<PAGE>
As filed with the Securities and Exchange Commission on November 17, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 2 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 June 30, 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)
Delaware 21-0715310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Werner Way 08833
Lebanon, New Jersey (Zip Code)
(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 August 11,
1999, was 9,911,080.
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
Page
----
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
June 30, 1999 (Unaudited) Post-Confirmation
And September 30, 1998 (Audited)
Pre-Confirmation.
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 1999
Seven Months Ended June 30, 1999 (Post-Confirmation),
Three Months Ended June 30, 1998
Two Months Ended November 29, 1998 (Pre-Confirmation)
Nine Months Ended June 30, 1998 (Pre-Confirmation)
Consolidated Statements of Cash Flows (Unaudited)
Seven Months Ended June 30, 1999 (Post-Confirmation),
Nine Months Ended June 30, 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
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 1999 (UNAUDITED) (POST-CONFIRMATION)
---------------------------------------------
AND SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
-----------------------------------------
(in thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
ASSETS Pre-Confirmation Post-Confirmation
------ ----------------------- ---------------------
September 30, 1998 June 30, 1999
(Unaudited)
----------------------- ----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,624 $ 7,303
Accounts receivable, net 57,046 50,710
Inventories 26,646 26,011
Prepaid expenses and other current assets 5,701 4,282
--------------- ---------------
Total current assets 101,017 88,306
Property, plant and equipment, net 122,579 123,372
Intangible assets, net 2,833 278,277
Other assets, net 24,552 6,647
--------------- ---------------
Total assets $250,981 $496,602
=============== ===============
</TABLE>
See accompany notes to the consolidated financial statements.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 1999 (UNAUDITED) (POST-CONFIRMATION)
---------------------------------------------
AND SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
-----------------------------------------
(in thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS'
(DEFICIENCY) EQUITY Pre-Confirmation Post-Confirmation
-------------------------------- ----------------------- --------------------------
September 30, June 30, 1999
1998 (Unaudited)
----------------------- --------------------------
<S> <C> <C>
Current liabilities:
Current portion of Debtor-in-Possession (DIP) loans $ 39,161 $ -
Creditors subordinated term loan. 25,000 -
Short-term borrowings - 1,113
Current portion of long-term debt - 1,000
Accounts payable 25,098 34,515
Accrued expenses 93,337 63,553
Income taxes payable 8,445 6,997
--------------- ---------------
Total current liabilities 191,041 107,178
Liabilities subject to compromise 385,665 -
Long-term debt - 73,500
Postretirement benefits other than pensions 95,515 95,438
Other 63,353 78,903
--------------- ---------------
Total liabilities 735,574 355,019
Commitments and Contingencies
14 1/4% Pay-In-Kind Exchangeable Preferred
Stock, (includes $10,142 of undeclared accrued dividends) 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, 9,520,575 shares issued and outstanding at June 30,1999 70 95
Additional paid-in capital 32,134 174,905
Additional minimum pension liability (8,902) -
Foreign currency translation adjustment (2,991) 310
Accumulated (deficit) retained earnings (629,541) (33,727)
--------------- ---------------
Total shareholders' (deficiency) equity. (609,230) 141,583
--------------- ---------------
Total liabilities and shareholders' (deficiency)
equity. $250,981 $496,602
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
THREE MONTHS ENDED JUNE 30, 1999
--------------------------------
(POST-CONFIRMATION) AND THREE MONTHS ENDED
------------------------------------------
JUNE 30, 1998 (PRE-CONFIRMATION)
--------------------------------
(in thousands of dollars, except share and per share data)
----------------------------------------------------------
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------ -------------------------
Quarter Ended Quarter Ended
June 30, 1998 June 30, 1999
------------------------ -------------------------
<S> <C> <C>
Sales $169,234 $129,908
Cost of sales 156,361 116,927
----------------- --------------
Gross profit 12,873 12,981
Selling, general and administrative expense 15,389 11,777
Amortization of intangible assets 396 15,696
Restructuring charges - (2,405)
Interest expense (contractual interest of $11,521 for the three months
ended June 30, 1998) 2,616 3,464
Gain on sale of operations 397 -
Other (income) expense, net 73 (930)
----------------- --------------
(Loss) income before reorganization items and income taxes (5,998) (14,621)
Reorganization items 1,144 -
----------------- --------------
Loss before income taxes (7,142) (14,621)
Provision for (benefit from) income taxes 171 (8)
----------------- --------------
Net (loss) ($7,313) ($14,613)
================= ==============
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------ ------------------------
Quarter Ended Quarter Ended
June 30, 1998 June 30, 1999
------------------------ ------------------------
<S> <C> <C>
PIK Preferred Dividends and Accretion (contractual
amount for the three months ended June 30, 1998
was $4,763) $ - $ -
================ ===============
Net (loss) attributable to common
shareholders ($7,313) ($14,613)
================ ===============
Basic and diluted earnings per share:
Net (loss) per share ($1.04) ($1.62)
================ ===============
Weighted average number of common shares outstanding 7,026,437 9,045,642
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-------------------------------------------------
SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION),
-----------------------------------------------------
NINE MONTHS ENDED JUNE 30, 1998 AND
------------------------------------
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
-----------------------------------------------------
(in thousands of dollars, except share and per share data)
----------------------------------------------------------
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------------------- ----------------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November 29, June 30,
1998 1998 1999
---------------- ----------------- ----------------------
<S> <C> <C> <C>
Sales $572,625 $89,050 $298,801
Cost of sales 542,174 79,628 266,231
--------------- -------------- ---------------
Gross profit 30,451 9,422 32,570
Selling, general and administrative expense 40,742 5,151 25,278
Amortization of intangible assets 1,188 264 36,624
Impairment of long-lived assets and restructuring charges 10,842 - (2,405)
Interest expense (contractual interest for the nine
months ended June 30, 1998, and for the two months
ended November 29, 1998, was $38,262 and $6,931,
respectively) 11,548 1,636 7,519
Gain on sale of operations (26,561) - -
Other (income) expense, net 1,044 (34) (1,026)
--------------- -------------- ---------------
(Loss) income before reorganization items and
income taxes (8,352) 2,405 (33,420)
Reorganization items 7,045 50,384 -
--------------- -------------- ---------------
Loss before income taxes and extraordinary item (15,397) (47,979) (33,420)
--------------- -------------- ---------------
Provision for income taxes 516 584 307
--------------- -------------- ---------------
Loss before extraordinary item - (48,563) (33,727)
--------------- -------------- ---------------
Extraordinary item--(gain) on forgiveness of debt - (206,363) -
--------------- -------------- ---------------
Net (loss) income ($15,913) $157,800 ($33,727)
=============== ============== ===============
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------------------- ----------------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November 29, June 30,
1998 1998 1999
---------------- ----------------- ----------------------
<S> <C> <C> <C>
PIK Preferred Dividends and Accretion (contractual
amounts for the nine months ended June 30, 1998,
for the two months ended November 29, 1998 were
$14,289 and $3,219, respectively) $ - $ - $ -
============== =============== ==============
Net (loss) income attributable to common
shareholders. ($15,913) $157,800 ($33,727)
============== =============== ==============
Basic and diluted earnings per share:
Loss before extraordinary item ($2.26) ($6.91) ($3.94)
Income from extraordinary item - 29.37 -
-------------- --------------- --------------
Net (loss) income per share ($2.26) $ 22.46 ($3.94)
============== =============== ==============
Weighted average number of common shares
outstanding 7,026,437 7,026,437 8,568,589
============== =============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-------------------------------------------------
SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION),
-----------------------------------------------------
NINE MONTHS ENDED JUNE 30, 1998
-------------------------------
AND TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
---------------------------------------------------------
(in thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------------------- ----------------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November 29, June 30,
1998 1998 1999
---------------- ----------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES:
Income (loss) from operations before reorganization
items ($8,868) $1,821 ($33,727)
Add back (deduct) items not affecting cash and cash
equivalents-
Depreciation 21,244 3,583 8,755
Amortization 1,188 396 37,280
Gain on sale of operation (26,561) -- --
Impairment of long-lived assets and
restructuring charge 10,842 -- (2,405)
Loss (gain) on disposition of property, plant and
equipment 839 -- (48)
Postretirement benefits 2,823 -- --
Changes in operating assets and liabilities net
of effects of divestitures and reorganization items-
Accounts receivable (2,827) (15,077) 19,421
Inventories 20,608 (1,168) 1,142
Other current assets 1,694 402 1,017
Accounts payable (11,027) 21,676 (12,259)
Accounts payable prepetition (826) - --
Accrued expenses and income taxes payable 11,705 (23,745) 2,891
Other noncurrent, net 3,476 (1,413) (1,777)
--------------- ----------------- -----------------
Net cash provided by (used in)
operations before reorganization
items 24,310 (13,525) 20,290
Net cash used by reorganization items (6,668) (4,018) (6,310)
--------------- ----------------- -----------------
Net cash provided by (used in)
operations 17,642 (17,543) 13,980
--------------- ----------------- -----------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
------------------------------------- ----------------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November 29, June 30,
1998 1998 1999
---------------- ----------------- ----------------------
<S> <C> <C> <C>
CASH FLOWS RELATED TO INVESTING ACTIVITIES:
Acquisition of property, plant and equipment. ($12,543) ($2,856) ($10,409)
Proceeds from disposition of property, plant and
equipment -- -- 48
Net proceeds from sale of operation 20,475 -- 4,482
--------------- ----------------- -----------------
Net cash provided by (used in) investing
activities 7,932 (2,856) (5,879)
--------------- ----------------- -----------------
CASH FLOWS RELATED TO FINANCING ACTIVITIES:
Net borrowings (repayments) under DIP
financing agreement (39,275) 1,062 --
Repayments of long-term debt (88) -- --
Payment of EPA settlements (55) -- --
Net borrowings (repayments) under
financing/credit agreement -- 81,425 (5,812)
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 (16,918) 13,789 (5,812)
--------------- ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents 8,656 (6,610) 2,289
CASH AND CASH EQUIVALENTS, beginning of
period. 9,212 11,624 5,014
--------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS, end of period. $ 17,868 $ 5,014 $ 7,303
=============== ================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
<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
seven month period ended June 30, 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 2.6667 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.
<PAGE>
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.
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 (Reorganization Value). " 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 or render such assets not recoverable. To determine if
reorganization value is recoverable, the Company compares the net
carrying amounts to undiscounted projected cash flows. If the
reorganization value asset is not recoverable, the Company would record
an impairment based on the differences between the net carrying amount
and fair value.
<PAGE>
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-Confirmation Post-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
Postretirement 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>
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 seven
months ended June 30, 1999 and contains adjustments for depreciation
expense, pension expense and the amortization of reorganization value.
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.
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended June 30, Pro Forma As
1999 Adjustments Adjusted
--------------------- ------------------ -----------------
<S> <C> <C> <C>
Sales $387,851 $ -- $387,851
Cost and expenses-
Cost of sales 345,859 (1,666) 344,193
Selling, general and administrative
expenses 30,429 -- 30,429
Amortization of intangible asset 36,888 10,200 47,088
Interest expense 9,155 (160) 8,995
Other expense (income) (3,465) -- (3,465)
--------------- -------------- --------------
Total costs and expenses 418,866 8,374 427,240
Loss from operations before income taxes,
reorganization items and extraordinary items (31,015) (8,374) (39,389)
Reorganization items 50,384 (50,384) --
Provision for income taxes 891 -- 891
Extraordinary item (206,363) 206,363 --
--------------- -------------- --------------
Net loss $124,073 ($164,353) ($40,280)
=============== ============== ==============
Basic and diluted earnings per share (4.06)
==============
Weighted average number of common and common
equivalent shares outstanding 9,911,080
==============
</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 had suffered recurring losses from operations and at
June 30, 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>
Post-
Pre-Confirmation Confirmation
------------------------------------- -----------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November June 30,
1998 29, 1998 1999
----------------- ---------------- -----------------
<S> <C> <C> <C>
Sales $219,829 $8,389 $17,754
Gross (loss) 1,517 (1,534) (7,673)
</TABLE>
<PAGE>
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 recognized no material gain or
loss on the sale. The Company attempted to sell 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 and has recorded a $1.2 million charge which
is included in Impairment of Long-Lived Assets and Restructuring
Charges in the Accompanying Statement of Operations for the period
ended June 30, 1999. This charge relates to severance for approximately
230 hourly and salaried employees ($1.0 million) and facility shutdown
costs ($0.2 million). In order to depreciate the March 31, 1999
carrying value of the Ripley long-lived assets to their estimated net
realizable value, the Company recorded an additional $2.3 million of
depreciation in the quarter ended June 30, 1999 and will record an
additional $1.5 million of depreciation through the shutdown date. In
July 1999 the Company sold its Toledo, Ohio facility for gross proceeds
of approximately $2.3 million.
(3) INVENTORIES:
------------
Inventories consist of the following-
<TABLE>
<CAPTION>
Pre-Confirmation Post-Confirmation
--------------------- -----------------------
June 30,
September 30, 1999
1998 (Unaudited)
--------------------- -----------------------
<S> <C> <C>
Finished goods $ 6,476 $ 7,171
Work-in-process 2,078 3,355
Tooling 5,991 2,385
Raw materials 12,101 13,100
------------- ------------
Total inventories $ 26,646 $ 26,011
============= ============
(4) LONG-TERM DEBT AND CREDIT AGREEMENTS:
--------------------------------------
Long-term debt consists of the following-
<CAPTION>
Pre-Confirmation Post-Confirmation
--------------------- -----------------------
June 30,
September 30, 1999
1998 (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
<PAGE>
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 EURODOLLAR 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 January 3, 1999
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.
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 dilutive securities.
Income (loss) available to common shareholders used in determining both
basic and diluted EPS was ($33,727) for the seven months ended June 30,
1999, $157,800 for the two months ended November 29, 1998, ($15,913) for
the nine months ended June 30, 1998 and ($14,613) and ($7,313) for the
three months ended June 30, 1999 and 1998, respectively. The weighted
average number of shares of common stock used in determining basic and
diluted EPS was 8,568,589 for the seven months ended June 30, 1999,
7,026,437 for the two months ended November 29, 1998, 7,026,437 for the
nine months ended June 30, 1998 and 9,045,642 and 7,026,437 for the three
months ended June 30, 1999 and 1998, respectively.
Although on August 11, 1999, 9,911,080 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 2,088,000 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.
<PAGE>
Six members of the Company's Board of Directors have each been granted
options to purchase 20,000 shares which vest in equal amounts of 4,000
shares per year over five (5) years. A total of 120,000 shares may be
issued if the Directors choose to exercise their options.
An annual stock grant is to be made to six members of the Company's Board
of Directors of a number of shares of common stock of Harvard equal to
$15,000 divided by the closing price per share of stock on the date of
the grant. Effective June 29, 1999, each of the six directors received
grants of 2,000 shares each of the Company's shares as an annual stock
grant.
An incentive plan has been authorized by the Board of Directors providing
for a grant of options to certain members of senior management. Pursuant
to said plan eighteen members of the Company's management have been
granted options to purchase stock which if exercised, would total in the
aggregate 1,555,000 shares. The above options, warrants, grants and
shares to be issued have been excluded from the computation of earnings
per share post confirmation as their effect would be anti-dilutive.
(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
--------------------------------------- ----------------------
Nine Months Two Months Seven Months
Ended Ended Ended
June 30, November 29, June 30,
1998 1998 1999
------------------ ---------------- ----------------------
<S> <C> <C> <C>
Net income (loss) ($15,913) $157,800 ($33,727)
Other comprehensive income, net of tax:
Foreign currency translation
adjustment (2,644) - 310
------------- ------------- ----------------
Comprehensive income (loss) ($18,557) $157,800 ($33,417)
============= ============= ================
</TABLE>
(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.
<PAGE>
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 June 30, 1999 (Post-Confirmation)
and September 30, 1998 (Pre-Confirmation) and condensed statements
of operations and cash flows for the seven months ended June 30,
1999 (Post-Confirmation), the nine months ended June 30, 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 nine months ended June 30, 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.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING BALANCE SHEETS (UNAUDITED)
----------------------------------------
JUNE 30, 1999 (POST-CONFIRMATION)
---------------------------------
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
ASSETS Company Subsidiaries Subsidiaries Eliminations Consolidated
- ------ ----------- -------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $4,853 $2,450 $ - $ - $7,303
Accounts receivable, net - 46,297 4,413 - 50,710
Inventories - 25,225 786 - 26,011
Prepaid expenses and other
current assets 2,864 1,409 9 - 4,282
----------- -------------- ----------------- -------------- ---------------
Total current assets 7,717 75,381 5,208 - 88,306
Investment in subsidiaries (28,386) 17,786 - 10,600 -
Property, plant and equipment, net 2,119 113,157 8,096 - 123,372
Intangible assets, net - 278,277 - - 278,277
Intercompany receivables 190,473 - 7,737 (198,210) -
Other assets, net 6,211 436 - - 6,647
----------- -------------- ----------------- -------------- ---------------
Total assets $178,134 $485,037 $21,041 ($187,610) $496,602
=========== ============== ================= ============== ===============
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING BALANCE SHEETS (UNAUDITED)
----------------------------------------
JUNE 30, 1999 (POST-CONFIRMATION)
---------------------------------
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
LIABILITIES AND Combined Combined
SHAREHOLDERS' EQUITY Parent Guarantor Non-Guarantor
(DEFICIENCY) Company Subsidiaries Subsidiaries Eliminations Consolidated
--------------------- ----------- -------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Current liabilities:
Short-term borrowings $ - $ - $ - $ - $ -
Current portion of long-term
debt - 2,113 - - 2,113
Accounts payable 2,055 29,996 2,464 - 34,515
Accrued expenses 19,478 43,622 453 - 63,553
Income taxes payable 34 6,625 338 - 6,997
----------- -------------- ----------------- -------------- ---------------
Total current liabilities 21,567 82,356 3,255 - 107,178
Long-term debt - 73,500 - - 73,500
Postretirement benefits other
than pensions - 95,438 - - 95,438
Intercompany payables - 198,210 - (198,210) -
Other 14,984 63,919 - - 78,903
----------- -------------- ----------------- -------------- ---------------
Total Liabilities 36,551 513,423 3,255 (198,210) 355,019
----------- -------------- ----------------- -------------- ---------------
Shareholders' Equity (Deficiency):
Common stock and additional
paid-in-capital 175,000 (2,526) 15,578 (13,052) 175,000
Foreign current translation
adjustment 310 310 310 (620) 310
Retained earnings (deficiency) (33,727) (26,170) 1,898 24,272 (33,727)
----------- -------------- ----------------- -------------- ---------------
Total shareholders'
equity (deficiency) 141,583 (28,386) 17,786 10,600 141,583
----------- -------------- ----------------- -------------- ---------------
Total liabilities and
shareholders'
equity (deficiency) $178,134 $485,037 $21,041 ($187,610) $496,602
=========== ============== ================= ============== ===============
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING BALANCE SHEETS
----------------------------
SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
-------------------------------------
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
Combined Combined
Parent Guarantor Non-Guarantor
ASSETS Company Subsidiaries Subsidiaries Eliminations Consolidated
----------- -------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
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>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING BALANCE SHEETS
----------------------------
SEPTEMBER 30, 1998 (PRE-CONFIRMATION)
-------------------------------------
(In thousands of dollars)
-------------------------
<TABLE>
<CAPTION>
LIABILITIES AND Combined Combined
SHAREHOLDERS' EQUITY Parent Guarantor Non-Guarantor
(DEFICIENCY) Company Subsidiaries Subsidiaries Eliminations Consolidated
-------------------- ----------- -------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
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.
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------
SEVEN MONTHS ENDED JUNE 30, 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 $ - $285,780 $13,021 $ - $298,801
------------ -------------- ----------------- -------------- ---------------
Costs and expenses:
Cost of sales - 255,822 10,409 - 266,231
Selling, general and
administrative 8,565 16,713 - - 25,278
Interest expense - 7,514 5 - 7,519
Amortization of
intangible assets - 36,624 - - 36,624
Impairment of long-lived
assets and restructuring
charges - (2,405) - - (2,405)
Other (income) expense, net (993) (383) 350 - (1,026)
Equity in (income) loss of
subsidiaries 26,170 (1,898) - (24,272) -
Allocated expenses (30) 30 - - -
------------ -------------- ----------------- -------------- ---------------
Total costs and
expenses 33,712 312,017 10,764 (24,272) 332,221
------------ -------------- ----------------- -------------- ---------------
Income (loss) before income taxes (33,712) (26,237) 2,257 24,272 (33,420)
Provision for income taxes 15 (67) 359 - 307
------------ -------------- ----------------- -------------- ---------------
Net income (loss) ($33,727) ($26,170) $1,898 $24,272 ($33,727)
============ ============== ================= ============== ===============
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)
--------------------------------------------------
NINE MONTHS ENDED JUNE 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>
Sales $8,148 $550,039 $14,438 $ - $572,625
------------ -------------- ------------ ---------- ------------
Costs and expenses:
Cost of sales 7,962 521,660 12,552 - 542,174
Selling, general and
administrative 6,016 33,809 917 - 40,742
Interest expense 5,843 5,687 18 - 11,548
Restructuring charges 5,000 5,842 - - 10,842
Gain on sale of operation (1,208) (25,353) - - (26,561)
Amortization of goodwill - 1,188 - - 1,188
Other (income) expense, net - 1,054 (10) - 1,044
Equity in (income) loss of -
subsidiaries 4,061 (686) - (3,375)
Allocated expenses (10,752) 10,477 275 - -
------------ -------------- ------------ ---------- ------------
Total costs and
expenses 16,922 553,678 13,752 (3,375) 580,977
------------ -------------- ------------ ---------- ------------
Income (loss) before income taxes
and reorganization items (8,774) (3,639) 686 3,375 (8,352)
Reorganization items 7,139 (94) - - 7,045
------------ -------------- ------------ ---------- ------------
Income (loss) before income taxes (15,913) (3,545) 686 3,375 (15,397)
Provision for income taxes - 516 - - 516
------------ -------------- ------------ ---------- ------------
Net gain (loss) ($15,913) ($4,061) $686 $3,375 ($15,913)
============ ============== ============ ========== ============
</TABLE>
<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 - 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>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------
SEVEN MONTHS ENDED JUNE 30, 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 ($33,727) ($26,170) $1,898 $24,272 ($33,727)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of
subsidiaries 26,170 (1,898) - (24,272) -
Depreciation and amortization 1,258 44,230 547 - 46,035
Restructuring charge - (2,405) - - (2,405)
Loss on disposition of property,
plant and equipment and
property held for sale - (48) - - (48)
Changes in operating assets and
liabilities net of effects from
reorganization items:
Accounts receivable 563 15,368 3,490 - 19,421
Inventories - 1,277 (135) - 1,142
Other current assets (1,352) 2,258 111 - 1,017
Accounts payable (4,526) (7,529) (204) - (12,259)
Accrued expenses and income
taxes payable 13,545 (5,225) (5,429) - 2,891
Other noncurrent (1,446) (53) (278) - (1,777)
----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) operations before
reorganization items 485 19,805 - - 20,290
Net cash provided by (used '
in) reorganization items - (6,310) - - (6,310)
----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) operations 485 13,495 - - 13,980
----------- ------------ ----------- ----------- ------------
Cash flows related to investing activities:
Acquisition of property, plant and
equipment - (10,409) - - (10,409)
Net proceeds from sale of operation - 4,482 - - 4,482
----------- ------------ ----------- ----------- ------------
Proceeds from disposition
of property, plant and
equipment - 48 - - 48
----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) investing activities - (5,879) - - (5,879)
----------- ------------ ----------- ----------- ------------
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
---------------------------------------------------
SEVEN MONTHS ENDED JUNE 30, 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 financing activities:
Net borrowings (repayments) under
financing/credit agreement $ - ($5,812) $ - $ - ($5,812)
----------- ------------ ----------- ----------- ------------
Net cash provided by (used
in) financing activities - (5,812) - - (5,812)
----------- ------------ ----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents 485 1,804 - - 2,289
Cash and cash equivalents:
Beginning of period 4,368 646 - - 5,014
----------- ------------ ----------- ----------- ------------
End of period $4,853 $2,450 $ - $ - $7,303
=========== ============ =========== =========== ============
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------
NINE MONTHS ENDED JUNE 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>
Cash flows related to operating activities:
Loss from operations before
reorganization items ($8,774) ($4,155) $686 $3,375 ($8,868)
Add back (deduct) items not affecting
cash and cash equivalents:
Equity in (income) loss of
subsidiaries 4,061 (686) - (3,375) -
Depreciation and amortization 1,291 20,207 934 - 22,432
Impairment of long-lived assets and
restructuring charge 5,000 5,842 - - 10,842
Gain on sale of operation (1,208) (25,353) - - (26,561)
Loss on disposition of property,
plant and equipment 283 355 201 - 839
Postretirement benefits - 2,823 - - 2,823
Changes in operating assets and liabilities
net of effects from reorganization items:
Accounts receivable 2,611 (3,086) (2,352) - (2,827)
Inventories 1,295 18,953 360 - 20,608
Other current assets (550) 2,250 (6) - 1,694
Accounts payable (264) (12,004) 415 - (11,853)
Accrued expenses and income
taxes payable 4,184 9,409 (1,888) - 11,705
Other noncurrent 16,756 (11,870) (1,410) - 3,476
----------- ------------ ---------------- -------------- --------------
Net cash provided by (used
in) operations before
reorganization items 24,685 2,685 (3,060) - 24,310
Net cash provided by (used
in) reorganization items (6,668) - - - (6,668)
----------- ------------ ---------------- -------------- --------------
Net cash provided by (used
in) operations 18,017 2,685 (3,060) - 17,642
----------- ------------ ---------------- -------------- --------------
Cash flows related to investing activities:
Acquisition of property, plant and
equipment (69) (12,300) (174) - (12,543)
Net proceeds from sale of operation 4,084 16,391 - - 20,475
----------- ------------ ---------------- -------------- --------------
Net cash provided by (used
in) investing activities 4,015 4,091 (174) - 7,932
----------- ------------ ---------------- -------------- --------------
</TABLE>
<PAGE>
HARVARD INDUSTRIES, INC.
------------------------
CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)
--------------------------------------------------
NINE MONTHS ENDED JUNE 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>
Cash flows related to financing activities:
Net borrowings (repayments) under DIP
financing ($1,572) ($37,703) $ - $ - ($39,275)
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 - (88) - - (88)
Repayment of EPA settlements - (55) - - (55)
Net changes in intercompany balances (39,069) 35,027 4,042 - -
----------- ------------ ---------------- -------------- --------------
Net cash provided by (used
in) financing activities (18,141) (2,819) 4,042 - (16,918)
----------- ------------ ---------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents 3,891 3,957 808 - 8,656
Cash and cash equivalents:
Beginning of period 3,324 5,376 512 - 9,212
----------- ------------ ---------------- -------------- --------------
End of period $7,215 $9,333 $1,320 $ - $17,868
=========== ============ ================ ============== ==============
</TABLE>
<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)
----------- ------------ ----------- ----------- ------------
</TABLE>
<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 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>
<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 seven months ended June 30, 1999 (Post-Confirmation) were
combined with the two months ended November 29, 1998 (Pre-Confirmation) and then
compared to the nine months ended June 30, 1998. Differences between periods due
to "Fresh Start Reporting" adjustments are explained when necessary.
<PAGE>
During the course of Harvard's bankruptcy proceeding, Harvard's OEM customers
were in some cases initially reluctant to award new business to Harvard. This
reluctance resulted in part from the long delay between the time a contract for
a new platform is awarded and the time the new product is produced and sold, and
the considerable designing and planning obligations required of the successful
bidder during the period of delay. These circumstances appeared to put Harvard
at a temporary disadvantage in attracting such new business until it
demonstrated an ability to successfully complete its reorganization. However,
since that time, and in particular during the months since emergence from
bankruptcy, Harvard has been successful in booking new business with the OEMs,
and management now believes that any effects of their initial reluctance to
award new business during Harvard's bankruptcy proceeding will not be material
to Harvard's operations or financial condition.
The following table is included solely for use in comparative analysis of
results of operations, and to complement management's discussion and analysis.
Nine months ended June 30, 1999 compared to the nine months ended June 30, 1998.
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
June 30, June 30,
1999 1998
-------------- ---------------
<S> <C> <C>
Sales $387,851 $572,625
Cost of Sales 345,859 542,174
-------------- ---------------
Gross profit 41,992 30,451
Selling, General and Administrative Expenses 30,429 40,742
-------------- ---------------
Operating income (loss) (a) 11,563 (10,291)
Amortization of intangible assets 36,888 1,188
Restructuring Charges (2,405) 10,842
Interest Expense 9,155 11,548
(Gain) on Sale of Operation - (26,561)
Other (Income) Expense, Net (1,060) 1,044
-------------- ---------------
Income (loss) before Income Taxes, Reorganization
Items and Extraordinary Item (31,015) (8,352)
Reorganization Items 50,384 7,045
Provision for Income Taxes 891 516
Extraordinary Item (206,363) -
-------------- ---------------
Net income (loss) $124,073 ($15,913)
============== ===============
</TABLE>
(a) Includes depreciation expense of $12,338 and $19,574 for the nine months
ended June 30, 1999 and June 30, 1998, respectively.
Sales. Sales decreased $184,774 from $572,625 to $387,851 or 32.3%. Aggregate
sales for the operations designated for sale or wind down decreased
approximately $193,686 from $219,829 to $26,143 as the Company's divestiture
program as contemplated under the Company's Plan of Reorganization nears
completion. Sales for the remaining operations increased $8,912 from $352,796 to
$361,708 as strong light truck demand was partially offset by the wind down of
older programs.
<PAGE>
Gross Profit. Gross profit, expressed as a percentage of sales, increased from
5.3% to 10.8%, or $11,541. The gross profit (loss) for operations designated for
sale or wind-down decreased from $1,517 to ($4,694). After adjusting 1999
results for $4,513 of operating losses charged to loss contract reserves
established in the fourth quarter of fiscal 1998, reported operating loss for
1999 would have been ($9,207). Gross (loss) increased by approximately $10,724
due to one-time tooling profits of approximately $1,900 in 1998 that did not
recur in 1999 offset by significantly lower volume in 1999 as a result of the
Company's divestiture program and the accelerated depreciation of long-lived
assets at its Ripley, Tennessee facility. The increase of $17,752 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 $40,742 to $30,429 due to reduced levels
of staffing and spending as a result of the reorganization program implemented
by current management and the 1999 charge of $6,200 for the purchase and
implementation of enterprise software compared to 1998 charges of $9,500 (see
Year 2000 Readiness).
Interest Expense. Interest expense decreased from $11,548 to $9,155 as a result
of lower borrowing levels resulting from the cash generated by the sale or wind
down of unprofitable businesses, a lower effective interest rate on
post-emergence financing and improved working capital management.
Amortization of Intangibles. Amortization of intangibles increased from $1,188
to $36,888 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 June 30, 1999, the Company
recorded restructuring charges of $1,200 for the shut-down of its Ripley,
Tennessee facility. In addition, the Company has reversed to income previously
provided restructuring reserves related to the divestiture program, $3,605 of as
contemplated under the Company's Plan of Reorganization, primarily as a result
of lower severance and related costs for the Tampa office, Harman Automotive and
the Harvard Interiors Furniture Division ($2,300) and lower facility shutdown
costs at Toledo ($1,200) due to the sale of that facility. During the period
ended June 30, 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.
Gain on Sale of Operation. During the period ended June 30, 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 $1,208 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 $1,044 to
($1,060) due to rental income and a favorable legal settlement in the period
ended June 30, 1999 as compared to a loss on the disposal of equipment in the
period ended June 30, 1998.
Reorganization Items. During the period ended June 30, 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 June 30, 1998 represent
mainly professional fees incurred in connection with the bankruptcy proceedings.
<PAGE>
Provision for Income Taxes. The Increase from $516 to $891 was principally due
to higher earnings at the Company's Canadian subsidiary.
Extraordinary Item. During the period ended June 30, 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 ($15,913) to $124,073
for the reasons described above.
Three months ended June 30, 1999 compared to the three months ended June 30,
1998.
The following table is included solely for use in comparative analysis of
results of operations and to complement management's discussion and analysis.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
June 30, June 30,
1999 1998
--------------- ----------------
<S> <C> <C>
Sales $129,908 $169,234
Cost of sales 116,927 156,361
--------------- ----------------
Gross profit 12,981 12,873
Selling, general and administrative expenses 11,777 15,389
--------------- ----------------
Operating income (loss) (a) 1,204 (2,516)
Amortization of intangible assets 15,696 396
Restructuring charges (income) (2,405) -
Interest expense 3,464 2,616
(Gain) on Sale of Operation - 397
Other (Income) Expense, Net (930) 73
--------------- ----------------
Income (loss) before Income Taxes, Reorganization
Items and Extraordinary Item (14,621) (5,998)
Reorganization Items - 1,144
Provision for Income Taxes (8) 171
Extraordinary Item - -
--------------- ----------------
Net (loss) ($14,613) ($7,313)
=============== ================
</TABLE>
(a) Includes depreciation expense of $5,239 and $6,052 for the three months
ended June 30, 1999 and June 30, 1998, respectively.
Sales. Sales decreased $39,326 from $169,234 to $129,908 or 23.2%. Aggregate
sales for the operations designated for sale or wind down decreased
approximately $45,045 from $50,541 to $5,496 as the Company's divestiture
program as contemplated under the Company's Plan of Reorganization nears
completion. Sales for the remaining operations increased $5,719 from $118,693 to
$124,412 as strong light truck demand was partially offset by the wind down of
older programs.
<PAGE>
Gross Profit. Gross profit, expressed as a percentage of sales, increased from
7.6% to 10.0%, or $108. The gross profit (loss) for operations designated for
sale or wind-down decreased from $1,754 to ($3,889). After adjusting 1999
results for $746 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 ($4,635). This gross profit decrease of approximately
$6,389 was due primarily to significantly lower volume in 1999 as a result of
the Company's divestiture program and the accelerated depreciation of
long-lived assets at its Ripley, Tennessee facility. The increase of $5,751
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 $15,389 to $11,777 primarily due to
1999 charges of $1,700 for the purchase and implementation of enterprise
software compared to 1998 charges of $4,500 (see Year 2000 Readiness).
Interest Expense. Interest expense increased from $2,616 to $3,464 as a result
of temporary higher working capital requirements for the launch of several new
car platforms.
Amortization of Intangibles. Amortization of intangibles increased from $396 to
$15,696 as a result of the amortization of 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 June 30, 1999, the Company
recorded restructuring charges of $1,200 for the shut-down of its Ripley,
Tennessee facility. In addition, the Company has reversed to income $3,605 of
previously provided restructuring reserves related to the divestiture program,
as contemplated under the Company's Plan of Reorganization, primarily as a
result of lower severance and related costs for the Tampa office, Harman
Automotive and the Harvard Interiors Furniture Division ($2,300) and lower
facility shutdown costs at Toledo ($1,200) due to the sale of that facility.
Gain on Sale of Operations. The period ended June 30, 1998 included an
adjustment to the gain on the sale of land, building and certain other assets of
the Harvard Interiors' St. Louis facility.
Other (Income) Expenses. Other (income) expense increased from $73 to ($930) due
to rental income and a favorable legal settlement in the period ended June 30,
1999 as compared to a loss on the disposal of equipment in the period ended June
30, 1998.
Reorganization Items. Reorganization charges during the period ended June 30,
1998 represent mainly professional fees incurred in connection with the
bankruptcy proceedings.
Provision for Income Taxes. The tax benefit of ($8) for the period ended June
30, 1999 was to adjust the estimated tax provision for the Canadian subsidiary.
Net Income (Loss). The net (loss) increased from ($7,313) to ($14,613) 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 seven months ended June 30, 1999
(post-confirmation) have been combined for purposes of comparison to the nine
months ended June 30, 1998.
<PAGE>
For the nine months ended June 30, 1999, the Company had cash used in operations
of ($3,563) compared to cash provided by operations of $17,642 for the nine
months ended June 30, 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. The prior year's results
included an advance from a major customer to partially defray the cost of
shutting down the Toledo, Ohio facility and also working capital reductions at
facilities being shutdown.
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 $43,500 as of June 30, 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 had suffered recurring
losses from operations and at June 30, 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.
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.
<PAGE>
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 July 31, 1999, the Company had successfully implemented
ERP software at all facilities except one, which is scheduled for
installation by October 1999, and the system is being utilized for
most financial functions.
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") 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.
<PAGE>
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 $13,900 of such amount has been spent
through June 30, 1999. The source of such funds was working capital
loans. The balance of the remediation costs are expected to be
incurred through September 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.
<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.
On June 11, 1999, Doehler-Jarvis, Inc. and Harvard Industries, Inc. (the
"Companies") filed a declaratory judgment action in the United States District
Court for the Eastern District of Pennsylvania seeking a declaration that the
termination of certain insurance benefits, including health insurance benefits,
to individuals on the seniority list when they retired from active or inactive
employee status at Doehler-Jarvis facilities in Pottstown, Pennsylvania or
Toledo, Ohio after July 16, 1999, and/or their eligible surviving spouses and/or
eligible dependents does not violate the Employee Retirement Income Security Act
("ERISA") or any other law, applicable collective bargaining agreement, or
contract. Thomas E. Kopystecki was named as the representative of the proposed
class of defendants. The response to the complaint is due on August 3, 1999.
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.
On June 23, 1999, John C. Gilbert, Eugene Appling, Robert A. LaClair, John E.
Malkulan, Christiane J. Myers, Kenneth McKnight, Thomas F. Klejta, and Fern M.
Yerger, on behalf of themselves and a class of persons similarly situated filed
an action against the Companies in the United States District Court for the
Northern District of Ohio seeking a declaration that the termination of
insurance benefits violates ERISA and the Labor Management Relations Act
("LMRA") and seeking unspecified damages resulting from the anticipated
termination of benefits. The Companies filed a motion to transfer the Ohio
action to Pennsylvania because the Pennsylvania action was the first filed
action and is the more convenient forum for the resolution of the issues. The
motion is presently pending before the Court. 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
<PAGE>
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. For the period of April 28, 1999 through June
29, 1999 an additional 1,670,785 shares in the aggregate were issued pursuant to
the Plan of Reorganization without any additional monetary consideration. 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.
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. Since that date the Company has had discussions
with various potential purchasers and is engaged in continued negotiations with
one such possible purchaser. However, there are no assurances that any
definitive agreement will be reached with that or any other purchaser. At such
time as the Company and a purchaser have reached agreement on purchase price and
other essential terms and conditions, the Company will make an appropriate
announcement or filing.
See Footnote 1 for information related to Emergence from Chapter 11
Reorganization
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:
<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.
Date: November 17, 1999 HARVARD INDUSTRIES, INC.
By: /s/ D. Craig Bowman
----------------------------------
D. Craig Bowman
Secretary and Vice President, Law
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ THEODORE W. VOGTMAN Executive Vice President and Chief November 17, 1999
- ----------------------- Financial Officer (Principal Financial
Theodore W. Vogtman Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,303
<SECURITIES> 0
<RECEIVABLES> 50,713
<ALLOWANCES> 0
<INVENTORY> 26,011
<CURRENT-ASSETS> 88,306
<PP&E> 132,203
<DEPRECIATION> 8,831
<TOTAL-ASSETS> 123,372
<CURRENT-LIABILITIES> 107,178
<BONDS> 0
0
0
<COMMON> 95
<OTHER-SE> 141,488
<TOTAL-LIABILITY-AND-EQUITY> 496,602
<SALES> 129,908
<TOTAL-REVENUES> 129,908
<CGS> 114,610
<TOTAL-COSTS> 114,610
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,464
<INCOME-PRETAX> (14,621)
<INCOME-TAX> (8)
<INCOME-CONTINUING> (14,613)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,613)
<EPS-BASIC> (1.62)
<EPS-DILUTED> 0
</TABLE>
