<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1997
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-21362
---------------------
HARVARD INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Florida 21-0715310
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2502 N. Rocky Point Drive, Suite 960
Tampa, Florida 33607
(Address of Principal Executive Offices) (Zip Code)
(813) 288-5000
(Registrant's telephone number, including area code)
---------------------
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 ( )
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes (X) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of August 1,
1997, was 7,026,437.
===============================================================================
<PAGE> 2
HARVARD INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets
June 30, 1997 (Unaudited) and September 30, 1996 (Audited) . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Operations (Unaudited)
Three and Nine Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements - (Unaudited) . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II. OTHER INFORMATION:
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
1
<PAGE> 3
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND SEPTEMBER 30, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
ASSETS (Unaudited) (Audited)
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 4,308 $ 1,107
Accounts receivable, net.......................................... 86,345 99,581
Inventories....................................................... 55,239 53,901
Prepaid expenses and other current assets......................... 3,224 1,637
----------- -------------
Total current assets....................................... 149,116 156,226
Property, plant and equipment, net.................................. 273,080 300,673
Intangible assets, net.............................................. 4,813 127,250
Other assets, net................................................... 24,244 33,556
----------- -------------
$ 451,253 $ 617,705
=========== =============
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of Debtor-in-possession (DIP) loans............... $ 13,682 $ -
Current portion of long term debt................................. 1,587 1,487
Accounts payable.................................................. 28,797 89,073
Accrued expenses.................................................. 56,376 66,949
Income taxes payable.............................................. 2,361 5,875
----------- -------------
Total current liabilities.................................. 102,803 163,384
Liabilities subject to compromise................................... 397,236
Long-term debt...................................................... 74,332 359,116
Postretirement benefits other than pensions......................... 105,031 100,464
Other .............................................................. 29,667 25,970
----------- -------------
Total liabilities.......................................... 709,069 648,934
----------- -------------
14 1/4% Pay-In-Kind Exchangeable Preferred Stock,
(At June 30, 1997 - includes
$10,142 of undeclared accrued dividends)........................ 124,637 114,495
----------- -------------
Shareholders' deficiency:
Common Stock, $.01 par value; 15,000,000 shares authorized;
shares issued and outstanding: 7,026,437 at June 30,
1997 and 7,014,357 at September 30, 1996...................... 70 70
Additional paid-in capital........................................ 32,135 42,245
Additional minimum pension liability............................. (1,767) (1,767)
Foreign currency translation adjustment........................... (1,970) (1,964)
Accumulated deficit............................................... (410,921) (184,308)
----------- -------------
Total shareholders' deficiency........................... (382,453) (145,724)
Commitments and contingent liabilities..............................
----------- -------------
$ 451,253 $ 617,705
=========== =============
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
2
<PAGE> 4
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
--------------------- ----------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales.................................................................. $ 217,914 $ 222,300 $ 614,401 $ 633,657
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales....................................................... 211,609 208,275 612,043 593,051
Selling, general and administrative................................. 10,832 10,335 35,422 32,534
Interest expense (contractual interest of $ 13,924 and
$ 38,196 for the three and nine months in 1997)................ 8,822 10,918 33,154 31,279
Amortization of goodwill............................................ 396 2,582 8,052 7,746
Other (income) expense, net......................................... 947 535 2,744 629
Impairment of long-lived assets..................................... - - 134,987 -
---------- ---------- ---------- ----------
Total costs and expenses........................................ 232,606 232,645 826,402 665,239
---------- ---------- ---------- ----------
Loss before reorganization items and income taxes...................... (14,692) (10,345) (212,001) (31,582)
Reorganization items................................................... (13,232) - (13,232)
---------- ---------- ---------- ----------
Loss before income taxes............................................... (27,924) (10,345) (225,233) (31,582)
Provision for income taxes............................................. 367 752 1,380 2,201
Net loss............................................................... $ (28,291) $ (11,097) $ (226,613) $ (33,783)
========== ========== ========== ==========
PIK preferred dividends and accretion ( contractual
$ 4,224 and $ 12,672 for the three and nine months in 1997)......... $ 1,694 $ 3,711 $ 10,142 $ 11,133
========== ========== ========== ==========
Net loss attributable to common shareholders........................... $ (29,985) $ (14,808) $ (236,755) $ (44,916)
========== ========== ========== ==========
Primary per common and common equivalent share:
Loss per common and common equivalent share......................... $ (4.27) $ (2.12) $ (33.73) $ (6.42)
========== ========== ========== ==========
Weighted average number of common and common
equivalent shares outstanding....................................... 7,024,080 6,999,407 7,018,778 6,997,157
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements (Unaudited).
3
<PAGE> 5
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
Nine months ended
-----------------
June 30, June 30,
1997 1996
-------- -------
<S> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before reorganization items........................ $ (213,381) $ (33,783)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation and amortization.................................................... 47,997 40,875
Impairment of long-lived assets.................................................. 134,987 -
Loss on disposition of property, plant and equipment
and property held for sale...................................................... 1,759 918
Postretirement benefits.......................................................... 5,145 5,768
Write-off of deferred debt expense............................................... 1,792 -
Senior notes interest accrued prior to chapter 11, not paid...................... 9,728 -
Changes in operating assets and liabilities of continuing operations,
net of effects from reorganization items:
Accounts receivable............................................................. 13,236 (16,024)
Inventories..................................................................... (1,338) 879
Other current assets............................................................ (1,587) (376)
Accounts payable................................................................ (60,704) (2,006)
Accounts payable prepetition.................................................... 82,246 -
Accrued expenses and income taxes payable....................................... (12,992) (12,281)
Other noncurrent liabilities.................................................... 7,126 (986)
-------------- -------------
Net cash used in continuing operations before reorganization items................. 14,014 (17,016)
Net cash used by reorganization items.............................................. (1,224) -
-------------- -------------
Net cash used in continuing operations............................................. 12,790 (17,016)
-------------- -------------
Cash flows related to investing activities:
Acquisition of property, plant and equipment....................................... (30,540) (28,560)
Cash flows related to discontinued operations...................................... 212 3,541
Proceeds from disposition of property, plant and equipment......................... 622 663
Net change in other noncurrent accounts............................................ (490) 585
-------------- -------------
Net cash used in investing activities.............................................. (30,196) (23,771)
-------------- -------------
Cash flows related to financing activities:
Net payments under financing/credit agreement...................................... (38,834) 31,000
Net borrowings under DIP financing agreement....................................... 68,931 -
Deferred DIP financing costs....................................................... (2,200) -
Proceeds from sale of stock/exercise of stock options.............................. 32 37
Repayments of long-term debt....................................................... (1,099) (2,074)
Pension fund payments pursuant to PBGC settlement agreement........................ (4,500) (4,500)
Payment of EPA settlements......................................................... (1,723) (2,493)
-------------- -------------
Net cash provided by financing activities.......................................... 20,607 21,970
-------------- -------------
Net increase (decrease) in cash and cash equivalents................................. 3,201 (18,817)
Beginning of period................................................................. 1,107 19,925
-------------- -------------
End of period....................................................................... $ 4,308 $ 1,108
============== =============
</TABLE>
See accompanying Notes to consolidated Financial Statements (Unaudited).
4
<PAGE> 6
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1
The interim consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments necessary for a fair
presentation of the results for the periods presented. The results of
operations for any interim period are not necessarily indicative of the results
to be expected for the full year. These interim consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30, 1996 included in
the Company's Annual Report on Form 10-K.
NOTE 2
On May 8, 1997, Harvard Industries, Inc. (the "Company") and
substantially all of its subsidiaries (the "Company" and such subsidiaries
hereinafter sometimes designated the "Debtors") filed voluntary petitions for
relief under chapter 11 of the federal bankruptcy laws in the United States
District Court (the "Court") for the District of Delaware. Under chapter 11,
certain claims against the Debtors arising prior to the filing of the petitions
for relief under the federal bankruptcy laws are stayed while the Debtors
continue business operations as debtors-in-possession ("DIP"). Additional
claims (liabilities subject to compromise) may arise subsequent to the filing
date resulting from rejection of executory contracts, including leases, and
from the determination by the Court (or agreed to by parties in interest) of
allowed claims for contingencies and other disputed amounts. Claims secured by
liens against the Debtors' assets ("secured claims") also are stayed as to
enforcement.
The Debtors have received approval from the Court to pay or otherwise
honor certain prepetition obligations, including employee wages, salaries and
other compensation, employee medical, pension and similar benefits,
reimbursable employee expenses and certain workers' compensation, as well as
continuation of prepetition customer practices with respect to warranty,
refunds and return policies.
The Company is in process of formulating a plan of reorganization. In
the event this plan of reorganization is formulated and approved by the Court,
continuation of the Company's business after reorganization is dependent upon
the success of future operations and the Company's ability to meet its
obligations as they become due. The accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates
continuity of operations and the realization of assets and liquidation of
liabilities in the ordinary course of business. However, as a result of the
chapter 11 proceedings and circumstances relating to this event, including the
Company's highly leveraged financial structure and recurring losses from
operations as reflected in the consolidated statements of operations, such
realization of assets and liquidation of liabilities is subject to significant
uncertainty. The consolidated financial statements do not give effect to the
carrying value of assets, or amounts and classification of liabilities that
might be necessary as a consequence of the bankruptcy proceedings.
The Senior Notes and other unsecured liabilities have been segregated
and classified in the consolidated balance sheet of June 30, 1997 as
"Liabilities subject to compromise."
5
<PAGE> 7
The Company also charged reorganization items for the deferred
financing costs related to the notes and discontinued accruing interest on such
debt from the date of bankruptcy.
NOTE 3
The Company has obtained a two-year post-petition Loan and Security
Agreement ("DIP financing") to enable it to continue normal operations during
the chapter 11 proceeding. The DIP financing provides up to $175,000 of
financing, subject to collateral availability, including the repayment of
pre-petition obligations of approximately $105,044. The DIP financing provides
for $65,000 of Term Loans and $110,000 of Revolving Credit Loans which includes
a $25,000 sub-limit letter of credit facility principally for stand by letters
of credit. As collateral, the Debtors have pledged substantially all assets of
the Debtors.
The Revolving Credit Loans bear interest at the rate of 1.50% in
excess of the Base Rate (Prime) and the Term Loans 1.75% in excess of the Base
Rate. The prime rate was 8.50% at June 30, 1997. The Term Loans provide for
quarterly payments of $3,250 beginning November 30, 1997 through February 28,
1999, with a final installment of $45,500 due on May 8, 1999.
The DIP financing provides that the net proceeds from asset sales, if
any, are to be utilized to prepay principal in respect of the Revolving Credit
Loans to the extent such collateral was sold, and any excess proceeds, shall be
applied to the Term Loan. The DIP financing also provides, among other things,
monthly covenants beginning May 8, 1997, with respect to EBITDA, capital
expenditures and a monthly fixed charge ratio beginning October 1, 1997.
NOTE 4
On three separate occasions in fiscal 1994, the Company became aware
that certain products of its ESNA division were not manufactured and/or tested
in accordance with required specifications at its Union, New Jersey and/or
Pocohontas, Arkansas facility. These fastener products were sold to the United
States Government and other customers for application in the construction of
aircraft engines and air frames. In connection therewith, the Company notified
the Department of Defense Office of Inspector General ("DoD/OIG") and, upon
request, was admitted into the Voluntary Disclosure Program of the Department
of Defense (the "ESNA matter"). At June 30, 1997, the remaining accrued costs
of discontinued operations, including the ESNA matter, are primarily related to
legal costs, fines and penalties, severance pay and certain building carrying
costs. The ultimate cost of disposition of the ESNA matter, as well as the
required funding of such cost, is dependent upon future events, the outcomes of
which are not determinable at the present time. Such outcomes could have a
material effect on the Company's financial condition, results of operations
and/or liquidity. If it is ultimately determined that the deviations from
specifications and certifications made in connection therewith constitute
violations of various statutory and regulatory provisions, the Company may,
among other things, be subject to criminal prosecution, treble damages and
penalties under the Civil False Claims Act or the Racketeer Influenced and
Corrupt Organization Act ("RICO"), as well as administrative sanctions, such as
debarment from future government contracting. The Company is unable to
determine the effect, if any, of the bankruptcy filing on the ESNA matter.
NOTE 5
During the nine months ended June 30, 1997, the Company recorded an
increase of $10,142 in its 14 1/4% Pay-In-Kind Exchangeable Preferred Stock
("PIK Preferred Stock") and a corresponding deduction in additional
paid-in-capital to recognize (i) an accrual to the date of bankruptcy of the
1997 dividend which was not declared due to the bankruptcy and (ii) the
accretion of the related difference between the fair value of such stock at
August 23, 1992 and redemption value.
6
<PAGE> 8
NOTE 6
Net loss per common share is computed by dividing net loss after
deducting accrued dividends and accretion related to PIK Preferred Stock by the
weighted average number of common shares outstanding. No consideration was
given in either period to equivalent shares related to stock options since such
options are anti-dilutive.
NOTE 7
The Company is also a party to various claims and routine litigation
arising in the normal course of its business. Based on information currently
available, management of the Company believes, after consultation with legal
counsel, that the result of such claims and litigation, except for the
uncertainties related to the ESNA matter discussed in Note 4, will not have a
material effect on the financial position or results of operations of the
Company.
NOTE 8
Income tax rates result principally from the fact of having an
operating profit in Canada and an operating loss in the U.S. for which benefit
was not recognized.
NOTE 9
The Company intends to sell or otherwise divest of its Doehler-Jarvis,
Harman Automotive and Harvard Interiors operations as well as the Material
Handling Division , a non-core product line of its Kingston-Warren subsidiary.
The Company recorded a $134,987 charge in the second quarter reflecting the
permanent impairment of long-lived assets at its Doehler-Jarvis and Harman
Automotive subsidiaries and one plant which is scheduled to close later in the
year. Any such dispositions will be subject to the approval of the Court.
There is no assurance that any of such businesses will, in fact, be sold.
Sales and loss before interest expense and reorganization items for
these operations are as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended June 30, ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $ 96,544 $ 107,191 $ 279,401 $ 307,879
======== ========= ========= =========
Loss before interest expense
and reorganization items $ 10,610 $ 7,314 $ 170,188 $ 10,110
======== ========= ========= =========
</TABLE>
NOTE 10
Both the 12% Notes and the 11 1/8% Notes are guarantied on a senior
unsecured basis, pursuant to guaranties (the Guaranties) by all of the
Company's wholly-owned direct and certain of its wholly-owned indirect domestic
subsidiaries (the "Guarantors"). Both Notes are unconditionally guarantied,
jointly and severally, on a senior unsecured basis, by each of the Guarantors
under such Guarantor's guaranty (a "Guaranty"). Each Guaranty by a Guarantor is
limited to an amount not to exceed the maximum amount that can be guarantied by
that Guarantor without rendering the Guaranty, as it relates to such Guarantor,
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer. As such, a Guaranty could be effectively subordinated to all other
indebtedness (including guaranties and other contingent liabilities) of the
applicable Guarantor, and, depending on the amount of such indebtedness, a
Guarantor's liability on its Guaranty could be reduced to zero.
7
<PAGE> 9
The following condensed consolidating information presents:
1. Condensed balance sheets as of June 30, 1997 and September 30,
1996 and condensed statements of operations and cash flows for the nine months
ended June 30, 1997 and 1996.
2. The Parent Company and Combined Guarantor Subsidiaries with
their investments in subsidiaries accounted for on the equity method.
Intercompany balances are reflected at historical amounts without considering
the effect, if any, to these amounts due to the bankruptcy.
3. Elimination entries necessary to consolidate the Parent Company
and all of its subsidiaries.
4. The Parent Company, pursuant to the terms of an interest bearing
note with Guarantor Subsidiaries, has included in their allocation of expenses,
interest expense for the nine and three months ended June 30, 1997 and 1996,
respectively.
The Company believes that providing the following condensed
consolidating information is of material interest to investors in the Notes and
has not presented separate financial statements for each of the Guarantors.
8
<PAGE> 10
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEET
JUNE 30, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 152 $ 4,156 $ - $ - $ 4,308
Accounts receivable, net.............................. 2,753 77,275 6,317 - 86,345
Inventories........................................... 2,341 52,898 - - 55,239
Prepaid expenses and other current assets............. 1,456 1,768 - - 3,224
---------- ------------ ------------- ------------ ------------
Total current assets................................ 6,702 136,097 6,317 - 149,116
Investment in Subsidiaries.............................. 118,308 12,457 - (130,765) -
Property, plant and equipment, net...................... 4,071 259,141 9,868 - 273,080
Intangible assets, net.................................. - 4,813 - - 4,813
Intercompany receivables................................ 428,207 283,746 9,494 (721,447) -
Other assets............................................ 19,054 5,190 - 24,244
---------- ------------ ------------- ------------ ------------
$ 576,342 $ 701,444 $ 25,679 $ (852,212) $ 451,253
LIABILITIES AND SHAREHOLDERS' ========== ============ ============= ============ ============
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of DIP loans.......................... $ 529 $ 13,153 $ - $ - $ 13,682
Current portion of long-term debt..................... - 1,587 - - 1,587
Accounts payable...................................... - 25,035 3,762 - 28,797
Accrued expenses...................................... 9,912 44,246 2,218 - 56,376
Income taxes payable.................................. 344 423 1,594 - 2,361
---------- ------------ ------------- ------------ ------------
Total current liabilities......................... 10,785 84,444 7,574 - 102,803
Liabilities subject to compromise(a).................... 318,159 78,905 172 - 397,236
Long-term debt.......................................... 749 73,583 - 74,332
Postretirement benefits other than pensions............. - 105,031 - - 105,031
Intercompany payables................................... 500,547 216,390 4,510 (721,447) -
Other................................................... 3,918 24,783 966 - 29,667
---------- ------------ ------------- ------------ ------------
Total liabilities................................ 834,158 583,136 13,222 (721,447) 709,069
---------- ------------ ------------- ------------ ------------
PIK Preferred........................................... 124,637 - - - 124,637
---------- ------------ ------------- ------------ ------------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital..................................... 32,205 73,054 10 (73,064) 32,205
Additional minimum pension liability.................. (1,767) (1,767) - 1,767 (1,767)
Foreign currency translation adjustment............... (1,970) (1,970) (1,997) 3,967 (1,970)
Retained earnings (deficiency)........................ (410,921) 48,991 14,444 (63,435) (410,921)
---------- ------------ ------------- ------------ ------------
Total shareholders' equity (deficiency)............. (382,453) 118,308 12,457 (130,765) (382,453)
---------- ------------ ------------- ------------ ------------
$ 576,342 $ 701,444 $ 25,679 $ (852,212) $ 451,253
========== ============ ============= ============ ============
</TABLE>
(a) Includes $300,000 senior notes payable which are
subject to the guaranty of the combined guarantor
subsidiaries
9
<PAGE> 11
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ (1,655) $ 4,367 $ (1,605) $ - $ 1,107
Accounts receivable, net............................. 5,925 88,124 5,532 - 99,581
Inventories.......................................... 5,056 46,312 2,533 - 53,901
Prepaid expenses and other current assets............. 372 1,265 - - 1,637
---------- ------------ ------------- ------------ ------------
Total current assets............................... 9,698 140,068 6,460 - 156,226
Investment in Subsidiaries............................. 296,822 41,877 - (338,699) -
Property, plant and equipment, net..................... 4,747 286,575 9,351 - 300,673
Intangible assets, net................................. - 127,250 - - 127,250
Intercompany receivables............................... 394,988 222,486 16,134 (633,608) -
Other assets........................................... 25,428 8,092 36 - 33,556
---------- ------------ ------------- ----------- ------------
$ 731,683 $ 826,348 $ 31,981 $ (972,307) $ 617,705
LIABILITIES AND SHAREHOLDERS' ========== ============ ============= ============ ============
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of long-term debt.................... $ - $ 1,487 $ - $ - $ 1,487
Accounts payable..................................... 3,711 81,975 3,387 - 89,073
Accrued expenses .................................... 19,947 47,002 - - 66,949
Income taxes payable ................................ 5 1,169 4,701 - 5,875
---------- ------------ ------------- ------------ ------------
Total current liabilities....................... 23,663 131,633 8,088 - 163,384
Long-term debt......................................... 300,445 58,671 - - 359,116
Postretirement benefits other than
pensions........................................... - 100,464 - - 100,464
Intercompany payables.................................. 435,038 217,523 (18,953) (633,608) -
Other.................................................. 3,766 21,235 969 - 25,970
---------- ------------ ------------- ------------ ------------
Total liabilities............................... 762,912 529,526 (9,896) (633,608) 648,934
---------- ------------ ------------- ------------ ------------
PIK Preferred.......................................... 114,495 - - - 114,495
---------- ------------ ------------- ------------ ------------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital.................................... 42,315 73,054 135 (73,189) 42,315
Additional minimum pension liability................. (1,767) (1,767) - 1,767 (1,767)
Foreign currency translation adjustment.............. (1,964) (1,952) (1,952) 3,904 (1,964)
Retained earnings (deficiency)....................... (184,308) 227,487 43,694 (271,181) (184,308)
---------- ------------ ------------- ------------ ------------
Total shareholders' deficiency.................. (145,724) 296,822 41,877 (338,699) (145,724)
---------- ------------ ------------- ------------ ------------
$ 731,683 $ 826,348 $ 31,981 $ (972,307) $ 617,705
========== ============ ============= ============ ============
</TABLE>
10
<PAGE> 12
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING INCOME STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
--------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Sales...................................................... $ 15,528 $ 574,526 $ 24,347 $ - $ 614,401
---------- ------------ ------------- ----------- ------------
Costs and expenses:
Cost of sales............................................ 16,543 573,230 22,270 - 612,043
Selling, general and administrative...................... 11,528 23,894 - - 35,422
Interest expense......................................... 27,110 5,877 167 - 33,154
Amortization of goodwill................................. - 8,052 - - 8,052
Other (income) expense, net.............................. 805 1,924 15 - 2,744
Impairment of long-lived assets........................... - 134,987 - - 134,987
Equity in (income) loss of
subsidiaries........................................... 189,086 (49) - (189,037) -
Allocated expenses....................................... (16,163) 14,864 1,299 - -
---------- ------------ ------------- ----------- ------------
Total costs and expenses............................. 228,909 762,779 23,751 (189,037) 826,402
---------- ------------ ------------- ----------- ------------
Income (loss) before income taxes and
reorganization items.................................. (213,381) (188,253) 596 189,037 (212,001)
Reorganization items....................................... (13,232) - - - (13,232)
---------- ----------- ------------- ----------- ------------
Loss before income taxes................................... (226,613) (188,253) 596 189,037 (225,233)
Provision for income taxes................................. - 833 547 - 1,380
---------- ------------ ------------- ----------- ------------
Net income (loss)....................................... $ (226,613) $ (189,086) $ 49 $ 189,037 $ (226,613)
========== ============ ============= =========== ============
</TABLE>
11
<PAGE> 13
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING INCOME STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996
(In thousand of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
-------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales.............................................. $ 24,476 $ 588,493 $ 20,688 $ - $ 633,657
--------- ------------ ------------- ----------- ------------
Costs and expenses:
Cost of sales.................................... 23,593 551,682 17,776 - 593,051
Selling, general and administrative.............. 7,989 24,541 4 - 32,534
Interest expense................................. 28,446 2,803 30 - 31,279
Amortization of goodwill......................... - 7,746 - - 7,746
Other (income) expense, net...................... 1,431 716 (1,518) - 629
Equity in (income) loss of subsidiaries......... 15,169 (1,838) - (13,331) -
Allocated expenses............................... (18,369) 16,923 1,446 - -
--------- ------------ ------------- ----------- ------------
Total costs and expenses..................... 58,259 602,573 17,738 (13,331) 665,239
========= ============ ============= =========== ============
Income (loss) before provision for
income taxes .................................... (33,783) (14,080) 2,950 13,331 (31,582)
Provision for income taxes......................... - 1,089 1,112 - 2,201
--------- ------------ ------------- ---------- ------------
Net income (loss).................................. $ (33,783) $ (15,169) $ 1,838 $ 13,331 $ (33,783)
========= ============ ============= =========== ============
</TABLE>
12
<PAGE> 14
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1997
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from continuing operations before reorganization items.... $ (213,381) $ (189,086) $ 49 $ 189,037 $ (213,381)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of subsidiaries...................... 189,086 (49) - (189,037) -
Depreciation and amortization................................ 2,034 45,097 866 - 47,997
Impairment of long-lived assets.............................. - 134,987 - - 134,987
Loss on Disposition of property, plant and
equipment and property held for sale........................ - 1,759 - - 1,759
Postretirement benefits...................................... - 5,145 - - 5,145
Write-off of deferred debt expense........................... 1,792 1,792
Senior notes interest accrued prior to chapter 11, not paid.. 9,728 9,728
Changes in operating assets and liabilities :
Accounts receivable.......................................... 3,172 10,849 (785) - 13,236
Inventories.................................................. 2,715 (6,586) 2,533 - (1,338)
Other current assets......................................... (1,084) (503) - - (1,587)
Accounts payable............................................. (4,139) (56,940) 375 - (60,704)
Accounts payable prepetition................................. 3,169 78,905 172 82,246
Accrued expenses and income taxes payable.................... (6,867) (5,236) (889) - (12,992)
Other noncurrent liabilities................................. 3,099 4,027 - - 7,126
---------- ---------- ------------- ---------- -----------
Net cash provided by (used in) continuing operations before
reorganization items........................................ (10,676) 22,369 2,321 - 14,014
Net cash used by reorganization items............................ (1,224) (1,224)
---------- ---------- ------------- ---------- -----------
Net cash provided by (used in) continuing operations............ (11,900) 22,369 2,321 - 12,790
---------- ---------- ------------- ---------- -----------
Cash flows related to investing activities:
Acquisition of property, plant and equipment................... (94) (29,084) (1,362) - (30,540)
Cash flows related to net assets of discountinued operations .. 212 - - - 212
Proceeds from disposition of property,
plant and equipment.......................................... - 622 - - 622
Net change in other noncurrent accounts........................ (1,220) 763 (33) - (490)
---------- ---------- ------------- ---------- -----------
Net cash used in investing activities............................ (1,102) (27,699) (1,395) - (30,196)
---------- ---------- ------------- ---------- -----------
Cash flows related to financing activities:
Net payments under financing / credit agreement................ (445) (38,389) - - (38,834)
Net borrowings under DIP financing agreement................... 1,278 67,653 68,931
Deferred DIP financing costs................................... (2,200) - (2,200)
Proceeds from sale of stock / exercise of stock options........ 32 - - - 32
Repayments of long-term debt................................... - (1,099) - - (1,099)
Pension fund payment pursuant to PBGC settlement agreement..... (4,500) - - - (4,500)
Payment of EPA settlements..................................... (1,074) (649) - - (1,723)
Net changes in intercompany balances........................... 21,718 (22,397) 679 - -
---------- ---------- ------------- ---------- ------------
Net cash provided by financing activities........................ 14,809 5,119 679 - 20,607
---------- ---------- ------------- ---------- ------------
Net increase (decrease) in cash and cash equivalents............. 1,807 (211) 1,605 - 3,201
Cash and cash equivalents :
Beginning of period............................................ (1,655) 4,367 (1,605) - 1,107
---------- ---------- ------------- ---------- ------------
End of period.................................................. $ 152 $ 4,156 $ - $ - $ 4,308
========== ========== ============= ========== ============
</TABLE>
13
<PAGE> 15
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1996
(In thousands of dollars)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Net income (loss).......................................... $ (33,783) $ (15,169) $ 1,838 $ 13,331 $ (33,783)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of subsidiaries................... 15,169 (1,838) - (13,331) -
Depreciation and amortization............................. 2,641 37,483 751 - 40,875
Loss on disposition of property, plant and
equipment and property held for sale..................... - 883 35 - 918
Postretirement benefits................................... - 5,768 - - 5,768
Changes in operating assets and liabilities:
Accounts receivable....................................... 271 (15,516) (779) - (16,024)
Inventories............................................... 237 1,651 (1,009) - 879
Other current assets...................................... (158) (211) (7) - (376)
Accounts payable.......................................... 207 (1,877) (336) - (2,006)
Accrued expenses and income taxes payable................. (4,513) (10,093) 2,314 11 (12,281)
Other noncurrent liabilities.............................. (1,633) 3,588 (2,941) - (986)
-------- -------- ------ --------- -------
Net cash provided by (used in) operations.................... (21,562) 4,669 (134) 11 (17,016)
-------- -------- ------ --------- -------
Cash flows related to investing activities:
Acquisition of property, plant and equipment................ (14) (25,323) (3,223) - (28,560)
Proceeds to date from sale of discontinued operations....... 3,541 - - - 3,541
Proceeds from disposition of property, plant and equipment.. - 663 - - 663
Net change in other noncurrent accounts..................... 2,113 (815) (1,089) 376 585
-------- -------- ------ --------- -------
Net cash provided by (used in) investing activities........... 5,640 (25,475) (4,312) 376 (23,771)
-------- -------- ------ --------- -------
Cash flows related to financing activities:
Proceeds from exercise of stock options..................... 37 - - - 37
Net borrowings under credit agreement....................... 31,000 - - - 31,000
Repayments of long-term debt................................ (25) (2,049) - - (2,074)
Pension fund payment pursuant to PBGC settlement agreement . - (4,500) - - (4,500)
Payment of EPA settlement agreements........................ (1,991) (502) - - (2,493)
Net changes in intercompany balances........................ (30,668) 30,037 987 (356) -
-------- -------- ------ --------- -------
Net cash provided by (used in) financing activities.......... (1,647) 22,986 987 (356) 21,970
-------- -------- ------ --------- -------
Net increase (decrease) in cash and cash equivalents.......... (17,569) 2,180 (3,459) 31 (18,817)
Cash and cash equivalents :
Beginning of period......................................... 18,645 (2,180) 3,491 (31) 19,925
-------- -------- ------ --------- -------
End of period............................................... $ 1,076 $ - $ 32 $ - $ 1,108
======== ======== ====== ========= =======
</TABLE>
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking
statements. Additional written or oral forward-looking statements may be made
by the Company from time to time, in filings with the Securities and Exchange
Commission or otherwise. Such forward-looking statements are within the
meaning of that term in Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such statements may include, but
not be limited to, projections of revenues, income or losses, covenants
provided for in the DIP financing agreement, capital expenditures, plans for
future operations, including the possible sale of underperforming operations,
financing needs or plans, plans relating to products or services of the
Company, as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified. Consequently,
future events and actual results could differ materially from those set forth
in, contemplated by, or underlying the forward-looking statements. Statements
in this Quarterly Report, particularly the Notes to Consolidated Financial
Statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," describe factors, among others, that could contribute
to or cause such differences. Other factors that could contribute to or cause
such differences include the effects of the bankruptcy filing upon suppliers,
vendors and customers, unanticipated increases in launch and other operating
costs, a reduction in, and inconsistent demand for, passenger cars and light
trucks, the ability to attain future EBITDA requirements and earlier than
anticipated and/or increased costs of resolving the ESNA matter.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30,1996
Sales. Consolidated sales decreased $4,386, or 2.0%. Aggregate sales
decreased approximately $10,647 in Harman Automotive, Harvard Interiors,
Doehler-Jarvis and the Material Handling Division of Kingston-Warren, each of
which has been designated for sale.
Gross Profit. The consolidated gross profit expressed as a percentage
of sales (the "gross profit margin") decreased from 6.3% to a gross profit of
2.9%. The decrease in the gross profit margin resulted from operational
inefficiencies at most of the Company's operating units, price reductions and
from unfavorable comparisons relative to tooling margins and long-term contract
recoveries.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $497 as compared to last year. As a
percentage of sales, such expenses were 5.0% and 4.6% or the three months ended
June 30, 1997 and 1996, respectively.
Interest Expense. Interest expense decreased from $10,918 to $8,822,
or 19.2%. However, but for giving effect to the discontinuance of accruing
interest on the senior notes of $5,102, interest expense would have increased
by $3,006 as a result of increased borrowings in the current period under the
DIP
15
<PAGE> 17
financing agreement.
Amortization of Goodwill. The decrease of $2,186 in goodwill
amortization occurred because goodwill related to the acquisition of
Doehler-Jarvis was written-off in the second quarter of 1997.
Other (Income) Expense, Net. The increase of $412 was due to an
increase in loss on disposal of machinery and equipment.
Reorganization Items. The $13,232 reflects the write-off of deferred
financing costs related to the senior notes and increased professional and
other costs attributable to the bankruptcy.
Provision for Income Taxes. The decrease in the provision for income
taxes results from a decrease in operating profit in Canadian operations.
Net Loss. The net loss increased from $11,097 to $28,291 for the
reasons described above.
Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996
Sales. Consolidated sales decreased $19,256, or 3.0%. Aggregate
sales for Harman Automotive, Harvard Interiors, Doehler-Jarvis and the Material
Handling Division of Kingston-Warren, each of which has been designated for
sale, decreased approximately $28,478 including $6,800 due to a decline in
average aluminum prices, the benefit of which was passed on to customers.
Gross Profit. The consolidated gross profit expressed as a percentage
of sales (the "gross profit margin") decreased from 6.4% to a gross profit of
0.4%. The decrease in the gross profit margin resulted primarily from
operational inefficiencies at most of the Company's operating units, price
reductions and from unfavorable comparisons relative to tooling margins and
long-term contract recoveries.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2,888, due to a $4,000 charge in the second
quarter, primarily related to the Termination, Consulting and Release Agreement
dated February 12, 1997 with Mr. Vincent J. Naimoli, the former Chairman of the
Board, President and Chief Executive Officer of the Company.
Interest Expense. Interest expense increased from $31,279 to $33,154
or 6.0%. Additionally, $5,102 was not accrued on the senior notes. The
increase in interest expense is a result of increased borrowings under
financing agreements.
Amortization of Goodwill. The increase of $306 in goodwill
amortization is attributable to the change from 15 years to 10 years in the
life of goodwill amortization in the first and second quarters related to the
acquisition of Doehler-Jarvis. Goodwill amortization related to Doehler-Jarvis
ceased March 31, 1997, when such goodwill was written-off as impaired.
Other (Income) Expense, Net. The increase of $2,115 was mainly due to
an increase in loss on disposal of machinery and equipment.
Impairment of Long-Lived Assets. As a result of continuing losses and
projections of future operations and cash flows, the Company recorded a charge
in the second quarter of $134,987 reflecting the permanent impairment of long-
lived assets at its Doehler-Jarvis and Harman Automotive subsidiaries and one
plant. The goodwill portion of this charge is $114,385.
16
<PAGE> 18
Provision for Income Taxes. The decrease in the provision for income
taxes results from a decrease in operating profit in Canada.
Net Loss. The net loss increased from $33,783 to $226,613 for the
reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
Material Event. On May 8, 1997, the Debtors filed voluntary petitions
for relief under chapter 11 of the federal bankruptcy laws in the United States
District Court for the District of Delaware. Under chapter 11, certain claims
against the Debtors arising prior to the filing of the petitions are stayed
while the Debtors continue business operations as DIP. Additional claims
(liabilities subject to compromise) may arise subsequent to the filing date
resulting from rejection of executory contracts, including leases, and from the
determination by the Court (or agreed to by parties in interest) of allowed
claims for contingencies and other disputed amounts. Claims secured by liens
against the Debtors' assets ("secured claims") also are stayed as to
enforcement.
The Company is in process of formulating a plan of reorganization. In
the event this plan of reorganization is formulated and approved by the
unsecured creditors and the Court, continuation of the Company's business after
reorganization is dependent upon the success of future operations and the
Company's ability to meet its obligations as they become due. The accompanying
consolidated financial statements have been prepared on a going concern basis,
which contemplates continuity of operations and the realization of assets and
liquidation of liabilities in the ordinary course of business. However, as a
result of the chapter 11 proceedings and circumstances relating to this event,
including the Company's highly leveraged financial structure and recurring
losses from operations as reflected in the consolidated statements of
operations, such realization of assets and liquidation of liabilities is
subject to significant uncertainty. The consolidated financial statements do
not give effect to the carrying value of assets, or amounts and classification
of liabilities that might be necessary as a consequence of the bankruptcy
proceedings.
General. For the nine months ended June 30, 1997, the Company had a
cash flow from operations of $12,790 compared to a negative cash flow of
$17,016 for the nine months ended June 30, 1996. The 1997 improvement in cash
flow resulted principally from the fact that prepetition accounts payable
claims are stayed by order of the Court. The Company increased its net
borrowings under its various financing agreements by $30,000 at June 30, 1997
to help fund investing activities of $30,000 and other financing activities of
$10,000. The Company had a deficiency of earnings over fixed charges and
dividends on preferred stock of $222,143 and $42,715 for the nine months ended
June 30, 1997 and 1996, respectively.
Financing. At June 30, 1997, $3,932 of DIP indebtedness was
outstanding under the Company's Revolving Line of Credit, $65,000 of
indebtedness was outstanding under the Company's Term Loan and stand-by Letters
of Credit outstanding amounted to $12,222. The Company's strategic plan is to
continue its efforts to sell or otherwise divest its Doehler-Jarvis and Harman
Automotive subsidiaries and its Harvard Interiors division as well as the
Material Handling Division, a non-core product line of its Kingston-Warren
subsidiary, subject to Court approval. There is no assurance that any of such
businesses will in fact be sold, but, in any event, any proceeds realized from
such dispositions are expected to be applied to the reduction of the Company's
borrowings from the DIP financing. To date, other than with respect to the
Material Handling Division, the Company has not obtained a firm proposal for
the sale of any of the businesses designated to be sold.
17
<PAGE> 19
The Company obtained a two-year DIP financing, approved by the Court
to enable it to continue normal operations during the chapter 11 proceeding.
The DIP financing provides up to $175,000 of financing, subject to collateral
availability, including the repayment of prepetition obligations of
approximately $105,044. The DIP financing provides for $65,000 of Term Loans
and $110,000 of Revolving Credit Loans which includes a $25,000 sub-limit
letter of credit facility principally for stand by letters of credit. The
Company believes the DIP financing will enable the Company to continue normal
operations during the chapter 11 proceedings.
The Revolving Credit Loans bear interest at the rate of 1.50% in
excess of the Base Rate (Prime) and the Term Loans 1.75% in excess of the Base
Rate. The prime rate was 8.50% at June 30, 1997. The Term Loans provide for
quarterly payments of $3,250 beginning November 30, 1997 through February 28,
1999 with a final installment of $45,500 due on May 8, 1999.
The DIP financing provides for the net proceeds from asset sales, if
any, to prepay principal in respect of the Revolving Credit Loans to the extent
such collateral was sold and any excess proceeds shall be applied to the
Term Loan.
The DIP financing also provides, among other things, monthly covenants
beginning May 31, 1997, covenants with respect to EBITDA and a capital
expenditures limitation of $10,000 for the five months ending September 30,
1997 and a monthly fixed charge ratio beginning October 1, 1997. As
collateral, the Debtors have pledged substantially all assets of the Debtors.
The Company was in compliance with the EBITDA covenant for the two months ended
June 30, 1997, and expects to be in compliance with the cumulative EBITDA
covenant of $11,000 for the five months ending September 30, 1997. The Company
is currently in discussions with the agent for the DIP lending syndicate to
obtain the necessary consent to exceed the $10,000 limitation discussed above.
Capital Expenditures. Capital expenditures of $9,000 are currently
anticipated for the balance of the year ended September 30, 1997. These
expenditures will exceed the limitations mentioned above and therefore require
the necessary consent. Moreover, the Company anticipates incurring expenses of
approximately $2,300 through fiscal 1998 as start-up costs under a V-6 engine
block program, a major outsourcing program with General Motors; however,
revenues from this program are not expected to commence until December 1997,
with full annual volumes not expected to be achieved until the year 2003.
Other Expenditures. The estimated closing costs of the plant mentioned
in Note 9 will approximate $2,900.
All of the above expenditures, which are subject to approval of the
Bankruptcy Court, will necessarily serve to compound the Company's existing
cash shortfall and its ability to meet its obligations. Although the DIP
financing, will ameliorate these liquidity concerns, it is also to be noted
that such financing places limitations on aggregate capital expenditures.
Nevertheless, management expects that its existing operations will continue
without interruption during the reorganization period.
ESNA. The Company believes that the 1997 estimated costs of the ESNA
matter, exclusive of possible fines, damages and penalties, if any, will not be
material. Such costs relate to carrying costs of the Union, N.J. facility
and costs associated with the Company's ongoing participation in the
Department of Defense Voluntary Disclosure Program. However, the ultimate cost
of disposition of this matter, as well as the required funding of such costs,
depends upon future events,
18
<PAGE> 20
the outcomes of which are not determinable at the present time, including the
Company receiving favorable consideration from the government as a result of
its admission into the Voluntary Disclosure Program. Such outcomes could have
a material effect on the Company's financial condition, results of operations
and/or liquidity. If it is ultimately determined that the deviation from
specifications and certifications made in connection therewith constitute
violations of various statutory and regulatory provisions, the Company may,
among other things, be subject to criminal prosecution, treble damages and
penalties under the Civil False Claims Act or RICO, as well as administrative
sanctions, such as debarment from future government contracting. The Company
is unable to determine the effect, if any, of the bankruptcy filing on
the ESNA matter.
Loss of Ford Business. Effective January 1997, the Company was
advised by Ford Motor Company that a program with approximately $8,000 of sales
during the year ended September 30, 1996 (related to mid-size passenger car
front wheel drive aluminum transmission housings) would be resourced to a
competitor due to the inability of the Doehler-Jarvis Toledo plant to maintain
delivery dates compatible with customer demands. This resulted from the
over-capacity situation at this plant.
19
<PAGE> 21
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
The Ratio of Earnings to Fixed Charges and Dividends on Preferred
Stock, and the supporting computation thereof, are filed as Exhibit 12.1 to
this Quarterly Report on Form 10-Q and are incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
12.1 Computation of Ratio of Earnings to Fixed Charges and Dividends on
Preferred Stock.
27.1 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None.
20
<PAGE> 22
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 authorized.
HARVARD INDUSTRIES, INC.
------------------------
(Registrant)
August 14, 1997 BY /s/ Joseph J. Gagliardi
-----------------------------------
Joseph J. Gagliardi
Senior Vice President Finance and
Chief Financial Officer
(Principal Financial Officer)
August 14, 1997 /s/ William J. Warren
--------------------------------------
William J. Warren
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
21
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
12.1 Computation of Ratio of Earnings to Fixed Charges and Dividends on
Preferred Stock.
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
22
<PAGE> 1
EXHIBIT 12.1
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
DIVIDENDS ON PREFERRED STOCK
(In thousands of dollars)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations
before reorganization items............................. $ (14,692) $ (10,345) $ (212,001) $ (31,582)
Add: Fixed charges........................................... 9,147 11,152 33,479 31,981
--------- --------- ---------- ---------
Income as adjusted........................................... $ (5,545) $ 807 $ (178,522) $ 399
========= ========= ========== =========
Fixed charges:
Interest on indebtedness................................. $ 8,822 $ 10,918 $ 33,154 $ 31,279
Portion of rents representative of the interest factor... 325 234 325 702
--------- --------- ---------- ---------
Fixed charges............................................. 9,147 11,152 33,479 31,981
Dividends on preferred stock and accretion................... 1,694 3,711 10,142 11,133
--------- --------- ---------- ---------
Fixed charges and dividends on preferred stock............... $ 10,841 $ 14,863 $ 43,621 $ 43,114
========= ========= ========== =========
Ratio of earnings over fixed charges and dividends
on preferred stock ...................................... n/a x n/a x n/a x n/a
Deficiency of earnings over fixed charges and
dividends on preferred stock............................. $ (16,386) $ (14,056) $ (222,143) $ (42,715)
========= ========= ========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 4,308
<SECURITIES> 0
<RECEIVABLES> 86,345
<ALLOWANCES> 0
<INVENTORY> 55,239
<CURRENT-ASSETS> 3,224
<PP&E> 403,740
<DEPRECIATION> 130,660
<TOTAL-ASSETS> 451,253
<CURRENT-LIABILITIES> 102,803
<BONDS> 0
124,637
0
<COMMON> 70
<OTHER-SE> (382,523)
<TOTAL-LIABILITY-AND-EQUITY> 451,253
<SALES> 614,401
<TOTAL-REVENUES> 614,401
<CGS> 612,043
<TOTAL-COSTS> 612,043
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,154
<INCOME-PRETAX> (225,233)
<INCOME-TAX> 1,380
<INCOME-CONTINUING> (226,613)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (226,613)
<EPS-PRIMARY> (33.73)
<EPS-DILUTED> 0
</TABLE>
