
----- ----- ----- -----
Loss before income taxes (79) (258) (169) (124)
Income taxes 1 (17) 1 9
----- ----- ----- -----
NET LOSS $ (80) $ (241) $ (170) $ (133)
===== ===== ===== =====
BASIC NET LOSS PER SHARE $(.05) $(.18) $(.12) $(.10)
==== ==== ==== ====
DILUTED NET LOSS PER SHARE $(.05)* $(.18)* $(.12)* $(.10)*
==== ==== ==== ====
Basic earnings per share-weighted
average shares 1,372,333 1,357,250
Diluted earnings per share-weighted
average shares 1,399,522 1,359,393
* Adjusted weighted average shares not used since effect on earnings
per share would be anti-dilutive.
</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
----------------
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (170) $ (133)
Adjustments to reconcile net loss
to net cash provided:
Depreciation and amortization 237 260
Receivables (1,051) 143
Inventories (479) 80
Prepaid expenses (117) 269
Accounts payable and accrued expenses 1,292 (406)
Sundry (23) 21
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CASH(USED IN)PROVIDED BY OPERATING ACTIVITIES (311) 234
INVESTING ACTIVITIES
Capital expenditures (195) (74)
Sundry 5 -
------- -----
CASH USED IN INVESTING ACTIVITIES (190) (74)
FINANCING ACTIVITIES
Change in short-term debt 779 (104)
Proceeds from issuance of long-term debt - 127
Reduction of long-term debt (67) (170)
Sundry (20) 37
------ -----
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES 692 (110)
Effect of exchange rate changes on cash 2 (330)
------ -----
Net change in cash 193 (280)
Cash at beginning of year 201 362
------ ------
CASH AT END OF PERIOD $ 394 $ 82
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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, 1999. 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. Harrison Alloys Inc. ("Harrison") was a fifty
percent owned company, recorded on the equity method of accounting,
which was carried at no value on the balance sheet at December 31,
1999.In the first quarter of 2000, Harrison liquidated its assets under
the Federal Bankruptcy Code.
3 - Comprehensive Income
The components of comprehensive loss as presented under Financial
Accounting Standard 130, "Reporting Comprehensive Income", for the three
and six months ended June 30, 2000 and 1999 are as follows:
<TABLE>
Three Months Six Months
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net loss $ (80) $(241) $(170) $(133)
Foreign currency translation adjustment 77 (267) (252) (599)
---- ----- ---- ----
Comprehensive loss $ (3) $(508) $(422) $(732)
==== ===== ==== ====
</TABLE>
4. Long-Term Debt
In April 2000, the Company renegotiated the terms of the note
payable to the Pension Benefit Guarantee Corporation (PBGC) whereby
payment of such note was extended from September 30, 2000 to April 16,
2001. Accordingly, this note has been classified as current beginning
June 30, 2000. In exchange for this extension, the Company agreed to
pay a fee by issuing 13,000 of its common shares to the PBGC and agreed
that the interest rate on the note would remain at 7% per year
compounded quarterly until October 1, 2000 at which time the interest
rate will increase to 11% per year. Interest is payable at maturity.
5. Industry Segments and Geographic Areas
The Company classifies its revenues based upon the location (i.e.
manufacture or purchase for resale-distribution) of the facility and its
function. Such revenues are regularly reviewed by the Directors and
management and decisions are made on such basis.
The operating expenses and resultant net profit (loss) and the
assets are similarly reviewed and decisions made based upon whether they
relate to manufacturing or purchase for resale (i.e. distribution).
<PAGE>
Reporting Segments
Parent Co. Manufacturing Distribution
(U.S.) (Ireland) (U.K.) Total
<TABLE>
Six months ended June 30, 2000:
Revenues
<S> <C> <C> <C> <C>
External revenues $18,854 $ 2,334 $21,188
Inter-segment revenues $ 182 670 852
Other revenues 20 11 31
Elimination of inter-
segment revenues (182) (670) (852)
-----------------------------------------------
Consolidated revenues 18,874 2,345 21,219
Net Profit/(Loss) (139) (8) (23) (170)
Assets
Total assets 1,477 18,189 2,143 21,809
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (168) (13) (1,010)
Elimination of inter-
company inventory (401) (401)
-----------------------------------------------
Total assets 25 18,021 1,729 19,775
Other Significant Items
Depreciation expense 223 14 237
Interest expense 44 238 35 317
Expenditures for assets 189 6 195
Six months ended June 30, 1999:
Revenues
External revenues $16,348 $ 2,048 $18,396
Inter-segment revenues $ 149 491 640
Other revenues 31 29 8 68
Elimination of inter-
segment revenues (149) (491) (640)
-----------------------------------------------
Consolidated revenues 31 16,377 2,056 18,464
Net Profit/(Loss) (321) 246 (58) (133)
Assets
Total assets 1,549 17,315 2,274 21,138
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (1,918) (119) (2,866)
Elimination of inter-
company inventory (60) (60)
-----------------------------------------------
Total assets 97 15,397 2,095 17,589
Other Significant Items
Depreciation expense 250 10 260
Interest expense 40 253 29 322
Expenditures for assets 74 74
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Financial Condition
The ratio of current assets to current liabilities was 1.00 at
June 30, 2000, compared to 1.13 at December 31, 1999. The decrease is
attributable to the reclassification of the note payable to the PBGC in
the amount of $1,248,000 from long term to current since it is payable
April 16, 2001. The liquidation of Harrison during the first quarter of
2000 had no impact upon the Company since it has been carried at no
value on the balance sheet since 1996.
At June 30, 2000, the Company's subsidiaries had approximately
$6.7 million in available bank credit lines of which $5.1 million was in
use.
The Company believes it has adequate cash flow from operations to
meet its ongoing obligations including debt repayments and capital
commitments. On April 10, 2000, the Company renegotiated the terms of
the note payable to the Pension Benefit Guarantee Corporation (PBGC)
whereby payment of such note was extended from September 30, 2000 to
April 16, 2001. In exchange for this extension, the Company agreed to
pay a fee by issuing 13,000 of its common shares to the PBGC and agreed
that the interest rate on the note would remain at 7% per year
compounded quarterly until October 1, 2000 at which time the interest
rate will increase to 11% per year. Interest is payable at maturity.
Market Risks
Foreign Currency Fluctuations
With operations in three different countries, the Company's
operating results may be adversely affected by significant fluctuations
in the relative values among the U.S. dollar, Irish Punt and the British
Pound Sterling. The Company is periodically involved in hedging
currency between the Irish Punt and the British Pound Sterling through
the use of futures contracts which are relatively short term in nature.
The Company historically has experienced minimal gains and losses on
such foreign currency hedging.
Debt Instruments
The Company's long term debt of $2,113,000 including the current
portion is primarily fixed rate debt of which $1,248,000 is U.S.
denominated with the remaining balance denominated in Irish Punt. The
Company's remaining debt of $5,144,000 is comprised of variable rate,
short-term facilities denominated primarily in Irish Punt which does not
subject the Company to significant interest rate risk as the borrowings
are short term. The Company does not believe any reasonable interest
rate change in the ensuing year would have a material impact on the
Company's Statement of Operations.
Results of Operations
Six Months of 2000 Compared to 1999:
Net sales to customers increased by 15.2% during the first six
months of 2000 compared to 1999. The increase is primarily attributable
to increases in selling prices, a more favorable exchange rate for the
Irish Punt against the British Pound Sterling along with an increase of
2.6% in quantities shipped for the six months ended June 30, 2000
compared to 1999.
<PAGE>
The gross profit percentage decreased to 11.9% in 2000 compared to
13.6% in 1999, due primarily to increased raw material costs. Selling,
general and administrative expenses decreased to 11.2% of net sales from
12.7% in the preceding year because sales increased without a
corresponding increase in administrative costs.
Second Quarter of 2000 Compared to 1999:
Net sales to customers increased by 22.1% during the second
quarter of 2000 compared to the same period in 1999. This increase is
primarily due to a continued upward trend of selling price increases and
the more favorable exchange rate of the Irish Punt against the British
Pound Sterling. Quantities shipped increased by 1.7% for the second
quarter of 2000 compared to the second quarter of 1999.
The gross profit percentage increased to 12.5% in 2000 compared to
11.4% in 1999 as a result of higher margins on an improved sales mix.
Selling, general and administrative expenses decreased to 11.9% of net
sales compared to 14.0% in 1999 since sales increased without a
corresponding increase in administrative costs.
The Company realized $93,000 in foreign exchange gains in the
second quarter of 1999 as a result of closing out foreign exchange
contracts which had been used to hedge exposure to the British Pound
Sterling by the Company's Irish subsidiary as well as the impact of
translating Sterling denominated receivables and payables into Irish
Punt.
Income taxes for 1999 resulted from foreign taxable income at the
Company's Irish subsidiary. The Company has tax loss carry forwards of
approximately $7,100,000 available to offset future U.S. taxable income,
which expire between 2000 and 2019.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual Meeting of Stockholders was held on June 28, 2000 at
the New Jersey Historical Society, Newark, New Jersey.
b. The following Directors were reelected to serve for the ensuing
year: Ralph T. Bartlett, H. Lewis Biggerstaff, David A. Driver
and Frank L. Driver IV.
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 2, 2000 By: Thomas J. Carey
--------------------- ------------------------
Chief Financial Officer
