<PAGE>
As filed with the Securities and Exchange Commission on August , 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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
Lebanon, New Jersey 08833
(Address of Principal Executive Offices) (Zip Code)
------------------------
(908) 437-4100
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /x/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes /x/ No / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of August
4, 2000, was 10,034,560.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
Page
--------
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1999 (Audited)
and June 30, 2000 (Unaudited) .................................... F-2
Consolidated Statements of Operations (Unaudited)
Three Months Ended June 30, 2000
Three Months Ended June 30, 1999
Nine Months Ended June 30, 2000
Seven Months Ended June 30, 1999 (Post-Confirmation),
Two Months Ended November 29, 1998 (Pre-Confirmation) ............ F-3
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended June 30, 2000
Seven Months Ended June 30, 1999 (Post-Confirmation),
Two Months Ended November 29, 1998 (Pre-Confirmation) ............ F-5
Notes to Consolidated Financial Statements--(Unaudited) ............ F-6-F-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ F-11
Item 3. Quantitative and Qualitative Disclosure About Market Risk .. F-15
PART II. Other Information: ........................................ F-16
Item 1. Legal Proceedings .......................................... F-16
Item 2. Changes in Securities ...................................... F-16
Item 3. Defaults Upon Senior Securities ............................ F-16
Item 4. Submission of Matters to a Vote of Securities Holders ...... F-16
Item 5. Other Information .......................................... F-17
Item 6. Exhibits and Reports on Form 8-K ........................... F-17
SIGNATURES ......................................................... F-18
F-1
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and June 30, 2000 (Unaudited)
(In thousands of dollars)
<TABLE>
<CAPTION>
September 30, June 30, 2000
ASSETS 1999 (Unaudited)
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 21,840 $ 2,794
Accounts receivable, net..................................................... 35,324 42,838
Inventories.................................................................. 18,107 18,775
Prepaid expenses and other current assets.................................... 6,453 5,115
--------- ---------
Total current assets........................................................... 81,724 69,522
Property, plant and equipment, net............................................. 72,358 77,691
Intangible assets, net......................................................... 177,581 145,618
Other assets, net.............................................................. 5,490 6,439
--------- ---------
Total assets................................................................... $ 337,153 $ 299,270
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings........................................................ $ -- $ 6,870
Accounts payable............................................................. 28,489 31,644
Accrued expenses............................................................. 57,654 34,048
Income taxes payable......................................................... 5,885 4,041
--------- ---------
Total current liabilities...................................................... 92,028 76,603
Postretirement benefits other than pensions.................................... 96,734 96,763
Other.......................................................................... 63,316 65,397
--------- ---------
Total liabilities.............................................................. 252,078 238,763
Commitments and Contingencies.................................................. -- --
Shareholders' equity:
Common stock $.01 par value; 50,000,000 shares authorized; 10,234,222
shares issued and outstanding at September 30, 1999 and 10,837,141
shares issued at June 30, 2000............................................ 102 108
Additional paid-in capital................................................... 174,898 174,892
Accumulated deficit.......................................................... (90,450) (109,692)
Accumulated other comprehensive income....................................... 525 482
Less--Cost of shares of common stock in treasury (802,581 shares at
June 30, 2000)............................................................ -- (5,283)
--------- ---------
Total shareholders' equity..................................................... 85,075 60,507
--------- ---------
Total liabilities and shareholders' equity..................................... $ 337,153 $ 299,270
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-2
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30, 1999
and Three Months Ended June 30, 2000
(Post-Confirmation) (Unaudited)
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
Post-Confirmation
--------------------------------
Three Months Three Months
Ended Ended
June 30, 1999 June 30, 2000
-------------- --------------
<S> <C> <C>
Sales............................................................................ $ 129,908 $ 86,355
Cost of sales.................................................................... 114,610 78,600
---------- ----------
Gross profit................................................................... 15,298 7,755
Selling, general and administrative expense...................................... 11,777 6,686
Amortization of intangible assets................................................ 15,696 10,653
Restructuring charges............................................................ (88) --
Interest expense................................................................. 3,464 265
Other (income) expense, net...................................................... (930) (246)
---------- ----------
Loss before income taxes......................................................... (14,621) (9,603)
Provision for (benefit from) income taxes........................................ (8) 427
---------- ----------
Net (loss)..................................................................... $ (14,613) $ (10,030)
========== ==========
Basic and diluted earnings per share
Net (loss) per share........................................................... (1.62) (1.01)
========== ==========
Weighted average number of common shares outstanding............................. 9,045,642 9,900,334
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Two Months Ended November 29, 1998 (Pre-Confirmation)
Seven Months Ended June 30, 1999 and
Nine Months Ended June 30, 2000 (Post-Confirmation)
(In thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
Pre- Post-Confirmation
Confirmation -------------------------
------------ Seven Nine
Two Months Months Months
Ended Ended Ended
November 29, June 30, June 30,
1998 1999 2000
------------ ----------- ----------
<S> <C> <C> <C>
Sales.................................................................. $ 89,050 $ 298,801 $ 260,032
Cost of sales.......................................................... 79,628 263,914 232,048
---------- ----------- ----------
Gross profit......................................................... 9,422 34,887 27,984
Selling, general and administrative expense............................ 5,151 25,278 20,019
Amortization of intangible assets...................................... 264 36,624 31,963
Impairment of long-lived assets and restructuring charges.............. -- (88) --
Interest expense (contractual interest of $6,931 for the
two months ended November 29, 1998).................................. 1,636 7,519 697
(Gain) on sale of operations........................................... -- -- (7,170)
Other (income) expense, net............................................ (34) (1,026) 467
---------- ----------- ----------
(Loss) income before reorganization items and income taxes............. 2,405 (33,420) (17,992)
Reorganization items................................................... 50,384 -- --
---------- ----------- ----------
Loss before income taxes and extraordinary item........................ (47,979) (33,420) (17,992)
---------- ----------- ----------
Provision for income taxes............................................. 584 307 1,250
---------- ----------- ----------
Loss before extraordinary item......................................... (48,563) (33,727) (19,242)
---------- ----------- ----------
Extraordinary item--(gain) on forgiveness of debt...................... (206,363) -- --
---------- ----------- ----------
Net (loss) income.................................................... $ 157,800 $ (33,727) $ (19,242)
========== =========== ==========
PIK Preferred Dividends and Accretion (contractual amount
for the two months ended November 29, 1998 was $3,219)............... $ -- $ -- $ --
========== =========== ==========
Net (loss) income attributable to common shareholders................ $ 157,800 $ (33,727) $ (19,242)
========== =========== ==========
Basic and diluted earnings per share:
Loss before extraordinary item......................................... $ (6.91) $ (3.94) $ (1.95)
Income from extraordinary item......................................... 29.37 -- --
---------- ----------- ----------
Net (loss) income per share.......................................... $ 22.46 $ (3.94) $ (1.95)
========== =========== ==========
Weighted average number of common shares outstanding................... 7,026,437 8,568,589 9,849,942
========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Two Months Ended November 29, 1998 (Pre-Confirmation),
Seven Months Ended June 30, 1999 and
Nine Months Ended June 30, 2000 (Post-Confirmation)
(In thousands of dollars)
<TABLE>
<CAPTION>
Pre- Post-Confirmation
Confirmation ---------------------
------------ Seven Nine
Two Months Months Months
Ended Ended Ended
November 29, June 30, June 30,
1998 1999 2000
------------ -------- ---------
<S> <C> <C> <C>
Cash flows related to operating activities:
Income (loss) from operations before reorganization items.................. $ 1,820 $(33,727) $ (19,242)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation............................................................. 3,503 6,518 6,331
Amortization............................................................. 476 37,200 32,143
(Gain) on sale of operations............................................. -- -- (7,170)
Impairment of long-lived assets and restructuring charges................ -- (88) --
(Gain) loss on disposition of property, plant and equipment.............. -- (48) 51
Changes in operating assets and liabilities net of effects of divestitures
and reorganization items:
Accounts receivable........................................................ (15,077) 19,421 (7,722)
Inventories................................................................ (1,168) 1,142 (856)
Other current assets....................................................... 402 1,017 (627)
Accounts payable........................................................... 21,676 (12,259) 3,155
Accrued expenses and income taxes payable.................................. (23,745) 2,891 (21,115)
Other noncurrent........................................................... (1,412) (1,777) (2,243)
-------- -------- ---------
Net cash provided by (used in) operations before reorganization items.... (13,525) 20,290 (17,295)
Net cash used by reorganization items.................................... (4,018) (6,310) --
-------- -------- ---------
Net cash provided by (used in) operations................................ (17,543) 13,980 (17,295)
-------- -------- ---------
Cash flows related to investing activities:
Acquisition of property, plant and equipment............................... (2,856) (10,409) (12,413)
Proceeds from disposition of property, plant and equipment................. -- 48 50
Net proceeds from sale of operations....................................... -- 4,482 9,775
-------- -------- ---------
Net cash provided by (used in) investing activities...................... (2,856) (5,879) (2,588)
-------- -------- ---------
Cash flows related to financing activities:
Net borrowings (repayments) under DIP financing agreement.................. 1,062 -- --
Net borrowings (repayments) under financing/credit agreement............... 81,425 (5,812) 6,870
Retirement of DIP financing................................................ (40,360) -- --
Retirement of creditors unsecured term loan................................ (25,000) -- --
Deferred financing costs................................................... (3,338) -- (750)
Purchase of treasury stock................................................. -- -- (5,283)
-------- -------- ---------
Net cash (used in) provided by financing activities...................... 13,789 (5,812) 837
-------- -------- ---------
Net increase (decrease) in cash and cash equivalents..................... (6,610) 2,289 (19,046)
Cash and cash equivalents, beginning of period............................... 11,624 5,014 21,840
-------- -------- ---------
Cash and cash equivalents, end of period..................................... $ 5,014 $ 7,303 $ 2,794
======== ======== =========
Supplemental disclosure of cash flow information:
Interest paid.............................................................. 1,870 1,118 36
Income taxes paid.......................................................... 228 1,288 3,087
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<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 nine month period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000. The balance sheet at September 30, 1999 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, 1999.
On November 24, 1998 (the "Effective Date") the Company emerged from
Chapter 11 reorganization under the United States Bankruptcy Code. 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 of
post-confirmation periods will be segregated by a black line in order to signify
that such consolidated statements of operations, stockholders' equity
(deficiency) and cash flows are those of a new reporting entity and have been
prepared on a basis not comparable to the pre-confirmation periods. The Company,
in accordance with SOP 90-7, has followed the accounting and reporting
guidelines for companies operating as debtor-in-possession since its filing for
bankruptcy protection on May 8, 1997 and until its emergence from bankruptcy
protection as described above.
The reorganization value of the Company was determined by management, with
assistance from Chanin Kirkland Messina LLC, independent financial
professionals. The methodology employed involved estimation of enterprise value
(i.e., the market value of the Company's debt and stockholders' equity which was
determined to be $275,000), taking into account a discounted cash flow analysis
(Enterprise Value). The discounted cash flow analysis was based on five-year
cash flow projections prepared by management and average discount rates of 5.34
percent. The reorganization value of the Company was determined to be $552,428
as of November 29, 1998.
The portion of the reorganization value which cannot be attributed to
specific tangible or identifiable intangible assets of the reorganized Company
has been reported as "Reorganization value in excess of amounts allocable to
identifiable assets." This intangible asset is being amortized using the
straight-line method over 5 years. The Company selected a useful life of
5 years based on the Company's previous experience, methodologies employed by
independent financial experts and the Company's turnaround business strategy.
The Company continually evaluates whether changes have occurred that would
require revision of the remaining estimated useful life of the reorganization
value in excess of amounts allocable to identifiable assets or render such
assets not recoverable. To determine if reorganization value in excess of
amounts allocable to identifiable assets is recoverable, the Company compares
the net carrying amounts to undiscounted projected cash flows. If the
reorganization asset is not recoverable, the Company would record an impairment
based on the difference between the net carrying amount and fair value.
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 in excess of amounts allocable to
identifiable assets. The unaudited pro forma financial information does not
F-6
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
(In thousands of dollars, except share and per share data)
1. Basis of Presentation and Emergence From Bankruptcy:--(Continued)
purport to be indicative of the results which would have been obtained had the
Plan been effective as of October 1, 1998, or which may be obtained in the
future.
<TABLE>
<CAPTION>
Pro Forma Adjustments
------------------------------------------
Nine Months
Ended
June 30, Pro Forma
1999 Adjustments As Adjusted
------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Net Sales......................................... $387,851 $ -- $ 387,851
Costs of Sales.................................... 343,542 (1,666) 341,876
-------- --------- -----------
Gross Profit...................................... 44,309 1,666 45,975
Selling, General and Administrative Expenses...... 30,429 -- 30,429
-------- --------- -----------
Operating Income.................................. 13,880 1,666 15,546
Other (Income) Expenses........................... (1,148) -- (1,148)
Interest expense................................ 9,155 (160) 8,995
Other--net...................................... -- -- --
Amortization of reorganization asset............ 36,888 10,200 47,088
-------- --------- -----------
Total other (income) expense................. 44,895 10,040 54,935
-------- --------- -----------
Income (loss) before income taxes................. (31,015) (8,374) (39,389)
Reorganization Items.............................. 50,384 (50,384) --
Provision (benefit) for income taxes.............. 891 -- 891
Extraordinary Item................................ (206,363) 206,363 --
-------- --------- -----------
Net income (loss)................................. $124,073 $(164,353) $ (40,280)
======== ========= ===========
Basic and diluted earnings (loss) per share....... (4.01)
===========
Weighted average number of common and common
equivalent shares outstanding................... 10,034,560
===========
<CAPTION>
Reorganization expenses included in the consolidated statements of
operations are comprised of the following:
<S> <C>
Fresh Start adjustments to state assets and liabilities at their
respective fair values............................................................ $(50,431)
Interest income on cash resulting from Chapter 11 proceedings....................... 47
--------
Total............................................................................... $(50,384)
========
</TABLE>
Certain prior year amounts have been reclassified in order to conform to
the current year presentation.
F-7
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
(In thousands of dollars, except share and per share data)
2. Disposition of Businesses:
Condensed operating data of operations disposed or being disposed of are as
follows:
Pre-
Confirmation Post-Confirmation
------------ ---------------------------
Two Months Seven Months Nine Months
Ended Ended Ended
November 28, June 30, June 30,
1998 1999 2000
------------ ------------ -----------
Sales ........................ $33,496 $101,134 $ --
Gross profit ................. 2,900 6,830 --
On December 21, 1999, the Company sold the land and building and certain
machinery and equipment of the Ripley, Tennessee facility of its Hayes-Albion
subsidiary for approximately $2,325 in cash. The Company recognized a gain of
$1,109 on this transaction.
On December 28, 1999, the Company sold its Farmington Hills facility for
gross proceeds of $5,500 in cash and entered into a leaseback agreement with the
buyer. The lease has been accounted for as an operating lease, with a term of
eight years. The Company recognized a gain of $1,149 on this transaction and
deferred $2,028 of gain to be amortized as a reduction of rent expense.
In January 2000 the Company received $4,550 in cash from Hutchinson as a
post-closing adjustment relating to the sale of Kingston-Warren on
September 30, 1999. This amount was recorded as a component of gain on sale of
operations as an adjustment to the loss on the sale of Kingston-Warren, recorded
in fiscal 1999, with a corresponding amount recorded in other receivables as of
December 31, 1999.
On March 8, 2000 the Company sold its Bolivar, Tennessee land and building
for gross proceeds of approximately $450. The Company recognized a gain of $362
on this transaction.
3. Inventories:
Inventories consist of the following:
September 30, June 30,
1999 2000
------------- -----------
(Unaudited)
Finished goods ........................... $5,005 $5,293
Work-in-process .......................... 2,918 4,030
Tooling .................................. 2,132 1,646
Raw materials ............................ 8,052 7,806
------- -------
Total inventories ........................ $18,107 $18,775
======= =======
4. Long-Term Debt and Credit Agreements:
On September 30, 1999, the Company put in place a new $50,000 revolving
credit facility with General Electric Capital Corporation ("GECC"). The Facility
is secured by substantially all of the assets of the Company. The interest rate
is base rate (prime rate) plus 1.25% or LIBOR plus 2.50% (interest rate at
June 30, 2000 was 10.75%). Effective March 31, 2000, and at the end of each
ensuing quarter the interest rate may be adjusted (up or down) prospectively
based upon the Company's achievement of consolidated financial performance
targets. The facility commitment terminates on September 30, 2001. No amount was
drawn down on the facility as of September 30, 1999 and $6,870 was drawn down as
of June 30, 2000 in addition to letters of credit outstanding of $9,720 and
$7,114 at September 30, 1999 and June 30, 2000, respectively.
F-8
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
(In thousands of dollars, except share and per share data)
5. Restructuring Charges:
During the ten-month period ended September 30, 1999, the Company recorded
a $1,200 restructuring charge representing shut-down costs for the Ripley,
Tennessee facility. The charge related to severance for approximately 230 hourly
and salaried employees ($1,000) and facility shut-down costs ($200). As of
June 30, 2000, the Company has completed the severance and facility related
payments totaling $1,078 and $166, respectively.
6. Earnings per Common Share:
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 ($19,242) for the nine months
ended June 30, 2000, ($33,727) for the seven months ended June 30, 1999,
$157,800 for the two months ended November 29, 1998 and ($10,030) and ($14,613)
for the three months ended June 30, 2000 and 1999, respectively. The weighted
average number of shares of common stock used in determining basic and diluted
EPS was 9,849,942 for the nine months ended June 30, 2000, 8,568,589 for the
seven months ended June 30, 1999, 7,026,437 for the two months ended
November 29, 1998, and 9,900,334 and 9,045,642 for the three months ended
June 30, 2000, and 1999, respectively.
Although on August 4, 2000, 10,034,560 of the Company's 50,000,000
authorized shares were outstanding, net of 802,581 shares of treasury stock, 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 500,000 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.
Members of the Company's Board of Directors have each been granted 20,000
shares which vest over four (4) years. A total of 120,000 shares were issued as
one director declined the grant and one member is ineligible.
An incentive plan has been authorized by the Board of Directors providing
for a grant of options to certain members of senior management. As of June 30,
2000, 1,845,000 shares have been awarded under this plan.
Equivalent shares of 5,669, as calculated using the treasury stock method,
relative to the above options and warrants have been excluded from the
computation of earnings per share for the nine month and three month periods
ended June 30, 2000 as their effect would be antidilutive. On October 5, 1999,
the Company used part of the proceeds of the sale of the assets of its
Kingston-Warren subsidiary to purchase 762,000 shares of its common stock in a
private transaction at an aggregate cost of approximately $4,999. On
January 12, 2000 the Company purchased 32,781 shares of its common stock in a
private transaction at an aggregate cost of approximately $245. On April 4, 2000
the Company purchased 5,500 shares of its common stock in a private transaction
at an aggregate cost of approximately $28. On May 17, 2000, the Company
purchased 2,300 shares of its common stock in a private transaction at an
aggregate cost of approximately $11.
F-9
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued)
(In thousands of dollars, except share and per share data)
7. Comprehensive Income:
<TABLE>
<CAPTION>
Pre-
Confirmation Post-Confirmation
------------ ---------------------------
Two Months Seven Months Nine Months
Ended Ended Ended
November 28, June 30, June 30,
1998 1999 2000
------------ ------------ -----------
<S> <C> <C> <C>
Net income (loss)....................... $157,800 $(33,727) $ (19,242)
Other comprehensive income:
Foreign currency translation
adjustment......................... -- 310 (42)
-------- -------- ---------
Comprehensive income (loss)............. $157,800 $(33,417) $ (19,284)
======== ======== =========
</TABLE>
8. Breed:
As previously disclosed, on June 12, 2000, the Company announced its
intention to acquire Breed Technologies Inc. ("Breed"), which is currently
operating under the protection of Chapter 11. On August 7, 2000 Breed and the
Company, as co-proponents, filed a Consolidated Plan of Reorganization of Breed
(the "Breed Plan") and a related Disclosure Statement with the United States
Brankruptcy Court for the District of Delaware. A hearing with respect to the
adequacy of the Disclosure Statement is scheduled to be held on September 5,
2000. Harvard and Breed have not yet entered into a definitive agreement for the
acquisition by Harvard of Breed. If a definitive agreement is entered into, the
closing will be subject to usual conditions and will also be subject to
Bankruptcy Court approval. There are no assurances that the transaction will be
consummated.
In connection with the Breed transaction the Company has recorded $1,200 of
expense and has capitalized $750 of financing costs. All unreimbursed costs will
be expensed in the event the transaction is not completed.
F-10
<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." 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 nine months ended June 30, 2000 was compared to
the combined seven months ended June 30, 1999 (Post-Confirmation) and the two
months ended November 29, 1998 (Pre-Confirmation). Differences between periods
due to "Fresh Start Reporting" adjustments are explained when necessary.
F-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
(In thousands of dollars)
Nine Months Ended June 30, 2000 compared to the Nine Months Ended June 30, 1999.
The following table is included solely for use in comparative analysis of
results of operations, and to complement management's discussion and analysis.
Certain reclasses have been made to present the results on a comparable basis.
<TABLE>
<CAPTION>
Nine Months Ended
--------------------
June 30, June 30,
1999 2000
-------- --------
<S> <C> <C>
Sales..................................................................................... $387,851 $260,032
Cost of sales........................................................................... 343,542 232,048
-------- --------
Gross profit.............................................................................. 44,309 27,984
Selling, general and administrative expenses............................................ 30,429 20,019
-------- --------
Operating income (a).................................................................... 13,880 7,965
Interest expense........................................................................ 9,155 697
Amortization of intangible assets....................................................... 36,888 31,963
Restructuring charges................................................................... (88) --
(Gain) on sale of operations............................................................ -- (7,170)
Other (income) expenses, net............................................................ (1,060) 467
-------- --------
(Loss) before income taxes, reorganization items and extraordinary item................. (31,015) (17,992)
Reorganization items.................................................................... 50,384 --
Provision for income taxes.............................................................. 891 1,250
Extraordinary item...................................................................... (206,363) --
-------- --------
Net income (loss)....................................................................... $124,073 $(19,242)
======== ========
</TABLE>
------------------
(a) Includes depreciation expense of $6,331 and $10,021 for the periods ended
June 30, 2000 and 1999, respectively.
Sales. Consolidated sales decreased $127,819 from $387,851 to $260,032, or
33.0%. Aggregate sales for the operations designated for sale or wind down
accounted for $134,630 of the decrease as the Company's divestiture program, as
contemplated in its plan of reorganization, is substantially complete. Sales for
the remaining operations increased $6,811 from $253,221 to $260,032 primarily
due to light truck volume, tooling sales and selective price increases offset
partially by lower military weapon systems sales and lower aluminum die cast
sales due to unscheduled machine down time.
Gross Profit. The consolidated gross margin, expressed as a percentage of
sales, decreased from 11.4% to 10.8%. The gross profit for operations designated
for sale or wind-down decreased $14,243 as the Company's divestiture program, as
contemplated in its plan of reorganization, is substantially complete. The
decrease of $2,082 in gross profit for the remaining operations was mainly due
to productivity losses due to a 2-day strike at the Pottstown facility in
February 2000, start-up inefficiencies for a new product at the Rock Valley,
Iowa facility, aluminum die-casting inefficiencies due to unscheduled machine
down time and lower labor productivity and lower military systems sales volume
partially offset by higher light truck sales volume and selected price
increases. Management is currently developing a program to upgrade die-cast
equipment and tooling to address machine down time.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $30,429 to $20,019 primarily due to the
divestiture of Kingston-Warren in September 1999 and the favorable resolution of
unauthorized deductions taken by two major customers in the fourth quarter of
fiscal year 1999.
F-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
(In thousands of dollars)
Interest Expense. Interest expense decreased from $9,155 to $697 due to
lower borrowing levels as a result of the sale of Kingston Warren on September
30, 1999 and the related retirement of all outstanding borrowings under the
$115,000 senior credit facility and the repurchase of the $25,000 14 1/2 %
senior secured notes.
Amortization of Intangibles. Amortization of intangibles decreased from
$36,888 to $31,963. The nine month period ended June 30, 1999 included seven
months of amortization expense relating to a $314,901 reorganization asset,
established as part of "Fresh Start Reporting," which was being amortized over a
five year period. The nine-month period ended June 30, 2000 includes nine months
of amortization expense on a reorganization asset of $212,901, which reflects an
adjustment for the sale of Kingston-Warren.
Gain on Sale of Operations. This amount includes a gain on the sale of the
building and certain inventory and machinery and equipment of the Ripley,
Tennessee facility of $1,109, a gain on the sale of the Farmington Hills land
and building of $1,149, a gain on the sale of the Bolivar, Tennessee land and
building of $362 and a reduction to the loss on the sale of Kingston Warren,
recorded in September 1999, of $4,550 which represents a post-closing
adjustment.
Reorganization Items. During the period ended June 30, 1999, the Company
recognized, as part of "Fresh Start Reporting," charges that aggregated $50,431
net of interest income of $47, for adjustments to reflect all assets and
liabilities at their respective fair values. Reorganization charges during the
period ended June 30, 1999 represent mainly professional fees incurred in
connection with the bankruptcy proceedings.
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) decreased from $124,073 to
($19,242) for the reasons described above.
Three Months Ended June 30, 2000 Compared to the Three Months Ended June 30,
1999.
The following table is included solely for use in comparative analysis of
results of operations, and to complement management's discussion and analysis.
Certain reclasses have been made to present the results on a comparable basis.
<TABLE>
<CAPTION>
Three Months Ended
--------------------
June 30, June 30,
1999 2000
-------- --------
<S> <C> <C>
Sales..................................................................................... $129,908 $ 86,355
Cost of sales........................................................................... 114,610 78,600
-------- --------
Gross profit.............................................................................. 15,298 7,755
Selling, general and administrative expenses............................................ 11,777 6,686
-------- --------
Operating income (a).................................................................... 3,521 1,069
Interest expense........................................................................ 3,464 265
Amortization of intangible assets....................................................... 15,696 10,653
Restructuring charges (income).......................................................... (88) --
Other (income) expense, net............................................................. (930) (246)
-------- --------
(Loss) before income taxes.............................................................. (14,621) (9,603)
Provision for income taxes.............................................................. (8) 427
-------- --------
Net (loss)........................................................................... $(14,613) $(10,030)
======== ========
</TABLE>
------------------
(a) Includes depreciation expense of $2,100 and $2,922 for the periods ended
June 30, 2000 and 1999, respectively.
F-13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
(In thousands of dollars)
Sales. Consolidated sales decreased $43,553 from $129,908 to $86,355 or
33.5%. Aggregate sales for the operations designated for sale or wind-down
accounted for $42,986 of the decrease as the Company's divestiture program, as
contemplated in its Plan of Reorganization, is substantially complete. Sales for
the remaining operations decreased $567 from $86,922 to $86,355 due primarily to
lower die cast volume due to unscheduled machine down time.
Gross Profit. The consolidated gross margin, expressed as a percentage of
sales, decreased from 11.8% to 9.0%. The gross profit from operations designated
for sale or wind-down decreased $3,427 as the Company's divestiture program, as
contemplated in its Plan of Reorganization, is substantially complete. The
decrease of $4,116 in gross profit for the remaining business is a result of
aluminum die cast inefficiencies resulting from unscheduled machine down time
and lower labor productivity and start-up inefficiencies for a new product at
the Rock Valley Facility. Management is currently developing a program to
upgrade die cast equipment and tooling to address the machine down time problem.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $11,777 to $6,686 primarily due to the
divestiture of the Kingston-Warren subsidiary in September 1999.
Interest Expense. Interest expense decreased from $3,464 to $265 due to
lower borrowing levels as a result of the sale of Kingston-Warren in September
1999 and the related retirement of all outstanding borrowings under the $115,000
Senior Credit Facility and the repurchase of the $25,000 14 1/2% Senior Secured
Notes.
Amortization of Intangible Assets. Amortization of intangible assets
decreased from $15,696 to $10,653 due to the reduction in the Company's
reorganization assets as a result of the divestiture of the Kingston-Warren
subsidiary in September 1999.
Restructuring Charges. During the period ended June 30, 1999 the Company
recorded a restructuring charge of $3,517 for the shut-down of its Ripley,
Tennessee facility offset by the reversal to income of previously provided
restructuring reserves for completed programs that aggregate to $3,605.
Net Loss. Net (loss) decreased from ($14,613) to ($10,030) 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, 2000.
For the nine months ended June 30, 2000, the Company had cash (used by)
operations of ($17,295) compared to cash (used by) operations of ($3,563) for
the nine months ended June 30, 1999. The decrease was due to a non-recurring
substantial increase in accounts payable in the prior year which resulted from
the Company's emergence from bankruptcy, a major customer rescinding favorable
collection terms, which were granted when the Company was in Chapter 11
proceedings, and the loss of favorable cash flow from operations divested in the
prior year. These amounts were partially offset by a decrease in financing,
legal and professional fees and other payments related to the Company's
emergence from Chapter 11 proceedings on November 24, 1998.
The Company sold substantially all the assets of it's Kingston-Warren
subsidiary on September 30, 1999 for gross proceeds of $115,000 and used part of
those proceeds to prepay the 14 1/2% Senior Secured Notes and all obligations
under the $115,000 Senior Secured Credit Facility on such date. Subsequently,
the Company put in place a new $50,000 revolving credit facility with GECC. The
Company had $6,870 outstanding under the facility in addition to $7,114 of
letters of credit and had borrowing availability of approximately $36,700 as of
June 30, 2000. Management anticipates having sufficient liquidity to conduct its
activities in fiscal 2000 as result of the borrowing availability provided by
this facility.
F-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(Continued)
(In thousands of dollars)
Capital Expenditures. Capital expenditures for property, plant and
equipment for the nine-month period ended June 30, 2000 were $12,413,
principally for machinery and equipment required in the ordinary course of
business and the expansion of the Company's Rock Valley, Iowa facility. The
Company is currently projecting to spend approximately $16,000 for machinery and
equipment in 2000. The projected capital expenditures are required for new
business and on-going cost savings programs necessary to maintain the Company's
competitive position, and the balance is for normal replacement. The actual
timing of capital expenditures for new business may be impacted by customer
delays and acceleration of program launches and the Company's continual review
of the priority of the timing of capital expenditures.
Quantitative and Qualitative Disclosure about Market Risk
Management does not believe that there is any material market risk exposure
with respect to derivative or other financial instruments that are required to
be disclosed.
F-15
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
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.
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
United States District Court for the Eastern District of Pennsylvania dismissed
the Pennsylvania action finding that the United States District Court for the
Northern District of Ohio was a more appropriate venue. The motion by the
Companies to transfer the Ohio action was denied. The U.S. District Court (N.D.
Ohio) granted the retirees' Motion for Summary Judgement and the matter is
currently pending before the U.S. District Court (N.D. Ohio) to determine what,
if any, damages were incurred. The companies filed an appeal with the U.S. 6th
Circuit Court of Appeals. 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 October 5, 1999, the Company used part of the proceeds of the sale of
assets of its Kingston-Warren subsidiary to purchase 762,000 shares of its
common stock in a private transaction at an aggregate cost of approximately
$4,999.
On January 12, 2000, the Company purchased 32,781 shares of its common
stock in a private transaction at an aggregate cost of approximately $245.
On April 4, 2000, the Company purchased 5,500 shares of its common stock in
a private transaction at an aggregate cost of approximately $28.
On May 17, 2000, the Company purchased 2,300 shares of its common stock in
a private transaction at an aggregate cost of approximately $11.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
F-16
<PAGE>
Item 5. Other Information
None
(a) Exhibits
None
(b) Reports on Form 8-K:
The Company filed a Current Report on Form 8-K, dated June 14, 2000, filing
as an exhibit under Item 7, "Financial Statements and Exhibits", a press release
issued on June 13, 2000 announcing that on June 12, 2000 the Company submitted
and Breed accepted the Company's proposal (the "Breed Acquisition Proposal") to
fund a plan of reorganization for, and to acquire, Breed and its subsidiaries.
The Company filed a Current Report on Form 8-K, dated June 22, 2000,
reporting the execution of the Breed Acquisition Proposal by Harvard and Breed
under Item 5, "Other Events" and filing the Breed Acquisition Proposal as an
exhibit under Item 7, "Financial Statements and Exhibits".
F-17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HARVARD INDUSTRIES, INC.
BY: /S/ ROGER G. POLLAZZI
--------------------------------
Roger G. Pollazzi
Chairman of the Board
Chief Executive Officer and Director
Date: August , 2000
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 Financial
------------------------------------------ Officer (Principal Financial Officer)
Theodore W. Vogtman
/s/ KEVIN L. B. PRICE Vice President, Controller and Treasurer
------------------------------------------ (Principal Accounting Officer)
Kevin L. B. Price
</TABLE>
F-18
