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 September 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 -- 1,427,712 shares as of November 1,
2000.
<PAGE>
DRIVER-HARRIS COMPANY
I N D E X
FOR THE QUARTER ENDED September 30, 2000
PART I FINANCIAL INFORMATION PAGE
----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999. . . . . . . . 3
Unaudited Condensed Consolidated Statements of Loss
- Three and Nine Months ended September 30, 2000
and September 30, 1999. . . . . . . . . . . . . . . . . 4
Unaudited Condensed Consolidated Statements of Cash
Flows - Nine Months ended September 30, 2000 and
September 30, 1999 . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . 8
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 . . . . . . . . . . . . . . . . . . . . . . . . . 9
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<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
(Amounts in thousands)
September 30, December 31,
2000 1999
-------- ------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 163 $ 201
Accounts receivable - net 9,357 10,678
Inventories:
Materials 760 594
Work in process 123 181
Finished products 2,713 2,690
----- ------
3,596 3,465
Prepaid expenses 656 375
----- ------
Total current assets 13,772 14,719
Property, plant & equipment - net 3,644 4,283
----- ------
$17,416 $ 19,002
====== ======
LIABILITIES
Current Liabilities:
Short-term borrowings $ 5,723 $ 4,590
Current portion of long-term debt 1,428 392
Accounts payable 4,556 6,651
Accrued expenses 2,474 1,357
Income taxes payable 46 72
Loans payable - officer 53 -
------ ------
Total current liabilities 14,280 13,062
Long-term debt 303 1,914
Deferred Grants 522 629
Deferred foreign income taxes 139 158
Postretirement benefit liabilities 552 557
Sundry liabilities 47 74
Stockholders' equity:
Common stock 1,281 1,235
Additional paid-in capital 2,404 2,333
Retained earnings 308 801
Accumulated other comprehensive loss (2,420) (1,761)
------ -----
Stockholders' equity 1,573 2,608
----- -----
$17,416 $ 19,002
====== ======
See accompanying notes.
</TABLE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 7,902 $ 8,981 $29,090 $27,377
Other revenues 16 26 47 94
------ ----- ----- ------
Total Revenues 7,918 9,007 29,137 27,471
Cost of sales 7,238 7,802 25,912 23,701
------ ------ ------ ------
680 1,205 3,225 3,770
Selling, general and
administrative expenses 1,100 1,035 3,475 3,377
------ ------ ------ ------
(420) 170 (250) 393
Other charges (credits):
Interest 150 171 467 493
Foreign exchange (gain) loss (246) (63) (224) (38)
----- ----- ----- -----
(Loss)/Income before
income taxes (324) 62 (493) (62)
Income taxes (1) 12 - 21
----- ----- ----- -----
NET (LOSS)/INCOME $ (323) $ 50 $ (493) $ (83)
===== ===== ===== =====
BASIC NET (LOSS)/
INCOME PER SHARE $(.24) $ .04 $(.36) $(.06)
==== ==== ==== ====
DILUTED NET (LOSS)/
INCOME PER SHARE $(.24)* $ .04* $(.36)* $(.06)*
==== ==== ==== ====
Basic earnings per share-weighted
average shares 1,378,486 1,361,021
Diluted earnings per share-weighted
average shares 1,378,486* 1,365,786
* Adjusted weighted average shares not used since effect on earnings
per share would be anti-dilutive.
See accompanying notes.
</TABLE>
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
NINE MONTHS ENDED
September 30
----------------
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (493) $ (83)
Adjustments to reconcile net loss
to net cash provided:
Depreciation and amortization 305 407
Non-cash compensation 92 -
Receivables (9) (539)
Inventories (562) 557
Prepaid expenses (296) 298
Accounts payable and accrued expenses (3) 422
Sundry (53) 72
------- ------
CASH(USED IN)PROVIDED BY OPERATING ACTIVITIES (1,019) 1,134
INVESTING ACTIVITIES
Capital expenditures (215) (173)
Sundry 7 35
------- -----
CASH USED IN INVESTING ACTIVITIES (208) (138)
FINANCING ACTIVITIES
Change in short-term debt 1,553 (604)
Proceeds from issuance of long-term debt - 157
Reduction of long-term debt (310) (348)
Sundry 25 -
------ -----
NET CASH PROVIDED BY(USED IN) FINANCING ACTIVITIES 1,268 (795)
Effect of exchange rate changes on cash (79) (469)
------ -----
Net change in cash (38) (268)
Cash at beginning of year 201 362
------ -----
CASH AT END OF PERIOD $ 163 $ 94
====== =====
See accompanying notes.
</TABLE>
<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 nine months ended September 30, 2000 and 1999 are as follows:
<TABLE>
Three Months Nine Months
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income (loss) $(323) $ 50 $ (493)$ (83)
Foreign currency translation adjustment (407) (3) (659) (602)
---- ----- ------ ----
Comprehensive loss $(730) $ 47 $(1,152)$(685)
==== ===== ==== ====
</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. Non-Cash Compensation
During the third quarter of 2000, the Company issued shares valued
at $117,000 in lieu of cash for Directors' fees and Officers and
employee compensation and related expenses. $25,152 related to prior
year compensation that had been accrued at December 31, 1999 and $92,215
related to the current year.
6. 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>
Nine months ended September 30, 2000:
Revenues
<S> <C> <C> <C> <C>
External revenues $25,914 $ 3,176 $29,090
Inter-segment revenues $ 230 977 1,207
Other revenues 27 5 15 47
Elimination of inter-
segment revenues (230) (977) (1,207)
Consolidated revenues 27 25,919 3,191 29,137
Net Profit/(Loss) (250) (221) (22) (493)
Assets
Total assets 1,482 16,121 1,976 19,579
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (306) (19) (1,154)
Elimination of inter-
company inventory (386) (386)
Total assets 30 15,815 1,571 17,416
Other Significant Items
Depreciation expense 292 13 305
Interest expense 66 350 51 467
Expenditures for assets 209 6 215
Nine months ended September 30, 1999:
Revenues
External revenues $24,467 $ 2,910 $27,377
Inter-segment revenues $ 224 766 990
Other revenues 12 67 15 94
Elimination of inter-
segment revenues (224) (766) (990)
Consolidated revenues 12 24,534 2,925 27,471
Net Profit/(Loss) (428) 419 (74) (83)
Assets
Total assets 1,509 17,638 2,127 21,274
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (1,406) (116) (2,351)
Elimination of inter-
company inventory (60) (60)
Total assets 57 16,232 1,951 18,240
Other Significant Items
Depreciation expense 378 29 407
Interest expense 61 388 44 493
Expenditures for assets 173 173
</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 .96 at
September 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 as well as the loss for nine months ended
September 30, 2000. 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 September 30, 2000, the Company's subsidiaries had
approximately $6.3 million in available bank credit lines of which $6.0
million was in use.
The Company continues to meet its ongoing obligations including
debt repayments and capital commitments on a current basis, however,
increases in the price of raw materials and the weaker Punt/Sterling
exchange rate has increased the Company's working capital needs
substantially. During the third quarter of 2000, the Company issued
shares valued at $117,000 in lieu of cash for Directors' fees and
Officers and employee compensation and related expenses. 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.
The Company is seeking an increased borrowing facility to fund its
receivables and inventory balances driven by higher raw material prices
and the weaker Punt/Sterling rate.
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 $1,731,000 including the current
portion is primarily fixed rate debt of which $1,270,000 is U.S.
denominated with the remaining balance denominated in Irish Punt. The
Company's remaining debt of $5,723,000 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.
<PAGE>
Results of Operations
Nine Months of 2000 Compared to 1999:
Net sales to customers increased by 6.3% during the first nine
months of 2000 compared to 1999. The increase is primarily attributable
to increases in selling prices offset by a decline of 13.0% in the value
of the Irish Punt compared to the US Dollar. Quantities shipped
increased by 1.2% for the nine months ended September 30, 2000 compared
to 1999.
The gross profit percentage decreased to 10.9% in 2000 compared to
13.5% in 1999, due primarily to increased raw material costs without
commensurate increases in selling prices. Selling, general and
administrative expenses decreased slightly to 12.0% of net sales from
12.3% in the preceding year. Exchange gains resulted from the
fluctuation of the British Sterling to the Irish Punt.
Third Quarter of 2000 Compared to 1999:
Net sales to customers decreased by 12.0% during the third quarter
of 2000 compared to the same period in 1999. This decrease is primarily
due to a decrease in quantities shipped by 10.3% coupled with a decline
of 5.0% in the value of the Irish Punt compared to the US Dollar for the
third quarter of 2000 compared to the third quarter of 1999.
The gross profit percentage declined to 8.4% in 2000 compared to
13.0% in 1999 as a result of higher raw material costs without
commensurate increases in selling prices. Selling, general and
administrative expenses increased to 13.9% of net sales compared to
11.5% in 1999 since sales decreased without a corresponding decrease in
administrative costs. Exchange gains resulted from the fluctuation of
the British Sterling to the 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.
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 14, 2000 By: Thomas J. Carey
--------------------- ------------------------
Chief Financial Officer
