SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
|_X_| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
___
| | Transition report pursuant to Section 13 or 15(d) of the Securities
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 incorporation or (I.R.S. Employer
organization) Identification No.)
308 Middlesex Street, Harrison, New Jersey 07029
- ----------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 483-4802
--------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class: on which registered:
---------------------- -----------------------------
Common stock - par value $0.83 1/3 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates and
the total number of common shares outstanding as of March 22, 2000:
Market Value - $3,602,000 Common Stock - 1,372,333 Shares
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the annual proxy statement anticipated to be filed on or about
April 28, 2000 are incorporated into Part III.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business
The Company is engaged in the business of manufacturing and marketing
non-ferrous metal products, principally insulated electrical wire and cable
through its wholly owned subsidiary, Irish Driver-Harris Co. Ltd., located
in Ireland and the U.K. In 1994, the Company restructured its operations
whereby the Company transferred its overseas resistance operations and its
U.S. operating subsidiary to Harrison Alloys Inc., ("Harrison")
in exchange for an increase to 50% of the Company's ownership of Harrison.
In February 1996, Harrison sold its foreign operations to Kanthal AB, a
Swedish company, and used a portion of the proceeds to repay a bank loan
($2,529,000) which the Company had guaranteed. At that time, the Company's
investment in Harrison was adjusted to zero in its financial
statements.
In September 1997, the Company sold its 50% interest in Quality Heat
Treatment Pty. Ltd., a company in the furnace manufacturing and heat treating
business, located in Australia, for a net profit of $128,000.
In November 1996, the Company acquired the assets of a distribution company,
Kestrel Cables Distribution Ltd. ("Kestrel") in the U.K. for $1,342,000.
After incurring substantial losses in 1997 and 1998, Kestrel was closed and
the net assets transferred to the Company's other U.K.
distributor, Kingston Cable Distributors.
In October 1999, Harrison declared bankruptcy and in January 2000 was ordered
to liquidate its assets under the Federal Bankruptcy Code by March 31, 2000.
(b) Financial Information About Industry Segments
Financial information about the Company's operating segments, manufacturing,
located in Ireland and distribution, located in the U.K. is presented in
Note 8 to the accompanying financial statements.
(c) Narrative Description of Business
(i) The principal products manufactured by the Registrant and its
subsidiaries are insulated electrical wire and cable. These products are
sold principally to the construction, appliance, and electrical equipment
industries by the Company's sales staff and through agents.
<PAGE>
Item 1. Business (Continued)
The following represents a breakdown of the Registrant's total net sales for
the last three fiscal years (in thousands):
<TABLE>
Insulated Electrical
Wire & Cable Other
<C> <C> <C>
1997 $39,525 $1,066
1998 40,389 0
1999 36,679 0
</TABLE>
(ii) The Company's specialty cable operation in Kilkenny, Ireland began
producing cable in the fall of 1997. The focus of this factory is to
manufacture lower volume, higher value-added cable products as part of the
Company's ongoing effort to shift its manufactured product orientation toward
higher margin specialty cable. The Kilkenny plant's initial product is a
high quality fire resistant cable designed to comply with the most stringent
fire standards worldwide.
(iii) The principal sources of raw material for insulated electrical wire
and cable products -- copper wire conductor, PVC and low smoke and fume
insulating materials -- are wire drawing and polymer companies, respectively.
During the past fiscal year, availability of raw materials was
satisfactory. PVC prices rose significantly in the latter part of the year.
(iv) The Company owns certain trademarks which are maintained
internationally. As part of the 1994 restructuring described in Item 1(a),
the Company granted Harrison a license to use certain trademarks in
consideration for specified license fees which have not been paid since 1996.
Except as mentioned above, there are no patents, licenses, franchises or
concessions held that are material to the business of the Registrant or its
subsidiaries.
(v) The business of the Registrant is not of a seasonal nature.
(vi) Following industry practice, the Registrant and its subsidiaries grant
payment terms to their customers ranging from 60 days to 90 days depending
on the countries where the companies do business.
(viii) The following amounts represent the backlog of orders believed to be
firm as of the end of each year; all were expected to be filled within the
following year:
<TABLE>
Irish Driver-Harris Co. Ltd.
<C> <C>
December 31, 1999 $2,043,000
December 31, 1998 30,000
</TABLE>
(ix) No material portion of the business of the Registrant and its
subsidiaries is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the U.S. government.
<PAGE>
Item 1. Business (Continued)
(x) The Registrant's insulated wire and cable products are marketed
primarily in Ireland, the U.K., the European continent, and the Mid and
Far East. Such products are essentially similar to those of its competitors
of which there are many, some substantially larger than the Company. The
principal methods of competition are price, quality, and responsiveness to
customers' orders. Significant restructuring of this industry and the
competitors within it has occurred in the past three years.
(xi) The Registrant believes that the cost of research and development
activities was not material during the past three fiscal years. No employees
were engaged in such activities on a full-time basis during that period.
All research and development projects have been performed by
engineering and production personnel in conjunction with other functions
without separate accounting therefor. In the future, the registrant intends
to allocate greater resources to these efforts.
(xii) The number of persons employed by the Registrant and its subsidiaries
at the end of the last fiscal year was 172.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales
(i) Information regarding foreign and domestic operations is provided in
Notes 2 and 8 to the consolidated financial statements.
(ii) The Registrant depends solely on foreign operations for the generation
of earnings. The insulated wire and cable operations are located in Ireland
and the U.K. These countries are considered to have relatively stable
governments and limited political risk; nonetheless there is
exposure to fluctuations in currency exchange rates and normal business risk.
(e) Executive Officers of the Registrant
<TABLE>
Name Age Position
<S> <C> <S>
Frank L. Driver IV 39 President, Chief Executive Officer
Lavinia Z. Emery 55 Secretary and Assistant Treasurer
Thomas J. Carey 63 Chief Financial Officer
</TABLE>
Officers are elected annually by the Board of Directors for one-year terms
expiring in June.
Mr. Frank L. Driver IV joined the Company in 1989 as Assistant Controller;
in 1991 he was elected Vice President-Marketing and in 1993 he became Vice
President-Finance. In September 1994, he was elected President. Prior to
joining the Company, he was a senior financial analyst with
General Motors Corp. Mr. Driver is the nephew of Mr. David A. Driver,
Chairman of the Company.
<PAGE>
Item 1. Business (Continued)
Ms. Lavinia Z. Emery joined the Company in 1982 in an administrative
capacity. In 1985 she was elected Assistant Secretary and Assistant
Treasurer. In 1988 she was elected Secretary and Assistant Treasurer.
Mr. Thomas J. Carey was hired by the Company as a Consultant and Chief
Financial Officer in 1995. From 1992 through 1994, he was Chief Financial
Officer of the Home News Company, New Brunswick, NJ and prior to that a
partner of Deloitte & Touche.
Item 2. Properties
The principal properties of the Registrant and its subsidiaries are two
plants and related distribution center in Ireland and a separate distribution
subsidiary in the U.K. The main plant was constructed in 1990 and expanded
during 1997 and is deemed adequate for the enterprise. Both
plants are owned by the Irish subsidiary and subject to liens by the lenders.
The second plant was acquired under a long-term Irish Development Authority
financing plan in 1997 and also has adequate land for expansion.
Item 3. Legal Proceedings
In February 2000, the landlord of the Harrison facility brought suit
against Driver-Harris claiming the Company was guarantor of the Harrison
lease and therefore liable for unpaid back rents. The Company believes the
complaint is without merit and intends to aggressively defend the claim.
Item 4. Submission of Matters to a Vote of Security Holders
None in the fourth quarter of 1999.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(a) The Company's common stock is traded on the American Stock Exchange.
The high and low sales prices for the stock were as follows:
<TABLE>
1999 1998
Quarter High Low High Low
<S> <C> <C> <C> <C>
First 3 3/4 2 11/16 10 5/8 8 1/2
Second 3 5/8 2 10 5/8 10
Third 4 3/4 3 1/4 11 8 3/8
Fourth 3 3/4 2 7/8 9 1/8 2 3/4
</TABLE>
(b) The approximate number of common shareholders as of March 22, 2000 was
390.
This figure represents the sum of the number of shareholders of record, plus
an estimate of the number of individual shareholders whose shares are held
collectively by stockbrokers.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
(c) The Company did not pay cash dividends during the five years ended
December 31,1999. The note payable to the Pension Benefit Guaranty
Corporation (PBGC) prohibits the payment of cash dividends without their
permission (reference is made to Note 4 to the consolidated financial
statements).
Item 6. Selected Financial Data
<TABLE>
(Amounts in thousands, except per share data)
1999 1998 1997 1996 1995
Net Sales and Other
<S> <C> <C> <C> <C> <C>
Revenues $36,782 $40,529 $40,754 $41,322 $36,719
Net (Loss)
Income (149) (2,080) (565) 2,452 1,332
Total Assets 19,002 20,564 20,724 21,178 16,255
Long-term Debt 1,914 2,142 2,524 2,023 1,907
Per Common Share:
Basic Net
(Loss) Income $(.11) $(1.55) $(.42) $1.86 $1.03
===== ==== === === ===
Diluted Net
(Loss) Income $(.11) $(1.55) $(.42) $1.86 $1.03
===== ==== === === ===
Basic Earnings Per Share
Weighted Average Shares
Outstanding 1,361 1,344 1,339 1,317 1,295
==== ==== ==== ==== ====
Diluted Earnings Per Share
Weighted Average Shares
Outstanding 1,374* 1,355* 1,354* 1,321 1,296
==== ==== ==== ==== ====
</TABLE>
* Adjusted weighted average shares outstanding was not used to calculate
diluted earnings per share since the effect on earnings per share would be
antidilutive.
During 1999, Harrison, the Company's 50% owned U.S. subsidiary, declared
bankruptcy and in January 2000 was ordered to liquidate its assets. This
investment has been carried at no value on the balance sheet since 1996 and
no loss was recorded as a result of these actions.
During 1998, the Company adopted the provisions of Financial Accounting
Standards Statement No. 131, "Disclosures about Segments of an Enterprise
and Related Information". This information is presented in Note 8 to the
financial statements.
Item 6. Selected Financial Data
During 1997, the Company adopted the provisions of Financial Accounting
Standards Statement No. 128, "Earnings Per Share". As a result all prior
year share amounts have been recalculated to conform with Statement 128.
In 1997, the Company sold its 50% interest in Quality Heat Treatment Pty.
Ltd. a company in the furnace manufacturing and heat treating business,
located in Australia, for a net profit of $128,000 ($.09 per share).
In 1996, the Company's fifty percent owned company, Harrison, sold its
foreign operations to Kanthal AB a Swedish company. This transaction
increased net income by $895,000 ($.68 per share).
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview and Financial Condition:
The Company, directly and through its subsidiaries, is engaged in the
business of manufacturing insulated electrical wire and cable through its
wholly owned subsidiary, Irish Driver-Harris Co. Ltd., located in Ireland
and the U.K.
The Company has a note payable to the Pension Benefit Guaranty Corporation
("PBGC") for which the due date has been extended to April 16, 2001. The
PBGC has the right to convert the
entire unpaid principal and accrued interest into common stock of the
Company. Until the note is paid in full, the Company may not pay cash
dividends on its capital stock without permission from
the PBGC.
In November 1996, the Company purchased the assets of a distribution
company, Kestrel Cables, in the U.K. for $1,342,000. Kestrel incurred
substantial losses in 1997 and 1998 and the
facility was closed in August 1998. The net assets of Kestrel were
transferred to the Company's other U.K. distribution company, Kingston Cable
Distributors Ltd. at that time. Closure costs for Kestrel totaled
approximately $117,000 and are recorded in cost of sales in 1998.
Capital expenditures during the year totaled approximately $295,000, all
at the Company's Irish subsidiary. Cash flow was sufficient to fund these
capital expenditures. At December 31,1999, the Company's subsidiaries had
approximately $6,499,000 of available bank lines of credit of
which $4,590,000 was drawn at December 31, 1999. The Company had $201,000
in cash on hand at December 31, 1999.
The ratio of current assets to current liabilities was 1.13 at the end of
1999, compared with 1.17 at the end of 1998. The decrease is due to a
reduction in inventory and prepaid expenses at the
Company's Irish subsidiary in 1999.
The Company believes it has adequate cash flow from operations to meet its
ongoing operating obligations including debt repayments and capital
commitments. On April 10, 2000, the
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Company renegotiated the terms of the note payable to the Pension Benefit
Guaranty 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 $2,306,000, including the current portion,
is primarily fixed rate debt of which $1,205,000 is U.S. denominated with
the remaining balance denominated in Irish Punt. The Company's remaining
debt of $4,590,000 is solely comprised of variable rate, short-
term facilities denominated primarily in Irish Punt to cover banking
overdrafts which does not subject the Company to significant interest rate
risk. 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.
Price Fluctuations and Availability of Raw Materials
Copper is the principal raw material purchased by the Company, and the
Company's sales may be affected by the market price of copper. The Company
generally does not hedge potential changes in copper prices.
The Company also purchases insulating compounds, such as PVC and low smoke
and fume polymer, from various suppliers. Although the Company has not
experienced any shortages of these compounds, the inability of suppliers to
supply such raw material could have a material adverse
effect on the Company's business until a replacement supplier is found or
substitute materials are approved for use. Although the Company has
generally been able to pass on increases in the price of
copper and other raw materials to its customers, there can be no assurance
that the Company will be able to do so in the future. Additionally,
significant increases in the price of copper or other raw
materials could have a negative effect on demand for the Company's products.
Similarly, significant increases in the price of copper, or shortage of such
other raw materials, over time could have a material adverse effect on the
Company's business.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Competition
The Company is subject to competition from a substantial number of
international competitors, some of which have greater financial, engineering,
manufacturing and other resources than the Company. The Company's
competitors can be expected to continue to aggressively pursue
increases in market share. Although the Company believes that it has
certain advantages over its competitors, realizing and maintaining such
advantages will require continued investment by the Company in engineering,
marketing and customer service and support. There can be no assurance
that the Company will have sufficient resources to continue to make such
investments or that the Company will be successful in maintaining such
advantages.
Year 2000
The Company completed the preparation for the Year 2000 issue in 1999, and
experienced no significant problems as of the balance sheet date. The
Company does not foresee any problems existing in 2000; however, if all Year
2000 issues were not properly identified or foreseen, there can
be no assurance that this issue will not materially adversely impact the
Company's results of operations or adversely affect the Company's
relationships with customers, vendors, or others.
Results of Operations
Year ended December 31, 1999 compared to year ended December 31, 1998
Net sales for the year decreased by 9.2% compared to 1998. Manufacturing
revenues in local currency increased by 7.8% but were flat in U.S. dollars
as the average value of the Irish Punt compared to the U.S. Dollar declined
by a similar percentage. Distribution revenues declined by
54.0% in U.S. Dollars as the distribution segment refocused its efforts on
higher margin product lines and significantly reduced costs including closure
of one subsidiary during 1998. The consolidated gross profit percentage
increased to 13.0% in 1999 compared to 11.5% in 1998. This
was primarily attributable to the improved margins within distribution, as
well as an improved product sales mix and moderately lower copper prices
within manufacturing. Selling, general and administrative expenses decreased
to 12.2% of net sales from 14.5% in the preceding year as a result
of ongoing efforts to reduce these costs as well as the reduction in
administrative costs resulting from the refocus of distribution activities.
Income taxes for 1999 result from foreign taxable income at the Company's
Irish subsidiary. The Company has tax loss carry forwards of approximately
$7,300,000 available to offset future U.S. taxable income, which expire
between 2000 and 2019. A valuation allowance of $2,715,000
and $2,708,000 has been provided at December 31, 1999 and 1998, respectively.
These valuation allowances were established since it is considered more
likely than not that the deferred tax assets,
primarily the net operating loss carry forwards, will not be realized.
See further discussion in Notes 1 and 6 to the consolidated financial
statements. The change in the effective tax rate between 1999
and 1998 is due to the fact that the Irish subsidiary had taxable income in
1999 compared to a taxable loss in 1998.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Year ended December 31, 1998 compared to year ended December 31, 1997
Units shipped were up 14.2% for the year within manufacturing although net
sales dollars increased only 2.2% due to pressure on sales prices resulting
from aggressive competition within the cable industry in the U.K., the
Company's primary market, and the foreign rate impact of the
value of the Irish Punt relative to the U.S. Dollar for 1998 compared to
1997. Overall, net sales to customers decreased by less than one percent for
the year ended December 31, 1998 compared to the prior year since there were
reduced sales at the distribution level and 1997 included sales of
$1,066,000 from the Australian subsidiary, sold in the third quarter of 1997.
Correspondingly, the gross profit percentage decreased to 11.4% from 13.3%
in 1997. The Company has taken steps to strengthen its distribution segment
by closing one subsidiary, Kestrel, in August 1998 and transferring its
assets to a second distribution subsidiary, Kingston. The Company has also
refocused its efforts at Kingston by reducing staff and concentrating
marketing efforts on specialty customers with higher profit margins while
de-emphasizing wholesale customers with poorer margins. Selling, general
and administrative expenses rose as a percentage of net sales to 14.4% in
1998 compared to 14.2% in 1997. This was attributable primarily to higher
costs at Kestrel and Kingston. Interest expense increased in 1998 by 11%
due to higher average borrowings in Ireland to meet ongoing obligations.
Income taxes for 1998 result 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 1999 and 2010. A valuation allowance of $2,708,000
and $2,560,000 has been provided at December 31, 1998 and 1997, respectively.
These valuation allowances were established since it is considered more
likely than not that the deferred tax assets, primarily the net operating
loss carry forwards, will not be realized. See further discussion in Notes
1 and 6 to the consolidated financial statements.
The foregoing discussion contains certain forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in such forward-looking statements.
Item 8. Financial Statements and Supplementary Data
This information is submitted in a separate section of this report.
Item 9. Change in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table summarizes the principal occupations and business
experience during the past five years, as well as certain other information
as of March 22, 2000, for each Director:
<TABLE>
Principal Occupation Company Common % of
During Last Five Stock Outstanding
Years and other Director Beneficially Common
Name Age Directorships Since Owned Stock
<S> <C> <S> <C> <C> <C>
Ralph T. Bartlett 75 Certified Public Accountant. 1985 8,600 *
Until 1984, a partner of Deloitte
Haskins & Sells (now Deloitte
& Touche), NY.
H.L.Biggerstaff 73 Retired. Until 1988, President 1980 9,650 *
Arwood Die Casting Division
of Arwood Corp.
David A.Driver 61 Chairman of the Board of Directors 1977 45,720 3.3
of the Company.
President, Atlantic Alloys Inc.
Frank L.Driver IV 39 President and Chief Executive
Officer 1993 111,540** 7.8
of the Company.
* Denotes less than 1% of the outstanding Common Stock.
** Includes 38,750 shares under options pursuant to the Driver-Harris
Employee Incentive Stock Option Plan, granted in 1990, 1991 and 1992,
which are fully exercisable, 3,000 shares granted in 1999 and 8,014
shares held in the Driver-Harris Staff 401-K Benefit account.
</TABLE>
The information with respect to executive officers is included in Part I of
this Form 10-K.
Item 11. Executive Compensation
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term
Annual Compensation
Compensation Awards
Securities Underlying All Other
Name and Principal Position Year Salary Options/SARs Compensation (a)
($) (#) ($)
Frank L. Driver IV,
<S> <C> <C> <C> <C>
President 1999 90,000 0 0 (b)
and Chief Executive Officer 1998 90,000 0 6,231 (c)
1997 90,000 0 9,000
</TABLE>
(a) Amount represents the Company's portion of contributions to a 401(k)
plan.
(b) The total amount accrued for 1999 was $9,000.
(c) A portion of his compensation has been accrued.
<PAGE>
Item 11. Executive Compensation (Continued)
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
Individual Grants
Percent of Potential Realizable Value At
Number of Total Assumed Annual Rates Of
Securities Options/ Stock Price Appreciation For
Underlying SARs Option Term
Options/ Granted to
SARs Employees Exercise of ---------------------
Granted In Fiscal Base Price Expiration
Name (#) Year ($/sh) Date 5% ($) 10% ($)
<S> ><c> <C> <C> <C> <C> <C>
Frank L. Driver IV 3,000 19% $3.937 9/13/09 $7,478 $18,825
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
<TABLE>
Number of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
------------------- ------------------
Shares Acquired Exercisable (E) Exercisable (E)
Name On Exercise(#) Unexercisable (U) Unexerciseable (U)
Exercisable options:
Frank L.
<S> <C> <C> <C> <S>
Driver IV 6,250 38,750 (E) -----
3,000 (U)
</TABLE>
PENSION PLANS
On November 21, 1986, the Company entered into a pension agreement with
Frank L. Driver III, under which Mr. Driver or his spouse would receive an
annual payment of $50,000 for a period of fifteen years after Mr. Driver's
retirement or death. On November 20, 1995, the Board of Directors approved
changing the period to twenty years and the addition of a contingent payment
to this agreement whereby in years where the profit of the Company exceeds
$500,000 before income taxes and before this payment, the $50,000 amount
will be supplemented by an amount based on a formula encompassing total
retirement payments, adjusted annually for the Consumer Price Index.
This pension is now payable to Corinne F. Driver, spouse of Frank L.
Driver III, deceased. In 1997, $21,072 was paid as an additional retirement
payment to Corinne F. Driver. No additional payments were made for 1998 or
1999.
COMPENSATION OF DIRECTORS
During 1999, each Director, with the exception of Frank L. Driver IV, was
paid $600 per Board of Directors Meeting and $600 per Audit or Compensation
Committee Meeting. In addition, in 1999, Ralph Bartlett and H. L.
Biggerstaff received 3,500 shares and David Driver received 4,000
shares of Common Stock, valued at $2.125 per share for a total of $23,375.
<PAGE>
Item 11. Executive Compensation (Continued)
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
The Company has a Compensation Committee of its Board of Directors. Mr.
David A. Driver, a member of the Committee is an uncle of Frank L. Driver IV,
President and Chief Executive Officer.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board's Compensation Committee reviews the compensation of the executive
officers of the Company annually.
The Company's salary policy is to pay a "competitive salary" plus an
incentive bonus based on profit performance in relation to prior years and
in relation to annual budget profit targets. The Compensation Committee may
also take into consideration other factors including dedication to the
job, external factors beyond the control of management, etc. An incentive
bonus of 750 shares each of Common Stock was paid in 1999 to Thomas J. Carey,
and Lavinia Z. Emery.
Compensation Committee
David A. Driver Ralph T. Bartlett H. L. Biggerstaff
Item 12. Security ownership of Certain Beneficial Owners and Management
(a) Ownership of shares of the Company's Common Stock by certain beneficial
owners as of March 22, 2000:
<TABLE>
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership Class
<S> <C> <C>
Estate of Frank L. Driver Jr. 64,172* 4.7
c/o David A. Driver, Executor
10 High Street
Bristol, RI 02809
Estate of Frank L. Driver III 66,662** 4.9
33 Birdseye Glen
Verona, NJ
Frank L. Driver IV 111,540*** 7.8
100 Warren Street
Jersey City, NJ
</TABLE>
<PAGE>
Item 12. Security ownership of Certain Beneficial Owners and Management
(Continued)
_____________________________
* All shares held of record and beneficially. As an executor of the Estate
of Frank L. Driver Jr., David A. Driver, Chairman of Driver-Harris Company,
holds voting rights to such shares.
** All shares held of record. Does not include 24,154 shares held by Corinne
F. Driver, his surviving spouse and the mother of Frank L. Driver IV, who
disclaims any beneficial interest in these shares. As an executor of the
Estate of Frank L. Driver III, Frank L. Driver IV, Director and
President, holds voting rights to such shares.
*** Includes 38,750 shares under options pursuant to the Driver-Harris
Employee Incentive Stock Option Plan, granted in 1990, 1991 and 1992, which
are fully exercisable, 3,000 shares granted in
1999 and 8,014 shares held in the Driver-Harris Staff 401-K Benefit account.
(b) Security ownership of management as of March 22, 2000:
<TABLE>
Amount and Nature of Percent of
Title of Class Beneficia Class
Ownership
Driver-Harris Company
<S> <C> <C>
Common Stock 342,494* 24.1%
</TABLE>
* Includes 50,250 shares under options pursuant to the 1983 and 1999 Driver-
Harris Employee Incentive Stock Option Plan and 8,014 shares held in the
Driver-Harris Staff 401-K Benefit account.
(c) Management is not aware of any arrangement which may result in a change
in control of the Company.
Item 13. Certain Relationships and Related Transactions
David A. Driver, Chairman of the Company, is the uncle of Frank L. Driver
IV, President.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) This portion of Item 14 is submitted in a separate section
of this report.
(3) Listing of Exhibits
Exhibit 3. Certificate of Incorporation and By-Laws
Exhibit 10. Material contracts
Exhibit 21. Subsidiaries of the Registrant
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None filed in the fourth quarter of 1999.
<PAGE>
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(Continued)
(c ) Exhibits Incorporated
by Reference
to Sec Form
Exhibit 3. Articles of Incorporation and By-Laws 8-K dated
November 1, 1982
Amendments thereto 8-K dated
June 17, 1987
Exhibit 10. Material Contracts:
Settlement Agreement with Pension 8-K dated
Benefit Guaranty Corporation dated December 22, 1993
December 22, 1993
Amended and Restated Agreement between
Harrison Alloys Inc., Driver-Harris
Company, HAI Industries Inc., and
HAI Holding Company Inc., dated 8-K dated
March 18, 1994 April 7, 1994
Note Modification Agreement, Loan and
Security Agreement Modification
Agreement, and Release of Guaranty
between Driver-Harris Alloys Inc.,
Harrison Alloys Inc., and Textron
Financial Corporation, all dated 8-K dated
February 25, 1994 April 7, 1994
Exhibit 21. Subsidiaries of the Registrant as of December 31, 1999
SUBSIDIARIES OF THE REGISTRANT
Name Jurisdiction of Incorporation
Driver-Harris Systems Inc. New Jersey (Inactive Corporation)
Irish Driver-Harris Co. Ltd. Ireland
Kingston Cable Distributors Ltd. United Kingdom
(Subsidiary of Irish Driver-Harris Co. Ltd.)
Exhibit 27. Financial Statement Schedules
This portion of Item 14 is submitted in a separate section of this report
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
April 12, 2000 /s/ Thomas J. Carey
- ------------- -------------------------------------------------------
Date Thomas J. Carey
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Ralph T. Bartlett /s/ David A. Driver
- ------------------------- ---------------------------------------
Ralph T. Bartlett David A. Driver
Director Chairman
Date: April 12, 2000 Date: April 12, 2000
/s/ H. L. Biggerstaff /s/ Frank L. Driver IV
- -------------------- ------------------------------------
H. L. Biggerstaff Frank L. Driver IV
Director Director, President and Chief Executive
Date: April 12, 2000 Officer
Date: April 12, 2000
<PAGE>
Annual Report on Form 10-K Item 8,
Item 14(a) (1) and (2), (c) and (d)
List of Financial Statements and
Financial Statement Schedules
Certain Exhibits
Financial Statement Schedules
<PAGE>
Driver-Harris Company and Subsidiaries
December 31, 1999
Driver-Harris Company and Subsidiaries
Form 10-K Item 14(a) (1) and (2)
List of Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Driver-Harris Company and
Subsidiaries are included in Item 8:
Consolidated Balance Sheets - December 31, 1999 and 1998 Page 22
Consolidated Statements of Operations - Years ended December 31, 1999,
1998 and 1997 Page 24
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1999, 1998 and 1997 Page 25
Consolidated Statements of Cash Flows - Years ended December 31,
1999, 1998 and 1997 Page 26
Notes to Consolidated Financial Statements Page 27
The following consolidated financial statement schedules of Driver-Harris
Company and Subsidiaries are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant Page 45
Schedule II - Valuation and Qualifying Accounts Page 49
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
<PAGE>
Report of Independent Auditors
Board of Directors
Driver-Harris Company
We have audited the accompanying consolidated balance sheets of Driver-Harris
Company and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedules listed at Item 14(a).
These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules
based on our audits. We did not audit the financial statements of certain
foreign consolidated subsidiaries which statements reflect total assets
constituting 5% in 1999 and 16% in 1998, and total revenues constituting 9%
in 1999, 19% in 1998 and 20% in 1997 of the related consolidated totals.
Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to data included
for such subsidiaries, is based solely on the reports of
other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management as well as
evaluating the overall financial statement presentation. We believe
that our audits and the reports of other auditors provide a reasonable basis
for our opinion.
In our opinion, based upon our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Driver-Harris
Company and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the
information set forth herein.
MetroPark, New Jersey
March 22, 2000, except /s/ ERNST & YOUNG LLP
for the third paragraph of Note 4, as
to which the date is
April 10, 2000
<PAGE>
AUDITORS' REPORT TO THE MEMBERS
of
KINGSTON CABLE DISTRIUBTORS LIMITED
We have audited the accompanying balance sheets of Kingston Cable
Distributors Limited as of 31 December 1999 and 31 December 1998 and the
related statements of profit and loss and cash flows for each of the three
years in the period ended 31 December 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
Basis of Opinion
We conducted our audits in accordance with generally accepted auditing
standards of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material mis-statement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
Opinion
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kingston Cable
Distributors Limited as of 31 December 1999 and 31 December
1998, and the results of its operations and its cash flows for each of the
three years in the period ended 31 December 1999 in conformity with
generally accepted accounting principles of the United
States.
Date: 22 March 2000 /s/ James, Stanley & Co.
Registered Auditors
Chartered Accountants
1733 Coventry Road
South Yardley
Birmingham
B26 1DT
<PAGE>
Auditors' Report to the Members
of
Kestrel Cables Distribution Limited
We have audited the accompanying balance sheets of Kestrel Cables
Distribution Limited as of 31 December 1998 and 31 December 1997 and the
related statements of profit and loss and cash flows
for each of the three years in the period ended 31 December 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these
financial statements based on our audit.
Basis of Opinion
We conducted our audits in accordance with generally accepted auditing
standards of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material mis-statement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
Opinion
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Kestrel Cables
Distribution Limited as of 31 December 1998 and 31 December
1997, and the results of its operations and its cash flows for each of the
three years in the period ended 31 December 1998 in conformity with
generally accepted accounting principles of the United
States.
Date: 26 March 1999 /s/ James, Stanley & Co.
Registered Auditors
Chartered Accountants
1733 Coventry Road
South Yardley
Birmingham
B26 1DT
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Balance Sheets
Dollar Amounts in Thousands
<TABLE>
December 31
Assets 1999 1998
Current Assets:
<S> <C> <C>
Cash $ 201 $ 362
Receivables, less allowances of $459
and $601 10,678 9,966
Inventories:
Materials 594 585
In process 181 152
Finished 2,690 3,223
------- -------
3,465 3,960
Prepaid expenses 375 1,054
------ ------
Total current assets 14,719 15,342
Property, plant and equipment, at cost:
Land and buildings 3,135 3,644
Machinery and equipment 3,466 3,739
Office equipment 293 352
------ ------
6,894 7,735
Less accumulated depreciation and
amortization 2,611 2,513
------ -------
4,283 5,222
------ -------
$19,002 $20,564
===== =====
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Balance Sheets (continued)
Dollar Amounts in Thousands
<TABLE>
December 31
Liabilities and stockholders' equity 1999 1998
Current liabilities:
<S> <C> <C>
Short term borrowings $ 4,590 $ 4,677
Current portion of long-term debt 392 599
Accounts payable 6,651 5,974
Accrued expenses 1,357 1,777
Income taxes payable 72 77
------ --------
Total current liabilities 13,062 13,104
Long-term debt 1,914 2,142
Deferred grants 629 781
Deferred foreign income taxes 158 184
Postretirement benefit liabilities 557 573
Other liabilities 74 111
------ --------
16,394 16,895
Stockholders' equity:
Common stock -- par value $0.83 1/3 per share:
Authorized 3,000,000 shares; issued 1,424,928
shares at December 31, 1999 and December
31, 1998 (including 52,595 and 72,095
treasury shares at December 31, 1999
and 1998) 1,235 1,233
Additional paid-in capital 2,333 2,282
Retained earnings 801 950
Accumulated other comprehensive loss (1,761) (796)
--------- -------
2,608 3,669
Commitments and contingencies
-------- --------
$19,002 $20,564
===== =====
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Operations
Dollar Amounts in Thousands, Except per Share Data
<TABLE>
Years ended December 31
1999 1998 1997
Revenues:
<S> <C> <C> <C>
Net sales $36,679 $40,389 $40,591
Other 103 140 163
-------- ------- --------
36,782 40,529 40,754
Costs and expenses:
Cost of sales 31,924 35,767 35,350
Selling, general and administrative 4,483 5,867 5,770
--------- ------- --------
Operating income (loss) 375 (1,105) (366)
Interest expense 622 722 649
Foreign exchange (gain) loss and sundry (145) 164 (374)
Gain on sale of interest in Australia subsidiary (128)
-------- ----- -------
(Loss) before income taxes (102) (1,994) (513)
Provision for income taxes 47 86 52
------- ----- ------
Net (Loss) $ (149) $(2,080) $ (565)
===== ==== ====
Basic net (loss) per share $(.11) $(1.55) $(.42)
==== ==== ====
Diluted net (loss) per share $(.11) $(1.55) $(.42)
==== ==== ====
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
For the three years ended December 31, 1999
Dollar Amounts in Thousands
<TABLE>
Accumulated
Other
Compre-
Additional hensive
Common Paid-In Retained Income
Stock Capital Earnings (Loss) Total
------- --------- --------- -------- ------
<S>
Balance at January 1, 1997
<C> <C> <C> <C> <C>
$ 1,221 $ 2,200 $ 3,595 $ 104 $ 7,120
Net loss (565) (565)
Adjustments from
exchange rate changes (1,322) (1,322)
Comprehensive loss (1,887)
Directors' and
Officers'
compensation 2 28 30
----------------------------------------------------
Balance at December 31, 1997
$ 1,223 $ 2,228 $ 3,030 $(1,218) $ 5,263
Net loss (2,080) (2,080)
Adjustments from exchange rate changes 422 422
Comprehensive loss (1,658)
Directors', Officers' and Employees'
compensation 4 35 39
7,062 shares purchased
by Officer 6 19 25
------------------------------------------------------
Balance at December 31, 1998
$ 1,233 $ 2,282 $ 950 $ (796) $3,669
Net loss (149) (149)
Adjustment from exchange rate changes (965) (965)
Comprehensive loss (1,114)
Directors', Officers' and employees'
compensation 1 27 28
6,250 shares purchased
by Officer 1 24 25
------------------------------------------------------
Balance at December 31, 1999
$ 1,235 $ 2,333 $ 801 $ (1,761) $2,608
====================================
</TABLE>
See accompanying notes
<PAGE>
Driver-Harris Company and Subsidiaries
Consolidated Statements of Cash Flows
Dollar Amounts in Thousands
<TABLE>
Years ended December 31
1999 1998 1997
Operating activities
<S> <C> <C> <C>
Net (loss) income $ (149) $(2,080) $ (565)
Adjustments to reconcile net (loss) income to
net cash used in operating
activities:
Depreciation and amortization 505 567 643
Provision for doubtful accounts 28 272 76
Loss (Gain) on sale of fixed assets (8) 14 (13)
Gain on sale of foreign subsidiary (128)
Non-cash compensation 28 39 30
Receivables (2,074) (641) (1,837)
Inventories 59 1,090 (520)
Prepaid expenses 501 (525) 340
Accounts payable, accrued expenses and
other liabilities 1,053 911 772
--------------------------------------
Net cash provided by (used in) operating
activities (57) (353) (1,202)
Investing activities
Capital expenditures (295) (272) (2,191)
Proceeds from sale of fixed assets 26 37 552
Proceeds from sale of subsidiary 225
---------------------------------------
Net cash used in investing activities (269) (235) (1,414)
Financing activities
Change in short-term debt 356 329 2,054
Change in deferred grants (46) (15) 110
Proceeds from issuance of long-term debt 180 118 1,322
Reduction of long-term debt (424) (587) (389)
Issuance of capital stock 25 25
----------------------------------
Net cash provided by (used in) financing
activities 91 (130) 3,097
Effect of exchange rate changes on cash 74 232 (35)
------------------------------------
Net change in cash (161) (486) 446
Cash at beginning of year 362 848 402
------------------------------------
Cash at end of year $ 201 $ 362 $ 848
=======================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 514 $ 646 $ 988
Income taxes 60 73
Supplemental schedule of non-cash investing and financing activities
Capital lease obligations incurred for machinery
and equipment $ 97 $ 221 $ 1,391
</TABLE>
See accompanying notes.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999
1. Summary of Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Driver-Harris
Company (the "Company") and its wholly-owned subsidiary, Irish Driver-Harris
Co. Ltd., ("IDH"), located in Ireland and the U.K. and for 1997, the
operations of Quality Heat Treatment Pty. Ltd. through the
date of its disposition in September, 1997. Intercompany accounts,
transactions and profits have been eliminated in consolidation.
The Company, directly and through its subsidiaries, is engaged in the
business of manufacturing and marketing insulated electrical wire and cable.
Harrison Alloys Inc. ("Harrison"), (referred to herein as a "related
company") was a fifty percent owned company, recorded on the equity method
of accounting, which was carried at no value on the balance sheets at
December 31, 1999 and 1998. In October 1999, Harrison declared bankruptcy
and in January 2000, was ordered to liquidate its assets under the Federal
Bankruptcy Code by March 31, 2000.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method for all inventories.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (continued)
Property, Plant and Equipment
Depreciation has been provided principally by the straight-line method based
upon estimated useful lives of the depreciable assets. Depreciable lives
range from four to forty years.
Deferred Grants
Deferred grants represent foreign government grants received by the Company's
Irish subsidiary.
The grants received with respect to capital expenditures are treated as a
deferred credit and are amortized to income over the expected useful life of
the related asset.
Income Taxes
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred
tax assets and liabilities.
Revenue Recognition
Sales revenues are recognized at the time products are shipped.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (continued)
Earnings per Common Share
Basic and diluted earnings per share are calculated in accordance with SFASB
128, "Earnings Per Share" as follows:
<TABLE>
1999 1998 1997
Numerator:
<S> <C> <C> <C>
Net (Loss) $ (149) $ (2,080) $ (565)
Denominator:
Basic earnings per share -
weighted average shares 1,361,020 1,344,204 1,339,046
Effect of dilutive shares -
stock options 12,805 10,539 14,824
------------ ----------- ------------
Diluted earnings per share -
adjusted weighted average
shares 1,373,825* 1,354,743* 1,353,870*
======= ======= =======
Basic (loss) per share $(.11) $(1.55) $ (.42)
==== ==== ====
Diluted (loss) per share $(.11) $(1.55) $ (.42)
==== ==== ====
</TABLE>
* Adjusted weighted average shares not used since effect on earnings per
share would be antidilutive.
Employee Stock Options
As permitted under FASB Statement 123, "Accounting for Stock-Based
Compensation" (FASB 123), the Company elects to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25),
and related interpretations in accounting for its employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals or is greater than the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (continued)
Concentration of Credit Risk
The predominant portion of the Company's customers are engaged in the
construction, appliance and electrical equipment industries in Ireland and
the U.K. The Company grants credit to its customers on open account. Two
customers outstanding balances represent 17.8% of consolidated receivables
at December 31, 1999 compared to three customers whose outstanding balances
represent 29.5% of consolidated receivables at December 31, 1998. The
majority of accounts receivable, including these customers, are insured
against loss. These same customers represent 20.3% of consolidated
revenues in 1999 and 25.2% in 1998.
Foreign Currency Translation
Assets and liabilities of foreign operations with a functional currency other
than the U.S. dollar are translated into U.S. dollars at year-end exchange
rates. Revenues and expenses are translated at the average exchange rates
in effect during the year. Translation adjustments are recorded as a
separate component of equity, accumulated other comprehensive income (loss).
Foreign Currency Options
To hedge against exposures to changes in foreign currency exchange rates on
certain sales commitments and anticipated, but not yet committed sales, the
Company occasionally enters into forward foreign currency contracts. These
contracts permit, but do not require, the Company to purchase specified
amounts of British Pounds expected to be received from its export sales for
pre-established Irish Punt amounts at specified dates. The forward contracts
are denominated in the same foreign currencies in which export sales are
expected to be denominated. These contracts are designated and effective
as hedges of probable quarterly export sales transactions, which otherwise
would expose the Company, on the basis of its aggregate net cash flows in
respective currencies, to foreign currency risk. The continued effectiveness
of these contracts as hedges is assessed periodically by analyzing the
correlation between the actual export sales which occur and the degree
of offset which the contracts provide.
The effects of movements in currency exchange rates on these instruments are
recognized when the related sale is recorded. Realized and unrealized gains
and losses on contracts that are not designated as hedges, that fail to be
effective as hedges, or that relate to sales that are no longer
probable of occurring are included in income as foreign exchange gains or
losses.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Impairment of Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
(Statement 121), requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. This requirement had no
effect on the financial statements in 1999 and 1998.
Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income (Loss)" (Statement 130).
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 Company's financial position or results
of operations. Statement 130 requires foreign currency translation
adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other comprehensive
income (loss). The financial statements have been reclassified to conform
to the requirements of Statement 130.
Segment Reporting
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (Statement 131). This information is contained in
Note 8.
Pensions and Other Postretirement Benefits
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No.132, "Disclosures about Pensions and Other
Postretirement Benefits" (Statement 132). This information is contained in
Note 5.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
1. Summary of Accounting Policies (continued)
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (Statement 133). Statement 133 requires
all derivatives to be recorded on the balance sheet at fair value and
establishes "special accounting" for the following three different types of
hedges: hedges of changes in the fair value of assets, liabilities or firm
commitments (referred to as fair value hedges); hedges of the variable cash
flows of forecasted transactions (cash flow hedges); and hedges of foreign
currency exposures of net investments in foreign operations. Each of the
three types of hedges requires accounting treatment and criteria that
recognizes offsetting changes in value or cash flows
of both the hedge and the hedged item in earnings in the same period.
Changes in the fair value of derivatives that do not meet the criteria of
one of these three categories of hedges must be included
in earnings in the period of the change. The Company is required to adopt
the provisions of this statement in the year 2001 due to a delay in the
original implementation date as amended by SFAS No. 137. The Company is
currently evaluating the impact of this statement on its financial
statements but does not expect a material effect therefrom.
Reclassification
Certain prior period amounts have been reclassified to conform with the
current year presentation.
2. Foreign Operations
Net assets which are located outside the United States and are included in
the consolidated balance sheets are as follows (in thousands):
<TABLE>
December 31
1999 1998
Assets
<S> <C> <C>
Receivables, net $ 10,678 $ 9,966
Inventories 3,465 3,960
Other current assets 559 1,174
Property, plant and equipment -- net 4,283 5,222
---------------------------
18,985 20,322
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
2. Foreign Operations (continued)
<TABLE>
December 31
1999 1998
Liabilities
<S> <C> <C>
Current Liabilities 12,892 12,969
Long-term debt 709 1,018
Other long-term liabilities 629 781
Deferred income taxes 158 184
Sundry 74 111
--------- ---------
14,462 15,063
--------- ---------
Net assets outside the United States $ 4,523 $ 5,259
===== =====
</TABLE>
Net income (loss) of the Company's foreign subsidiaries included in the
accompanying financial statements amounted to approximately $229 in 1999,
$(1,659) in 1998, and $(259) in 1997.
Because the Company plans to continue to finance foreign expansion and
operating requirements by reinvesting a substantial portion of the
undistributed earnings of its foreign subsidiaries, United
States income taxes have not been provided on such earnings. Unremitted
earnings of foreign subsidiaries at December 31, 1999 amounted to
approximately $3,721.
3. Leases
Property, plant and equipment includes the following amounts related to
capital leases (in thousands):
<TABLE>
December 31
1999 1998
<S> <C> <C>
Machinery and equipment $ 1,374 $ 1,505
Less accumulated amortization 666 570
--------- ---------
$ 708 $ 935
===== =====
</TABLE>
Amortization of the assets recorded under capital leases is included in
depreciation expense.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
3. Leases (continued)
The future minimum rental commitments for all operating leases as of
December 31, 1999 are as follows (in thousands):
<TABLE>
<C> <C>
2000 $ 72
2001 69
2002 49
2003 48
2004 48
Thereafter 145
$ 431
====
</TABLE>
Total rent expense under operating leases for 1999, 1998 and 1997 was
$ 72, $179 and $193, respectively.
4. Long-Term Debt and Lines of Credit
<TABLE>
Long-term debt is as follows (in thousands): December 31
1999 1998
<S> <C> <C>
Note payable to Pension Benefit Guaranty Corp. $ 1,205 $ 1,124
Other mortgage loans 578 913
Capitalized lease obligations 523 704
--------- ---------
2,306 2,741
Less current portion 392 599
--------- ---------
$ 1,914 $ 2,142
===== =====
</TABLE>
The Company's obligations approximate fair market value.
On April 10, 2000, the Company renegotiated the terms of the note payable to
the Pension Benefit Guaranty 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 PBGC has the right to convert the
entire unpaid principal and accrued interest into common stock of the
Company at a price of $7.875 per share, until maturity. Until the note is
paid in full, the Company may not pay cash dividends on
its capital stock without permission from the PBGC. As a result of the
change in the due date to April 16, 2001, the PBGC note is included in
long-term debt in the Company's consolidated balance
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Long-Term Debt and Lines of Credit (continued)
sheet. The Other mortgage loans, which are the liability of a subsidiary
and are denominated primarily in Irish Punt, bear interest at 8% per year,
and are due in monthly installments through 2000. These loans and the Irish
subsidiary's $5,691,000 general credit line are jointly collateralized
by all of its assets with a book value of $18,385,000 at December 31, 1999.
Under the terms of the loans, there are certain restrictions which limit the
payment of dividends and management fees by
the subsidiary to the Company.
Maturities of long-term debt at December 31, 1999 are as follows (in
thousands):
<TABLE>
Capitalized
Leases Other
<C> <C> <C>
2000 $ 178 $ 214
2001 186 1,306
2002 129 101
2003 19 101
2004 11 61
Thereafter - -
$ 523 $1,783
==================
</TABLE>
At December 31, 1999, the Company and its subsidiaries had available short-
term lines of credit in the aggregate amount of approximately $6,499,000 of
which $4,590,000 was in use and is recorded as short-term borrowings on the
balance sheet.
The weighted average interest rate on the short-term borrowings of the
Company and its subsidiaries was 7.5%, 9.3%, and 7.2% at December 31, 1999,
1998 and 1997, respectively.
5. Savings Plan/Postretirement Benefits - Pensions and Health Care
Savings Plan
The Parent Company has a 401K profit sharing plan for eligible employees in
the U.S. Each year the Company contributes 5% of each participant's annual
compensation and matches participant's contribution up to an additional 5%.
U.S. pension expense for the years 1999, 1998 and 1997 was
$21,500, $20,885 and $13,500, respectively.
Pension
The Company's only defined benefit pension plans are those of a foreign
subsidiary. These cover a majority of the foreign subsidiary's employees,
who must contribute to the plan cost. Benefits are based on employees'
years of service and final compensation. The subsidiary makes contributions
to the plans in amounts that are intended to provide for current service and
to fund past service liability.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
5. Savings Plan/Postretirement Benefits - Pensions and Health Care
(continued)
The following tables provide a reconciliation of the changes in the pension
plans' benefit obligations and fair value of assets over the two year period
ending December 31, 1999 and a statement of the funded status as of December
31 of both years (in thousands):
<TABLE>
Pension Benefits
December 31
1999 1998
Reconciliation of benefit obligation
<S> <C> <C>
Obligation at January 1 $ 1,598 $ 1,719
Service cost 156 181
Interest cost 116 143
Participant contributions 35 41
Actuarial gain (80) (251)
Benefit payments (3) (309)
Foreign currency exchange rate
changes (234) 74
----------------------
Obligation at December 31 1,588 1,598
Reconciliation of fair value of plan assets
Fair value of plan assets at
January 1 1,628 1,617
Actual return on plan assets 192 144
Employer contributions 154 61
Participant contributions 35 41
Benefit payments (3) (309)
Foreign currency exchange rate
changes (251) 74
----------------------
Fair value of plan assets invested in pooled separate
account of an insurance company
at December 31 1,755 1,628
Reconciliation of Funded status
Funded status at December 31 167 30
Unrecognized actuarial (gain)
/loss (76) 74
Unrecognized prior service cost (91) (112)
----------------------
Prepaid (accrued) benefit cost $ 0 $ (8)
=============
Prepaid benefit cost $ 76 $ 73
Accrued benefit liability (76) (81)
----------------------
Net (liability) recognized $ 0 $ (8)
=============
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
5. Savings Plan/Postretirement Benefits - Pensions and Health Care
(continued)
Net pension expense for the Company's defined benefit pension plans for 1999,
1998 and 1997 included the following components (in thousands):
<TABLE>
December 31
1999 1998 1997
<S> <C> <C> <C>
Service cost for benefits earned during the year $ 156 $ 181 $ 126
Interest cost on projected benefit obligation 116 143 124
Actual return on plan assets (192) (144) (243)
Net amortization and other 152 84 143
-----------------------------------
232 264 150
Less employee contributions 35 41 38
-----------------------------------
Net pension expense $ 197 $ 223 $ 112
=====================
</TABLE>
The assumptions used in computing the preceding information at December 31,
1999, 1998 and 1997 are: an assumed discount rate of 8%, an assumed rate of
compensation increase of 6% and an expected rate of return on plan assets of
8%.
The Company also has a supplemental pension plan which provides benefits to
the estate of the former Chairman. The net liability for such benefits at
December 31, 1999 was approximately $407,000 and is reflected in the balance
sheet in postretirement benefit liabilities.
Health Care and Life Insurance
Effective June 30, 1998, the Company terminated its postretirement health
care and life insurance benefits program for U.S. employees.
Accumulated postretirement benefits aggregating $261,000, of which $150,000
was accrued through June 30, 1998, were eliminated. Postretirement benefit
costs charged to expense for the six months ended June 30, 1998 amounted to
$10,500.
The Company will use the accrued amount of $150,000 to pay supplemental
medical insurance premiums to U.S. employees and surviving spouses who had
15 years or more service at June 30,1998 when they reach the age of 65 until
this accrued amount is exhausted.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
5. Savings Plan/Postretirement Benefits - Pensions and Health Care
(continued)
Postretirement benefit costs for 1997 included the following components (in
thousands):
<TABLE>
1997
<S> <C>
Service cost for benefits earned during the year $ 5
Interest cost on accumulated postretirement benefit
obligation 18
Amortization of transition obligation 13
--------
$ 36
====
</TABLE>
The following assumptions were used at December 31, 1997: a discount rate
of 7.25% assumed health care cost trend rate of 5%.
6. Income Taxes
Income tax expense is composed of the following (in thousands):
<TABLE>
1999 1998 1997
Foreign:
<S> <C> <C> <C>
Current $ 47 $ 49 $ 79
Deferred - 37 (27)
-------------------------------
$ 47 $ 86 $ 52
==================
</TABLE>
Pre-tax (loss) income attributable to domestic and foreign operations is as
follows (in thousands):
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
United States $ (378) $ (421) $ (322)
Foreign 276 (1,573) (191)
-------------------------------
$(102) $(1,994) $(513)
===================
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Income Taxes (continued)
Following is a reconciliation of income tax expense (benefit) to the amount
based on the U.S. statutory rate of 34% (1999, 1998 and 1997) (in thousands):
<TABLE>
1999 1998 1997
<S> <C> <C> <C>
Income taxes based on U.S. statutory rate $ (35) $ (678) $ (174)
Increase of valuation allowances 7 148 120
Taxes of foreign subsidiaries at rates different
than U.S. statutory rate 75 616 113
Other (net) (7)
------------------------------
$ 47 $ 86 $ 52
=================
</TABLE>
The components of deferred tax assets and liabilities at December 31, 1999
and 1998, were as follows (in thousands):
<TABLE>
1999 1998
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Depreciation $ 211 $ 283
Accrued expenses $ 146 $ 191
Tax loss carry forwards 2,542 2,510
Tax credits 27 49
Sundry 53 57
------------------- --------------------
2,768 211 2,807 283
Valuation allowance 2,715 2,708
------------------- ---------------------
Total $ 53 $ 211 $ 99 $ 283
============ ==============
</TABLE>
At December 31, 1999, the Company had approximately $7,300,000 of loss carry
forwards available to offset future U.S. taxable income. Such carry forwards
expire between 2000 and 2019. A valuation allowance of $2,715,000 and
$2,708,000 has been provided at December 31, 1999 and 1998, respectively.
These valuation allowances were established since it is more likely than not
that the deferred tax assets, primarily the net operating loss carry
forwards, will not be realized.
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
7. Employee Stock Options
The 1983 Driver-Harris Employee Incentive Stock Option Plan which expired in
1993 provided for the grant of stock options at 100% of market value on date
of grant which are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code. Under this plan, 38,750
and 45,000 shares of stock are reserved for issuance at December 31, 1999
and 1998, respectively.
In May 1999, the Company adopted the 1999 Driver-Harris Incentive Stock
Option Plan for Directors, Officers and key employees. Two hundred thousand
shares of stock are reserved for issuance under the Plan. During 1999,
non-employee directors were granted 4,500 options to
acquire shares of common stock at an option price of $3.937 per share which
represented the fair value of the Company's common stock at date of grant.
Officers and employees were granted 12,500 options to acquire shares of
common stock at an option price of $3.937 per share and 3,500 options
to acquire shares of common stock at an option price of $3.50 per share
which represented the fair value of the Company's common stock on date of
grant. To date, no shares have been exercised under this Plan. Options for
non-employee Directors are exercisable over three years and options for
Officers and employees are exercisable over five years. The following table
summarizes the Company's Stock Option activity:
<TABLE>
Number Weighted Avg.
of Options Exercise Price
Outstanding January 1, 1997
and December 31, 1997
<S> <C> <C>
and 1998 45,000 $4.00
Granted 20,500 3.86
Exercised (6,250) 4.00
Outstanding December 31, 1999 59,250 3.95
=====
</TABLE>
On March 22, 1999, the Compensation Committee of the Board of Directors
repriced outstanding options at December 31, 1998 to purchase 45,000 shares
of common stock having exercise prices ranging from $7.50 and $8.50 to $4.00
per share. The new exercise price reflects the closing price of
common stock on that date. The repriced options are included at the
repriced exercise price on the original date of grant in the table above.
The outstanding options at December 31, 1998, which are all fully vested,
expire between 2000 and 2002.
FASB 123 requires pro forma information regarding net income and earnings
per share as if the Company has accounted for its employee stock options
under the fair value method of FASB 123. The fair value of these options was
estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions for 1999: weighted average
risk
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
7. Employee Stock Options (continued)
free interest rate at 5.9%; expected volatility of .721; weighted average
expected option life of five years and an expected dividend yield of 0.0%.
For purposes of pro forma disclosures, the estimated fair value of the equity
awards is amortized to expense over the options vesting period. The Company's
pro forma information is as follows for the year ended December 31, 1999:
<TABLE>
<S> <C>
Pro forma net loss $ (154,000)
Pro forma basic loss per share (.11)
</TABLE>
These amounts may not necessarily be indicative of the pro forma effect of
SFAS No. 123 for future periods in which options may be granted.
During 1999 and 1998, the Company issued 13,250 and 5,350 shares of stock
respectively to non-executive Directors, officers and employees as
compensation and bonus. Total compensation expense recorded in conjunction
with the issuance of these shares was $28,000 in 1999 and $39,000
in 1998.
8. Industry Segments and Geographic Areas
The Company classifies its revenues based upon the location of the facility
and its function (i.e.manufacture or purchase for resale-distribution).
Such revenues are regularly reviewed by the Directors and management and
decisions are made on such a 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).
<TABLE>
Reportable Segments
Parent Manufacturing Distribution
Co. (U.S.) (Ireland) (U.K.) Total
Year ended December 31, 1999:
Revenues
<S> <C> <C> <C> <C>
External revenues $ 33,222 $ 3,457 $36,679
Inter-segment revenues 1,127 1,127
Other revenues $ 14 89 103
Elimination of inter-segment revenue (1,127) (1,127)
---------------------------------------------------------------------
Consolidated revenues $ 14 $ 33,311 $ 3,457 $36,782
Net Profit (Loss) $(315) $ 182 $ (16) $ (149)
Assets
Total assets $1,469 $18,385 $ 1,170 $21,024
Elimination of investment(623) (623)
Elimination of inter-company
receivables (829) (215) (133) (1,177)
Elimination of inter-company
inventory (222) ( 222)
-----------------------------------------------------------------------
Total Assets $ 17 $17,948 $ 1,037 $19,002
Other Significant items
Depreciation expense $ 466 $ 39 $ 505
Interest expense $ 82 484 56 622
Expenditures for assets 295 295
Year ended December 31, 1998:
Revenues
External revenues $32,837 $7,552 $40,389
Inter-segment revenues 3,379 143 3,522
Other revenues $ 50 90 140
Elimination of inter-segment
revenue (3,379) (143) (3,522)
---------------------------------------------------------------------
Consolidated revenues $ 50 $32,927 $7,552 $40,529
Net Profit (Loss) $ (303) $ 106 $(1,883) $ (2,080)
Assets
Total assets $1,694 $20,423 $4,104 $26,221
Elimination of investment (623) (623)
Elimination of inter-company
receivables (829) (3,289) (733) (4,851)
Elimination of inter-company
inventory (100) (83) (183)
-----------------------------------------------------------------------
Total Assets $ 242 $17,034 $3,288 $20,564
Other Significant items
Depreciation expense $ 1 $ 485 $ 65 $ 551
Interest expense 77 569 76 722
Expenditures for assets 231 41 272
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
8. Industry Segments and Geographic Areas (continued)
<TABLE>
Heat
Parent Manufacturing Distribution Treating
Co. (U.S.) (Ireland) (U.K.) (Australia) Total
Year ended December 31, 1997:
Revenues
<S> <C> <C> <C> <C> <C>
External revenues $ 30,894 $ 8,390 $ 1,066 $40,350
Inter-segment revenues 4,275 38 4,313
Other revenues $ 332 63 9 404
Elimination of inter-segment
revenue (4,275) (38) (4,313)
Consolidated revenues $ 332 $ 30,957 $ 8,399 $ 1,066 $40,754
Net Profit (Loss) $ (306)$ 482 $ (744) $ 3 $ (565)
Assets
Total assets $2,315 $ 19,994 $ 4,435 $26,744
Elimination of
investment (623) (289) (912)
Elimination of inter-company
receivables (829) (4,074) (13) (4,916)
Elimination of inter-company
inventory (192) (192)
$ 863 $ 15,439 $ 4,422 $ 20,724
Other Significant Items
Depreciation
expenses $ 1 $ 511 $ 91 $ 24 $ 627
Interest expense 17 482 80 70 649
Expenditures for assets 2,137 50 4 2,191
<PAGE>
Driver-Harris Company and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
9. Financial Instruments
Off Balance Sheet Risk
The Company enters into forward exchange contracts to hedge certain firm
sales commitments denominated in foreign currencies and to hedge certain
anticipated but not yet committed sales expected to be denominated in
foreign currencies. The purpose of the Company's foreign currency
hedging activities is to protect the Company from the risk that the eventual
cash flows resulting from the sale of products to international customers
will be adversely affected by changes in exchange rates. At December 31,
1998, the Company had forward exchange contracts, all having maturities of
less than six months, to exchange British pound currencies for Irish Punt
in the amount of 3.5 million British Pounds. There were no contracts
outstanding at December 31, 1999.
Gross deferred realized gains and losses from hedging firm sales commitments
and anticipated but not yet committed sales transactions were a net $5,000
loss at December 31, 1998.
10. Commitments and Contingencies
In February 2000, the landlord of the Harrison facility brought suit against
Driver-Harris claiming the Company was guarantor of the Harrison lease and
therefore liable for unpaid back rents. The Company believes the complaint
is without merit and intends to aggressively defend the claim.
<PAGE>
Driver-Harris Company and Subsidiaries
Schedule I - Condensed Financial Information of Registrant
Condensed Balance Sheets
</TABLE>
<TABLE>
Dollar Amounts in Thousands
December 31
1999 1998
Assets
Current assets:
<S> <C> <C>
Cash $ 11 $ 218
Accounts receivable from subsidiaries 829 829
------- -------
Total current assets 840 1,047
Investment in subsidiaries 3,694 4,430
Other assets 6 24
------- -------
$ 4,540 $ 5,501
===== =====
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 37 $ 25
Accrued expenses 133 110
------- -------
Total current liabilities 170 135
Long-term debt 1,205 1,124
Postretirement benefit liabilities 557 573
------ -------
Total liabilities 1,932 1,832
Stockholders' equity
Common stock 1,235 1,233
Additional paid-in capital 2,333 2,282
Retained earnings 801 950
Accumulated other comprehensive loss (1,761) (796)
------ ------
2,608 3,669
Commitments (note 1)
------- -------
$4,540 5,501
===== =====
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Schedule I - Condensed Financial Information of Registrant
Condensed Statements of Operation
<TABLE>
Dollar Amounts in Thousands
Years Ended December 31
1999 1998 1997
<S> <C> <C> <C>
Fees from subsidiaries $ 220 $ 220 $ 220
Other income 14 50 54
----------------------------------
234 270 274
Selling, general and
administrative expenses 530 614 638
Interest and financing expenses 82 77 70
Gain on sale of interest in Australia subsidiary (128)
---------------------------------
(Loss) before equity in net income and (loss)
of subsidiaries (378) (421) (306)
Equity in net income (loss) of
subsidiaries 229 (1,659) (259)
---------------------------------
Net (loss) $ (149) $ (2,080) $ (565)
=====================
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Schedule I - Condensed Financial Information of Registrant
Condensed Statements of Cash Flow
<TABLE>
Dollar Amounts in Thousands
Years Ended December 31
1999 1998 1997
Operating activities
<S> <C> <C> <C>
Net loss $ (149) $ (2,080) $ (565)
Adjustments to reconcile net loss to net
cash (provided by) used in operating activities:
Undistributed net (income) loss
of subsidiaries (229) 1,659 259
Non-cash compensation 28 39 30
Increase (reduction) in retirement
benefit liability (16) (1) 295
Receivables from subsidiaries 103
Accounts payable and accrued expenses 35 (22) (52)
Sundry 18 (9) 6
-----------------------------------
Net cash provided by (used in)
operating activities (313) (414) 76
Financing activities
Increase in debt 81 75 70
Issuance of capital stock 25 25
-----------------------------------
Net cash provided by financing activities 106 100 70
-----------------------------------
Net change in cash (207) (314) 146
Cash at beginning of year 218 532 386
-----------------------------------
Cash at end of year $ 11 $ 218 $ 532
=====================
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest $ 1 $ 1 $ -
====================
</TABLE>
<PAGE>
Driver-Harris Company and Subsidiaries
Schedule I - Condensed Financial Information of Registrant
Notes to Condensed Financial Statements
1. Basis of Presentation
In the parent company only (Driver-Harris Company - U.S. Corporate Holding
Company) financial statements, the Company's investment in subsidiary
(Irish Driver-Harris Co. Ltd.) is stated at cost plus equity in undistributed
earnings since the date of acquisition. The Driver-Harris Company - U.S.
Corporate Holding Company financial statements should be read in conjunction
with the Company's consolidated financial statements.
<PAGE>
Driver-Harris Company and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
<TABLE>
Dollar Amounts in Thousands
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at Charged to Balance
Beginning Costs and Deductions at End
Description of Period Expenses Describe of Period
Year ended
December 31, 1999:
Deduction from
related asset:
Tax valuation
<S> <C> <C> <C> <C>
allowance $ 2,708 $ 7(2) $ 2,715
Allowances for
doubtful trade
accounts 601 28 $ (170)(1) 459
===================================
Year ended December 31, 1998:
Deduction from
related asset:
Tax valuation
allowance $ 2,560 $ 148(2) $ 2,708
Allowances for
doubtful trade
accounts 406 272 $ (77)(1) 601
===================================
Year ended December 31, 1997:
Deduction from related asset:
Tax valuation
allowance $ 2,440 $ 120(2) $ 2,560
Allowances for doubtful trade
accounts 408 76 $ 78(1) 406
===================================
</TABLE>
(1) Accounts charged off during the year and adjustments due to currency
fluctuations.
(2) The change in valuation allowance is principally due to the change in
deferred tax assets.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at December 31, 1999 and the
Company's Consolidated Statement of Operations for the year ended
December 31, 1999, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 201
<SECURITIES> 0
<RECEIVABLES> 11137
<ALLOWANCES> 459
<INVENTORY> 3465
<CURRENT-ASSETS> 14719
<PP&E> 6894
<DEPRECIATION> 2611
<TOTAL-ASSETS> 19002
<CURRENT-LIABILITIES> 13062
<BONDS> 1914
0
0
<COMMON> 1235
<OTHER-SE> 1373
<TOTAL-LIABILITY-AND-EQUITY> 19002
<SALES> 36679
<TOTAL-REVENUES> 36782
<CGS> 31924
<TOTAL-COSTS> 31924
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 622
<INCOME-PRETAX> (102)
<INCOME-TAX> 47
<INCOME-CONTINUING> (149)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (149)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
