<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1998
===============================================================================
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, 1998
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)
3 WERNER WAY, LEBANON, NEW JERSEY 08833
(Address of Principal Executive Offices) (Zip Code)
(908)437-4100
(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
MAY 1, 1998, WAS 7,026,437.
===============================================================================
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
PART I. FINANCIAL INFORMATION: PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1998 (Unaudited) and September 30, 1997 (Audited).........2
Consolidated Statements of Operations (Unaudited)
Three and Six Months Ended March 31, 1998 and 1997..................3
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31, 1998 and 1997............................4
Notes to Consolidated Financial Statements (Unaudited).......................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................16
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K...................................21
SIGNATURES..................................................................22
1
<PAGE>
<TABLE>
<CAPTION>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND SEPTEMBER 30, 1997
(IN THOUSANDS OF DOLLARS)
March 31, September 30,
1998 1997
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 12,289 $ 9,212
Accounts receivable, net .................................. 83,750 76,190
Inventories ............................................... 39,911 54,218
Prepaid expenses and other current assets ................. 6,492 7,602
--------- ---------
Total current assets ................................. 142,442 147,222
Property, plant and equipment, net ............................. 116,656 132,266
Intangible assets, net ......................................... 3,625 4,417
Other assets, net .............................................. 23,310 23,589
--------- ---------
$ 286,033 $ 307,494
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of Debtor-in-Possession (DIP) loans ....... $ 10,347 $ 36,436
Current portion of long-term debt ......................... -- 1,748
Accounts payable .......................................... 29,941 32,267
Accrued expenses .......................................... 83,029 72,235
Income taxes payable ...................................... 2,897 2,440
--------- ---------
Total current liabilities ............................ 126,214 145,126
Liabilities subject to compromise .............................. 405,077 397,319
DIP loans ...................................................... 36,347 51,035
Creditors Subordinated Term Loan ............................... 25,000 --
Long-term debt ................................................. -- 12,339
Postretirement benefits other than pensions .................... 99,261 96,929
Other liabilities .............................................. 25,474 27,237
--------- ---------
Total liabilities .................................... 717,373 729,985
--------- ---------
14 1/4% Pay-In-Kind Exchangeable Preferred Stock
(Includes $10,142 of undeclared accrued dividends) ........ 124,637 124,637
--------- ---------
Shareholders' deficiency:
Common Stock, $.01 par value; 15,000,000 shares authorized;
7,026,437 shares issued and outstanding .............. 70 70
Additional paid-in capital ................................ 32,134 32,134
Additional minimum pension liability ...................... (3,665) (3,665)
Foreign currency translation adjustment ................... (2,179) (1,930)
Accumulated deficit ....................................... (582,337) (573,737)
--------- ---------
Total shareholders' deficiency ....................... (555,977) (547,128)
--------- ---------
Commitments and contingent liabilities
$ 286,033 $ 307,494
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
-2-
<PAGE>
<TABLE>
<CAPTION>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three months ended Six months ended
---------------------- ----------------------
March 31, March 31, March 31, March 31,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales ........................................... $ 206,339 $ 209,226 $ 403,391 $ 396,487
--------- --------- --------- ---------
Costs and expenses:
Cost of sales ................................. 194,091 209,972 385,813 400,434
Selling, general and administrative ........... 15,518 14,385 25,353 24,590
Interest expense (contractual interest of
$13,983 and $26,741 for the three and
six months ended March 1998, respectively) . 5,079 12,144 8,932 24,332
Impairment of long-lived assets and
restructuring costs ......................... 5,842 134,987 10,842 134,987
Gain on sale of operations .................... (15,604) -- (26,958) --
Amortization of goodwill ...................... 396 3,828 792 7,656
Other (income) expense, net ................... 963 1,539 971 1,797
--------- --------- --------- ---------
Total costs and expenses .................. 206,285 376,855 405,745 593,796
--------- --------- --------- ---------
Income (loss) before reorganization items and
income taxes ............................... 54 (167,629) (2,354) (197,309)
Reorganization items ............................ 2,959 -- 5,901 --
--------- --------- --------- ---------
Loss before income taxes ........................ (2,905) (167,629) (8,255) (197,309)
Provision for income taxes ...................... 176 525 345 1,013
--------- --------- --------- ---------
Net loss ..................................... $ (3,081) $(168,154) $ (8,600) $(198,322)
========= ========= ========= =========
PIK preferred dividends and accretion
(contractual amounts were $4,763 and $9,526
for the three and six months ended March 1998,
respectively) ................................ $ -- $ 4,224 $ -- $ 8,448
========= ========= ========= =========
Net loss attributable to common shareholders .... $ (3,081) $(172,378) $ (8,600) $(206,770)
========= ========= ========= =========
Basic and diluted loss per share ............. $ (0.44) $ (24.57) $ (1.22) $ (29.47)
========= ========= ========= =========
Weighted average number of common shares
outstanding ................................ 7,026 7,017 7,026 7,016
========= ========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
-3-
<PAGE>
<TABLE>
<CAPTION>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
1998 1997
--------- ---------
Cash flows related to operating activities:
<S> <C> <C>
Net loss before reorganization items .................................. $ (2,699) $(198,322)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation and amortization ....................................... 16,062 34,718
Impairment of long-lived assets and restructuring costs ............. 5,842 134,987
Gain on sale of operations .......................................... (26,958) --
Loss on disposition of property, plant and equipment ................ 920 1,208
Postretirement benefits ............................................. 2,332 3,499
Changes in operating assets and liabilities of operations, net of effects
of divestitures and reorganization items:
Accounts receivable ................................................. (10,905) (1,181)
Inventories ......................................................... 12,379 (3,995
Other current assets ................................................ 1,110 (587)
Accounts payable .................................................... (2,123) 13,541
Accrued expenses and income taxes payable ........................... 13,729 2,166
Other, net .......................................................... 675 2,088
--------- ---------
Net cash provided by (used in) operations before reorganization items ... 10,364 (11,878)
Net cash used by reorganization items ................................... (4,397) --
--------- ---------
Net cash provided by (used in) operations ............................... 5,967 (11,878)
--------- ---------
Cash flows related to investing activities:
Acquisition of property, plant and equipment .......................... (6,403) (20,313)
Cash flows related to discontinued operation .......................... -- 204
Net proceeds from sale of operations .................................. 19,428 --
Proceeds from disposition of property, plant and equipment ............ -- 395
--------- ---------
Net cash provided by (used in) investing activities ................... 13,025 (19,714)
--------- ---------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing agreement ............. (38,277) 38,274
Proceeds of Creditors Subordinated Term Loan, net of
financing costs of $2,500 ........................................... 22,500 --
Proceds from sale of stock and exercise of stock options .............. -- 23
Repayments of long-term debt .......................................... (83) (730)
Pension fund payments pursuant to PBGC settlement agreement ........... -- (3,000)
Payment of EPA settlements ............................................ (55) (1,634)
--------- ---------
Net cash provided by (used in) financing activities ................... (15,915) 32,933
--------- ---------
Net increase in cash and cash equivalents ............................... 3,077 1,341
Cash and cash equivalents beginning of period ........................... 9,212 1,107
--------- ---------
Cash and cash equivalents end of period ................................. $ 12,289 $ 2,448
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
-4-
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1
The interim consolidated financial statements are unaudited but, in
the opinion of management, reflect all adjustments (consisting only of normal
recurring 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, 1997 included in the Company's Annual Report on Form 10-K.
NOTE 2
On May 8, 1997, Harvard Industries, Inc. and its domestic subsidiaries
(all of whom are hereinafter sometimes designated the "Debtors") filed
voluntary petitions for relief under chapter 11 ("chapter 11") of the Federal
bankruptcy laws in the United States Bankruptcy Court for the District of
Delaware (the "Court"). Under chapter 11, holders of most claims arising
prior to the filing of the petitions for relief under the Federal bankruptcy
laws are stayed from collecting on such claims while the Debtors continue
business operations as debtors-in-possession ("DIP"). Additional claims may
arise subsequent to the filing date resulting from rejection of executory
contracts, including leases. Holders of pre-petition claims secured by liens
against the Debtors' assets ("secured claims") also are stayed from enforcing
their rights as secured creditors without leave of the Court.
The Debtors have received approval from the Court to pay or otherwise
honor certain pre-petition obligations, including certain employee wages,
salaries and other compensation, employee benefits, reimbursable employee
expenses and certain workers' compensation claims, as well as to continue
pre-petition customer practices with respect to warranties, refunds and return
policies. All proofs of claim were required to be filed against the Debtors by
February 9, 1998 or be forever barred from assertion.
The Debtors have not yet filed with the Court any plans of
reorganization. Under the Bankruptcy Code, a Debtor is given an exclusive
period of 120 days to file a plan of reorganization and 180 days to solicit
acceptances to such plan. These periods afforded to the Debtors under the
Bankruptcy Code initially expired on September 5, 1997 and November 4, 1997,
respectively, and have been extended by the Court from time to time. The Court
has given the Debtors until June 2, 1998 to formulate and file their plans of
reorganization, and until August 1, 1998 to solicit plan acceptances thereto.
The Debtors anticipate the filing of their plans of reorganization by June 2,
1998 (but the timing is not certain, and in light of this, application has
been made to the Court to extend the exclusivity periods to formulate and file
the plan from June 2, 1998 to and including August 1, 1998 and extend the
solicitation period from August 1, 1998 to and including September 30, 1998).
In the event such plans are formulated and approved by the creditors and the
Court, continuation of the Debtors' business after reorganization is dependent
upon the success of future operations and the ability to meet 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.
5
<PAGE>
However, as a result of the chapter 11 proceedings and circumstances
related 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 substantial doubt. Management is unable to predict
how and when the chapter 11 proceedings or the expense associated therewith,
which could be substantial, will be concluded. There can be no assurances that
the liabilities of the Company will not be found in the chapter 11 proceedings
to exceed the fair value of its assets. This could result in claims being
provided for in the chapter 11 proceedings at less than 100% of their face
value. It is impossible at this time to predict with certainty the actual
recovery the creditors and shareholders will realize.
The Company discontinued accruing interest on its 12% and 11 1/8%
Notes (aggregating $300,000 of principal amount) and dividends on the PIK
Preferred Stock since the date of filing under chapter 11.
NOTE 3
In November 1997, the Company sold the Material Handling division of
its Kingston-Warren subsidiary for approximately $18,000 of gross proceeds,
of which $7,840 was applied to the scheduled DIP term loans quarterly
payments in November 1997 and February and May 1998 and $7,840 was applied to
the final installment due May 1999. The balance of the proceeds was used to
reduce the DIP revolving facility. The transaction resulted in a gain on sale
of approximately $11,400 in the first quarter of fiscal 1998.
During the three months ended March 31, 1998, the Company sold its
land, building and certain other assets related to the Harvard Interiors
Furniture Division located in St. Louis, Missouri for $3,797. Of the proceeds,
$830 was applied to the May 31, 1998 DIP quarterly term principal payment, $830
was applied to the May 8, 1999 payment and the balance to reduce the DIP
revolving facility.
In May 1998, the Company received Bankruptcy Court approval for the
sale of the ESNA facility located in Union, New Jersey, for $1,900 in cash.
Management is in the process of winding down operations at the
Company's Doehler-Jarvis Toledo, Inc. subsidiary. General Motors has entered
into an agreement with the Company to defray certain expenses in connection
with such wind-down. The Company is also negotiating with Ford an agreement to
defray certain expenses with respect to the wind-down. Ford has heretofore made
a payment of $5,000 to the Company to be applied to Ford's obligation under a
final negotiated transition agreement and has obtained certain assets at the
facility and assumed the related lease obligation. The Company is unable at
this time to estimate the net costs associated with this wind-down, but the
amount is not expected to be material, giving effect to the General Motors and
Ford agreements, and anticipated sale of assets.
Condensed operating data of operations designated for sale or wind-down
(Harman Automotive, Harvard Interiors, Material Handling, the Toledo facility
and the Tiffin, Ohio facility of the Hayes-Albion subsidiary) are as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31 March 31
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $62,373 $60,556 $114,825 $122,027
Gross profit (loss) 1,810 (5,938) (1,072) (9,529)
</TABLE>
Improvements in operating results are primarily as a result of
decreased depreciation expense due to the write down of property, plant and
equipment at the Toledo facility and at Harman Automotive.
6
<PAGE>
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"). The ultimate costs of disposition of the ESNA
matter, as well as the required funding of such costs, are dependent upon
future events, the outcomes of which are not determinable at the present time,
including the Company receiving favorable consideration from the government
as a result of admission into the Voluntary Disclosure Program. Such outcomes
could have a material adverse 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
The Company failed to meet the fixed charge ratio financial covenant
in connection with its DIP financing agreement during October and November
1997, and on December 29, 1997 obtained a waiver of such default from its
lenders. On December 29, 1997, the Company entered into Amendment No. 1
Waiver and Consent (the "Amendment") to Post-Petition Loan and Security
Agreement with its lenders whereby the lenders from December 29, 1997 waived
all defaults or events of default which have occurred prior to such date from
the failure to comply with the above financial covenant. The lenders also
entered into the Amendment to replace the fixed charge ratio covenant with
monthly consolidated EBITDA and consolidated tangible net worth covenants,
commencing calculations at December 31, 1997. The Amendment requires the
lenders' consent for capital expenditures in excess of $30,000 for the year
ending September 30, 1998. The Company was in compliance with the EBITDA and
consolidated tangible net worth covenants at March 31, 1998.
The Company also entered into Amendment No. 2 and Consent to the
Post-petition Loan and Security Agreement, dated January 27, 1998 (the "Amended
DIP Financing Agreement"), pursuant to which the lenders have consented to the
term loan, discussed in Note 7, the creation of subordinated liens thereunder
and to certain asset sales. In addition, the Amended DIP Financing Agreement
presently provides for an availability reserve of $5,000 and will be eliminated
upon the receipt by the lenders of not less than $15,000 from the sale or other
disposition of the Toledo facility. The Company is required to use the Toledo
fixed asset proceeds to prepay remaining installments, 50% in direct order and
50% in inverse order of their maturities.
The term of the amended DIP Facility is the earlier of (i) May 8, 1999
or (ii) the date the line of credit is terminated, or (iii) the earlier of the
effective date a Plan of Reorganization is confirmed by an order of the
bankruptcy court or the date on which any distributions are made under
a Plan of Reorganization that is confirmed by order of a bankruptcy court.
The Amended DIP Financing Agreement provides that any asset sale
proceeds (other than Toledo proceeds) are to be used to pay pre-petition and
revolving loans indebtedness so that after giving effect thereto the aggregate
net availability is restored to its status immediately prior to the transaction
giving rise to the proceeds; and then to prepay remaining installments in the
order described above.
7
<PAGE>
The lenders have consented to certain minimum realizations from future
asset sales, as follows: not less than $2,000 with respect to the sale of
Harman Automotive, not less than $15,000 with respect to the sale or disposition
of Toledo, and not less than $2,000 with respect to the sale of Harvard
Interiors, all with prepayments of indebtedness to be effected in the manner
set forth above. There is no assurance that such minimum realizations will be
obtained.
The Company entered into Amendment No. 3 to the Post-Petition Loan and
Security Agreement, dated as of April 30, 1998, extending to May 31, 1998, the
date upon which an agreement with Ford regarding the wind down of the Toledo
facility is required to be approved by the Court.
NOTE 6
During the three months ended December 31, 1997, the Company recorded
a $5,000 restructuring charge representing estimated shutdown costs, of which
$2,500 related primarily to severance and moving costs associated with the move
of the corporate headquarters from Tampa, Florida to Lebanon, New Jersey and
approximately $2,500 was accrued for two senior executive officers to induce
them to stay until the earlier of (i) the date of consummation of the plan of
reorganization, plus, if requested by the Board, up to an additional 60 days
beyond such date, (ii) the date of termination by the executive for good
reason, death, disability or retirement or (iii) the termination by the Company
of the executive's employment for any reason.
During the three months ended March 31, 1998, the Company recorded a
charge of $5,842 consisting of the impairment of the property, plant and
equipment of the Tiffin plant, which is being considered for sale or wind down,
and the equipment and tooling for a platform that is being discontinued earlier
than planned.
NOTE 7
The Company entered into a Term Loan Agreement dated as of January 16,
1998 for a $25,000 postpetition term loan facility which is subordinated to
the security interests under the existing DIP loans. The loan is payable May 8,
1999 or the date the existing DIP loan is terminated and bears interest at a
rate per annum equal to the greater of (i) the highest per annum interest rate
for term loans and revolving credit loans under the existing DIP loans plus
3% or (ii) 13%. The net proceeds of $22,500 from the loan were used to reduce
the current balance of the revolver portion of the DIP loans. The financing
costs of $2,500 were charged to interest expense.
NOTE 8
Basic and diluted loss per share are 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. Options
to purchase 836,571 shares of common stock are outstanding at March 31, 1998.
No consideration was given in either period to equivalent shares related to
stock options since such assumed exercise would be anti-dilutive.
NOTE 9
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 ESNA discussed in Note 4, will not have a material
adverse effect on the financial position or results of operations of the
Company.
8
<PAGE>
NOTE 10
Income tax rates result principally from having operating profit in
Canada and an operating loss in the U.S. for which benefit was not recognized.
NOTE 11
Both the 12% Notes and the 11 1/8% Notes are guaranteed 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. The Company
conducts all of its automotive business through and derives virtually all of
its income from its subsidiaries. Therefore, the Company's ability to make
required principal and interest payments with respect to the Company's
indebtedness (including the Notes) and other obligations depends on the
earnings of its subsidiaries and on its ability to receive funds from its
subsidiaries through dividends or other payments. The ability of its
subsidiaries to pay such dividends or make payments on intercompany
indebtedness or otherwise will be subject to applicable state laws.
Upon the sale or other disposition of a Guarantor or the sale or
disposition of all or substantially all of the assets of a Guarantor (in each
case other than to the Company or an affiliate of the Company) permitted by the
indenture governing the Notes, such Guarantor will be released and relieved
from all of its obligations under its Guaranty.
The following condensed consolidating information presents:
1. Condensed balance sheets as of March 31, 1998 and September 30,
1997 and condensed statements of operations and cash flows for the six months
ended March 31, 1998 and 1997.
2. The Parent Company and Combined Guarantor Subsidiaries with their
investments in subsidiaries accounted for on the equity method.
3. Elimination entries necessary to consolidate the Parent Company and
all of its subsidiaries.
4. Reorganization items have been included under the Parent Company in
the accompanying condensed consolidating statements of operations and cash
flows.
5. 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 six months ended March 31, 1998 and 1997.
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
because it was deemed that such financial statements would not provide the
investor with any material additional information.
9
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEETS
MARCH 31, 1998
(UNAUDITED)
(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 ............... $ 2,849 $ 9,904 $ (464) $ -- $ 12,289
Accounts receivable, net ................ 963 78,174 4,613 -- 83,750
Inventories ............................. 478 38,770 663 -- 39,911
Prepaid expenses and other current assets 2,181 4,319 (8) -- 6,492
--------- --------- --------- --------- ---------
Total current assets .................. 6,471 131,167 4,804 -- 142,442
Investment in subsidiaries ................ (52,888) 11,626 -- 41,262 --
Property, plant and equipment, net ........ 3,667 104,721 8,268 -- 116,656
Intangible assets, net .................... -- 3,625 -- -- 3,625
Intercompany receivables .................. 506,817 261,287 12,155 (780,259) --
Other assets, net ......................... 21,366 1,944 -- -- 23,310
--------- --------- --------- --------- ---------
$ 485,433 $ 514,370 $ 25,227 $(738,997) $ 286,033
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of DIP loans ............ $ 237 $ 10,110 $ -- $ -- $ 10,347
Accounts payable ........................ -- 27,765 2,176 -- 29,941
Accrued expenses ........................ 21,442 61,577 10 -- 83,029
Income taxes payable .................... 167 1,815 915 -- 2,897
--------- --------- --------- --------- ---------
Total current liabilities ........... 21,846 101,267 3,101 -- 126,214
Liabilities subject to compromise ......... 325,757(a) 79,320 -- -- 405,077
DIP loans ................................. 36,347 -- -- 36,347
Creditors Subordinated Term Loan .......... 25,000 -- -- -- 25,000
Postretirement benefits other than pensions -- 99,261 -- -- 99,261
Intercompany payables ..................... 543,448 227,269 9,542 (780,259) --
Other liabilities ......................... 722 23,794 958 -- 25,474
--------- --------- --------- --------- ---------
Total liabilities .................. 916,773 567,258 13,601 (780,259) 717,373
--------- --------- --------- --------- ---------
PIK Preferred Stock ....................... 124,637 -- -- -- 124,637
--------- --------- --------- --------- ---------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital ....................... 32,204 73,054 10 (73,064) 32,204
Additional minimum pension liability .... (3,665) (3,659) -- 3,659 (3,665)
Foreign currency translation adjustment . (2,179) (2,179) (2,179) 4,358 (2,179)
Retained earnings (deficiency) .......... (582,337) (120,104) 13,795 106,309 (582,337)
--------- --------- --------- --------- ---------
Total shareholders' equity (deficiency) (555,977) (52,888) 11,626 41,262 (555,977)
--------- --------- --------- --------- ---------
$ 485,433 $ 514,370 $ 25,227 $(738,997) $ 286,033
========= ========= ========= ========= =========
(a) Includes $309,728 senior notes payable and accrued interest which are subject to the guaranty of the combined
guarantor subsidiaries.
</TABLE>
10
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1997
(UNAUDITED)
(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 ............... $ 3,324 $ 5,376 $ 512 $ -- $ 9,212
Accounts receivable, net ................ 2,795 71,355 2,040 -- 76,190
Inventories ............................. 2,475 50,662 1,081 -- 54,218
Prepaid expenses and other current assets 1,698 5,904 -- -- 7,602
--------- --------- --------- --------- ---------
Total current assets .................. 10,292 133,297 3,633 -- 147,222
Investment in subsidiaries ................ (48,751) 12,138 -- 36,613 --
Property, plant and equipment, net ........ 3,878 119,164 9,224 -- 132,266
Intangible assets, net .................... -- 4,417 -- -- 4,417
Intercompany receivables .................. 240,542 276,424 9,483 (526,449) --
Other assets, net ......................... 20,164 3,425 -- -- 23,589
--------- --------- --------- --------- ---------
$ 226,125 $ 548,865 $ 22,340 $(489,836) $ 307,494
========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities:
Current portion of DIP loans ............ $ 867 $ 35,569 $ -- $ -- $ 36,436
Current portion of long-term debt ....... -- 1,748 -- -- 1,748
Accounts payable ........................ 228 30,214 1,825 -- 32,267
Accrued expenses ........................ 16,088 55,959 188 -- 72,235
Income taxes payable .................... (1,751) 1,246 2,945 -- 2,440
--------- --------- --------- --------- ---------
Total current liabilities ........... 15,432 124,736 4,958 -- 145,126
Liabilities subject to compromise ......... 317,508(a) 79,742 69 -- 397,319
DIP loans ................................. 705 50,330 -- -- 51,035
Long-term debt ............................ -- 12,339 -- -- 12,339
Postretirement benefits other than pensions -- 96,929 -- -- 96,929
Intercompany payables ..................... 311,955 210,284 4,210 (526,449) --
Other liabilities ......................... 3,016 23,256 965 -- 27,237
--------- --------- --------- --------- ---------
Total liabilities .................. 648,616 597,616 10,202 (526,449) 729,985
--------- --------- --------- --------- ---------
PIK Preferred Stock ....................... 124,637 -- -- -- 124,637
--------- --------- --------- --------- ---------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital ....................... 32,204 73,054 10 (73,064) 32,204
Additional minimum pension liability .... (3,665) (3,659) -- 3,659 (3,665)
Foreign currency translation adjustment . (1,930) (1,930) (1,930) 3,860 (1,930)
Retained earnings (deficiency) .......... (573,737) (116,216) 14,058 102,158 (573,737)
--------- --------- --------- --------- ---------
Total shareholders' equity (deficiency) (547,128) (48,751) 12,138 36,613 (547,128)
--------- --------- --------- --------- ---------
$ 226,125 $ 548,865 $ 22,340 $(489,836) $ 307,494
========= ========= ========= ========= =========
(a) Includes $309,728 senior notes payable and accrued interest which are subject to the guaranty of the combined
guarantor subsidiaries.
</TABLE>
11
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales ............................... $ 7,533 $ 386,798 $ 9,060 $ -- $ 403,391
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales ..................... 7,523 370,009 8,281 -- 385,813
Selling, general and administrative 4,095 21,108 150 -- 25,353
Interest expense .................. 3,295 5,630 7 -- 8,932
Impairment of long-lived assets
and restructuring costs .......... 5,000 5,842 -- -- 10,842
Gain on sale of operations ........ (1,605) (25,353) -- -- (26,958)
Amortization of goodwill .......... -- 792 -- -- 792
Other (income) expense, net ....... (860) 1,626 205 -- 971
Equity in loss of subsidiaries .... 3,468 263 -- (3,731) --
Allocated expenses ................ (10,760) 10,080 680 -- --
--------- --------- --------- --------- ---------
Total costs and expenses ...... 10,156 389,997 9,323 (3,731) 405,745
--------- --------- --------- --------- ---------
Loss before reorganization items and
income taxes ...................... (2,623) (3,199) (263) 3,731 (2,354)
Reorganization items ................ 5,977 (76) -- -- 5,901
--------- --------- --------- --------- ---------
Loss before income taxes ............ (8,600) (3,123) (263) 3,731 (8,255)
Provision for income taxes .......... -- 345 -- -- 345
--------- --------- --------- --------- ---------
Net loss ......................... $ (8,600) $ (3,468) $ (263) $ 3,731 $ (8,600)
========= ========= ========= ========= =========
</TABLE>
12
<PAGE>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Sales ............................... $ 11,367 $ 371,849 $ 13,271 $ -- $ 396,487
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales ..................... 12,081 376,442 11,911 -- 400,434
Selling, general and administrative 9,092 15,498 -- -- 24,590
Interest expense .................. 18,740 5,458 134 -- 24,332
Amortization of goodwill .......... -- 7,656 -- -- 7,656
Impairment of long-lived assets ... -- 134,987 -- -- 134,987
Other (income) expense, net ....... 593 1,190 14 -- 1,797
Equity in loss of subsidiaries .... 179,954 3 -- (179,957) --
Allocated expenses ................ (10,771) 9,912 859 -- --
--------- --------- --------- --------- ---------
Total costs and expenses ...... 209,689 551,146 12,918 (179,957) 593,796
--------- --------- --------- --------- ---------
Income (loss) before income taxes ... (198,322) (179,297) 353 179,957 (197,309)
Provision for income taxes .......... -- 657 356 -- 1,013
--------- --------- --------- --------- ---------
Net income (loss) ................ $(198,322) $(179,954) $ (3) $ 179,957 $(198,322)
========= ========= ========= ========= =========
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Net loss before reorganization items ...................... $ (7,623) $ (3,544) $ (263) $ 8,731 $ (2,699)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of subsidiaries ................. 8,468 263 -- (8,731) --
Depreciation and amortization ........................... 918 14,397 747 -- 16,062
Impairment of long-lived assets and restructuring costs . -- 5,842 -- -- 5,842
Gain on sale of operations .............................. (1,605) (25,353) -- -- (26,958)
Loss on disposition of property, plant and
equipment .............................................. 283 436 201 -- 920
Postretirement benefits ................................. -- 2,332 -- -- 2,332
Changes in operating assets and liabilities, net of effects
from reorganization items:
Accounts receivable ..................................... 1,832 (10,164) (2,573) -- (10,905)
Inventories ............................................. 1,439 10,522 418 -- 12,379
Other current assets .................................... (483) 1,585 8 -- 1,110
Accounts payable ........................................ (228) (2,246) 351 -- (2,123)
Accrued expenses and income taxes payable ............... 11,835 4,171 (2,277) -- 13,729
Other, net .............................................. (2,693) 3,442 (74) -- 675
-------- -------- -------- -------- --------
Net cash provided by (used in) operations before
reorganization items ................................... 12,143 1,683 (3,462) -- 10,364
Net cash provided by (used in) reorganization items ......... (4,473) 76 -- -- (4,397)
-------- -------- -------- -------- --------
Net cash provided by (used in) operations ................... 7,670 1,759 (3,462) -- 5,967
-------- -------- -------- -------- --------
Cash flows related to investing activities:
Acquisition of property, plant and equipment .............. (65) (6,164) (174) -- (6,403)
Net proceeds from sale of operations ...................... 3,037 16,391 -- -- 19,428
-------- -------- -------- -------- --------
Net cash provided by (used in) investing activities ......... 2,972 10,227 (174) -- 13,025
-------- -------- -------- -------- --------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing agreement . (1,335) (36,942) -- -- (38,277)
Proceeds of Creditors Subordinated Term Loan, net of
financing costs of $2,500 ............................... 22,500 -- -- -- 22,500
Repayments of long-term debt .............................. -- (83) -- -- (83)
Payment of EPA settlements ................................ -- (55) -- -- (55)
Net changes in intercompany balances ...................... (32,282) 29,622 2,660 -- --
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities ......... (11,117) (7,458) 2,660 -- (15,915)
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents ........ (475) 4,528 (976) -- 3,077
Cash and cash equivalents :
Beginning of period ....................................... 3,324 5,376 512 -- 9,212
-------- -------- -------- -------- --------
End of period ............................................. $ 2,849 $ 9,904 $ (464) $ -- $ 12,289
======== ======== ======== ======== ========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
HARVARD INDUSTRIES, INC.
(DEBTOR-IN-POSSESSION)
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
Combined Combined
Parent Guarantor Non-Guarantor
Company Subsidiaries Subsidiaries Elimination Consolidated
------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Net (loss) ................................................. $(198,322) $(179,954) $ (3) $ 179,957 $(198,322)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in loss of subsidiaries ........................... 179,954 3 -- (179,957) --
Depreciation and amortization ............................ 1,500 32,635 583 -- 34,718
Impairment of long-lived assets .......................... -- 134,987 -- -- 134,987
Loss on disposition of property, plant and
equipment and property held for sale .................... -- 1,208 -- -- 1,208
Postretirement benefits .................................. -- 3,499 -- -- 3,499
Changes in operating assets and liabilities :
Accounts receivable ...................................... 2,938 (3,885) (234) -- (1,181)
Inventories .............................................. 1,814 (5,242) (567) -- (3,995)
Other current assets ..................................... (921) 332 2 -- (587)
Accounts payable ......................................... (1,359) 15,238 (338) -- 13,541
Accrued expenses and income taxes payable ................ 179 2,451 (464) -- 2,166
Other, net ............................................... 2,320 (190) (42) -- 2,088
--------- --------- --------- --------- ---------
Net cash provided by (used in) operations .................... (11,897) 1,082 (1,063) -- (11,878)
--------- --------- --------- --------- ---------
Cash flows related to investing activities:
Acquisition of property, plant and equipment ............... (3) (19,010) (1,300) -- (20,313)
Proceeds to date from sale of discontinued operations ...... -- -- -- -- --
Cash flows related to net assets of discountinued operations 204 -- -- -- 204
Proceeds from disposition of property,
plant and equipment ...................................... -- 395 -- -- 395
--------- --------- --------- --------- ---------
Net cash used in investing activities ........................ 201 (18,615) (1,300) -- (19,714)
--------- --------- --------- --------- ---------
Cash flows related to financing activities:
Net borrowings under financing/credit agreement ............ 2,266 36,008 -- -- 38,274
Proceeds from sale of stock/exercise of stock options ...... 23 -- -- -- 23
Repayments of long-term debt ............................... (730) -- -- -- (730)
Pension fund payment pursuant to PBGC settlement agreement . (3,000) -- -- -- (3,000)
Payment of EPA settlements ................................. (1,007) (627) -- -- (1,634)
Net changes in intercompany balances ....................... 15,807 (19,775) 3,968 -- --
--------- --------- --------- --------- ---------
Net cash provided by financing activities .................... 13,359 15,606 3,968 -- 32,933
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash equivalents ......... 1,663 (1,927) 1,605 -- 1,341
Cash and cash equivalents :
Beginning of period ........................................ (1,655) 4,367 (1,605) -- 1,107
--------- --------- --------- --------- ---------
End of period .............................................. $ 8 $ 2,440 $ -- $ -- $ 2,448
========= ========= ========= ========= =========
</TABLE>
15
<PAGE>
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 agreements, capital expenditures, plans for future
operations, financing needs or plans, plans relating to products or services of
the Company, as well as assumptions relating to the foregoing. In addition,
when used in this discussion, the words "anticipates," "believes," "estimates,"
"expects," "intends," "plans" and similar expressions are intended to identify
forward-looking statements.
Forward-looking statements are inherently subject to risks and
uncertainties, including, but not limited to, product demand, pricing, market
acceptance, risk of dependence on third party suppliers, intellectual property
rights and litigation, risks in product and technology development and other
risk factors detailed in the Company's Securities and Exchange Commission
filings, some of which cannot be predicted or quantified based on current
expectations. 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
in 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
unanticipated increases in launch and other operating costs, a reduction and
inconsistent demand for passenger cars and light trucks, labor disputes,
capital requirements, adverse weather conditions, the inability to consummate
successfully negotiations looking towards defraying certain costs in connection
with the wind-down of the Toledo, Ohio facility, unanticipated developments in
the bankruptcy proceedings and the impact thereof, as well as other pending
litigation, and increases in borrowing costs.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,1997
Sales. Consolidated sales decreased $2,887 from $209,226 to $206,339,
or 1.4%. Aggregate sales for Harman Automotive, the furniture product line
of Harvard Interiors, Toledo, Tiffin and the Material Handling Division of
Kingston-Warren ("Operations designated for sale or wind-down") increased
$1,817 from $60,556 to $62,373, primarily
16
<PAGE>
due to higher tooling sales as a result of the shut-downs. The remaining
operations' sales decreased $4,704 from $148,670 to $143,966 due to lower
volumes.
Gross Profit. The consolidated gross profit expressed as a percentage
of sales (the "gross profit margin") increased from (0.4%) to 5.9%, or $12,994.
The gross profit (loss) for Operations designated for sale or wind-down
amounted to $1,810 and $(5,938) in 1998 and 1997, respectively. The improvement
was due mainly to a decrease of approximately $3,700 in depreciation resulting
from the write-down of certain property, plant and equipment in the fourth
quarter of 1997 at Toledo and favorable impact due to Toledo being reimbursed
for certain costs and expenses resulting from the wind-down agreements signed
and or expected to be signed. The increase in gross profit for the remaining
operations was mainly due to improved operating efficiencies and approximately
$2,400 from decreases in depreciation resulting from the 1997 write-down of
certain property, plant and equipment at the other operations of Doehler-Jarvis.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $14,385 to $15,518. The increase
reflects a $5,000 charge for the purchase and implementation of information
systems and technology which, upon completion, is expected to make the
Company's systems year 2000 compliant, offset by the prior period's charge of
$4,000 related to the termination and consulting and release agreement of a
former executive.
Interest Expense. Interest expense decreased from $12,144 to $5,079.
However, but for giving effect to the discontinuance of accruing interest on
the senior notes of $8,904 from the date of filing of chapter 11, interest
expense would have increased by $1,839. This increase resulted from expensing
$2,500 of financing fees relating to the post-petition term loan facility
offset partially by lower borrowing levels.
Amortization of Goodwill. The decrease of $3,432 in goodwill
amortization occurred because goodwill related to the acquisition of
Doehler-Jarvis ceased March 31, 1997, when such goodwill was written-off as
impaired.
Impairment of Long-Lived Assets. In March 1998, substantially all the
property, plant and equipment at Hayes-Albion's Tiffin, Ohio facility and
equipment and tooling for a platform that is being discontinued earlier than
planned were written-off as impaired compared to the 1997 quarter's charge
of $134,987 for impairment of long-lived assets at several subsidiaries.
Gain on Sale of Operations. This includes the gain on the sale of the
land, building and certain other assets of the Harvard Interiors' St. Louis
facility and the transfer of certain assets at the Toledo facility and
related lease obligations to a third party.
Other (Income) Expense, Net. The decrease of $576 was mainly due to a
decrease in the loss on disposal of machinery and equipment.
Reorganization Items. These costs represent mainly professional fees
incurred in connection with the bankruptcy proceedings.
Provision for Income Taxes. The decrease in the provision for income
taxes resulted from a decrease in operating profit in Canada.
Net Loss. The net loss decreased from $168,154 to $3,081 for the
reasons described above.
17
<PAGE>
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31,1997
Sales. Consolidated sales increased $6,904 from $396,487 to $403,391,
or 1.7%. Aggregate sales for the Operations designated for sale or wind-down
decreased approximately $7,202 from $122,027 to $114,825, related to the
wind-down. The remaining operations' sales increased $14,106 from $274,460 to
$288,566 due primarily to higher volumes and the pass-through of $2,995 of
aluminum costs which represent higher average aluminum costs in 1998.
Gross Profit. The consolidated gross profit expressed as a percentage
of sales (the "gross profit margin") increased from (1.0%) to 4.4%, or $21,525.
The gross loss for Operations designated for sale or wind-down amounted to
$(1,072) and $(9,529) in 1998 and 1997, respectively. The improvement was due
mainly to a decrease of approximately $7,400 in depreciation resulting from the
write-down of certain Toledo property, plant and equipment in the fourth
quarter of 1997 and favorable impact due to Toledo being reimbursed for certain
costs and expenses resulting from the wind down agreements signed and or
expected to be signed. The increase in gross profit for the remaining
operations was mainly due to increased volume, improved operating efficiencies
and approximately $4,800 from decreases in depreciation resulting from the 1997
write-down of certain property, plant and equipment at the other operations of
Doehler-Jarvis.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $24,590 to $25,353. The increase
reflects a $5,000 charge for the purchase and implementation of information
systems and technology which, upon completion, is expected to make the
Company's systems year 2000 compliant, offset by the prior period's charge of
$4,000 relating to the termination and consulting and release agreement of a
former executive.
Interest Expense. Interest expense decreased from $24,332 to $8,932.
However, but for giving effect to the discontinuance of accruing interest on
the senior notes of $17,809 from the date of the chapter 11 filing, interest
expense would have increased by $2,409. This increase resulted from the
expensing of financing fees relating to the post-petition term loan
facility.
Amortization of Goodwill. The decrease of $6,864 in goodwill
amortization occurred because goodwill related to the acquisition of
Doehler-Jarvis ceased March 31, 1997, when such goodwill was written-off as
impaired.
Impairment of Long-Lived Assets and Restructuring Costs. During the
six months ended March 31, 1998, the Company recorded $5,000 in restructuring
charges representing estimated shutdown and relocation costs of $2,500, relating
primarily to severance and moving costs associated with the move of the
corporate headquarters from Tampa, Florida to Lebanon, New Jersey, and
approximately $2,500 was accrued for two senior executive officers to induce
them to stay until the earliest of (i) the date of consummation of the plan of
reorganization, plus, if requested by the Board, up to an additional 60 days
beyond such date, (ii) the date of termination by the executive for good
reason, death, disability or retirement or (iii) the termination by the Company
of the executive's employment for any reason. In addition, the Company
wrote-off as impaired substantially all the property, plant and equipment at
Hayes-Albion's Tiffin, Ohio facility and the equipment and tooling for a
platform that is being discontinued earlier than planned. During the six months
ended March 31, 1997, a charge of $134,987 was recorded for the impairment of
long-lived assets at several subsidiaries.
Gain on Sale of Operations. This includes a gain on the sale of the
Material Handling division of the Company's Kingston-Warren subsidiary, a
gain on the sale of the land, building
18
<PAGE>
and certain other assets of the Harvard Interiors' St. Louis facility of $1,605
and a gain of $13,999 on the transfer of certain assets at the Toledo facility
and their related lease obligations to a third party.
Other (Income) Expense, Net. The decrease of $826 was mainly due to a
decrease in the loss on disposal of machinery and equipment.
Reorganization Items. These costs represent mainly professional fees
incurred in connection with the bankruptcy proceedings.
Provision for Income Taxes. The decrease in the provision for income
taxes resulted from a decrease in operating profit in Canada.
Net Loss. The net loss decreased from $198,322 to $8,600 for the
reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended March 31, 1998, the Company had cash flow
from operations of $5,967 as compared with a negative cash flow from
operations of $11,878 for the six months ended March 31, 1997. The 1998 cash
flows improved due to increased profit margins, lower inventory levels and
the timing of payments, but were negatively affected by payments of
reorganization items and advance and accelerated payments to post-petition
suppliers. The cash flow from operations in 1998, together with the proceeds
of $19,428 from the sale of operations and the $22,500 proceeds from the
creditors subordinated term loan was used primarily to fund capital
expenditures of $6,403 and to repay DIP financing activities amounting
to $38,277.
Projected cash flows for the year ending September 30, 1998
contemplate spending $15,000 in reorganization items, $15,000 in restructuring
charges and approximately $6,000 for new systems that are anticipated to make
the Company's systems year 2000 compliant prior to the year 2000, resulting in
negative cash flow from continuing operations. Additionally, capital
expenditures of $30,000 are contemplated for the year ending September 30,
1998. The Company, therefore, entered into a Term Loan Agreement, dated as of
January 16, 1998, for a $25,000 post-petition term loan facility to allow
greater borrowing availability for its ongoing operations. This facility is
subordinated to the security interests under the existing DIP loans, is payable
the earlier of May 8, 1999 or the date the existing DIP loan is terminated and
bears interest at a rate per annum equal to the greater of (i) the highest per
annum interest rate for term loans and revolving credit loans under the
existing DIP loans plus 3% or (ii) 13%. The Company was required to pay
facility and funding fees aggregating $2,500. The net proceeds were used to
reduce the current balance of the revolver portion of the DIP loans.
The Company did not meet the fixed charge ratio financial covenant
of its DIP Facility during the months of October and November 1997. On
December 29, 1997, the Company entered into Amendment No. 1 Waiver and Consent
(the "Amendment") to Post-Petition Loan and Security Agreement with its lenders
whereby the lenders from December 29, 1997 waived all defaults or events of
default which have occurred prior to such date from the failure to comply with
the above financial covenant. The lenders also entered into the Amendment to
replace the fixed charge ratio covenant with monthly consolidated EBITDA and
consolidated tangible net worth covenants commencing calculations at December
31, 1997. The Amendment requires the lenders' consent for capital expenditures
in excess of $30,000 for the year ending September 30, 1998. The Company was
in compliance with the EBITDA and consolidated tangible net worth covenants at
March 31, 1998.
The Company also entered into Amendment No. 2 and Consent to the
Post-Petition Loan and
19
<PAGE>
Security Agreement, dated as of January 27, 1998, pursuant to which the lenders
have consented to the term loan, discussed above, the creation of subordinated
liens thereunder and to certain asset sales. In addition, the Amended DIP
Financing Agreement presently provides for an availability reserve of $5,000
and will be eliminated upon the receipt by the lenders of not less than $15,000
from the sale or other disposition of the Toledo facility. The Company is to
use the Toledo proceeds to prepay remaining installments, 50% in direct order
and 50% in inverse order of their maturities.
As of May 8, 1998, the Company had availability to borrow funds in the
amount of $54,000 pursuant to the DIP revolving credit facility; at March 31,
1998 and May 8, 1998, the revolving credit facility had less than $1,000
outstanding.
The Company is not permitted to borrow any money for funding any costs
or expenses incurred in connection with the closing of the Doehler-Jarvis
Toledo facility under both the DIP loan agreement and the subordinated loan
agreement unless reimbursed or anticipated to be reimbursed. It is contemplated
that the costs and expenses of the wind-down of the Doehler-Jarvis Toledo
facility will be borne by two major customers. One definitive agreement has
been reached and negotiations are currently being conducted to effect the
second customer's agreement. Definitive agreements reflecting such obligations
are subject to the consent of the DIP lenders, the Bankruptcy Court and the
Toledo unions.
ESNA. The Company believes that the 1998 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, 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 adverse 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 Racketeer
Influenced and Corrupt Organization Act, 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.
Year 2000 Compliance. Certain of the Company's information systems are
not presently compliant with the requirements of the year 2000. The Company has
committed the resources necessary to ensure that its critical information
systems and technology infrastructure are "Year 2000 Compliant" before
transactions for the year 2000 are expected. Certain of the Company's systems
will be replaced with an "Enterprise Resource Planning" (ERP) solution, which
the Company intends to implement shortly, and will be Year 2000 compliant and
provide the Company with significantly enhanced manufacturing and business
systems capability.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
10.15 Amendment No. 3 to Post-Petition Loan and Security Agreement,
dated as of April 30, 1998, among the Company and certain of
its subsidiaries and The CIT Group/Business Credit, Inc. and
other lenders therein specified.
12.1 Computation of Ratio of Earnings to Fixed Charges and Dividends
on Preferred Stock.
(b) Reports on Form 8-K:
None.
21
<PAGE>
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)
May 15, 1998 BY /s/ Roger G. Pollazzi
------------- -----------------------------------
Roger G. Pollazzi
Chief Operating Officer
May 15, 1998 BY /s/ Joseph J. Gagliardi
------------- -----------------------------------
Joseph J. Gagliardi
Senior Vice President Finance and
Chief Financial Officer
(Principal Financial Officer)
22
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
10.15 Amendment No. 3 to Post-Petition Loan and
Security Agreement, dated as of April 30,
1998, among the Company and certain of its
subsidiaries and The CIT Group/Business
Credit, Inc. and other lenders therein
specified.
12.l Computation of Ratio to Earnings to Fixed
Charges and Dividends on Preferred Stock.
27.1 Financial Data Schedule
<PAGE>
AMENDMENT NO. 3
TO
POST-PETITION LOAN AND SECURITY AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
AS AGENT AND LENDER
AND
CONGRESS FINANCIAL CORPORATION
GENERAL ELECTRIC CAPITAL CORPORATION
HELLER FINANCIAL, INC.
FINOVA CAPITAL CORPORATION
FOOTHILL CAPITAL CORPORATION
AND
BANKBOSTON, N.A.
AS LENDERS
AND
HARVARD INDUSTRIES, INC.,
THE KINGSTON-WARREN CORPORATION,
HARMAN AUTOMOTIVE, INC.,
HAYES-ALBION CORPORATION,
DOEHLER-JARVIS, INC.,
DOEHLER-JARVIS GREENEVILLE, INC.,
DOEHLER-JARVIS POTTSTOWN, INC.,
DOEHLER-JARVIS TECHNOLOGIES, INC.,
AND
DOEHLER-JARVIS TOLEDO, INC.
(AS COMPANIES)
DATED AS OF: APRIL 30, 1998
<PAGE>
AMENDMENT NO 3. (the "Amendment") dated as of April 30, 1998, by and
among HARVARD INDUSTRIES, INC., a Florida corporation and a debtor and debtor
in possession under chapter 11 of the Bankruptcy Code (herein "Harvard"),
DOEHLER-JARVIS, INC., a Delaware corporation and a debtor and debtor in
possession under chapter 11 of the Bankruptcy Code ("DJ Inc."), THE
KINGSTON-WARREN CORPORATION, a New Hampshire corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Kingston
Warren"), HARMAN AUTOMOTIVE, INC., a Michigan corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Harman
Automotive"), HAYES-ALBION CORPORATION, a Michigan corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code ("Hayes-Albion"),
DOEHLER-JARVIS GREENEVILLE, INC., a Delaware corporation and a debtor and
debtor in possession under chapter 11 of the Bankruptcy Code, DOEHLER-JARVIS
POTTSTOWN, INC., a Delaware corporation and a debtor and debtor in possession
under chapter 11 of the Bankruptcy Code ("DJ Pottstown"), DOEHLER-JARVIS
TECHNOLOGIES, INC., a Delaware corporation and a debtor and debtor in
possession under chapter 11 of the Bankruptcy Code ("DJ Technologies"),
DOEHLER-JARVIS TOLEDO, INC., a Delaware corporation and a debtor and debtor in
possession under chapter 11 of the Bankruptcy Code ("DJ Toledo"), THE CIT
GROUP/BUSINESS CREDIT, INC. ("CITBC"), as agent for the lenders whose names are
set forth on the signature pages hereto (each a "Lender" and collectively the
"Lenders" and CITBC as such agent being the "Agent") and the Lenders. Harvard
and each of the entities subsequently identified above (other than the Agent
and the Lenders) are referred to herein individually as a "Company" and
collectively as the "Companies").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Companies, the Lenders and CITBC, as Agent, are parties
to that certain Post-Petition Loan and Security Agreement, dated as of May 8,
1997 (as amended hereby and by Amendment No. 1, Waiver and Consent dated
December 29, 1997, Amendment No. 2 and Consent dated as of January 16, 1998 and
as further amended, extended, supplemented or otherwise modified from time to
time, the "DIP Financing Agreement" and capitalized terms defined in the DIP
Financing Agreement and not otherwise defined herein having the meanings
provided therein), providing for, inter alia, Term Loans and Revolving Credit
Loans to the Companies in the aggregate principal amounts of $65,000,000 for
the Term Loans and up to $110,000,000 for the Revolving Credit Loans; and
WHEREAS, the Companies have requested the Agent and the Lenders to
enter into this Amendment to extent the date for compliance set forth in
Section
<PAGE>
11.1(u) of the DIP Financing Agreement to May 31, 1998, upon the terms and
subject to the conditions contained in this Amendment; and
WHEREAS, the Lenders have agreed with the Companies to enter into this
Amendment upon the terms and subject to the conditions contained herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Amendments to the DIP Financing Agreement. Upon the
satisfaction of the condition in Section 3 of this Amendment relating to the
effectiveness of this Section 1, Section 11.1(u) of the DIP Financing
Agreements is hereby amended by replacing the reference therein to "April 30,
1998" with "May 31, 1998").
SECTION 2. Representations and Warranties. Each of the Companies
hereby represents and warrants as to itself and its Subsidiaries that (a) the
execution, delivery and performance of this Amendment have been duly authorized
by all necessary corporate action on the part of such Company and this
Amendment constitutes a legal, valid and binding obligation of such Company,
enforceable against it in accordance with its terms, (b) except as disclosed in
writing to the Agent and the lenders, no event has occurred and is continuing
on the date hereof that constitutes a Default or an Event of Default or would
constitute a Default of an Event of Default after giving effect to this
Amendment, and (c) the representations and warranties of such Company contained
in Section 6 of the DIP Financing Agreement are true and correct both before
and after giving effect to this Amendment, except to the extent such
representations and warranties are stated to be true only as of a particular
date, in which case such representations and warranties were correct on and as
of such date.
SECTION 3. Conditions to Effectiveness. The amendment in Section 1 of
this Amendment shall become effective on the date when counterparts hereof
shall have been executed by all of the Lenders, the Agent and the Companies.
SECTION 4. Effect on the DIP Financing Agreement. Except as amended
hereby, the DIP Financing Agreement and the other Post-Petition Loan Documents
shall remain in full force and effect. Nothing in this Amendment shall be
deemed to (i) constitute a waiver of compliance by any of the Companies of any
term, provision or condition of the DIP Financing Agreement or any other
instrument or agreement referred to therein or under the Post-Petition Loan
Documents or (ii) prejudice any right or remedy that Agent or any Lender may
now have or may have
2
<PAGE>
in the future under or in connection with the DIP Financing Agreement or any
other Post-Petition Loan Document.
SECTION 5. Counterparts. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which taken together constitute one and the same agreement.
SECTION 6. Governing Law. The validity, interpretation and enforcement
of this Amendment shall be governed by the law of the State of New York.
SECTION 7. Headings. Section headings in this Amendment are included
herein for the convenience of reference only and shall not constitute part of
this Amendment for any other purpose.
SECTION 8. References. References herein and in the Post-Petition Loan
Documents and the Final Order to the "DIP Financing Agreement", the
"Post-Petition Loan and Security Agreement", the "Postpetition Loan Agreement",
"this Agreement", "hereunder", "hereof", or words of like import referring to
the DIP Financing Agreement, shall mean and be a reference to the DIP Financing
Agreement as amended hereby.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their proper and duly authorized officers as of the
date set forth above. This Amendment shall take effect as of the date set forth
above after being accepted below by an officer of the Agent and the Lenders
after which, the Agent shall forward to Harvard a duly executed original for
its files.
HARVARD INDUSTRIES, INC.
THE KINGSTON-WARREN CORPORATION
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
DOEHLER-JARVIS, INC.
DOEHLER-JARVIS GREENEVILLE, INC.
DOEHLER-JARVIS POTTSTOWN, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
By: /s/ Joseph J. Gagliardi
------------------------------
Title: Chief Financial Officer
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT AND LENDER
By: /s/ Frank Grimaldi
------------------------------
Title: Vice President
CONGRESS FINANCIAL CORPORATION, AS
LENDER
By:
------------------------------
Title: First Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, AS LENDER
By:
------------------------------
Title: Duly Authorized Signatory
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed and delivered by their proper and duly authorized officers as of the
date set forth above. This Amendment shall take effect as of the date set forth
above after being accepted below by an officer of the Agent and the Lenders
after which, the Agent shall forward to Harvard a duly executed original for
its files.
HARVARD INDUSTRIES, INC.
THE KINGSTON-WARREN CORPORATION
HARMAN AUTOMOTIVE, INC.
HAYES-ALBION CORPORATION
DOEHLER-JARVIS, INC.
DOEHLER-JARVIS GREENEVILLE, INC.
DOEHLER-JARVIS POTTSTOWN, INC.
DOEHLER-JARVIS TECHNOLOGIES, INC.
DOEHLER-JARVIS TOLEDO, INC.
By:
------------------------------
Title:
THE CIT GROUP/BUSINESS CREDIT, INC.,
AS AGENT AND LENDER
By:
------------------------------
Title: Vice President
CONGRESS FINANCIAL CORPORATION, AS
LENDER
By: /s/ Lawrence S. Forte
------------------------------
Title: First Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, AS LENDER
By:
------------------------------
Title: Duly Authorized Signatory
<PAGE>
HELLER FINANCIAL, INC., AS LENDER
By: /s/ Albert J. Forzano
------------------------------
Title: Vice President
FINOVA CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Assistant Vice President
FOOTHILL CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Vice President
BANKBOSTON, N.A. AS LENDER
By:
------------------------------
Title: Vice President
<PAGE>
HELLER FINANCIAL, INC., AS LENDER
By:
------------------------------
Title: Senior Vice President
FINOVA CAPITAL CORPORATION, AS
LENDER
By: /s/ Brian Rujawitz
------------------------------
Title: Assistant Vice President
FOOTHILL CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Vice President
BANKBOSTON, N.A. AS LENDER
By:
------------------------------
Title: Vice President
<PAGE>
HELLER FINANCIAL, INC., AS LENDER
By:
------------------------------
Title: Senior Vice President
FINOVA CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Assistant Vice President
FOOTHILL CAPITAL CORPORATION, AS
LENDER
By: /s/ Matthew Simoneau
------------------------------
Title: Vice President
BANKBOSTON, N.A. AS LENDER
By:
------------------------------
Title: Vice President
<PAGE>
HELLER FINANCIAL, INC., AS LENDER
By:
------------------------------
Title: Vice President
FINOVA CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Assistant Vice President
FOOTHILL CAPITAL CORPORATION, AS
LENDER
By:
------------------------------
Title: Vice President
BANKBOSTON, N.A. AS LENDER
By: /s/ Garrett Quinn
------------------------------
Title: Vice President
<PAGE>
HARVARD INDUSTRIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
DIVIDENDS ON PREFERRED STOCK
(In thousands of dollars)
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------------- --------------------------
1998 1997 1998 1997
--------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations........ $ 54 $ (167,629) $ (2,354) $ (197,309)
Add: Fixed charges ..................................... 6,579 12,469 11,932 24,657
--------- ----------- ---------- -----------
Income as adjusted ..................................... $ 6,633 $ (155,160) $ 9,578 $ (172,652)
========= =========== ========== ===========
Fixed charges:
Interest on indebtedness ............................. $ 5,079 $ 12,144 $ 8,932 $ 24,332
Portion of rents representative of the interest factor 1,500 325 3,000 325
--------- ----------- ---------- -----------
Fixed charges ........................................ 6,579 12,469 11,932 24,657
Dividends on preferred stock and accretion ............. 4,224 8,448
--------- ----------- ---------- -----------
Fixed charges and dividends on preferred stock $ 6,579 $ 16,693 $ 11,932 $ 33,105
========= =========== ========== ===========
Ratio of earnings over fixed charges and dividends
on preferred stock ................................... 1.01x n/a n/a x n/a
Surplus (Deficiency) of earnings over fixed charges and
dividends on preferred stock ......................... $ 54 $ (171,853) $ (2,354) $ (205,757)
========= =========== ========== ===========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 12,289
<SECURITIES> 0
<RECEIVABLES> 83,750
<ALLOWANCES> 0
<INVENTORY> 39,911
<CURRENT-ASSETS> 142,442
<PP&E> 230,573
<DEPRECIATION> 113,917
<TOTAL-ASSETS> 286,033
<CURRENT-LIABILITIES> 120,647
<BONDS> 0
124,637
0
<COMMON> 70
<OTHER-SE> (556,047)
<TOTAL-LIABILITY-AND-EQUITY> 286,033
<SALES> 403,391
<TOTAL-REVENUES> 403,391
<CGS> 385,813
<TOTAL-COSTS> 385,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,932
<INCOME-PRETAX> (8,255)
<INCOME-TAX> 345
<INCOME-CONTINUING> (8,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,600)
<EPS-PRIMARY> (1.22)<F1>
<EPS-DILUTED> (1.22)
<FN>
<F1> AMOUNT REPRESENTS BASIC EARNINGS PER SHARE.
</FN>
</TABLE>
