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 March 31, 2000
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number: 1-1212
DRIVER-HARRIS COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 22-0870220
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Essex Street
Harrison, New Jersey 07029
(Address of principal executive offices)
Registrant's telephone no., including area code (973) 483-4802
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $0.83 1/3 par value -- 1,372,333 shares as of May 3, 2000.
<PAGE>
DRIVER-HARRIS COMPANY
I N D E X
PART I FINANCIAL INFORMATION PAGE
- ----------------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
March 31, 2000 and December 31, 1999. . . . . . . . . .3
Condensed Consolidated Statements of
Income - Three Months ended March 31,
2000 and March 31, 1999. . . . . . . . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows -
Three Months ended March 31, 2000 and
March 31, 1999. . . . . . . . . . . . . . . . . . . . .5
Notes to Financial Statements. . . . . . . . . . . . . . .6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . .8
PART II OTHER INFORMATION
- ---------------------------
Item 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
- ----------
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
March 31, December 31,
2000 1999
-------- ------------
ASSETS (Unaudited)
Current assets:
<S> <C> <C>
Cash $ 181 $ 201
Accounts receivable - net 11,634 10,678
Inventories:
Materials 579 594
Work in process 170 181
Finished products 2,707 2,690
----- ------
3,456 3,465
Prepaid expenses 512 375
------ ------
Total current assets 15,783 14,719
Property, plant & equipment - net 4,037 4,283
----- -----
$ 19,820 $ 19,002
======= ======
LIABILITIES
Current Liabilities:
Short-term borrowings $ 4,324 $ 4,590
Current portion of long-term debt 338 392
Accounts payable 7,911 6,651
Accrued expenses 1,736 1,357
Income taxes payable 81 72
------- ------
Total current liabilities 14,390 13,062
Long-term debt 1,873 1,914
Deferred Grants 587 629
Deferred foreign income taxes 151 158
Postretirement benefit liabilities 565 557
Sundry liabilities 65 74
Stockholders' equity:
Common stock 1,235 1,235
Additional paid-in capital 2,333 2,333
Retained earnings 711 801
Accumulated other comprehensive loss (2,090) (1,761)
------ -------
Stockholders' equity 2,189 2,608
------ -------
$ 19,820 $ 19,002
======= ======
See accompanying notes.
</TABLE>
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share data)
<TABLE>
THREE MONTHS ENDED
March 31
2000 1999
---- ----
<S> <C> <C>
Net sales $11,081 $10,119
Other revenues 20 28
----- ------
Total Revenues 11,101 10,147
Cost of sales 9,833 8,563
----- ------
Gross Profit 1,268 1,584
Selling, general and administrative
expenses 1,171 1,183
----- ------
97 401
Other charges:
Interest 158 149
Foreign exchange loss 29 118
----- ------
(Loss) Income before
income taxes (90) 134
Income taxes - 26
----- ------
Net (Loss) Income $ (90) $ 108
===== ======
BASIC NET (LOSS)
INCOME PER SHARE $ (.07) $ .08
DILUTED NET (LOSS)
INCOME PER SHARE $ (.07)* $ .08*
Basic earnings per share - weighted
average shares 1,372,333 1,352,833
Diluted earnings per share - adjusted
weighted average shares 1,391,501 1,352,833
* Adjusted weighted average shares not used since effect on earnings
per share would be anti-dilutive.
</TABLE>
See accompanying notes.
<PAGE>
DRIVER-HARRIS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Amounts in thousands)
<TABLE>
THREE MONTHS ENDED
March 31
----------------
2000 1999
---- ----
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ (90) $ 108
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization 115 124
Receivables (1,482) (984)
Inventories (167) 450
Prepaid expenses (156) 265
Accounts payable and accrued expenses 2,050 491
Sundry (31) (109)
------- ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 239 345
INVESTING ACTIVITIES
Capital expenditures (81) (70)
Sundry 5 -
----- -----
NET CASH USED IN INVESTING ACTIVITIES (76) (70)
FINANCING ACTIVITIES
Change in short-term debt (65) (412)
Issuance of long-term debt 21 111
Reduction of long-term debt (40) (131)
Sundry (10) 1
------ -----
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (94) (431)
Effect of exchange rate changes on cash (89) (8)
------ -----
Net change in cash (20) (164)
Cash at beginning of year 201 362
------ -----
CASH AT END OF PERIOD $ 181 $ 198
====== =====
</TABLE>
See accompanying notes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1 - Basis of Presentation
These financial statements have been prepared in accordance with
the instructions to Form 10-Q and therefore do not include all
information, disclosures, and notes necessary for a fair presentation of
financial position, results of operations, and cash flows in conformity
with generally accepted accounting principles. Reference should be made
to the financial statements contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999. These financial
statements include all adjustments which are, in the opinion of
management, necessary to a fair presentation of the results for the
interim period.
2 - Investments in Related Company and Other Subsidiaries
The Company owns Irish Driver-Harris Co. Ltd. ("IDH"), located in
Ireland and the U.K. Harrison Alloys Inc. ("Harrison") was a fifty
percent owned company, recorded on the equity method of accounting,
which was carried at no value on the balance sheet at December 31, 1999.
In the first quarter of 2000, Harrison liquidated its assets under the
Federal Bankruptcy Code.
3 - Comprehensive Income
The components of comprehensive income as presented under
Financial Accounting Standard 130, "Reporting Comprehensive Income", for
the three month periods ended March 31, 2000 and 1999 are as follows:
<TABLE>
2000 1999
<S> <C> <C>
Net income (loss) $ (90) $ 108
Foreign currency translation adjustment (329) (332)
---- ----
Comprehensive loss $(419) $(224)
==== ====
</TABLE>
4 - 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).
5 - Subsequent Event
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.
<TABLE>
Reporting Segments
Parent Co. Manufacturing Distribution
(U.S.) (Ireland) (U.K.) Total
Three months ended March 31, 2000:
Revenues
<S> <C> <C> <C> <C>
External revenues $ 9,835 $ 1,246 $11,081
Inter-segment revenues $ 89 418 507
Other revenues 20 20
Elimination of inter-
segment revenues (89) (418) (507)
Consolidated revenues 9,855 1,246 11,101
Net Profit/(Loss) (53) (29) (8) (90)
Assets
Total assets 1,468 18,321 1,820 21,609
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (230) (19) (1,078)
Elimination of inter-
company inventory (88) (88)
----- ----- ------ ------
Total assets 16 18,090 1,713 19,820
Other Significant Items
Depreciation expense 105 10 115
Interest expense 21 117 20 158
Expenditures for assets 81 81
Three months ended March 31, 1999:
Revenues
External revenues $ 9,019 $ 1,100 $10,119
Inter-segment revenues $ 69 281 350
Other revenues 18 2 8 28
Elimination of inter-
segment revenues (69) (281) (350)
Consolidated revenues 18 9,021 1,108 10,147
Net Profit/(Loss) (75) 201 (18) 108
Assets
Total assets 1,609 18,616 2,885 23,110
Elimination of investment (623) (623)
Elimination of inter-
company receivables (829) (2,076) (308) (3,213)
Elimination of inter-
company inventory (88) (88)
----- ------ ------ -------
Total assets 157 16,540 2,489 19,186
Other Significant Items
Depreciation expense 114 10 124
Interest expense 20 115 14 149
Expenditures for assets 70 70
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Financial Condition
The ratio of current assets to current liabilities was 1.10 at
March 31, 2000 compared to 1.13 at December 31, 1999. The decrease is
attributable to an increase in payables due to currency effects and
price increases in raw materials. 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 March 31, 2000, the Company's subsidiaries had approximately
$6.2 million in available bank credit lines of which $4.3 million was in
use.
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 Company renegotiated the
terms of the note payable to the Pension Benefit Guarantee Corporation
(PBGC) whereby payment of such note was extended from September 30, 2000
to April 16, 2001. In exchange for this extension, the Company agreed
to pay a fee by issuing 13,000 of its common shares to the PBGC and
agreed that the interest rate on the note would remain at 7% per year
compounded quarterly until October 1, 2000 at which time the interest
rate will increase to 11% per year. Interest is payable at maturity.
Market Risks
Foreign Currency Fluctuations
With operations in three different countries, the Company's
operating results may be adversely affected by significant fluctuations
in the relative values among the U.S. Dollar, Irish Punt and the British
Pound Sterling. The Company is periodically involved in hedging
currency between the Irish Punt and the British Pound Sterling through
the use of futures contracts which are relatively short term in nature.
The Company historically has experienced minimal gains and losses on
such foreign currency hedging. At March 31, 1999, the Company had gross
deferred unrealized losses of approximately $127,000 from hedging sales
commitments. No such losses existed at March 31, 2000.
Debt Instruments
The Company's long term debt of $2,211,000, is primarily fixed
rate debt of which $1,226,000 is U.S. denominated with the remaining
balance primarily denominated in Irish Punt. The Company's remaining
debt of $4,324,000 is solely 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.
Impact of Year 2000
The Company experienced no significant problems relating to the
Year 2000 issue in the first quarter of this year. The Company does not
foresee any problems for the remainder of 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.
<PAGE>
Results of Operations
Net sales to customers increased by 9.5% during the first quarter
of 2000 compared to the first quarter of 1999. Manufacturing revenue
increased by 9.0% while distribution sales increased by 13.3%. Units
shipped in manufacturing increased by 3.4%. The gross profit percentage
decreased to 11.3% in 2000 compared to 15.4% in 1999. This is primarily
attributable to increased raw material costs. Selling, general and
administrative expenses decreased to 10.6% of net sales from 11.7% in
the preceding year because sales increased without a corresponding
increase in administrative costs.
The Company had a foreign exchange loss of $29,000 for the three
months ended March 31, 2000 compared to a loss of $118,000 for the three
months ended March 31, 1999. These losses were primarily due to the
effect of the translation of Sterling denominated receivables and
payables into Irish Punt.
The Company has tax loss carryforwards of approximately $7,300,000
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: May 15, 2000 By: Thomas J. Carey
----------------------- ---------------------------
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at March 31, 2000 and the Company's
Consolidated Statement of Operations for the three months ended March 31,
2000 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 181
<SECURITIES> 0
<RECEIVABLES> 12074
<ALLOWANCES> 440
<INVENTORY> 3456
<CURRENT-ASSETS> 15783
<PP&E> 9564
<DEPRECIATION> 2670
<TOTAL-ASSETS> 19820
<CURRENT-LIABILITIES> 14390
<BONDS> 1873
0
0
<COMMON> 1235
<OTHER-SE> 954
<TOTAL-LIABILITY-AND-EQUITY> 19820
<SALES> 11081
<TOTAL-REVENUES> 20
<CGS> 9833
<TOTAL-COSTS> 9833
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (90)
<INCOME-TAX> 0
<INCOME-CONTINUING> (90)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (90)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
