<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 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 DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-21362
HARVARD INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 21-0715310
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
------------------------
3 WERNER WAY
LEBANON, NEW JERSEY 08833
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
------------------------
(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
February 9, 2000 was 9,942,427.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
HARVARD INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets
September 30, 1999 (Audited)
and December 31, 1999 (Unaudited)........................................................................ F-2
Consolidated Statements of Operations (Unaudited)
Two Months Ended November 29, 1998 (Pre-Confirmation)
One Month-Ended January 3, 1999 and
Three Months Ended December 31, 1999 (Post-Confirmation)................................................. F-3
Consolidated Statements of Cash Flows (Unaudited)
Two Months Ended November 29, 1998 (Pre-Confirmation)
One Month Ended January 3, 1999 and
Three Months Ended December 31, 1999 (Post-Confirmation)................................................. F-4
Notes to Consolidated Financial Statements--(Unaudited).................................................... F-5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................................ F-10
PART II. Other Information:
Item 1. Legal Proceedings..................................................................................
Item 2. Changes in Securities..............................................................................
Item 3. Defaults Upon Senior Securities....................................................................
Item 4. Submission of Matters to a Vote of Securities Holders..............................................
Item 5. Other Information..................................................................................
Item 6. Exhibits and Reports on Form 8-K...................................................................
SIGNATURES.................................................................................................
</TABLE>
F-1
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1999 (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, 1999
ASSETS 1999 (UNAUDITED)
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 21,840 $ 7,107
Accounts receivable, net..................................................... 35,324 36,766
Inventories.................................................................. 18,107 16,928
Prepaid expenses and other current assets.................................... 6,453 10,188
--------- ---------
Total current assets........................................................... 81,724 70,989
Property, plant and equipment, net............................................. 72,358 73,621
Intangible assets, net......................................................... 177,581 167,081
Other assets, net.............................................................. 5,490 5,438
--------- ---------
Total assets................................................................... $ 337,153 $ 317,129
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 28,489 $ 26,431
Accrued expenses............................................................. 57,654 45,729
Income taxes payable......................................................... 5,885 4,965
--------- ---------
Total current liabilities...................................................... 92,028 77,125
Postretirement benefits other than pensions.................................... 96,734 96,643
Other.......................................................................... 63,316 65,136
--------- ---------
Total liabilities.............................................................. 252,078 238,904
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 10,544,334 shares issued
and outstanding at December 31, 1999...................................... 102 105
Additional paid-in capital................................................... 174,898 174,895
Accumulated deficit.......................................................... (90,450) (92,396)
Accumulated other comprehensive income....................................... 525 620
Less--cost of shares of common stock in treasury (762,000 shares at
December 31, 1999)........................................................ -- (4,999)
--------- ---------
Total shareholders' equity..................................................... 85,075 78,225
--------- ---------
Total liabilities and shareholders' equity..................................... $ 337,153 $ 317,129
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
ONE MONTH ENDED JANUARY 3, 1999 AND
THREE MONTHS ENDED DECEMBER 31, 1999 (POST-CONFIRMATION)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRE-
CONFIRMATION POST-CONFIRMATION
------------ ----------------------------
TWO MONTHS ONE MONTH THREE MONTHS
ENDED ENDED ENDED
NOVEMBER 29, JANUARY 3, DECEMBER 31,
1998 1999 1999
------------ ----------- -------------
<S> <C> <C> <C>
Sales................................................................ $ 89,050 $ 40,166 $ 83,624
Cost of sales........................................................ 79,628 35,634 73,933
---------- ----------- -----------
Gross profit....................................................... 9,422 4,532 9,691
Selling, general and administrative expense.......................... 5,151 3,021 7,174
Amortization of intangible assets.................................... 264 5,232 10,500
Interest expense (contractual interest of $6,931 for the two months
ended November 29, 1998)........................................... 1,636 991 238
(Gain) on sale of operations......................................... -- -- (6,808)
Other (income) expense, net.......................................... (34) (7) 148
---------- ----------- -----------
(Loss) income before reorganization items and income taxes........... 2,405 (4,705) (1,561)
Reorganization items................................................. 50,384 -- --
---------- ----------- -----------
Loss before income taxes and extraordinary item...................... (47,979) (4,705) (1,561)
---------- ----------- -----------
Provision for income taxes........................................... 584 292 385
---------- ----------- -----------
Loss before extraordinary item....................................... (48,563) (4,997) (1,946)
---------- ----------- -----------
Extraordinary item-(gain) on forgiveness of debt..................... (206,363) -- --
---------- ----------- -----------
Net (loss) income.................................................. $ 157,800 $ (4,997) $ (1,946)
---------- ----------- -----------
---------- ----------- -----------
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 $ (4,997) $ (1,946)
---------- ----------- -----------
---------- ----------- -----------
Basic and diluted earnings per share:
Loss before extraordinary item....................................... $ (6.91) $ (0.61) $ (0.20)
Income from extraordinary item....................................... 29.37 -- --
---------- ----------- -----------
Net (loss) income per share........................................ $ 22.46 $ (0.61) $ (0.20)
---------- ----------- -----------
---------- ----------- -----------
Weighted average number of common shares outstanding................. 7,026,437 8,240,295 9,651,122
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
HARVARD INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION)
ONE MONTH ENDED JANUARY 3, 1999 AND
THREE MONTHS ENDED DECEMBER 31, 1999 (POST-CONFIRMATION)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
PRE-
CONFIRMATION POST-CONFIRMATION
------------ ---------------------------
TWO MONTHS ONE MONTH THREE MONTHS
ENDED ENDED ENDED
NOVEMBER 29, JANUARY 3, DECEMBER 31,
1998 1999 1999
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows related to operating activities:
Income (loss) from operations before reorganization items............ $ 1,821 $ (4,997) $ (1,946)
Add back (deduct) items not affecting cash and cash equivalents:
Depreciation....................................................... 3,503 848 2,059
Amortization....................................................... 476 5,318 10,560
(Gain) on sale of operations....................................... -- -- (6,808)
(Gain) on disposition of property, plant and equipment............. -- -- (11)
Changes in operating assets and liabilities net of effects of
divestitures and reorganization items:
Accounts receivable................................................ (15,077) 24,093 (1,650)
Inventories........................................................ (1,168) (4,455) 991
Other current assets............................................... 402 (1,538) (1,150)
Accounts payable................................................... 21,676 (6,120) (2,058)
Accrued expenses and income taxes payable.......................... (23,745) (4,620) (10,081)
Other noncurrent................................................... (1,413) (638) (782)
-------- --------- ----------
Net cash provided by (used in) operations before reorganization
items................................................................ (13,525) 7,891 (10,876)
Net cash used by reorganization items.................................. (4,018) (2,477) --
-------- --------- ----------
Net cash provided by (used in) operations.............................. (17,543) 5,414 (10,876)
-------- --------- ----------
Cash flows related to investing activities:
Acquisition of property, plant and equipment......................... (2,856) (3,100) (3,822)
Net proceeds from sale of operations................................. -- -- 4,964
-------- --------- ----------
Net cash provided by (used in) investing activities.................... (2,856) (3,100) 1,142
Cash flows related to financing activities:
Net borrowings under DIP financing agreement......................... 1,062 -- --
Retirement of creditors unsecured term loan.......................... (25,000) -- --
Net borrowings under financing/credit agreement...................... 81,425 (9) --
Retirement of DIP financing.......................................... (40,360) -- --
Deferred financing costs............................................. (3,338) -- --
Purchase of treasury stock........................................... -- -- (4,999)
-------- --------- ----------
Net cash (used in) provided by financing activities.................... 13,789 (9) (4,999)
-------- --------- ----------
Net increase (decrease) in cash and cash equivalents................... (6,610) 2,305 (14,733)
Cash and cash equivalents, beginning of period......................... 11,624 5,014 21,840
-------- --------- ----------
Cash and cash equivalents, end of period............................... $ 5,014 $ 7,319 $ 7,107
-------- --------- ----------
-------- --------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid........................................................ $ 1,870 $ 108 $ 3
Income taxes paid.................................................... 228 33 1,348
-------- --------- ----------
-------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<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 three month period ended December 31, 1999 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.
F-5
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
The following table summarizes unaudited pro forma financial information as
if the Plan of Reorganization ("Plan") 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 one month ended January 3,
1999 and contains adjustments for depreciation expense, pension expense and the
amortization of reorganization value in excess of amounts allocable to
identifiable assets. The unaudited pro forma financial information does not
purport to be indicative of the results which would have been obtained had the
Plan been effective as of October 1, 1998, or which may be obtained in the
future.
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------------------
THREE MONTHS
ENDED
JANUARY 3, PRO FORMA
1999 ADJUSTMENTS AS ADJUSTED
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Net Sales.......................................... $129,216 $ -- $ 129,216
Costs of Sales..................................... 115,262 (1,666) 113,596
-------- --------- -----------
Gross Profit....................................... 13,954 1,666 15,620
Selling, General and Administrative Expenses....... 8,172 -- 8,172
-------- --------- -----------
Operating Income................................... 5,782 1,666 7,448
Other (Income) Expenses
Interest expense................................. 2,627 (160) 2,467
Other - net...................................... (41) -- (41)
Amortization of reorganization asset............. 5,496 10,200 15,696
-------- --------- -----------
Total other (income) expense.................. 8,082 10,040 18,122
-------- --------- -----------
Income (loss) before income taxes.................. (2,300) (8,374) (10,674)
Reorganization Items............................... 50,384 (50,384) --
Provision (benefit) for income taxes............... 876 -- 876
Extraordinary Item................................. (206,363) 206,363 --
-------- --------- -----------
Net income (loss)............................. $152,803 ($164,353) ($ 11,550)
-------- --------- -----------
-------- --------- -----------
Basic and diluted earnings per share............... (1.18)
-----------
-----------
Weighted average number of common and common
equivalent shares outstanding.................... 9,770,198
-----------
-----------
</TABLE>
Reorganization expenses included in the consolidated statements of
operations are comprised of the following:
<TABLE>
<CAPTION>
TWO MONTHS
ENDED
NOVEMBER 29,
1998
------------
<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-6
<PAGE>
HARVARD INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
2. DISPOSITION OF BUSINESS:
Condensed operating data of operations disposed or being disposed of are as
follows:
<TABLE>
<CAPTION>
PRE-
CONFIRMATION POST-CONFIRMATION
------------ ----------------------------
TWO MONTHS ONE MONTH THREE MONTHS
ENDED ENDED ENDED
NOVEMBER 29, JANUARY 3, DECEMBER 31,
1998 1999 1999
------------ ----------- -------------
<S> <C> <C> <C>
Sales................................... $ 33,496 $14,975 $ --
Gross profit............................ 2,900 1,065 --
</TABLE>
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.
3. INVENTORIES:
Inventories consist of the following (unaudited):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1999
------- --------
<S> <C> <C>
Finished goods...................................................................... $ 5,005 $ 3,234
Work-in-process..................................................................... 2,918 2,901
Tooling 2,132 1,292
Raw materials....................................................................... 8,052 9,501
------- --------
Total inventories................................................................... $18,107 $ 16,928
------- --------
------- --------
</TABLE>
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
December 31, 1999 was 9.75%). Effective March 2000, the interest rate will 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 amounts were drawn down on the facility as of
September 30, 1999 and December 31, 1999 except for $9,720 of letters of credit.
F-7
<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
December 31, 1999, the Company has completed the severance payments totaling
$1,078 and made facility related payments of approximately $95. In connection
with the sale of this facility in December 1999, the remaining facility related
payments will be made in the second fiscal quarter.
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 ($1,946) for the three months
ended December 31, 1999, ($4,977) for the one month ended January 3, 1999,
$157,800 for the two months ended November 29, 1998, respectively. The weighted
average number of shares of common stock used in determining basic and diluted
EPS was 9,651,122 for the three months ended December 31, 1999, 8,240,295 for
the one month ended January 3, 1999, and 7,026,437 for the two months ended
November 29,1998.
Although on February 9, 2000, 9,942,427 of the Company's 50,000,000
authorized shares were outstanding, net of 794,781 shares of treasury stock, the
Registrant'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 1,000,000 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 Reorganization Plan 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 of management 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 December
31, 1999, 1,845,000 shares have been awarded under this plan.
Equivalent shares of 24,598, 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 three month period ended December 31,
1999 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.
F-8
<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 ONE MONTH THREE MONTHS
ENDED ENDED ENDED
NOVEMBER 29, JANUARY 3, DECEMBER 31,
1998 1999 1999
------------ ----------- ------------
<S> <C> <C> <C>
Net income (loss)........................ $157,800 $(4,997) $ (1,946)
Other comprehensive income, net of tax:
Foreign currency translation
adjustment.......................... -- (851) 95
--
-------- ------- --------
Comprehensive income (loss)............ $157,800 $(5,848) $ (1,851)
-------- ------- --------
-------- ------- --------
</TABLE>
F-9
<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 three months ended December 31, 1999 was
compared to the combined one month ended January 3, 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-10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
(IN THOUSANDS OF DOLLARS)
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THE THREE MONTHS ENDED JANUARY
3, 1999.
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>
3 MONTHS ENDED
--------------------------
DECEMBER 31, JANUARY 3,
1999 1999
------------ ----------
<S> <C> <C>
Sales.................................................................................. $ 83,624 $129,216
Cost of sales........................................................................ 73,933 115,262
-------- --------
Gross profit........................................................................... 9,691 13,954
Selling, general and administrative expenses......................................... 7,174 8,172
-------- --------
Operating income (a)................................................................. 2,517 5,782
Interest expense..................................................................... 238 2,627
Amortization of intangible assets.................................................... 10,500 5,496
(Gain) on sale of operation.......................................................... (6,808) --
Other (income) expenses, net......................................................... 148 (41)
-------- --------
Income (loss) before income taxes, reorganization items and
extraordinary item................................................................ (1,561) (2,300)
Reorganization items................................................................. -- 50,384
Provision for income taxes........................................................... 385 876
Extraordinary item................................................................... -- (206,363)
-------- --------
Net income (loss)................................................................. $ (1,946) $152,803
-------- --------
-------- --------
</TABLE>
- ------------------
(a) Includes depreciation expense of $2,059 and $4,351 for the periods ended
December 31, 1999 and January 3, 1999, respectively.
Sales. Consolidated sales decreased $45,592 from $129,216 to $83,624, or
35.3%. Aggregate sales for the operations designated for sale or wind down
accounted for $48,471 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 $2,879 from $80,745 to $83,624 primarily due
to light truck volume, tooling sales and selective price increases.
Gross Profit. The consolidated gross margin, expressed as a percentage of
sales, increased from 10.8% to 11.6%. The gross profit for operations designated
for sale or wind-down decreased from $6,334 to $0 as the Company's divestiture
program, as contemplated in its plan of reorganization, is substantially
complete. The increase of $2,071 in gross profit for the remaining operations
was mainly due to light truck volume, selective price increases, lower
depreciation expense due to "Fresh Start Reporting" ($975) and improved
operating efficiencies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased from $8,172 to $7,174 primarily due to the
divestiture of Kingston-Warren in September 1999.
Interest Expense. Interest expense decreased from $2,627 to $238 as a
result of 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 increased from
$5,496 to $10,500. The three month period ended January 3, 1999 included one
month of amortization expense relating to the $314,901 reorganization asset,
established as part of "Fresh Start Reporting," which is being amortized over a
five year
F-11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
(IN THOUSANDS OF DOLLARS)
period. The three-month period ended December 31, 1999 includes three months of
amortization expense on the remaining reorganization asset of $212,901, as
adjusted for the sale of Kingston-Warren.
Gain on Sale of Operations. This 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 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 January 3, 1999, the Company
recognized, as part of "Fresh Start Reporting," charges that aggregated $50,430
for adjustments to reflect all assets and liabilities at their respective fair
values.
Provision for Income Taxes. The decrease from $876 to $385 was principally
due to the reorganization of the Company. Items that materially contributed to
the decrease were the Federal minimum tax and state income taxes.
Extraordinary Item. During the period ended January 3, 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). Net income (loss) decreased from $152,803 to $(1,946)
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 one month ended January 3, 1999
(post-confirmation) have been combined for purposes of comparison to the three
months ended December 31, 1999.
For the three months ended December 31, 1999, the Company had cash (used
by) operations of $(10,876) compared to cash (used by) operations of $(12,129)
for the three months ended January 3, 1999. The increase was due to 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 partially
offset by a non-recurring increase in accounts payable in the prior year which
resulted from the Company's emergence from bankruptcy.
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 no amounts outstanding under the facility other than $8,364 of
letters of credit and had borrowing availability of approximately $41,600 as of
February 1, 2000. Management anticipates having sufficient liquidity to conduct
its activities in fiscal 2000 as result of the borrowing availability provided
by this facility.
Capital Expenditures. Capital expenditures for property, plant and
equipment for the three-month period ended December 31, 1999 were $3,822,
principally for machinery and equipment required in the ordinary course of
business. The Company is currently projecting to spend approximately $16,500 for
machinery and equipment in 2000. The projected capital expenditures are required
for new business and on-going cost savings programs necessary to maintain
competitive position, and the balance 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 priority
of the timing of capital expenditures.
F-12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
YEAR 2000 COMPLIANCE
The Company has completed its assessment of year 2000 impact on internal
information and facilities systems and has successfully installed a new
management information system that will allow its critical information systems
and technology infrastructure to be Year 2000 compliant before transactions for
the year 2000 are expected. Many of the Company's systems include new hardware
and packaged software recently purchased from large vendors who have represented
that these systems are already Year 2000 compliant. The Company has obtained
assurances from vendors that timely updates will be made available to make all
remaining purchased software Year 2000 compliant. The Company utilized both
internal and external resources to reprogram or replace and test all of it's
software for Year 2000 compliance. The cost for this project was $14.5 million.
The Company spent approximately $7.7 million for Year 2000 compliance in fiscal
1998 and approximately $6.8 million in fiscal 1999.
As of February 13, 2000, the Company has not experienced any material
adverse impact relating to Year 2000 issues on either internal or external
information systems.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Management does not believe that here is any material market risk exposure
with respect to derivative or other financial instruments that are required to
be disclosed.
F-13
<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 dismiss the Ohio action was denied and the Companies are vigorously
defending the action in Ohio. Based on information currently available,
management of the Company believes, after consultation with legal 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
(a) Exhibits
None
(b) Reports on Form 8-K:
On October 15, 1999, the Company filed a Current Report on Form 8-K in
which it reported, in Item 2 thereof, that on September 30, 1999, The
Kingston-Warren Corporation, a wholly-owned subsidiary of Harvard Industries,
Inc. (the "Company"), completed its previously announced sale of substantially
all of its assets to KWC Acquisition Corp., a subsidiary of Hutchinson, S.A., a
French corporation, for $115 million.
In Item 5 thereof the Company reported that on September 30, 1999, the
Company used part of the proceeds of the sale of the assets of its
Kingston-Warren subsidiary to repurchase all of its 14 1/2% Senior Secured Notes
due 2003 for $30,585,361.11.
The Company also reported in Item 5 that on September 30, 1999, the Company
used part of the proceeds of the sale of the assets of its Kingston-Warren
subsidiary to satisfy all obligations under its $115 million Senior Secured
Revolving Credit Facility with General Electric Capital Corporation ("GECC").
The Company further reported in Item 5 that on September 30, 1999, the
Company put in place a new $50 million credit facility with General Electric
Capital Corporation.
F-14
<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: February , 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 February 14, 2000
- ------------------------------------------ Officer (Principal Financial Officer)
Theodore W. Vogtman
/s/ KEVIN L. B. PRICE Vice President, Controller and Treasurer February 14, 2000
- ------------------------------------------ (Principal Accounting Officer)
Kevin L. B. Price
</TABLE>
F-15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,107
<SECURITIES> 0
<RECEIVABLES> 36,766
<ALLOWANCES> 0
<INVENTORY> 16,928
<CURRENT-ASSETS> 70,989
<PP&E> 83,124
<DEPRECIATION> 9,503
<TOTAL-ASSETS> 317,129
<CURRENT-LIABILITIES> 77,125
<BONDS> 0
0
0
<COMMON> 105
<OTHER-SE> 78,120
<TOTAL-LIABILITY-AND-EQUITY> 317,129
<SALES> 83,624
<TOTAL-REVENUES> 83,624
<CGS> 73,933
<TOTAL-COSTS> 73,933
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> (1,561)
<INCOME-TAX> 385
<INCOME-CONTINUING> (1,946)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,946)
<EPS-BASIC> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
