<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
Amendment No. 1 to
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, 1999
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)
<TABLE>
<S> <C>
DELAWARE 21-0715310
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
3 WERNER WAY
LEBANON, NEW JERSEY
(ZIP CODE) 08833
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
(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 11, 1999, was 8,639,401.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets................................................................................
March 31, 1999 (Unaudited) Post-Confirmation
And September 30, 1998 (Audited) Pre-Confirmation........................................................
Consolidated Statements of Operations (Unaudited)
Three Months Ended March 31, 1999
Four Months Ended March 31, 1999 (Post-Confirmation),
Three Months Ended March 31, 1998
Two Months Ended November 29, 1998 (Pre-Confirmation)....................................................
Consolidated Statements of Cash Flows (Unaudited)
Four Months Ended March 31, 1999 (Post-Confirmation),
Six Months Ended March 31, 1998 And Two Months Ended
November 29, 1998 (Pre-Confirmation).....................................................................
Notes to Consolidated Financial Statements--(Unaudited)....................................................
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................................
PART II. Other Information:
Item 1. Legal Proceedings..................................................................................
Item 2. Changes in Securities..............................................................................
Item 3. Defaults Upon Senior Securities....................................................................
Item 4. Submission of Matters to a Vote of Securities Holders..............................................
Item 5. Other Information..................................................................................
Item 6. Exhibits and Reports on Form 8-K...................................................................
SIGNATURES.................................................................................................
</TABLE>
F-1
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 (UNAUDITED) (POST-CONFIRMATION) AND SEPTEMBER 30, 1998
(PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
---------------- -----------------
SEPTEMBER 30, MARCH 31, 1999
ASSETS 1998 (UNAUDITED)
---------------- -----------------
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................................. $ 11,624 $ 13,118
Accounts receivable, net................................................... 57,046 54,560
Inventories................................................................ 26,646 27,379
Prepaid expenses and other current assets.................................. 5,701 5,709
-------- ---------
Total current assets......................................................... 101,017 100,766
Property, plant and equipment, net........................................... 122,579 125,873
Intangible assets, net....................................................... 2,833 293,973
Other assets, net............................................................ 24,552 6,453
-------- ---------
Total assets................................................................. $250,981 $ 527,065
-------- ---------
-------- ---------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-2
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 (UNAUDITED) (POST-CONFIRMATION)
AND SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
POST-CONFIRMATION
PRE-CONFIRMATION -----------------
---------------- MARCH 31,
SEPTEMBER 30, 1999
1998 (UNAUDITED)
---------------- -----------------
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY
<S> <C> <C>
Current liabilities:
Current portion of Debtor-in-Possession (DIP) loans........................ $ 39,161 $ --
Creditors subordinated term loan........................................... 25,000 --
Short-term borrowings...................................................... -- 5,590
Current portion of long-term debt.......................................... -- 1,000
Accounts payable........................................................... 25,098 45,539
Accrued expenses........................................................... 93,337 63,962
Income taxes payable....................................................... 8,445 6,975
---------- ---------
Total current liabilities.................................................... 191,041 123,066
Liabilities subject to compromise............................................ 385,665 --
Long-term debt............................................................... -- 73,500
Postretirement benefits other than pensions.................................. 95,515 95,466
Other........................................................................ 63,353 78,952
---------- ---------
Total liabilities............................................................ 735,574 370,984
---------- ---------
Commitments and Contingencies:
14 1/4% Pay-In-Kind Exchangeable Preferred Stock,
(includes $10,142 of undeclared accrued dividends
at September 30, 1998)..................................................... 124,637 --
Shareholders' (deficiency) equity:
Common stock $.01 par value; 15,000,000 shares authorized,
7,026,437 shares issued and outstanding at September 30,
1998 and 50,000,000 shares authorized, 8,240,295 shares
issued and outstanding at March 31, 1999................................ 70 82
Additional paid-in capital................................................. 32,134 174,918
Additional minimum pension liability....................................... (8,902) --
Foreign currency translation adjustment.................................... (2,991) 195
Accumulated (deficit) retained earnings.................................... (629,541) (19,114)
---------- ---------
Total shareholders' (deficiency) equity...................................... (609,230) 156,081
---------- ---------
Total liabilities and shareholders' (deficiency) equity...................... $ 250,981 $ 527,065
---------- ---------
---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 (POST-CONFIRMATION) AND
THREE MONTHS ENDED MARCH 31, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
QUARTER ENDED QUARTER ENDED
MARCH 31, 1998 MARCH 31, 1999
---------------- -----------------
<S> <C> <C>
Sales........................................................................ $ 206,339 $ 128,727
Cost of sales................................................................ 194,091 113,670
---------- -----------
Gross profit............................................................ 12,248 15,057
Selling, general and administrative expense.................................. 15,518 10,480
Amortization of intangible assets............................................ 396 15,696
Restructuring charges........................................................ 5,842 --
Interest expense (contractual interest of $13,983 for the three months ended
March 31, 1998)............................................................ 5,079 3,064
Gain on sale of operations................................................... (15,604) --
Other (income) expense, net.................................................. 963 (89)
---------- -----------
(Loss) income before reorganization items and income taxes................... 54 (14,094)
Reorganization items......................................................... 2,959 --
---------- -----------
Loss before income taxes..................................................... (2,905) (14,094)
Provision for income taxes................................................... 176 23
---------- -----------
Net (loss).............................................................. $ (3,081) $ (14,117)
---------- -----------
---------- -----------
PIK Preferred Dividends and Accretion (contractual amount for the three
months ended March 31, 1998 was $4,763).................................... $ -- $ --
---------- -----------
---------- -----------
Net (loss) attributable to common shareholders.......................... $ (3,081) $ (14,117)
---------- -----------
---------- -----------
Basic and diluted earnings per share:
Net (loss) per share......................................................... $ (0.44) $ (1.71)
---------- -----------
---------- -----------
Weighted average number of common shares outstanding......................... 7,026,437 8,240,295
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOUR MONTHS ENDED MARCH 31, 1999 (POST-CONFIRMATION),
SIX MONTHS ENDED MARCH 31, 1998 AND
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
POST-
PRE-CONFIRMATION CONFIRMATION
-------------------------- ------------
SIX MONTHS TWO MONTHS FOUR MONTHS
ENDED ENDED ENDED
MARCH 31, NOVEMBER 29, MARCH 31,
1998 1998 1999
---------- ------------ ------------
<S> <C> <C> <C>
Sales................................................................... $ 403,391 $ 89,050 $ 168,893
Cost of sales........................................................... 385,813 79,628 149,304
---------- ---------- ----------
Gross profit.......................................................... 17,578 9,422 19,589
Selling, general and administrative expense............................. 25,353 5,151 13,501
Amortization of intangible assets....................................... 792 264 20,928
Restructuring charges................................................... 10,842 -- --
Interest expense (contractual interest for the six
months ended March 31, 1998, and for the two
months ended November 29, 1998, was $26,741 and
$6,931, respectively)................................................. 8,932 1,636 4,055
Gain on sale of operations.............................................. (26,958) -- --
Other (income) expense, net............................................. 971 (34) (96)
---------- ---------- ----------
(Loss) income before reoganization items and
income taxes.......................................................... (2,354) 2,405 (18,799)
Reorganization items.................................................... 5,901 50,384 --
---------- ---------- ----------
Loss before income taxes and extraordinary item......................... (8,255) (47,979) (18,799)
---------- ---------- ----------
Provision for income taxes.............................................. 345 584 315
---------- ---------- ----------
Loss before extraordinary item.......................................... (8,600) (48,563) (19,114)
---------- ---------- ----------
Extraordinary item--gain on forgiveness of debt......................... -- (206,363) --
---------- ---------- ----------
Net (loss) income....................................................... ($ 8,600) $ 157,800 ($ 19,114)
---------- ---------- ----------
---------- ---------- ----------
PIK Preferred Dividends and Accretion (contractual amounts for the six
months ended March 31, 1998, for the two months ended November 29,
1998 were $9,526 and $3,219, respectively)............................ $ -- $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
Net (loss) income attributable to common shareholders.............. ($ 8,600) $ 157,800 ($ 19,114)
---------- ---------- ----------
---------- ---------- ----------
Basic and diluted earnings per share:
Loss before extraordinary item.......................................... ($ 1.22) ($ 6.91) ($ 2.32)
Income from extraordinary item.......................................... -- 29.37 --
---------- ---------- ----------
Net (loss) income per share............................................. ($ 1.22) $ 22.46 ($ 2.32)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common shares outstanding.................... 7,026,437 7,026,437 8,240,295
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOUR MONTHS ENDED MARCH 31, 1999 (POST-CONFIRMATION),
SIX MONTHS ENDED MARCH 31, 1998
AND TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
POST-
PRE-CONFIRMATION CONFIRMATION
-------------------------- ------------
SIX MONTHS TWO MONTHS FOUR MONTHS
ENDED ENDED ENDED
MARCH 31, NOVEMBER 29, MARCH 31,
1998 1998 1999
---------- ------------ ------------
<S> <C> <C> <C>
Cash flows related to operating activities:
Income (loss) from operations before reorganization items............. $ (2,699) $ 1,820 $ (19,114)
Add back (deduct) items not affecting cash
and cash equivalents:
Depreciation..................................................... 13,522 3,503 3,596
Amortization..................................................... 2,540 476 21,274
Gain on sale of operation........................................ (26,958) -- --
Impairment of long-lived assets and restructuring charge......... 5,842 -- --
Loss on disposition of property, plant and equipment............. 920 -- --
Postretirement benefits.......................................... 2,332 -- --
Changes in operating assets and liabilities net of effects of
divestitures and reorganization items:
Accounts receivable.............................................. (10,905) (15,077) 15,571
Inventories...................................................... 12,379 (1,168) (225)
Other current assets............................................. 1,110 402 (410)
Accounts payable................................................. (2,123) 21,676 (1,235)
Accrued expenses and income taxes payable........................ 13,729 (23,745) 775
Other noncurrent................................................. 675 (1,412) (1,196)
-------- -------- ----------
Net cash provided by (used in) operations before reorganization items... 10,364 (13,525) 19,036
Net cash used by reorganization items................................... (4,397) (4,018) (5,318)
-------- -------- ----------
Net cash provided by (used in) operations............................... 5,967 (17,543) 13,718
-------- -------- ----------
Cash flows related to investing activities:
Acquisition of property, plant and equipment.......................... (6,403) (2,856) (7,832)
Net proceeds from sale of operation................................... 19,428 -- 3,553
-------- -------- ----------
Net cash provided by (used in) investing activities..................... 13,025 (2,856) (4,279)
-------- -------- ----------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing agreement............. $(38,277) $ 1,062 $ --
Repayments of long-term debt.......................................... (83) -- --
Payment of EPA settlements............................................ (55) -- --
Net borrowings (repayments) under financing/credit agreement.......... -- 81,425 (1,335)
Retirement of DIP financing........................................... -- (40,360) --
Retirement of creditors unsecured term loan........................... -- (25,000) --
Proceeds from creditors subordinated term loan, net of financing costs
of $2,500.......................................................... 22,500 -- --
Deferred financing costs.............................................. -- (3,338) --
-------- -------- ----------
Net cash (used in) provided by financing activities..................... (15,915) 13,789 (1,335)
-------- -------- ----------
Net increase (decrease) in cash and cash equivalents.................... 3,077 (6,610) 8,104
Cash and cash equivalents, beginning of period.......................... 9,212 11,624 5,014
-------- -------- ----------
Cash and cash equivalents, end of period................................ $ 12,289 $ 5,014 $ 13,118
-------- -------- ----------
-------- -------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION AND EMERGENCE FROM BANKRUPTCY
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments and fresh start reporting
adjustments) considered necessary for a fair presentation have been included.
Operating results for the four month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the period ending
September 30, 1999. The balance sheet at September 30, 1998 has been derived
from the audited financial statements at that date. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended September 30, 1998.
On November 24, 1998 (the "Effective Date") the Company emerged from
Chapter 11 reorganization under the United States Bankruptcy Code. On the
Effective Date, pursuant to the Company's First Amended Modified Consolidated
Plan under Chapter 11 of the Bankruptcy Code ("Plan of Reorganization"),
substantially all pre-petition unsecured debt of pre-reorganization Harvard was
converted into equity of post-reorganization Harvard in the form of common stock
(the "New Common Stock"). Each one hundred dollars ($100) of pre-petition debt
allowed as a claim by the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") is entitled to receive 2.66667 shares of New
Common Stock. Under the terms of the Plan of Reorganization, holders of
Harvard's Pay-In-Kind Exchangeable Preferred ("PIK Preferred Stock") and holders
of Harvard's then existing common stock (the "Old Common Stock") have each
received warrants ("Warrants") to acquire, in the aggregate, approximately 5% of
the New Common Stock, with holders of PIK Preferred Stock each receiving their
pro rata share of 66.67% of the Warrants and holders of the Old Common Stock
each receiving their pro rata share of 33.33% of the Warrants. On the Effective
Date, the Old Common Stock and PIK Preferred Stock were canceled in their
entirety.
In connection with its emergence from Chapter 11 bankruptcy proceedings,
the Company implemented "Fresh Start Reporting," as of November 29, 1998 (its
normal interim closing date), as set forth in Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7), issued by the American Institute of Certified Public Accountants.
"Fresh Start Reporting" was required because there was more than a 50% change in
the ownership of the Company. Accordingly, all assets and liabilities were
restated to reflect their respective fair values. Consolidated financial
statement amounts for post-confirmation periods will be segregated by a black
line in order to signify that such consolidated statements of operations,
stockholders' equity (deficiency) and cash flows are those of a new reporting
entity and have been prepared on a basis not comparable to the pre-confirmation
periods. The Company, in accordance with SOP 90-7, has followed the accounting
and reporting guidelines for companies operating as debtor-in-possession since
its filing for bankruptcy protection on May 8, 1997 and until its emergence from
bankruptcy protection as described above.
The reorganization value of the Company was determined by management, with
assistance from Chanin Kirkland Messina LLC, independent financial
professionals. The methodology employed involved estimation of enterprise value
(i.e., the market value of the Company's debt and stockholders' equity which was
determined to be $275,000), taking into account a discounted cash flow analysis
(Enterprise Value). The discounted cash flow analysis was based on five-year
cash flow projections prepared by management and average discount rates of 5.34
percent. The reorganization value of the Company was determined to be $552,428
as of November 29, 1998 (Reorganization Value).
F-7
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION AND EMERGENCE FROM BANKRUPTCY--(CONTINUED)
The reorganization value of the Company has been allocated to specific
asset categories as follows:
<TABLE>
<S> <C>
Current assets......................................................................... $110,250
Property, plant and equipment.......................................................... 121,516
Other noncurrent assets................................................................ 5,761
Reorganization value in excess of amounts allocable to identifiable assets............. 314,901
--------
$552,428
--------
--------
</TABLE>
Current assets have been recorded at their historical carrying values.
Property, plant and equipment have been recorded at their appraised value as
determined by an independent appraisal performed by Norman Levy Associates,
Inc., independent appraiser, based on "orderly liquidation value," which assumes
that the assets will be used for the purpose for which they were designed and
constructed. Property held for sale is valued at net realizable value. Other
noncurrent assets are stated at historical carrying values which approximate
fair value. The portion of the reorganization value which cannot be attributed
to specific tangible or identifiable intangible assets of the reorganized
Company has been reported as "Reorganization value in excess of amounts
allocable to identifiable assets." This intangible asset is being amortized
using the straight-line method over 5 years. The Company selected a useful life
of 5 years based on the Company's previous experience, methodologies employed by
independent financial experts and the Company's turnaround business strategy.
The Company evaluates whether changes have occurred that would require revision
of the remaining estimated useful life of the reorganization value in excess of
amounts allocable to identifiable assets or render such assets not recoverable.
The effect of the Plan on the Company's consolidated balance sheet as of
November 29, 1998 was as follows:
<TABLE>
<CAPTION>
ADJUSTMENTS TO RECORD EFFECTS OF THE PLAN
------------------------------------------------------------
PRE- POST-
CONFIRMATION CONFIRMATION
CONSOLIDATED REORGANIZATION FRESH START CONSOLIDATED
BALANCE SHEET ADJUSTMENTS ADJUSTMENTS BALANCE SHEET
------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Current assets...................................... $ 110,250 $ -- $ -- $ 110,250
Property, plant and equipment, net.................. 117,816 -- 3,700 121,516
Intangible assets, net.............................. 2,569 -- (2,569) --
Other assets, net................................... 3,645 -- 2,116 5,761
Reorganization value in excess of amounts allocable
to identifiable assets............................ -- -- 314,901 314,901
--------- -------- --------- ---------
$ 234,280 -- $ 318,148 $ 552,428
--------- -------- --------- ---------
--------- -------- --------- ---------
Current liabilities................................. $ 193,973 $ -- ($ 71,155) $ 122,818
Liabilities subject to compromise................... 381,363 (381,363) -- --
Long-term debt...................................... 200 -- 81,225 81,425
Post retirement benefits other than pension......... 95,466 -- -- 95,466
Other............................................... 77,719 -- -- 77,719
14 1/4% PIK exchangeable preferred stock............ 124,637 -- (124,637) --
Common stock........................................ 70 82 (70) 82
Additional paid-in capital.......................... 32,134 174,918 (32,134) 174,918
Additional minimum pension liability................ (8,902) -- 8,902 --
Foreign currency translation adjustments............ (3,163) -- 3,163 --
Accumulated deficit................................. (659,217) 206,363 452,854 --
--------- -------- --------- ---------
$ 234,280 $ -- $ 318,148 $ 552,428
--------- -------- --------- ---------
--------- -------- --------- ---------
</TABLE>
F-8
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION AND EMERGENCE FROM BANKRUPTCY--(CONTINUED)
Reorganization adjustments reflect the conversion of both the 12% Notes and
the 11 1/8% Notes and the related accrued interest as of May 7, 1997 and other
prepetition trade payables into new common stock resulting in an extraordinary
gain of $206,363. Fresh start adjustments reflect the adjustments to state
assets and liabilities at their respective fair values which resulted in a net
fair value adjustment of $50,431, which adjustment, net of interest income of
$47, has been shown as a reorganization item. All of the reorganization and
fresh start adjustments have been reflected in the consolidated statement of
operations for the two months ended November 29, 1998.
The following table summarizes unaudited pro forma financial information as
if the Plan of Reorganization had become effective on October 1, 1998. The
unaudited pro forma financial information combines the Company's operations for
the two months ended November 29, 1998 with the four months ended March 31, 1999
and contains adjustments for depreciation expense, pension expense and the
amortization of reorganization value in excess of amounts allocable to
identifiable assets. The unaudited pro forma financial information does not
purport to be indicative of the results which would have been obtained had the
Plan been effective as of October 1, 1998, or which may be obtained in the
future.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, 1999
(UNAUDITED)
--------------
<S> <C>
Sales............................................................... $257,943
--------
--------
Net loss............................................................ ($25,667)
--------
--------
Loss per common share............................................... ($ 3.11)
--------
--------
</TABLE>
The net loss is before reorganization items.
Continuation of the Company's business after reorganization is dependent
upon the success of future operations, including execution of the company's
turnaround business strategy and the ability to meet obligations as they become
due. The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and at March 31, 1999 had a net working capital deficit.
These factors among others raise substantial doubt about the Company's ability
to achieve successful future operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
2. DISPOSITION OF BUSINESSES
Condensed operating data of operations disposed or being disposed of are as
follows:
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
------------------------ -----------------
SIX MONTHS TWO MONTHS FOUR MONTHS
ENDED ENDED ENDED
MARCH 31, NOVEMBER MARCH 31,
1998 29, 1998 1999
---------- ---------- -----------------
<S> <C> <C> <C>
Sales.................................. $169,288 $8,389 $12,258
Gross (loss)........................... (237) (1,534) (3,038)
</TABLE>
On January 28, 1999, the Company sold the land, building, and certain other
assets of its Tiffin, Ohio facility for gross proceeds of approximately
$1.5 million. The Company has pursued a sale of its Ripley, Tennessee facility,
during fiscal 1999, as a result of its changed market outlook for magnesium
products. Such efforts did not result in any acceptable offers and as a result,
in April 1999, the company announced its intention to shut down the facility
in August 1999 after customer requirements are fulfilled. The carrying value of
long-lived assets at March 31, 1999 was approximately $4.8 million and such
amount, net of estimated recovery, will be depreciated through the shutdown
date.
F-9
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
3. INVENTORIES
Inventories consist of the following-
<TABLE>
<CAPTION>
POST-CONFIRMATION
PRE-CONFIRMATION -----------------
---------------- MARCH 31,
SEPTEMBER 30, 1999
1998 (UNAUDITED)
---------------- -----------------
<S> <C> <C>
Finished goods..................................................... $ 6,476 $ 8,598
Work-in-process.................................................... 2,078 2,213
Tooling............................................................ 5,991 3,639
Raw materials...................................................... 12,101 12,929
-------- -------
Total inventories.................................................. $ 26,646 $27,379
-------- -------
-------- -------
</TABLE>
4. LONG-TERM DEBT AND CREDIT AGREEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
---------------- -----------------
SEPTEMBER 30, MARCH 31,
1998 1999
---------------- -----------------
(UNAUDITED)
<S> <C> <C>
14 1/2% Senior Secured Notes Due 2003(a)................. $ -- $25,000
Senior Secured Credit Facility(b)........................ -- 49,500
-------- -------
Total long-term debt................................ -- 74,500
Less current portion..................................... -- 1,000
-------- -------
Long-term portion........................................ $ -- $73,500
-------- -------
-------- -------
</TABLE>
- ------------------
(a) On November 24, 1998, the Company issued $25,000 of 14 1/2% Senior Secured
Notes (the "Notes") due September 1, 2003. The Notes were issued pursuant to
an indenture by and among the Company and Guarantors, which are subsidiaries
of the Company, and Norwest Bank Minnesota, National Association, as
Trustee. In addition to the stated coupon interest rate the Notes have a
Cash Flow Participation Interest provision which entitles the holder to
additional interest computed as a percentage of consolidated cash flow as
set forth in the indenture. This interest can be no less than $1,000 for any
12 month period. The Notes are subject to restrictive covenants for
Consolidated Leverage Ratio and Consolidated Interest Coverage Ratio, as
defined.
(b) On November 24, 1998 the Company entered into a $115,000 senior credit
facility that provides for up to $50,000 in term loan borrowings and up to
$65,000 of revolving credit borrowings. The term loan has an interest rate
equal to the base rate (prime rate) plus 2.250% or the Eurdollar base rate
(Eurodollar loan rate) plus 3.500%. The term loan has 16 quarterly
installment payments of principal in the amount of $250 commencing on
December 31, 1998 with the balance of the loan due on September 30, 2002.
The revolver has an interest rate of the base rate plus 2.125% or the
Eurodollar base rate plus 3.375%. The revolving credit facility terminates
on November 24, 2001. The senior credit facility is subject to restrictive
covenants for Consolidated Leverage Ratio, Consolidated interest Coverage
Ratio and Fixed Charge Ratio, as defined.
5. EARNINGS PER COMMON SHARE
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
which became effective for fiscal 1998, established new standards for computing
and presenting earnings per share (EPS). The new standard requires the
presentation of basic EPS and diluted EPS and the restatement of previously
reported EPS amounts.
F-10
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
5. EARNINGS PER COMMON SHARE--(CONTINUED)
Basic EPS is calculated by dividing income available to common shareholders
by the weighted average number of shares of common stock outstanding during the
period. Diluted EPS is calculated by dividing income available to common
shareholders, adjusted to add back dividends or interest on convertible
securities, by the weighted average number of shares of common stock outstanding
plus additional common shares that could be issued in connection with
potentially dilative securities. Income (loss) available to common shareholders
used in determining both basic and diluted EPS was ($19,114) for the four months
ended March 31, 1999, $157,800 for the two months ended November 29, 1998,
($8,600) for the six months ended March 31, 1998 and ($14,117) and ($3,081) for
the three months ended March 31, 1999 and 1998, respectively. The weighted
average number of shares of common stock used in determining basic and diluted
EPS was 8,240,295 for the four months ended March 31, 1999, 7,026,437 for the
two months ended November 29, 1998, 7,026,437 for the six months ended
March 31, 1998 and 8,240,295 for the three months ended March 31, 1999 and
7,026,437 for the three months ended March 31, 1998 respectively.
Although on May 11, 1999, 8,639,401 of the Company's 50,000,000 authorized
shares were outstanding, the Company's Chapter 11 Plan of Reorganization
requires it to issue additional shares to certain claimants in the Bankruptcy
case. The exact number of shares to be issued is presently unknown, as certain
claims are unliquidated and others are disputed as to amount or validity.
However, management estimates that approximately 3,350,000 additional shares
will be issued in the process of resolving claims. The issuance of additional
shares will not involve additional consideration, and therefore no accounting
recognition other than the impact on outstanding share and per share amounts is
expected.
The Company's Plan of Reorganization also provides for holders of its Old
Common Stock and PIK Preferred Stock to receive in the aggregate approximately
633,000 warrants, expiring November 23, 2003, permitting the purchase of new
common shares at an exercise price of $41.67 per share.
Seven members of the Company's Board of Directors have each been granted
20,000 shares which vest over five (5) years. A total of 120,000 shares will be
issued as one director declined the grant.
An incentive plan has been authorized by the Board of Directors providing
for a grant of options to certain members of senior management. No shares have
yet been awarded under this plan. At its December, 1998 meeting, the Board of
Directors approved a schedule of the number of option grants to be made to
individual member of senior management and board members and established an
exercise price. However the options have not yet been awarded. The above
options, warrants and shares to be issued have been excluded from the
computation of earnings per share as their effect would be antidilutive.
6. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," which is effective for fiscal years beginning after
December 15, 1997. Reclassification of financial statements for earlier periods
is required.
<TABLE>
<CAPTION>
PRE-CONFIRMATION POST-CONFIRMATION
-------------------------- -----------------
SIX MONTHS TWO MONTHS FOUR MONTHS
ENDED ENDED ENDED
MARCH 31, NOVEMBER 29, MARCH 31,
1998 1998 1999
---------- ------------ -----------------
<S> <C> <C> <C>
Net income (loss).................................................. $ (8,600) $157,800 $ (19,114)
Other comprehensive income, net of tax:
Foreign currency translation adjustment.......................... (2,179) -- 195
-------- -------- ---------
Comprehensive income (loss)...................................... $(10,779) $157,800 $ (18,919)
-------- -------- ---------
-------- -------- ---------
</TABLE>
F-11
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
7. GUARANTOR SUBSIDIARIES
Both the $115,000 Senior Credit Facility and the 14 1/2% Senior Secured
Notes are unconditionally guaranteed (collectively, the "Guarantees") jointly
and severally on a senior basis, by each of the Company's domestic subsidiaries
(the "Subsidiary Guarantors"). The Senior Credit Facility is secured by a first
priority security interest and the Senior Secured Notes are senior obligations
of the Subsidiary Guarantors (including indebtedness incurred under the Senior
Credit Facility) and rank senior to all existing and future subordinated
obligations of such Subsidiary Guarantors. The Senior Secured Notes are secured
by a second priority security interest in substantially all of the tangible
property (and all of the capital stock of the Subsidiary Guarantors) of the
Company and the Subsidiary Guarantors and all proceeds thereof. Harvard's
Canadian Subsidiary, Trim Trends Canada, Ltd. has pledged a majority of its
common stock under the Guarantees.
The claims of the creditors (including trade creditors) of any subsidiary
that is not a Subsidiary Guarantor, (i.e. Trim Trends Canada, Ltd.) generally
have priority as to the assets of such subsidiaries over the claims of the
holders of the Notes.
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 inter-company
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, 1999 (Post-Confirmation)
and September 30, 1998 (Pre-Confirmation) and condensed statements of
operations and cash flows for the four months ended March 31, 1999
(Post-Confirmation), the six months ended March 31, 1998 and two months
ended November 29, 1998 (Pre-Confirmation).
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 two months ended November 29, 1998 and
the six months ended March 31, 1998.
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.
F-12
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS (UNAUDITED)
MARCH 31, 1999 (POST-CONFIRMATION)
(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................. $ 1,622 $ 11,486 $ 10 $ 13,118
Accounts receivable, net.................. (1) 49,773 4,788 54,560
Inventories............................... -- 26,243 1,136 27,379
Prepaid expenses and other current
assets................................. 3,166 2,524 19 5,709
-------- -------- ------- ---------- --------
Total current assets........................ 4,787 90,026 5,953 100,766
Investment in subsidiaries.................. (17,414) 16,230 -- 1,184 --
Property, plant and equipment, net.......... 2,137 115,756 7,980 125,873
Intangible assets, net...................... -- 293,973 -- 293,973
Intercompany receivables.................... 197,709 -- 11,842 (209,551) --
Other assets, net........................... 6,441 12 -- 6,453
-------- -------- ------- ---------- --------
Total assets................................ $193,660 $515,997 $25,775 ($ 208,367) $527,065
-------- -------- ------- ---------- --------
-------- -------- ------- ---------- --------
</TABLE>
See accompanying notes to the consolidated financial statements.
F-13
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS (UNAUDITED)
MARCH 31, 1999 (POST-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings..................... $ -- $ 5,590 $ -- $ 5,590
Current portion of long-term debt......... -- 1,000 -- 1,000
Accounts payable.......................... 5,898 36,273 3,368 45,539
Accrued expenses.......................... 8,265 54,620 1,077 63,962
Income taxes payable...................... 34 6,941 -- 6,975
-------- -------- --------- ---------- --------
Total current liabilities................... 14,197 104,424 4,445 123,066
-------- -------- --------- ---------- --------
Long-term debt.............................. -- 73,500 -- 73,500
Postretirement benefits other than
pensions.................................. -- 95,466 -- 95,466
Intercompany payables....................... 8,299 196,152 5,100 (209,551) --
Other....................................... 15,083 63,869 -- 78,952
-------- -------- --------- ---------- --------
Total Liabilities........................... 37,579 533,411 9,545 (209,551) 370,984
-------- -------- --------- ---------- --------
Shareholders' Equity (Deficiency):
Common stock and additional paid-in-
capital................................ 175,000 (2,526) 15,578 (13,052) 175,000
Foreign current translation adjustment.... 195 195 195 (390) 195
Retained earnings (deficiency)............ (19,114) (15,083) 457 14,626 (19,114)
-------- -------- --------- ---------- --------
Total shareholders' equity (deficiency)..... 156,081 (17,414) 16,230 1,184 156,081
-------- -------- --------- ---------- --------
Total liabilities and shareholders' equity
(deficiency).............................. $193,660 $515,997 $ 25,775 $ (208,367) $527,065
-------- -------- --------- ---------- --------
-------- -------- --------- ---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
(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................ $ 10,229 $ 1,395 $ -- $ -- $ 11,624
Accounts receivable, net................. 2,217 50,990 3,839 -- 57,046
Inventories.............................. 1,720 24,177 749 -- 26,646
Prepaid expenses and other current
assets................................ 1,982 3,702 17 -- 5,701
-------- -------- ------- ------------ --------
Total current assets....................... 16,148 80,264 4,605 -- 101,017
-------- -------- ------- ------------ --------
Investment in subsidiaries................. (262,212) 14,653 -- 247,559 --
Property, plant and equipment, net......... 2,755 112,057 7,767 -- 122,579
Intangible assets,net...................... -- 2,833 -- -- 2,833
Intercompany receivables................... 600,848 524,198 14,625 (1,139,671) --
Other assets, net.......................... 23,211 1,341 -- -- 24,552
-------- -------- ------- ------------ --------
Total assets............................... $380,750 $735,346 $26,997 (892,112) $250,981
-------- -------- ------- ------------ --------
-------- -------- ------- ------------ --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current portion of (DIP) loans............ $ -- $ 39,161 $ -- $ -- $ 39,161
Creditors subordinated term loan.......... -- 25,000 -- -- 25,000
Accounts payable.......................... 2,382 19,812 2,904 -- 25,098
Accrued expenses.......................... 12,285 81,104 (52) -- 93,337
Income taxes payable...................... 8,144 169 132 -- 8,445
-------- -------- ------- ---------- --------
Total current liabilities................... 22,811 165,246 2,984 -- 191,041
Liabilities subject to compromise (a)....... 385,665 -- -- -- 385,665
Postretirement benefits other than
pensions.................................. 81,949 13,566 -- -- 95,515
Intercompany payables....................... 351,525 779,115 9,031 (1,139,671) --
Other....................................... 23,393 39,631 329 -- 63,353
-------- -------- ------- ---------- --------
Total liabilities........................... 865,343 997,558 12,344 (1,139,671) 735,574
-------- -------- ------- ---------- --------
PIK preferred............................... 124,637 -- -- -- 124,637
-------- -------- ------- ---------- --------
Shareholders' equity (deficiency):
Common stock and additional
paid-in-capital........................ 32,204 16,937 10 (16,947) 32,204
Additional minimum pension liability...... (8,902) (8,902) -- 8,902 (8,902)
Foreign current translation adjustment ... (2,991) (2,991) (2,991) 5,982 (2,991)
Retained earnings (deficiency)............ (629,541) (267,256) 17,634 249,622 (629,541)
-------- -------- ------- ---------- --------
Total shareholders' equity (deficiency)..... (609,230) (262,212) 14,653 247,559 (609,230)
-------- -------- ------- ---------- --------
Total liabilities and shareholders' equity
(deficiency).............................. $380,750 $735,346 $26,997 $ (892,112) $250,981
-------- -------- ------- ---------- --------
-------- -------- ------- ---------- --------
</TABLE>
- ------------------
(a) Includes $309,728 senior notes payable and accrued interest which are
subject to the guaranty of the combined guarantor subsidiaries.
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
FOUR MONTHS ENDED MARCH 31, 1999 (POST-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales........................................ $ -- $162,124 $ 6,769 $ -- $168,893
-------- -------- ------- -------- --------
Costs and expenses:
Cost of sales.............................. -- 143,674 5,630 -- 149,304
Selling, general and administrative........ 4,090 9,411 -- -- 13,501
Interest expense........................... -- 4,046 9 -- 4,055
Amortization of intangible assets.......... -- 20,928 -- -- 20,928
Other (income) expense, net................ (74) (343) 321 -- (96)
Equity in (income) loss of subsidiaries.... 15,083 (457) -- (14,626) --
Allocated expenses......................... -- -- -- -- --
-------- -------- ------- -------- --------
Total costs and expenses................ 19,099 177,259 5,960 (14,626) 187,692
-------- -------- ------- -------- --------
Income (loss) before income taxes............ (19,099) (15,135) 809 14,626 (18,799)
Provision for income taxes................... 15 (52) 352 -- 315
-------- -------- ------- -------- --------
Net income (loss)....................... $(19,114) $(15,083) $ 457 $ 14,626 $(19,114)
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS 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
Restructuring charges...................... 5,000 5,842 -- -- 10,842
Gain on sale of operation.................. (1,605) (25,353) -- -- (26,958)
Amortization of goodwill................... -- 792 -- -- 792
Other (income) expense, net................ (860) 1,626 205 -- 971
Equity in (income) 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
-------- -------- ------- ------ --------
Income (loss) before income taxes and
reorganization items....................... (2,623) (3,199) (263) 3,731 (2,354)
Reorganization items......................... 5,977 (76) -- -- 5,901
-------- -------- ------- ------ --------
Income (loss) before income taxes............ (8,600) (3,123) (263) 3,731 (8,255)
Provision for income taxes................... -- 345 -- -- 345
-------- -------- ------- ------ --------
Net gain (loss)......................... $ (8,600) $ (3,468) $ (263) $3,731 $ (8,600)
-------- -------- ------- ------ --------
-------- -------- ------- ------ --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales....................................... $ -- $ 85,550 $ 3,500 $ 89,050
-------- -------- ------- -------- --------
Costs and expenses:
Cost of sales............................. -- 76,774 2,854 79,628
Selling, general and administrative....... 2,230 2,921 5,151
Interest expense.......................... 1,636 (3) 3 1,636
Restructuring charges:
Gain on sale of operation.................
Amortization of goodwill.................. 264 0 264
Other (income) expense, net................. (198) 164 (34)
Equity in (income) loss of subsidiaries..... (1,376) (269) 1,645 --
Allocated expenses.......................... (20) 20 --
-------- -------- ------- -------- --------
Total costs and expenses............... 2,470 79,509 3,021 1,645 86,645
-------- -------- ------- -------- --------
Income (loss) before income taxes and
reorganization items...................... (2,470) 6,041 479 (1,645) 2,405
Reorganization items........................ 45,793 4,591 -- -- 50,384
-------- -------- ------- -------- --------
Income (loss) before income taxes........... (48,263) 1,450 479 (1,645) (47,979)
Provision for income taxes.................. 300 74 210 -- 584
-------- -------- ------- -------- --------
Net loss before extraordinary item.......... (48,563) 1,376 269 (1,645) (48,563)
Extraordinary item.......................... 206,363 -- -- -- 206,363
-------- -------- ------- -------- --------
Net income (loss)...................... $157,800 $ 1,376 $ 269 ($ 1,645) $157,800
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
FOUR MONTHS ENDED MARCH 31, 1999 (POST-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from operations before reorganization
items................................... $(19,114) $(15,083) $ 457 $ 14,626 $(19,114)
Add back (deduct) items not affecting cash
and cash equivalents:
Equity in (income) loss of
subsidiaries.......................... 15,083 (457) -- (14,626) --
Depreciation and amortization.............. 23 24,463 384 -- 24,870
Changes in operating assets and liabilities
net of effects from reorganization
items:
Accounts receivable..................... 564 15,091 (84) -- 15,571
Inventories............................. -- 260 (485) -- (225)
Other current assets.................... (1,654) 1,143 101 -- (410)
Accounts payable........................ (683) (1,252) 700 -- (1,235)
Accrued expenses and income taxes
payable............................... 5,822 (5,662) 615 -- 775
Other noncurrent........................ (2,787) 3,269 (1,678) -- (1,196)
-------- -------- ------- -------- --------
Net cash provided by (used in) operations
before reorganization items................ (2,746) 21,772 10 -- 19,036
Net cash provided by (used in) reorganization
items...................................... -- (5,318) -- -- (5,318)
-------- -------- ------- -------- --------
Net cash provided by (used in) operations ... (2,746) 16,454 10 -- 13,718
-------- -------- ------- -------- --------
Cash flows related to investing activities:
Acquisition of property, plant and
equipment............................... -- (7,832) -- -- (7,832)
Net proceeds from sale of operation.......... -- 3,553 -- -- 3,553
-------- -------- ------- -------- --------
Net cash provided by (used in) investing
activities................................. $ -- $ (4,279) $ -- $ -- $ (4,279)
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS (POST-CONFIRMATION)
FOUR MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to financing activities:
Net borrowings (repayments) under
financing/credit agreement.............. $ -- $ (1,335) $-- $ -- $ (1,335)
------- -------- --- -------- --------
Net cash provided by (used in) financing
activities.............................. -- (1,335) -- -- (1,335)
------- -------- --- -------- --------
Net increase (decrease) in cash and cash
equivalents................................ (2,746) 10,840 10 -- 8,104
Cash and cash equivalents:
Beginning of period........................ 4,368 646 -- -- 5,014
------- -------- --- -------- --------
End of period.............................. $1,622 $ 11,486 $10 $ -- $ 13,118
------- -------- --- -------- --------
------- -------- --- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from operations 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 charge.................. -- 5,842 -- 5,842
Gain on sale of operation................ (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 noncurrent......................... (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 operation........ 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................................ $ (1,335) $(36,942) $ -- $ -- $(38,277)
Proceeds of creditors subordinated term
loan, net of financing costs of $2,500... 22,500 -- -- -- 22,500
Advance payment from customer.............. -- -- -- -- --
Repayments of long-term debt............... -- (83) -- -- (83)
Repayment 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>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COMBINED COMBINED
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows related to operating activities:
Loss from operations before reorganization
items.................................... $ (9,355) $ 4,331 $ 269 $ 6,575 $ 1,820
Add back (deduct) items not affecting cash
and cash equivalents:
Equity in (income) loss of subsidiaries.. 6,844 (269) -- (6,575) --
Depreciation and amortization............ 12 3,799 168 -- 3,979
Gain on sale of operation................ -- -- -- -- --
Loss on disposition of property, plant
and equipment......................... -- -- -- -- --
Postretirement benefits.................. -- -- -- -- --
Changes in operating assets and liabilities
net of effects from reorganization items:
Accounts receivable...................... 1,654 (12,667) (4,064) -- (15,077)
Inventories.............................. 1,720 (2,986) 98 -- (1,168)
Other current assets..................... 470 35 (103) -- 402
Accounts payable......................... 4,199 17,713 (236) -- 21,676
Accrued expenses and income taxes
payable............................... (16,671) (7,456) 382 -- (23,745)
Other noncurrent......................... 5,266 (10,164) 3,486 -- (1,412)
-------- -------- ------- -------- --------
Net cash provided by (used in) operations
before reorganization items................ (5,861) (7,664) -- -- (13,525)
Net cash provided by (used in) reorganization
items...................................... -- (4,018) -- -- (4,018)
-------- -------- ------- -------- --------
Net cash provided by (used in) operations.... (5,861) (11,682) -- -- (17,543)
-------- -------- ------- -------- --------
Cash flows related to investing activities:
Acquisition of property, plant and
equipment................................ -- (2,856) -- -- (2,856)
Net proceeds from sale of operation.......... -- -- -- -- --
-------- -------- ------- -------- --------
Net cash provided by (used in) investing
activities................................. -- (2,856) -- -- (2,856)
-------- -------- ------- -------- --------
Cash flows related to financing activities:
Deferred financing cost.................... $ -- $ (3,338) $ -- $ -- $ (3,338)
Net borrowings (repayments) under DIP
financing................................ -- 1,062 -- -- 1,062
Net borrowings (and repayments) under
financing/credit agreement............... -- 81,425 -- -- 81,425
Retirement of DIP financing................ -- (40,360) -- -- (40,360)
Retirement of creditors unsecured term
loan..................................... -- (25,000) -- -- (25,000)
-------- -------- ------- -------- --------
Net cash provided by (used in) financing
activities................................. -- 13,789 -- -- 13,789
-------- -------- ------- -------- --------
Net increase (decrease) in cash and cash
equivalents................................ (5,861) (749) -- -- (6,610)
Cash and cash equivalents:
Beginning of period........................ 10,229 1,395 -- -- 11,624
-------- -------- ------- -------- --------
End of period.............................. $ 4,368 $ 646 $ -- $ -- $ 5,014
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<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
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, 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
General
Effective November 24, 1998, the Company emerged from Chapter 11 bankruptcy
proceedings and implemented "Fresh Start Reporting" as of November 29, 1998 (its
normal interim closing date). Accordingly, all assets and liabilities were
restated to reflect their respective fair values. The consolidated financial
statements after that date are those of a new reporting entity and are not
comparable to the Pre-Confirmation periods. However, for purposes of this
discussion, the four months ended March 31, 1999 (Post-Confirmation) were
combined with the two months ended November 29, 1998 (Pre-Confirmation) and then
compared to the six months ended March 31, 1998. Differences between periods due
to "Fresh Start Reporting" adjustments are explained when necessary. The
following table is included solely for use in comparative analysis of results of
operations, and to complement management's discussion and analysis.
F-24
<PAGE>
Six Months Ended March 31, 1999 compared to the Six Months Ended March 31,
1998.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1999 1998
--------- ---------
<S> <C> <C>
Sales..................................................................................... $ 257,943 $ 403,391
Cost of Sales............................................................................. 228,932 385,813
--------- ---------
Gross profit......................................................................... 29,011 17,578
Selling, General and Administrative Expenses.............................................. 18,652 25,353
--------- ---------
Operating income (loss)(a)........................................................... 10,359 (7,775)
Interest Expense.......................................................................... 5,691 8,932
Amortization of intangible assets......................................................... 21,192 792
Restructuring Charges..................................................................... -- 10,842
(Gain) on Sale of Operation............................................................... -- (26,958)
Other (Income) Expense, Net............................................................... (130) 971
--------- ---------
Income (loss) before Income Taxes, Reorganization Items and Extraordinary Item....... (16,394) (2,354)
Reorganization Items...................................................................... 50,384 5,901
Provision for Income Taxes................................................................ 899 345
Extraordinary Item........................................................................ (206,363) --
--------- ---------
Net income (loss).................................................................... $ 138,686 ($ 8,600)
--------- ---------
--------- ---------
</TABLE>
- ------------------
(a) Included depreciation expense of $7,099 and $13,522 for the six months ended
March 31, 1999 and March 31, 1998, respectively.
Due to the long gestation between the time that an OEM customer awards the
Company a contract to produce parts for a new platform and the time the Company
produces those parts (in almost all instances 2 to 4 years), and the
considerable designing and planning obligations required of the successful
bidder during this period of delay, OEMs were reluctant to award new business to
the Company during the pendency of the Company's Chapter 11 case. As a result,
the awarded new business during the pendency of the Chapter 11 case was less
than would be anticipated under normal conditions. This could have serious
effects on the financial strength of the Company in the next several years when
the recently awarded platforms commence production. Such effects, if
experienced, will occur over that extended future period; the Company has not
yet experienced such effects sufficiently to be able to furnish more specific
estimates of the timing or amount thereof.
Sales. Sales decreased $145,448 from $403,391 to $257,943 or 36.1%.
Aggregate sales for the operations designated for sale or wind down decreased
approximately $148,641 from $169,288 to $20,647 as the Company's divestiture
program as contemplated under the Company's Plan of Reorganization nears
completion. Sales for the remaining operations increased $3,193 from $234,103 to
$237,296 as strong light truck demand was partially offset by the wind down of
older programs.
Gross Profit. Gross margin, expressed as a percentage of sales, increased
from 4.4% to 11.2%, or $11,433. The gross (loss) for operations designated for
sale or wind-down increased from ($237) to ($805). After adjusting 1999 results
for $3,767 of operating losses charged to loss contract reserves established in
the fourth quarter of fiscal 1998, reported operating losses for 1999 would have
been $4,572. Gross (loss) increased by approximately $4,300 due to one-time
tooling profits of approximately $1,900 in 1998 and significantly lower volume
in 1999 as a result of the divestiture program. The increase of $12,001 in gross
profit for the remaining operations was mainly due to improved operating
efficiencies, strong light truck demand and management's focus on higher margin
business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $25,353 to $18,652 due to reduced levels
of staffing and spending as a result of the reorganization program implemented
by current management and the 1998 charge of $5,000 for the purchase and
implementation of enterprise software (see Year 2000 Readiness).
F-25
<PAGE>
Interest Expense. Interest expense decreased from $8,932 to $5,691 as a
result of lower borrowing levels resulting from the cash generated by the sale
or wind down of unprofitable businesses and improved working capital management.
Amortization of Intangibles. Amortization of intangibles increased from
$792 to $21,192 as a result of the amortization on the $314,901 reorganization
asset, established as part of "Fresh Start Reporting," which is being amortized
over five years.
Restructuring Charges. During the period ended March 31, 1998 the Company
recorded $5,000 in restructuring charges for shutdown and relocation costs
relating to the move of the corporate headquarters from Tampa, Florida to
Lebanon, New Jersey and a $5,842 charge for the impairment write-off of certain
property, plant and equipment. No restructuring charges were recorded during the
period ended March 31, 1999.
Gain on Sale of Operation. During the period ended March 31, 1998, the
Company recognized a gain on the sale of the Material Handling division of
Kingston Warren of $11,354, a gain on the sale of the land, building 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 obligation to a third party.
Other (Income) Expenses. Other (income) expense increased from $971 to
($130) due to rental income from an idle facility in the period ended March 31,
1999 and loss on the disposal of equipment in the period ended March 31, 1998.
Reorganization Items. During the period ended March 31, 1999, the Company
recognized, as part of "Fresh Start Reporting," charges that aggregated $50,431
for adjustments to reflect all assets and liabilities at their respective fair
values. Reorganization charges during the period ended March 31, 1998 represent
mainly professional fees incurred in connection with the bankruptcy proceedings.
Provision for Income Taxes. The Increase from $345 to $897 was principally
due to higher earnings at the Company's Canadian subsidiary.
Extraordinary Item. During the period ended March 31, 1999 an
extraordinary gain of $206,363 was recorded for the forgiveness of debt that
resulted from the reorganization of the Company in accordance with "Fresh Start
Reporting."
Net Income (Loss). The net income (loss) increased from ($8,600) to
$138,686 for the reasons described above.
F-26
<PAGE>
Three months ended March 31, 1999 compared to the three months ended
March 31, 1998.
The following table is included solely for use in comparative analysis of
results of operating and to complement management's discussion and analysis.
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
------------------- -------------------
MARCH 31, MARCH 31,
1999 1998
------------------- -------------------
<S> <C> <C>
Sales................................................................................ $ 128,727 $ 206,339
Cost of Sales........................................................................ 113,670 194,091
--------- ---------
Gross Profit.................................................................... 15,057 12,248
Selling, General and Administrative Expenses......................................... 10,480 15,518
--------- ---------
Operating income (loss)(a)...................................................... 4,577 (3,270)
Interest Expense..................................................................... 3,064 5,079
Amortization of intangible assets.................................................... 15,696 396
Restructuring Charges................................................................ -- 5,842
(Gain) on Sale of Operation.......................................................... -- (15,604)
Other (Income) Expense, Net.......................................................... (89) 963
--------- ---------
Income (loss) before Income Taxes, Reorganization Items and Extraordinary Item.. (14,094) 54
Reorganization Items................................................................. -- 2,959
Provision for Income Taxes........................................................... 23 176
Extraordinary Item................................................................... -- --
--------- ---------
Net (loss)...................................................................... ($ 14,117) ($ 3,081)
--------- ---------
--------- ---------
</TABLE>
- ------------------
(a) Includes depreciation expense of $2,748 and $6,708 for the three months
ended March 31, 1999 and March 31, 1998, respectively.
Due to the long gestation between the time that an OEM customer awards the
Company a contract to produce parts for a new platform and the time the Company
produces those parts (in almost all instances 2 to 4 years), and the
considerable designing and planning obligations required of the successful
bidder during this period of delay, OEMs were reluctant to award new business to
the Company during the pendency of the Company's Chapter 11 case. As a result,
the awarded new business during the pendency of the Chapter 11 case was less
than would be anticipated under normal conditions. This could have serious
effects on the financial strength of the Company in the next several years when
the recently awarded platforms commence production. Such effects, if
experienced, will occur over that extended future period; the Company has not
yet experienced such effects sufficiently to be able to furnish more specific
estimates of the timing or amount thereof.
Sales. Sales decreased $77,612 from $206,339 to $128,727 or 37.6%.
Aggregate sales for the operations designated for sale or wind down decreased
approximately $80,193 from $89,255 to $9,062 as the Company's divestiture
program as contemplated under the Company's Plan of Reorganization nears
completion. Sales for the remaining operations increased $2,581 from $117,084 to
$119,665, as strong light truck demand was partially offset by the wind down of
older programs.
Gross Profit. The gross margin, expressed as a percentage of sales,
increased from 5.9% to 11.7%, or $2,809. The gross profit (loss) for operations
designated for sale or wind-down decreased from $2,585 to ($340) After adjusting
1999 results for $1,398 of operating losses charged to loss contract reserves
that were established in the fourth quarter of fiscal 1998 reported operating
losses for 1999 would have been $1,738. Gross profit decreased approximately
$4,300 due primarily to one-time tooling profits of approximately $1,900 in 1998
and significantly lower volume in 1999 as a result of the Company's divestiture
program. The increase of $5,734 in gross profit for the remaining operations was
mainly due to improved operating efficiencies, strong light truck demand and
management's focus on higher margin business.
F-27
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $15,518 to $10,480 due to a 1998 charge
of $5,000 for the purchase and implementation of enterprise software (see Year
2000 Readiness).
Interest Expense. Interest expense decreased from $5,079 to $3,064 as a
result of lower borrowing levels resulting from the cash generated by the sale
or wind down of unprofitable businesses and improved working capital management.
Amortization of Intangibles. Amortization of intangibles increased from
$396 to $15,696 as a result of the amortization on the $314,901 reorganization
asset, established as part of "Fresh Start Reporting," which is being amortized
over five years.
Restructuring Charges. During the period ended March 31, 1998 the Company
recorded a $5,842 charge for the impairment write-down of certain property,
plant and equipment. No restructuring charges were recorded during the period
ended March 31, 1999.
Gain on Sale of Operations. During the period ended March 31, 1998, the
Company recognized a gain on the sale of the land, building 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 obligation to a third party.
Other (Income) Expenses. Other (income) expense increased from $963 to
($89) due to rental income from an idle facility in the period ended March 31,
1999 and a loss on the disposal of equipment in the period ended March 31, 1998.
Reorganization Items. Reorganization charges during the period ended
March 31, 1998 represent mainly professional fees incurred in connection with
the bankruptcy proceedings.
Provision for Income Taxes. The decrease from $176 to $23 was principally
due to adjustments to the estimated tax provision for the Canadian subsidiary.
Net Income (Loss). The net (loss) increased from ($3,081) to ($14,117) for
the reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
On a pro forma basis, the cash flow (usage) for the two months ended
November 29, 1998 (pre-confirmation) and the four months ended March 31, 1999
(post-confirmation) have been combined for purposes of comparison to the six
months ended March 31, 1998.
For the six months ended March 31, 1999, the Company had cash used in
operations of $3,825 compared to cash provided by operations of $5,967 for the
six months ended March 31, 1998. The decrease was due to an increase in
financing, legal and professional fees and other payments related to the
Company's emergence from Chapter 11 proceedings on November 24, 1998 in addition
to significant expenditures related to its installation of a new management
information system that will allow its critical information systems and
technology infrastructure to be Year 2000 compliant; partially offset by
improved working capital. The prior year's results included an advance from a
major customer to partially defray the cost of shutting down the Toledo, Ohio
facility.
The Company emerged from Chapter 11 on November 24, 1998, repaid the DIP
Facility, the Post-Petition Term Loan, and issued $25,000 of Senior Secured
Notes and entered into a $115,000 Senior Credit facility. The Company had
borrowing availability of approximately $35,000 as of March 31, 1999. Management
anticipates having sufficient liquidity to conduct its activities in fiscal 1999
as result of the borrowing availability provided by these facilities.
Continuation of the Company's business after reorganization is dependent
upon the success of future operations, including execution of the company's
turnaround business strategy and the ability to meet obligations as they become
due. The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and at March 31, 1999 had a net working capital deficit.
These factors among others raise substantial doubt about the Company's ability
F-28
<PAGE>
to achieve successful future operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of many computer programs and imbedded
chips being written using two digits rather than four to define the applicable
year. Many of the Company's computer programs that have date-sensitive software
may recognize a date using "00" as the year 1900 rather than the year 2000.
If not addressed and completed on a timely basis, failure of the Company's
computer systems to process Year 2000 related data correctly could have a
material adverse effect on the Company's financial condition and results of
operations. Failures of this kind could, for example, lead to incomplete or
inaccurate accounting, supplier and customer order processing or recording
errors in inventories or other assets and the disruption of its manufacturing
process as well as transactions with third parties. If not addressed, the
potential risks to the Company include financial loss, legal liability and
interruption to business.
YEAR 2000 READINESS.
During the summer of 1997, the Company undertook an evaluation of its
critical information systems and technology infrastructure for Year 2000
compliance and functionality. The Company determined as a result of its
evaluation that its computer systems and related software applications lacked
the Year 2000 compliance and functionality needed to support the Company's
operations. Based upon such determination, the Company decided to replace
(i) its computer hardware with new hardware and peripheral equipment, and
(ii) its computer software with Enterprise Resource Planning ("ERP") software.
During the fourth quarter of 1997, the Company's cross-functional Year 2000
compliance team (consisting of members of the Company's materials management,
scheduling, manufacturing, marketing, engineering, information technology, cost
accounting and finance divisions) selected the "System 21" and "Future 3" ERP
software of JBA International as the software to replace the Company's existing
software.
In January 1998, the Company engaged a consulting firm to provide project
management for the implementation of the new ERP software system.
The Company's ERP implementation project consists of five phases, as
follows:
Phase I--Analysis. Document Harvard's business strategy and current
processes at pilot sites (including various plants and the corporate
accounting and finance offices), design future processes and conduct
Company-wide integration meetings in order to obtain input from both the
management and staff of all operating plants. This phase commenced in
February 1998 and was completed in April 1998.
Phase II--Design. Designate a general corporate pilot site, determine
improvements to planned systems to achieve full utilization of System 21
software capabilities and design methods to implement such improvements.
Phase II commenced in April 1998 and ended in June 1998.
Phase III--Construction. Begin conference room pilot programs at
designated pilot sites, develop and approve policies and procedures and
design training and education materials. Phase III commenced in June 1998
and ended in August 1998.
Phase IV--Implementation at Pilot Sites and Finance Division. Provide
training and education, implementation support and post-implementation
reviews at pilot sites. Phase IV commenced in July 1998 and ended in
October 1998.
Phase V--Implementation Roll-out. Provide training and education,
implementation support and post-implementation reviews at all other sites.
As of March 1, 1999, the Company had successfully implemented ERP software
at eleven plants and in corporate finance. The new ERP software is
scheduled to be installed at four additional plants between March 29, 1999
and September 30, 1999.
Concurrent with the implementation of the new ERP software system, the
Company completed an inventory of millennium-sensitive information technology
("IT") equipment (manufacturing, engineering, lab and measurement equipment, IT
infrastructure, general office equipment and electronic data interchange ("EDI")
F-29
<PAGE>
interfaces). Components of such equipment containing microprocessors were
identified and are being tested for correct date processing. The Company
estimates that the final verification of date processing capabilities of
components containing microprocessors will be completed on or about
September 30, 1999.
Surveys. Even if the changes made by the Company are successful, the
Company remains at risk from Year 2000 failures caused by third parties. The
Company's purchasing organization has evaluated systems in place for the supply
of many of the raw materials, services and other items, the disruption of which
could have an impact upon the Company's operations. Although various suppliers
and utilities have not yet responded to the Company's requests for information,
based upon the responses received, the Company does not currently foresee any
significant interruptions of its business arrangements due to Year 2000 issues.
Nevertheless, failure by key suppliers or utilities to complete Year 2000
compliance work in a timely manner could have a material adverse effect on
certain of the Company's operations. Examples of problems that could result from
the failure by third parties with whom the Company interacts to remediate Year
2000 problems include, in the case of utilities, service failures such as power,
telecommunications, elevator operations and loss of security access control and,
in the case of suppliers, failures to satisfy orders on a timely basis and to
process orders correctly. Additionally, general uncertainty regarding the
success of remediation may cause many suppliers to reduce their activities
temporarily as they assess and address their Year 2000 efforts in 1999. This
could result in a general reduction in available supplies in late 1999 and early
2000. Management cannot predict the magnitude of any such reduction or its
impact on the Company's financial results. There can be no assurance that the
systems of other companies on which the Company's systems rely will be converted
in a timely fashion, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company's consolidated financial statements.
Remediation costs. The Company expects to spend approximately $14,000 to
address issues related to Year 2000 compliance and functionality, including
$2,400 for new software, $2,000 for new hardware (mainframe, personal computers
and infrastructure wiring), $4,200 for software implementation and $5,400 for
project management consultants. Approximately $13,200 of such amount has been
spent through March 31, 1999. The source of such funds was working capital
loans. The balance of the remediation costs are expected to be incurred through
August 1999. The Company does not believe that the payment of such costs will
have a material impact on the Company's financial position or results of
operations.
Contingency plans. The Company is currently installing a backup hardware
system to supplement the Company's hardware in the event of Year 2000 failures.
The Company also plans to conduct a strategy session during the summer of 1999
to evaluate the necessity of preparing any additional contingency plans for
addressing the consequences of possible Year 2000 failures.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments that are required to
be disclosed.
F-30
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to various claims and routine litigation arising in
the normal course of its business. Obligations of the Company in respect of
litigation arising out of activities prior to the Petition Date, will be
discharged in accordance with the Plan of Reorganization. Based on information
currently available, management of the Company believes, after consultation with
legal counsel, that the result of such claims and litigation will not have a
material adverse effect on the financial position or results of operations of
the Company.
ITEM 2. CHANGES IN SECURITIES
On May 8, 1997 ("Petition Date"), Harvard filed a petition for relief under
Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for
the District of Delaware. On November 24, 1998, the Company substantially
consummated its First Amended Modified Consolidated Plan Under Chapter 11 of The
Bankruptcy Code dated August 19, 1998 and emerged from bankruptcy.
The Plan of Reorganization provided that New Common Stock, New Junior
Secured Debentures and the New Warrants issued under the Plan of Reorganization
may be resold by the holders thereof without registration unless any such holder
is deemed to be an "underwriter" with respect to such securities, as defined in
section 1145(b)(1) of the Bankruptcy Code.
On November 24, 1998, the Company issued $25,000 of 14 1/2% Senior Secured
Notes due September 1, 2003. The Notes were issued pursuant to its Chapter 11
Plan of Reorganization and subject to an exemption from the registration
requirements of the Securities Act of 1933 (and of equivalent state securities
or "blue sky" laws) provided by section 1145(a)(1) of the Bankruptcy Code. The
Notes were issued to Lehman Brothers, as initial purchaser, and resold pursuant
to Rule 144A to Qualified Institutional Buyers (as defined in such Rule) for an
aggregate purchase price of $25,000,000, of which $1,000,000 was retained by
Lehman Brothers, as underwriter's discount, and $24,000,000 was received by the
Company.
On or about November 24, 1998, in reliance upon Section 3(a)(7) of the
Securities Act and Section 1145(a)(1) of the Bankruptcy Code and pursuant to the
confirmed Plan of Reorganization, the Company issued 8,240,295 shares of New
Common Stock, in the aggregate, to holders of allowed unsecured claims in the
Company's bankruptcy proceeding. In addition, on and after November 24, 1998,
warrants to purchase an aggregate of approximately 626,200 shares of New Common
Stock have been issued pursuant to the confirmed Plan of Reorganization and in
reliance upon Section 3(a)(7) of the Securities Act and Section 1145(a)(1) of
the Bankruptcy Code, to holders of the Company's formerly outstanding shares of
common and preferred stock, which were canceled pursuant to the Plan of
Reorganization. The warrants are exercisable until November 23, 2003 to purchase
shares of New Common Stock at an exercise price of $41.67 per share. The shares
of New Common Stock and warrants issued pursuant to the Plan of Reorganization
were issued without cash or other consideration. See Footnote 5 for the
financial impact of the Plan of Reorganization on registered securities.
On March 24, 1999, the Board of Directors of the Company declared a
dividend on each outstanding share of the Company's Common Stock, payable to
holders of record on April 5, 1999, of a preferred share purchase right which,
when exercisable, entitles the holder thereof to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company. The terms of the rights are set forth in a Rights Agreement between the
Company and State Street Bank and Trust Company, as Rights Agent, and are
described in the Company's Report on Form 8-K filed on March 25, 1999, which is
hereby incorporated herein by reference. No registration of such rights was
required under the Securities Act since the transaction constituted a dividend
on the Company's outstanding shares of common stock and no sale of any security
was involved.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
The Company announced on May 11, 1999 that it continues to look at
potential acquisitions to diversify its industrial base and it has retained
Lehman Brothers, Inc. to assist in exploring alternatives with respect to the
assets of its Kingston-Warren subsidiary including the possible divestiture of
substantially all those assets.
See Footnote 1 for information related to Emergence from Chapter 11
Reorganization
F-31
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(27) Financial Data Schedule (for electronic submission only)
(b) Reports on Form 8-K:
On March 25, 1999, the Company filed a Current Report on Form 8-K in which
it reported, in Item 5 thereof, the adoption of a Rights Agreement between the
Company and State Street Bank and Trust Company, as Rights Agent, and, pursuant
thereto, the distribution on March 24, 1999, with respect to each outstanding
share of common stock of the Company held of record on April 5, 1999, of one
preferred share purchase right which, when exercisable, entitles the holder
thereof to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock of the Company.
F-32
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HARVARD INDUSTRIES, INC.
BY: /S/ ROGER G. POLLAZZI
---------------------------------
Roger G. Pollazzi
Chairman of the Board
Chief Executive Officer and Director
Date: August 23, 1999
BY: /S/ THEODORE W. VOGTMAN
---------------------------------
Theodore W. Vogtman
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
F-33
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