-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A31fyuxdbZeSbUUDHqpIbe/sE8g8RfHH1upSy1XC2F2eFSf0QG7EjgAnzts48Nrp S1+wQhbwvE4ea5uvdX0//g== 0000889812-99-002530.txt : 19990820 0000889812-99-002530.hdr.sgml : 19990820 ACCESSION NUMBER: 0000889812-99-002530 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARVARD INDUSTRIES INC CENTRAL INDEX KEY: 0000046012 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 210715310 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01044 FILM NUMBER: 99696365 BUSINESS ADDRESS: STREET 1: 3 WERNER WAY CITY: LEBANON STATE: NJ ZIP: 08833 BUSINESS PHONE: 9084374100 MAIL ADDRESS: STREET 1: 3 WERNER WAY STREET 2: SUITE 960 CITY: LEBANON STATE: NJ ZIP: 08833 FORMER COMPANY: FORMER CONFORMED NAME: HARVARD BREWING CO DATE OF NAME CHANGE: 19710315 10-Q 1 QUARTERLY REPORT PRELIMINARY AND TENTATIVE As filed with the Securities and Exchange Commission on August __, 1999 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, 1999 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-21362 HARVARD INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) Delaware 21-0715310 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3 Werner Way 08833 Lebanon, New Jersey (Zip Code) (Address of Principal Executive Offices) (908) 437-4100 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /x/ No / / APPLICABLE ONLY TO CORPORATE ISSUERS: The number of shares outstanding of Registrant's Common Stock, as of August 11, 1999, was 9,911,080. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. INDEX Page ---- PART I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets June 30, 1999 (Unaudited) Post-Confirmation And September 30, 1998 (Audited) Pre-Confirmation. Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, 1999 Seven Months Ended June 30, 1999 (Post-Confirmation), Three Months Ended June 30, 1998 Two Months Ended November 29, 1998 (Pre-Confirmation) Nine Months Ended June 30, 1998 (Pre-Confirmation) Consolidated Statements of Cash Flows (Unaudited) Seven Months Ended June 30, 1999 (Post-Confirmation), Nine Months Ended June 30, 1998 And Two Months Ended November 29, 1998 (Pre-Confirmation). Notes to Consolidated Financial Statements--(Unaudited). Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. Other Information: Item 1. Legal Proceedings. Item 2. Changes in Securities. Item 3. Defaults Upon Senior Securities. Item 4. Submission of Matters to a Vote of Securities Holders. Item 5. Other Information. Item 6. Exhibits and Reports on Form 8-K SIGNATURES PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- JUNE 30, 1999 (UNAUDITED) (POST-CONFIRMATION) --------------------------------------------- AND SEPTEMBER 30, 1998 (PRE-CONFIRMATION) ----------------------------------------- (in thousands of dollars) -------------------------
ASSETS Pre-Confirmation Post-Confirmation ------ ----------------------- --------------------- September 30, 1998 June 30, 1999 (Unaudited) ----------------------- ---------------------- Current assets: Cash and cash equivalents $ 11,624 $ 7,303 Accounts receivable, net 57,046 50,710 Inventories 26,646 26,011 Prepaid expenses and other current assets 5,701 4,282 --------------- --------------- Total current assets 101,017 88,306 Property, plant and equipment, net 122,579 123,372 Intangible assets, net 2,833 278,277 Other assets, net 24,552 6,647 --------------- --------------- Total assets $250,981 $496,602 =============== ===============
See accompany notes to the consolidated financial statements. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATED BALANCE SHEETS --------------------------- JUNE 30, 1999 (UNAUDITED) (POST-CONFIRMATION) --------------------------------------------- AND SEPTEMBER 30, 1998 (PRE-CONFIRMATION) ----------------------------------------- (in thousands of dollars) -------------------------
LIABILITIES AND SHAREHOLDERS' (DEFICIENCY) EQUITY Pre-Confirmation Post-Confirmation -------------------------------- ----------------------- -------------------------- September 30, June 30, 1999 1998 (Unaudited) ----------------------- -------------------------- Current liabilities: Current portion of Debtor-in-Possession (DIP) loans $ 39,161 $ - Creditors subordinated term loan. 25,000 - Short-term borrowings - 1,113 Current portion of long-term debt - 1,000 Accounts payable 25,098 34,515 Accrued expenses 93,337 63,553 Income taxes payable 8,445 6,997 --------------- --------------- Total current liabilities 191,041 107,178 Liabilities subject to compromise 385,665 - Long-term debt - 73,500 Postretirement benefits other than pensions 95,515 95,438 Other 63,353 78,903 --------------- --------------- Total liabilities 735,574 355,019 Commitments and Contingencies 14 1/4% Pay-In-Kind Exchangeable Preferred Stock, (includes $10,142 of undeclared accrued dividends) 124,637 - Shareholders' (deficiency) equity: Common stock $.01 par value; 15,000,000 shares authorized, 7,026,437 shares issued and outstanding at September 30, 1998 and 50,000,000 shares authorized, 9,520,575 shares issued and outstanding at June 30,1999 70 95 Additional paid-in capital 32,134 174,905 Additional minimum pension liability (8,902) - Foreign currency translation adjustment (2,991) 310 Accumulated (deficit) retained earnings (629,541) (33,727) --------------- --------------- Total shareholders' (deficiency) equity. (609,230) 141,583 --------------- --------------- Total liabilities and shareholders' (deficiency) equity. $250,981 $496,602 =============== ===============
See accompanying notes to consolidated financial statements. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ------------------------------------------------- THREE MONTHS ENDED JUNE 30, 1999 -------------------------------- (POST-CONFIRMATION) AND THREE MONTHS ENDED ------------------------------------------ JUNE 30, 1998 (PRE-CONFIRMATION) -------------------------------- (in thousands of dollars, except share and per share data) ----------------------------------------------------------
Pre-Confirmation Post-Confirmation ------------------------ ------------------------- Quarter Ended Quarter Ended June 30, 1998 June 30, 1999 ------------------------ ------------------------- Sales $169,234 $129,908 Cost of sales 156,361 114,610 ----------------- -------------- Gross profit 12,873 15,298 Selling, general and administrative expense 15,389 11,777 Amortization of intangible assets 396 15,696 Restructuring charges - (88) Interest expense (contractual interest of $11,521 for the three months ended June 30, 1998) 2,616 3,464 Gain on sale of operations 397 - Other (income) expense, net 73 (930) ----------------- -------------- (Loss) income before reorganization items and income taxes (5,998) (14,621) Reorganization items 1,144 - ----------------- -------------- Loss before income taxes (7,142) (14,621) Provision for (benefit from) income taxes 171 (8) ----------------- -------------- Net (loss) ($7,313) ($14,613) ================= ==============
PRELIMINARY AND TENTATIVE -2-
Pre-Confirmation Post-Confirmation ------------------------ ------------------------ Quarter Ended Quarter Ended June 30, 1998 June 30, 1999 ------------------------ ------------------------ PIK Preferred Dividends and Accretion (contractual amount for the three months ended June 30, 1998 was $4,763) $ - $ - ================ =============== Net (loss) attributable to common shareholders ($7,313) ($14,613) ================ =============== Basic and diluted earnings per share: Net (loss) per share ($1.04) ($1.62) ================ =============== Weighted average number of common shares outstanding 7,026,437 9,045,642 ================ ===============
See accompanying notes to consolidated financial statements. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ------------------------------------------------- SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION), ----------------------------------------------------- NINE MONTHS ENDED JUNE 30, 1998 AND ------------------------------------ TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION) ----------------------------------------------------- (in thousands of dollars, except share and per share data) ----------------------------------------------------------
Pre-Confirmation Post-Confirmation ------------------------------------- ---------------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November 29, June 30, 1998 1998 1999 ---------------- ----------------- ---------------------- Sales $572,625 $89,050 $298,801 Cost of sales 542,174 79,628 263,914 --------------- -------------- --------------- Gross profit 30,451 9,422 34,887 Selling, general and administrative expense 40,742 5,151 25,278 Amortization of intangible assets 1,188 264 36,624 Impairment of long-lived assets and restructuring charges 10,842 - (88) Interest expense (contractual interest for the nine months ended June 30, 1998, and for the two months ended November 29, 1998, was $38,262 and $6,931, respectively) 11,548 1,636 7,519 Gain on sale of operations (26,561) - - Other (income) expense, net 1,044 (34) (1,026) --------------- -------------- --------------- (Loss) income before reorganization items and income taxes (8,352) 2,405 (33,420) Reorganization items 7,045 50,384 - --------------- -------------- --------------- Loss before income taxes and extraordinary item (15,397) (47,979) (33,420) --------------- -------------- --------------- Provision for income taxes 516 584 307 --------------- -------------- --------------- Loss before extraordinary item - (48,563) (33,727) --------------- -------------- --------------- Extraordinary item--(gain) on forgiveness of debt - (206,363) - --------------- -------------- --------------- Net (loss) income ($15,913) $157,800 ($33,727) =============== ============== ===============
PRELIMINARY AND TENTATIVE -2-
Pre-Confirmation Post-Confirmation ------------------------------------- ---------------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November 29, June 30, 1998 1998 1999 ---------------- ----------------- ---------------------- PIK Preferred Dividends and Accretion (contractual amounts for the nine months ended June 30, 1998, for the two months ended November 29, 1998 were $14,289 and $3,219, respectively) $ - $ - $ - ============== =============== ============== Net (loss) income attributable to common shareholders. ($15,913) $157,800 ($33,727) ============== =============== ============== Basic and diluted earnings per share: Loss before extraordinary item ($2.26) ($6.91) ($3.94) Income from extraordinary item - 29.37 - -------------- --------------- -------------- Net (loss) income per share ($2.26) $ 22.46 ($3.94) ============== =============== ============== Weighted average number of common shares outstanding 7,026,437 7,026,437 8,568,589 ============== =============== ==============
See accompanying notes to consolidated financial statements. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ------------------------------------------------- SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION), ----------------------------------------------------- NINE MONTHS ENDED JUNE 30, 1998 ------------------------------- AND TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION) --------------------------------------------------------- (in thousands of dollars) -------------------------
Pre-Confirmation Post-Confirmation ------------------------------------- ---------------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November 29, June 30, 1998 1998 1999 ---------------- ----------------- ---------------------- CASH FLOWS RELATED TO OPERATING ACTIVITIES: Income (loss) from operations before reorganization items ($8,868) $1,821 ($33,727) Add back (deduct) items not affecting cash and cash equivalents- Depreciation 21,244 3,583 6,438 Amortization 1,188 396 37,280 Gain on sale of operation (26,561) -- -- Impairment of long-lived assets and restructuring charge 10,842 -- (88) Loss (gain) on disposition of property, plant and equipment 839 -- (48) Postretirement benefits 2,823 -- -- Changes in operating assets and liabilities net of effects of divestitures and reorganization items- Accounts receivable (2,827) (15,077) 19,421 Inventories 20,608 (1,168) 1,142 Other current assets 1,694 402 1,017 Accounts payable (11,027) 21,676 (12,259) Accounts payable prepetition (826) - -- Accrued expenses and income taxes payable 11,705 (23,745) 2,891 Other noncurrent, net 3,476 (1,413) (1,777) --------------- ----------------- ----------------- Net cash provided by (used in) operations before reorganization items 24,310 (13,525) 20,290 Net cash used by reorganization items (6,668) (4,018) (6,310) --------------- ----------------- ----------------- Net cash provided by (used in) operations 17,642 (17,543) 13,980 --------------- ----------------- -----------------
PRELIMINARY AND TENTATIVE
Pre-Confirmation Post-Confirmation ------------------------------------- ---------------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November 29, June 30, 1998 1998 1999 ---------------- ----------------- ---------------------- CASH FLOWS RELATED TO INVESTING ACTIVITIES: Acquisition of property, plant and equipment. ($12,543) ($2,856) ($10,409) Proceeds from disposition of property, plant and equipment -- -- 48 Net proceeds from sale of operation 20,475 -- 4,482 --------------- ----------------- ----------------- Net cash provided by (used in) investing activities 7,932 (2,856) (5,879) --------------- ----------------- ----------------- CASH FLOWS RELATED TO FINANCING ACTIVITIES: Net borrowings (repayments) under DIP financing agreement (39,275) 1,062 -- Repayments of long-term debt (88) -- -- Payment of EPA settlements (55) -- -- Net borrowings (repayments) under financing/credit agreement -- 81,425 (5,812) Retirement of DIP financing -- (40,360) -- Retirement of creditors unsecured term loan -- (25,000) -- Proceeds from creditors subordinated term loan, net of financing costs of $2,500 22,500 -- -- Deferred financing costs -- (3,338) -- --------------- ----------------- ----------------- Net cash (used in) provided by financing activities (16,918) 13,789 (5,812) --------------- ----------------- ----------------- Net increase (decrease) in cash and cash equivalents 8,656 (6,610) 2,289 CASH AND CASH EQUIVALENTS, beginning of period. 9,212 11,624 5,014 --------------- ----------------- ----------------- CASH AND CASH EQUIVALENTS, end of period. $ 17,868 $ 5,014 $ 7,303 =============== ================= =================
See accompanying notes to consolidated financial statements. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) ------------------------------------------------------ (in thousands of dollars, except share and per share data) ---------------------------------------------------------- (1) BASIS OF PRESENTATION AND EMERGENCE FROM BANKRUPTCY: --------------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and fresh start reporting adjustments) considered necessary for a fair presentation have been included. Operating results for the seven month period ended June 30, 1999 are not necessarily indicative of the results that may be expected for the period ending September 30, 1999. The balance sheet at September 30, 1998 has been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 1998. On November 24, 1998 (the "Effective Date") the Company emerged from Chapter 11 reorganization under the United States Bankruptcy Code. On the Effective Date, pursuant to the Company's First Amended Modified Consolidated Plan under Chapter 11 of the Bankruptcy Code ("Plan of Reorganization"), substantially all pre-petition unsecured debt of pre-reorganization Harvard was converted into equity of post-reorganization Harvard in the form of common stock (the "New Common Stock"). Each one hundred dollars ($100) of pre-petition debt allowed as a claim by the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") is entitled to receive 2.6667 shares of New Common Stock. Under the terms of the Plan of Reorganization, holders of Harvard's Pay-In-Kind Exchangeable Preferred ("PIK Preferred Stock") and holders of Harvard's then existing common stock (the "Old Common Stock") have each received warrants ("Warrants") to acquire, in the aggregate, approximately 5% of the New Common Stock, with holders of PIK Preferred Stock each receiving their pro rata share of 66.67% of the Warrants and holders of the Old Common Stock each receiving their pro rata share of 33.33% of the Warrants. On the Effective Date, the Old Common Stock and PIK Preferred Stock were canceled in their entirety. In connection with its emergence from Chapter 11 bankruptcy proceedings, the Company implemented "Fresh Start Reporting," as of November 29, 1998 (its normal interim closing date), as set forth in Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), issued by the American Institute of Certified Public Accountants. "Fresh Start Reporting" was required because there was more than a 50% change in the ownership of the Company. Accordingly, all assets and liabilities were restated to reflect their respective fair values. Consolidated financial statement amounts for post-confirmation periods will be segregated by a black line in order to signify that such consolidated statements of operations, stockholders' equity (deficiency) and cash flows are those of a new reporting entity and have been prepared on a basis not comparable to the pre-confirmation periods. The Company, in accordance with SOP 90-7, has followed the accounting and reporting guidelines for companies operating as debtor-in-possession since its filing for bankruptcy protection on May 8, 1997 and until its emergence from bankruptcy protection as described above. PRELIMINARY AND TENTATIVE The reorganization value of the Company was determined by management, with assistance from Chanin Kirkland Messina LLC, independent financial professionals. The methodology employed involved estimation of enterprise value (i.e., the market value of the Company's debt and stockholders' equity which was determined to be $275,000), taking into account a discounted cash flow analysis (Enterprise Value). The discounted cash flow analysis was based on five-year cash flow projections prepared by management and average discount rates of 5.34 percent. The reorganization value of the Company was determined to be $552,428 as of November 29, 1998. The reorganization value of the Company has been allocated to specific asset categories as follows- Current assets $110,250 Property, plant and equipment. 121,516 Other noncurrent assets. 5,761 Reorganization value in excess of amounts allocable to identifiable assets 314,901 ---------------- $552,428 ================
Current assets have been recorded at their historical carrying values. Property, plant and equipment have been recorded at their appraised value as determined by an independent appraisal performed by Norman Levy Associates, Inc., independent appraiser, based on "orderly liquidation value," which assumes that the assets will be used for the purpose for which they were designed and constructed. Property held for sale is valued at net realizable value. Other noncurrent assets are stated at historical carrying values which approximate fair value. The portion of the reorganization value which cannot be attributed to specific tangible or identifiable intangible assets of the reorganized Company has been reported as "Reorganization value in excess of amounts allocable to identifiable assets (Reorganization Value). " This intangible asset is being amortized using the straight-line method over 5 years. The Company selected a useful life of 5 years based on the Company's previous experience, methodologies employed by independent financial experts and the Company's turnaround business strategy. The Company evaluates whether changes have occurred that would require revision of the remaining estimated useful life of the reorganization value or render such assets not recoverable. To determine if reorganization value is recoverable, the Company compares the net carrying amounts to undiscounted projected cash flows. If the reorganization value asset is not recoverable, the Company would record an impairment based on the differences between the net carrying amount and fair value. PRELIMINARY AND TENTATIVE The effect of the Plan on the Company's consolidated balance sheet as of November 29, 1998 was as follows-
Adjustments to Record Effects of the Plan --------------------------------------------------------------------------- Pre-Confirmation Post-Confirmation Consolidated Reorganization Fresh Start Consolidated Balance Sheet Adjustments Adjustments Balance Sheet ---------------- ---------------- --------------- ---------------- Current assets $110,250 $ - $ - $110,250 Property, plant and equipment, net 117,816 - 3,700 121,516 Intangible assets, net 2,569 - (2,569) - Other assets, net 3,645 - 2,116 5,761 Reorganization value in excess of amounts allocable to identifiable assets - - 314,901 314,901 ---------------- ---------------- --------------- ---------------- $234,280 $ - $318,148 $552,428 ================ ================ =============== ================ Current liabilities $193,973 $ - ($71,155) $122,818 Liabilities subject to compromise 381,363 (381,363) - - Long-term debt 200 - 81,225 81,425 Postretirement benefits other than pension 95,466 - - 95,466 Other 77,719 - - 77,719 14 1/4% PIK exchangeable preferred stock 124,637 - (124,637) - Common stock 70 82 (70) 82 Additional paid-in capital 32,134 174,918 (32,134) 174,918 Additional minimum pension liability (8,902) - 8,902 - Foreign currency translation adjustments (3,163) - 3,163 - Accumulated deficit (659,217) 206,363 452,854 - ---------------- ---------------- --------------- ---------------- $234,280 $ - $318,148 $552,428 ================ ================ =============== ================
Reorganization adjustments reflect the conversion of both the 12% Notes and the 11 1/8% Notes and the related accrued interest as of May 7, 1997 and other prepetition trade payables into new common stock resulting in an extraordinary gain of $206,363. Fresh start adjustments reflect the adjustments to state assets and liabilities at their respective fair values which resulted in a net fair value adjustment of $50,431, which adjustment, net of interest income of $47, has been shown as a reorganization item. All of the reorganization and fresh start adjustments have been reflected in the consolidated statement of operations for the two months ended November 29, 1998. The following table summarizes unaudited pro forma financial information as if the Plan of reorganization had become effective on October 1, 1998. The unaudited pro forma financial information combines the Company's operations for the two months ended November 29, 1998 with the seven months ended June 30, 1999 and contains adjustments for depreciation expense, pension expense and the amortization of reorganization value. The unaudited pro forma financial information does not purport to be indicative of the results which would have been obtained had the Plan been effective as of October 1, 1998, or which may be obtained in the future. PRELIMINARY AND TENTATIVE
Nine Months Ended June 30, Pro Forma As 1999 Adjustments Adjusted --------------------- ------------------ ----------------- Sales $387,851 $ -- $387,851 Cost and expenses- Cost of sales 343,542 (1,666) 341,876 Selling, general and administrative expenses 30,429 -- 30,429 Amortization of intangible asset 36,888 10,200 47,088 Interest expense 9,155 (160) 8,995 Other expense (income) (1,148) -- (1,148) --------------- -------------- -------------- Total costs and expenses 418,866 8,374 427,240 Loss from operations before income taxes, reorganization items and extraordinary items (31,015) (8,374) (39,389) Reorganization items 50,384 (50,384) -- Provision for income taxes 891 -- 891 Extraordinary item (206,363) 206,363 -- --------------- -------------- -------------- Net loss $124,073 ($164,353) ($40,280) =============== ============== ============== Basic and diluted earnings per share (4.06) ============== Weighted average number of common and common equivalent shares outstanding 9,911,080 ==============
The net loss is before reorganization items. Continuation of the Company's business after reorganization is dependent upon the success of future operations, including execution of the company's turnaround business strategy and the ability to meet obligations as they become due. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company had suffered recurring losses from operations and at June 30, 1999 had a net working capital deficit. These factors among others raise substantial doubt about the Company's ability to achieve successful future operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. (2) DISPOSITION OF BUSINESSES: -------------------------- Condensed operating data of operations disposed or being disposed of are as follows-
Post- Pre-Confirmation Confirmation ------------------------------------- ----------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November June 30, 1998 29, 1998 1999 ----------------- ---------------- ----------------- Sales $219,829 $8,389 $17,754 Gross (loss) 1,517 (1,534) (5,356)
PRELIMINARY AND TENTATIVE On January 28, 1999, the Company sold the land, building, and certain other assets of its Tiffin, Ohio facility for gross proceeds of approximately $1.5 million. The Company recognized no material gain or loss on the sale. The Company attempted to sell its Ripley, Tennessee facility during fiscal 1999, as a result of its changed market outlook for magnesium products. Such efforts did not result in any acceptable offers and as a result, in April 1999, the Company announced its intention to shut down the facility in August 1999 after customer requirements are fulfilled and has recorded a $3.5 million charge which is included in Impairment of Long-Lived Assets and Restructuring Charges in the Accompanying Statement of Operations for the period ended June 30, 1999. This charge relates to severance for approximately 230 hourly and salaried employees ($1.0 million), facility shutdown costs ($0.2 million) and charges to fully depreciate the March 31, 1999 carrying value of long-lived assets through the shutdown date ($2.3 million). In July 1999 the Company sold its Toledo, Ohio facility for gross proceeds of approximately $2.3 million. (3) INVENTORIES: ------------ Inventories consist of the following-
Pre-Confirmation Post-Confirmation --------------------- ----------------------- June 30, September 30, 1999 1998 (Unaudited) --------------------- ----------------------- Finished goods $ 6,476 $ 7,171 Work-in-process 2,078 3,355 Tooling 5,991 2,385 Raw materials 12,101 13,100 ------------- ------------ Total inventories $ 26,646 $ 26,011 ============= ============ (4) LONG-TERM DEBT AND CREDIT AGREEMENTS: -------------------------------------- Long-term debt consists of the following- Pre-Confirmation Post-Confirmation --------------------- ----------------------- June 30, September 30, 1999 1998 (Unaudited) --------------------- ----------------------- 14 1/2% Senior Secured Notes Due 2003 (a) $ - $25,000 Senior Secured Credit Facility (b) - 49,500 ------------- ------------ Total long-term debt - 74,500 Less current portion - 1,000 ------------- ------------ Long-term portion $ - $73,500 ============= ============
(a) On November 24, 1998, the Company issued $25,000 of 14 1/2% Senior Secured Notes (the "Notes") due September 1, 2003. The Notes were issued pursuant to an indenture by and among the Company and Guarantors, which are subsidiaries of the Company, and Norwest Bank Minnesota, National Association, as Trustee. In addition to the stated coupon interest rate the Notes have a Cash Flow Participation Interest provision which entitles the holder to PRELIMINARY AND TENTATIVE additional interest computed as a percentage of consolidated cash flow as set forth in the indenture. This interest can be no less than $1,000 for any 12 month period. The Notes are subject to restrictive covenants for Consolidated Leverage Ratio and Consolidated Interest Coverage Ratio, as defined. (b) On November 24, 1998 the Company entered into a $115,000 senior credit facility that provides for up to $50,000 in term loan borrowings and up to $65,000 of revolving credit borrowings. The term loan has an interest rate equal to the base rate (prime rate) plus 2.250% or the EURODOLLAR base rate (Eurodollar loan rate) plus 3.500%. The term loan has 16 quarterly installment payments of principal in the amount of $250 commencing on January 3, 1999 with the balance of the loan due on September 30, 2002. The revolver has an interest rate of the base rate plus 2.125% or the Eurodollar base rate plus 3.375%. The revolving credit facility terminates on November 24, 2001. The senior credit facility is subject to restrictive covenants for Consolidated Leverage Ratio, Consolidated Interest Coverage Ratio and Fixed Charge Ratio, as defined. (5) EARNINGS PER COMMON SHARE: --------------------------- Statement of Financial Accounting Standards No. 128, "Earnings per Share," which became effective for fiscal 1998, established new standards for computing and presenting earnings per share (EPS). The new standard requires the presentation of basic EPS and diluted EPS and the restatement of previously reported EPS amounts. Basic EPS is calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated by dividing income available to common shareholders, adjusted to add back dividends or interest on convertible securities, by the weighted average number of shares of common stock outstanding plus additional common shares that could be issued in connection with potentially dilutive securities. Income (loss) available to common shareholders used in determining both basic and diluted EPS was ($33,727) for the seven months ended June 30, 1999, $157,800 for the two months ended November 29, 1998, ($15,913) for the nine months ended June 30, 1998 and ($14,613) and ($7,313) for the three months ended June 30, 1999 and 1998, respectively. The weighted average number of shares of common stock used in determining basic and diluted EPS was 8,568,589 for the seven months ended June 30, 1999, 7,026,437 for the two months ended November 29, 1998, 7,026,437 for the nine months ended June 30, 1998 and 9,045,642 and 7,026,437 for the three months ended June 30, 1999 and 1998, respectively. Although on August 11, 1999, 9,911,080 of the Company's 50,000,000 authorized shares were outstanding, the Company's Chapter 11 Plan of Reorganization requires it to issue additional shares to certain claimants in the Bankruptcy case. The exact number of shares to be issued is presently unknown, as certain claims are unliquidated and others are disputed as to amount or validity. However, management estimates that approximately 2,088,000 additional shares will be issued in the process of resolving claims. The issuance of additional shares will not involve additional consideration, and therefore no accounting recognition other than the impact on outstanding share and per share amounts is expected. The Company's Plan of Reorganization also provides for holders of its Old Common Stock and PIK Preferred Stock to receive in the aggregate approximately 633,000 warrants, expiring November 23, 2003, permitting the purchase of new common shares at an exercise price of $41.67 per share. PRELIMINARY AND TENTATIVE Six members of the Company's Board of Directors have each been granted options to purchase 20,000 shares which vest in equal amounts of 4,000 shares per year over five (5) years. A total of 120,000 shares may be issued if the Directors choose to exercise their options. An annual stock grant is to be made to six members of the Company's Board of Directors of a number of shares of common stock of Harvard equal to $15,000 divided by the closing price per share of stock on the date of the grant. Effective June 29, 1999, each of the six directors received grants of 2,000 shares each of the Company's shares as an annual stock grant. An incentive plan has been authorized by the Board of Directors providing for a grant of options to certain members of senior management. Pursuant to said plan eighteen members of the Company's management have been granted options to purchase stock which if exercised, would total in the aggregate 1,555,000 shares. The above options, warrants, grants and shares to be issued have been excluded from the computation of earnings per share post confirmation as their effect would be anti-dilutive. (6) COMPREHENSIVE INCOME: ---------------------- In June 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods is required.
Pre-Confirmation Post-Confirmation --------------------------------------- ---------------------- Nine Months Two Months Seven Months Ended Ended Ended June 30, November 29, June 30, 1998 1998 1999 ------------------ ---------------- ---------------------- Net income (loss) ($15,913) $157,800 ($33,727) Other comprehensive income, net of tax: Foreign currency translation adjustment (2,644) - 310 ------------- ------------- ---------------- Comprehensive income (loss) ($18,557) $157,800 ($33,417) ============= ============= ================
(7) GUARANTOR SUBSIDIARIES: ------------------------ Both the $115,000 Senior Credit Facility and the 14 1/2% Senior Secured Notes are unconditionally guaranteed (collectively, the "Guarantees") jointly and severally on a senior basis, by each of the Company's domestic subsidiaries (the "Subsidiary Guarantors"). The Senior Credit Facility is secured by a first priority security interest and the Senior Secured Notes are senior obligations of the Subsidiary Guarantors (including indebtedness incurred under the Senior Credit Facility) and rank senior to all existing and future subordinated obligations of such Subsidiary Guarantors. The Senior Secured Notes are secured by a second priority security interest in substantially all of the tangible property (and all of the capital stock of the Subsidiary Guarantors) of the Company and the Subsidiary Guarantors and all proceeds thereof. Harvard's Canadian Subsidiary, Trim Trends Canada, Ltd. has pledged a majority of its common stock under the Guarantees. The claims of the creditors (including trade creditors) of any subsidiary that is not a Subsidiary Guarantor, (i.e. Trim Trends Canada, Ltd.) generally have priority as to the assets of such subsidiaries over the claims of the holders of the Notes. PRELIMINARY AND TENTATIVE The Company conducts all of its automotive business through and derives virtually all of its income from its subsidiaries. Therefore, the Company's ability to make required principal and interest payments with respect to the Company's indebtedness (including the Notes) and other obligations depends on the earnings of its subsidiaries and on its ability to receive funds from its subsidiaries through dividends or other payments. The ability of its subsidiaries to pay such dividends or make payments on inter-company indebtedness or otherwise will be subject to applicable state laws. Upon the sale or other disposition of a Guarantor or the sale or disposition of all or substantially all of the assets of a Guarantor (in each case other than to the Company or an affiliate of the Company) permitted by the indenture governing the Notes, such Guarantor will be released and relieved from all of its obligations under its Guaranty. The following condensed consolidating information presents- 1. Condensed balance sheets as of June 30, 1999 (Post-Confirmation) and September 30, 1998 (Pre-Confirmation) and condensed statements of operations and cash flows for the seven months ended June 30, 1999 (Post-Confirmation), the nine months ended June 30, 1998 and two months ended November 29, 1998 (Pre-Confirmation). 2. The Parent Company and Combined Guarantor Subsidiaries with their investments in subsidiaries accounted for on the equity method. 3. Elimination entries necessary to consolidate the Parent Company and all of its subsidiaries. 4. Reorganization items have been included under the Parent Company in the accompanying condensed consolidating statements of operations and cash flows. 5. The Parent Company, pursuant to the terms of an interest bearing note with Guarantor Subsidiaries, has included in their allocation of expenses, interest expense for the two months ended November 29, 1998 and the nine months ended June 30, 1998. The Company believes that providing the following condensed consolidating information is of material interest to investors in the Notes and has not presented separate financial statements for each of the Guarantors, because it was deemed that such financial statements would not provide the investor with any material additional information. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING BALANCE SHEETS (UNAUDITED) ---------------------------------------- JUNE 30, 1999 (POST-CONFIRMATION) --------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor ASSETS Company Subsidiaries Subsidiaries Eliminations Consolidated - ------ ----------- -------------- ----------------- -------------- --------------- Current assets: Cash and cash equivalents $4,853 $2,450 $ - $ - $7,303 Accounts receivable, net - 46,297 4,413 - 50,710 Inventories - 25,225 786 - 26,011 Prepaid expenses and other current assets 2,864 1,409 9 - 4,282 ----------- -------------- ----------------- -------------- --------------- Total current assets 7,717 75,381 5,208 - 88,306 Investment in subsidiaries (28,386) 17,786 - 10,600 - Property, plant and equipment, net 2,119 113,157 8,096 - 123,372 Intangible assets, net - 278,277 - - 278,277 Intercompany receivables 190,473 - 7,737 (198,210) - Other assets, net 6,211 436 - - 6,647 ----------- -------------- ----------------- -------------- --------------- Total assets $178,134 $485,037 $21,041 ($187,610) $496,602 =========== ============== ================= ============== ===============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING BALANCE SHEETS (UNAUDITED) ---------------------------------------- JUNE 30, 1999 (POST-CONFIRMATION) --------------------------------- (In thousands of dollars) -------------------------
LIABILITIES AND Combined Combined SHAREHOLDERS' EQUITY Parent Guarantor Non-Guarantor (DEFICIENCY) Company Subsidiaries Subsidiaries Eliminations Consolidated --------------------- ----------- -------------- ----------------- -------------- --------------- Current liabilities: Short-term borrowings $ - $ - $ - $ - $ - Current portion of long-term debt - 2,113 - - 2,113 Accounts payable 2,055 29,996 2,464 - 34,515 Accrued expenses 19,478 43,622 453 - 63,553 Income taxes payable 34 6,625 338 - 6,997 ----------- -------------- ----------------- -------------- --------------- Total current liabilities 21,567 82,356 3,255 - 107,178 Long-term debt - 73,500 - - 73,500 Postretirement benefits other than pensions - 95,438 - - 95,438 Intercompany payables - 198,210 - (198,210) - Other 14,984 63,919 - - 78,903 ----------- -------------- ----------------- -------------- --------------- Total Liabilities 36,551 513,423 3,255 (198,210) 355,019 ----------- -------------- ----------------- -------------- --------------- Shareholders' Equity (Deficiency): Common stock and additional paid-in-capital 175,000 (2,526) 15,578 (13,052) 175,000 Foreign current translation adjustment 310 310 310 (620) 310 Retained earnings (deficiency) (33,727) (26,170) 1,898 24,272 (33,727) ----------- -------------- ----------------- -------------- --------------- Total shareholders' equity (deficiency) 141,583 (28,386) 17,786 10,600 141,583 ----------- -------------- ----------------- -------------- --------------- Total liabilities and shareholders' equity (deficiency) $178,134 $485,037 $21,041 ($187,610) $496,602 =========== ============== ================= ============== ===============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING BALANCE SHEETS ---------------------------- SEPTEMBER 30, 1998 (PRE-CONFIRMATION) ------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor ASSETS Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- -------------- ----------------- -------------- -------------- Current assets: Cash and cash equivalents $ 10,229 $ 1,395 $ - $ - $ 11,624 Accounts receivable, net 2,217 50,990 3,839 - 57,046 Inventories 1,720 24,177 749 - 26,646 Prepaid expenses and other current assets 1,982 3,702 17 - 5,701 ----------- ------------ ------------ ------------- -------------- Total current assets 16,148 80,264 4,605 - 101,017 Investment in subsidiaries (262,212) 14,653 - 247,559 - Property, plant and equipment, net 2,755 112,057 7,767 - 122,579 Intangible assets, net - 2,833 - - 2,833 Intercompany receivables 600,848 524,198 14,625 (1,139,671) - Other assets, net 23,211 1,341 - - 24,552 ----------- ------------ ------------ ------------- -------------- Total assets $ 380,750 $ 735,346 $ 26,997 $ (892,112) $ 250,981 =========== ============ ============ ============= ==============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING BALANCE SHEETS ---------------------------- SEPTEMBER 30, 1998 (PRE-CONFIRMATION) ------------------------------------- (In thousands of dollars) -------------------------
LIABILITIES AND Combined Combined SHAREHOLDERS' EQUITY Parent Guarantor Non-Guarantor (DEFICIENCY) Company Subsidiaries Subsidiaries Eliminations Consolidated -------------------- ----------- -------------- ----------------- -------------- -------------- Current liabilities: Current portion of (DIP) loans $ - $ 39,161 $ - $ - $ 39,161 Creditors subordinated term loan - 25,000 - - 25,000 Accounts payable 2,382 19,812 2,904 - 25,098 Accrued expenses 12,285 81,104 (52) - 93,337 Income taxes payable 8,144 169 132 - 8,445 ----------- -------------- ----------- ------------- ----------- Total current liabilities 22,811 165,246 2,984 - 191,041 Liabilities subject to compromise (a) 385,665 - - - 385,665 Postretirement benefits other than pensions 81,949 13,566 - - 95,515 Intercompany payables 351,525 779,115 9,031 (1,139,671) - Other 23,393 39,631 329 - 63,353 ----------- -------------- ----------- ------------- ----------- Total liabilities 865,343 997,558 12,344 (1,139,671) 735,574 ----------- -------------- ----------- ------------- ----------- PIK preferred 124,637 - - - 124,637 ----------- -------------- ----------- ------------- ----------- Shareholders' equity (deficiency): Common stock and additional paid-in-capital 32,204 16,937 10 (16,947) 32,204 Additional minimum pension liability (8,902) (8,902) - 8,902 (8,902) Foreign current translation adjustment (2,991) (2,991) (2,991) 5,982 (2,991) Retained earnings (deficiency) (629,541) (267,256) 17,634 249,622 (629,541) ----------- -------------- ----------- ------------- ----------- Total shareholders' equity (deficiency) (609,230) (262,212) 14,653 247,559 (609,230) ----------- -------------- ----------- ------------- ----------- Total liabilities and shareholders' equity (deficiency) $380,750 $ 735,346 $ 26,997 ($892,112) $ 250,981 =========== ============== =========== ============= ===========
(a) Includes $309,728 senior notes payable and accrued interest which are subject to the guaranty of the combined guarantor subsidiaries. PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED) -------------------------------------------------- SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION) ---------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ------------ -------------- ----------------- -------------- --------------- Sales $ - $285,780 $13,021 $ - $298,801 ------------ -------------- ----------------- -------------- --------------- Costs and expenses: Cost of sales - 253,505 10,409 - 263,914 Selling, general and administrative 8,565 16,713 - - 25,278 Interest expense - 7,514 5 - 7,519 Amortization of intangible assets - 36,624 - - 36,624 Impairment of long-lived assets and restructuring charges - (88) - - (88) Other (income) expense, net (993) (383) 350 - (1,026) Equity in (income) loss of subsidiaries 26,170 (1,898) - (24,272) - Allocated expenses (30) 30 - - - ------------ -------------- ----------------- -------------- --------------- Total costs and expenses 33,712 312,017 10,764 (24,272) 332,221 ------------ -------------- ----------------- -------------- --------------- Income (loss) before income taxes (33,712) (26,237) 2,257 24,272 (33,420) Provision for income taxes 15 (67) 359 - 307 ------------ -------------- ----------------- -------------- --------------- Net income (loss) ($33,727) ($26,170) $1,898 $24,272 ($33,727) ============ ============== ================= ============== ===============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED) -------------------------------------------------- NINE MONTHS ENDED JUNE 30, 1998 (PRE-CONFIRMATION) -------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ------------ -------------- ----------------- -------------- --------------- Sales $8,148 $550,039 $14,438 $ - $572,625 ------------ -------------- ------------ ---------- ------------ Costs and expenses: Cost of sales 7,962 521,660 12,552 - 542,174 Selling, general and administrative 6,016 33,809 917 - 40,742 Interest expense 5,843 5,687 18 - 11,548 Restructuring charges 5,000 5,842 - - 10,842 Gain on sale of operation (1,208) (25,353) - - (26,561) Amortization of goodwill - 1,188 - - 1,188 Other (income) expense, net - 1,054 (10) - 1,044 Equity in (income) loss of - subsidiaries 4,061 (686) - (3,375) Allocated expenses (10,752) 10,477 275 - - ------------ -------------- ------------ ---------- ------------ Total costs and expenses 16,922 553,678 13,752 (3,375) 580,977 ------------ -------------- ------------ ---------- ------------ Income (loss) before income taxes and reorganization items (8,774) (3,639) 686 3,375 (8,352) Reorganization items 7,139 (94) - - 7,045 ------------ -------------- ------------ ---------- ------------ Income (loss) before income taxes (15,913) (3,545) 686 3,375 (15,397) Provision for income taxes - 516 - - 516 ------------ -------------- ------------ ---------- ------------ Net gain (loss) ($15,913) ($4,061) $686 $3,375 ($15,913) ============ ============== ============ ========== ============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED) -------------------------------------------------- TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION) ----------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ------------ -------------- ----------------- -------------- --------------- Sales $ - $85,550 $3,500 $89,050 ------------ -------------- ------------ ---------- ------------ Costs and expenses: Cost of sales - 76,774 2,854 79,628 Selling, general and administrative 2,230 2,921 5,151 Interest expense 1,636 (3) 3 1,636 Restructuring charges Gain on sale of operation Amortization of goodwill 264 - 264 Other (income) expense, net (198) 164 (34) Equity in (income) loss of subsidiaries (1,376) (269) 1,645 - Allocated expenses (20) 20 - ------------ -------------- ------------ ---------- ------------ Total costs and expenses 2,470 79,509 3,021 1,645 86,645 ------------ -------------- ------------ ---------- ------------ Income (loss) before income taxes and reorganization items (2,470) 6,041 479 (1,645) 2,405 Reorganization items 45,793 4,591 - - 50,384 ------------ -------------- ------------ ---------- ------------ Income (loss) before income taxes (48,263) 1,450 479 (1,645) (47,979) Provision for income taxes 300 74 210 - 584 ------------ -------------- ------------ ---------- ------------ Net loss before extraordinary item (48,563) 1,376 269 (1,645) (48,563) Extraordinary item (206,363) - - - (206,363) ------------ -------------- ------------ ---------- ------------ Net income (loss) $157,800 $1,376 $269 ($1,645) $157,800 ============ ============== ============ ========== ============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------------------------- SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION) ---------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to operating activities: Loss from operations before reorganization items ($33,727) ($26,170) $1,898 $24,272 ($33,727) Add back (deduct) items not affecting cash and cash equivalents: Equity in (income) loss of subsidiaries 26,170 (1,898) - (24,272) - Depreciation and amortization 1,258 41,913 547 - 43,718 Restructuring charge - (88) - - (88) Loss on disposition of property, plant and equipment and property held for sale - (48) - - (48) Changes in operating assets and liabilities net of effects from reorganization items: Accounts receivable 563 15,368 3,490 - 19,421 Inventories - 1,277 (135) - 1,142 Other current assets (1,352) 2,258 111 - 1,017 Accounts payable (4,526) (7,529) (204) - (12,259) Accrued expenses and income taxes payable 13,545 (5,225) (5,429) - 2,891 Other noncurrent (1,446) (53) (278) - (1,777) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) operations before reorganization items 485 19,805 - - 20,290 Net cash provided by (used ' in) reorganization items - (6,310) - - (6,310) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) operations 485 13,495 - - 13,980 ----------- ------------ ----------- ----------- ------------ Cash flows related to investing activities: Acquisition of property, plant and equipment - (10,409) - - (10,409) Net proceeds from sale of operation - 4,482 - - 4,482 ----------- ------------ ----------- ----------- ------------ Proceeds from disposition of property, plant and equipment - 48 - - 48 ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) investing activities - (5,879) - - (5,879) ----------- ------------ ----------- ----------- ------------
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) --------------------------------------------------- SEVEN MONTHS ENDED JUNE 30, 1999 (POST-CONFIRMATION) ---------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to financing activities: Net borrowings (repayments) under financing/credit agreement $ - ($5,812) $ - $ - ($5,812) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) financing activities - (5,812) - - (5,812) ----------- ------------ ----------- ----------- ------------ Net increase (decrease) in cash and cash equivalents 485 1,804 - - 2,289 Cash and cash equivalents: Beginning of period 4,368 646 - - 5,014 ----------- ------------ ----------- ----------- ------------ End of period $4,853 $2,450 $ - $ - $7,303 =========== ============ =========== =========== ============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------------------------- NINE MONTHS ENDED JUNE 30, 1998 (PRE-CONFIRMATION) -------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to operating activities: Loss from operations before reorganization items ($8,774) ($4,155) $686 $3,375 ($8,868) Add back (deduct) items not affecting cash and cash equivalents: Equity in (income) loss of subsidiaries 4,061 (686) - (3,375) - Depreciation and amortization 1,291 20,207 934 - 22,432 Impairment of long-lived assets and restructuring charge 5,000 5,842 - - 10,842 Gain on sale of operation (1,208) (25,353) - - (26,561) Loss on disposition of property, plant and equipment 283 355 201 - 839 Postretirement benefits - 2,823 - - 2,823 Changes in operating assets and liabilities net of effects from reorganization items: Accounts receivable 2,611 (3,086) (2,352) - (2,827) Inventories 1,295 18,953 360 - 20,608 Other current assets (550) 2,250 (6) - 1,694 Accounts payable (264) (12,004) 415 - (11,853) Accrued expenses and income taxes payable 4,184 9,409 (1,888) - 11,705 Other noncurrent 16,756 (11,870) (1,410) - 3,476 ----------- ------------ ---------------- -------------- -------------- Net cash provided by (used in) operations before reorganization items 24,685 2,685 (3,060) - 24,310 Net cash provided by (used in) reorganization items (6,668) - - - (6,668) ----------- ------------ ---------------- -------------- -------------- Net cash provided by (used in) operations 18,017 2,685 (3,060) - 17,642 ----------- ------------ ---------------- -------------- -------------- Cash flows related to investing activities: Acquisition of property, plant and equipment (69) (12,300) (174) - (12,543) Net proceeds from sale of operation 4,084 16,391 - - 20,475 ----------- ------------ ---------------- -------------- -------------- Net cash provided by (used in) investing activities 4,015 4,091 (174) - 7,932 ----------- ------------ ---------------- -------------- --------------
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------------------------- NINE MONTHS ENDED JUNE 30, 1998 (PRE-CONFIRMATION) -------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to financing activities: Net borrowings (repayments) under DIP financing ($1,572) ($37,703) $ - $ - ($39,275) Proceeds of creditors subordinated term loan, net of financing costs of $2,500 22,500 - - - 22,500 Advance payment from customer - - - - - Repayments of long-term debt - (88) - - (88) Repayment of EPA settlements - (55) - - (55) Net changes in intercompany balances (39,069) 35,027 4,042 - - ----------- ------------ ---------------- -------------- -------------- Net cash provided by (used in) financing activities (18,141) (2,819) 4,042 - (16,918) ----------- ------------ ---------------- -------------- -------------- Net increase (decrease) in cash and cash equivalents 3,891 3,957 808 - 8,656 Cash and cash equivalents: Beginning of period 3,324 5,376 512 - 9,212 ----------- ------------ ---------------- -------------- -------------- End of period $7,215 $9,333 $1,320 $ - $17,868 =========== ============ ================ ============== ==============
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------------------------- TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION) ----------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to operating activities: Loss from operations before reorganization items ($9,355) $4,331 $269 $6,575 $1,820 Add back (deduct) items not affecting cash and cash equivalents: Equity in (income) loss of subsidiaries 6,844 (269) - (6,575) - Depreciation and amortization 12 3,799 168 - 3,979 Gain on sale of operation - - - - - Loss on disposition of property, plant and equipment - - - - - Postretirement benefits - - - - - Changes in operating assets and liabilities net of effects from reorganization items: Accounts receivable 1,654 (12,667) (4,064) - (15,077) Inventories 1,720 (2,986) 98 - (1,168) Other current assets 470 35 (103) - 402 Accounts payable 4,199 17,713 (236) - 21,676 Accrued expenses and income taxes payable (16,671) (7,456) 382 - (23,745) Other noncurrent 5,266 (10,164) 3,486 - (1,412) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) operations before reorganization items (5,861) (7,664) - - (13,525) Net cash provided by (used in) reorganization items - (4,018) - - (4,018) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) operations (5,861) (11,682) - - (17,543) ----------- ------------ ----------- ----------- ------------ Cash flows related to investing activities: Acquisition of property, plant and equipment - (2,856) - - (2,856) Net proceeds from sale of operation - - - - - ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) investing activities - (2,856) - - (2,856) ----------- ------------ ----------- ----------- ------------
PRELIMINARY AND TENTATIVE HARVARD INDUSTRIES, INC. ------------------------ CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED) -------------------------------------------------- TWO MONTHS ENDED NOVEMBER 29, 1998 (PRE-CONFIRMATION) ----------------------------------------------------- (In thousands of dollars) -------------------------
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ---------------- -------------- -------------- Cash flows related to financing activities: Deferred financing cost $ - ($3,338) $ - $ - ($3,338) Net borrowings (repayments) under DIP financing - 1,062 - - 1,062 Net borrowings (and repayments) under financing/credit agreement - 81,425 - - 81,425 Retirement of DIP financing - (40,360) - - (40,360) Retirement of creditors unsecured term loan - (25,000) - - (25,000) ----------- ------------ ----------- ----------- ------------ Net cash provided by (used in) financing activities - 13,789 - - 13,789 ----------- ------------ ----------- ----------- ------------ Net increase (decrease) in cash and cash equivalents (5,861) (749) - - (6,610) Cash and cash equivalents: Beginning of period 10,229 1,395 - - 11,624 ----------- ------------ ----------- ----------- ------------ End of period $4,368 $646 $- $- $5,014 =========== ============ =========== =========== ============
PRELIMINARY AND TENTATIVE MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- (in thousands of dollars) ------------------------- Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements may include, but not be limited to, projections of revenues, income or losses, covenants provided for in the financing agreements, capital expenditures, plans for future operations, financing needs or plans, plans relating to products or services of the Company, as well as assumptions relating to the foregoing. In addition, when used in this discussion, the words "anticipates," "believes," "estimates," "expects," "intends," "plans" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, including, but not limited to, product demand, pricing, market acceptance, risk of dependence on third party suppliers, intellectual property rights and litigation, risks in product and technology development and other risk factors detailed in the Company's Securities and Exchange Commission filings, some of which cannot be predicted or quantified based on current expectations. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Statements in this Quarterly Report, particularly in the Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations," describe factors, among others, that could contribute to or cause such differences. Other factors that could contribute to or cause such differences include unanticipated increases in launch and other operating costs, a reduction and inconsistent demand for passenger cars and light trucks, labor disputes, capital requirements, adverse weather conditions, and increases in borrowing costs. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Results of Operations General Effective November 24, 1998, the Company emerged from Chapter 11 bankruptcy proceedings and implemented "Fresh Start Reporting" as of November 29, 1998 (its normal interim closing date). Accordingly, all assets and liabilities were restated to reflect their respective fair values. The consolidated financial statements after that date are those of a new reporting entity and are not comparable to the Pre-Confirmation periods. However, for purposes of this discussion, the seven months ended June 30, 1999 (Post-Confirmation) were combined with the two months ended November 29, 1998 (Pre-Confirmation) and then compared to the nine months ended June 30, 1998. Differences between periods due to "Fresh Start Reporting" adjustments are explained when necessary. PRELIMINARY AND TENTATIVE During the course of Harvard's bankruptcy proceeding, Harvard's OEM customers were in some cases initially reluctant to award new business to Harvard. This reluctance resulted in part from the long delay between the time a contract for a new platform is awarded and the time the new product is produced and sold, and the considerable designing and planning obligations required of the successful bidder during the period of delay. These circumstances appeared to put Harvard at a temporary disadvantage in attracting such new business until it demonstrated an ability to successfully complete its reorganization. However, since that time, and in particular during the months since emergence from bankruptcy, Harvard has been successful in booking new business with the OEMs, and management now believes that any effects of their initial reluctance to award new business during Harvard's bankruptcy proceeding will not be material to Harvard's operations or financial condition. The following table is included solely for use in comparative analysis of results of operations, and to complement management's discussion and analysis. Nine months ended June 30, 1999 compared to the nine months ended June 30, 1998.
Nine Months Ended --------------------------------- June 30, June 30, 1999 1998 -------------- --------------- Sales $387,851 $572,625 Cost of Sales 343,542 542,174 -------------- --------------- Gross profit 44,309 30,451 Selling, General and Administrative Expenses 30,429 40,742 -------------- --------------- Operating income (loss) (a) 13,880 (10,291) Amortization of intangible assets 36,888 1,188 Restructuring Charges (88) 10,842 Interest Expense 9,155 11,548 (Gain) on Sale of Operation - (26,561) Other (Income) Expense, Net (1,060) 1,044 -------------- --------------- Income (loss) before Income Taxes, Reorganization Items and Extraordinary Item (31,015) (8,352) Reorganization Items 50,384 7,045 Provision for Income Taxes 891 516 Extraordinary Item (206,363) - -------------- --------------- Net income (loss) $124,073 ($15,913) ============== ===============
(a) Includes depreciation expense of $10,021 and $19,574 for the nine months ended June 30, 1999 and June 30, 1998, respectively. Sales. Sales decreased $184,774 from $572,625 to $387,851 or 32.3%. Aggregate sales for the operations designated for sale or wind down decreased approximately $193,686 from $219,829 to $26,143 as the Company's divestiture program as contemplated under the Company's Plan of Reorganization nears completion. Sales for the remaining operations increased $8,912 from $352,796 to $361,708 as strong light truck demand was partially offset by the wind down of older programs. PRELIMINARY AND TENTATIVE Gross Profit. Gross profit, expressed as a percentage of sales, increased from 5.3% to 11.4%, or $13,858. The gross profit (loss) for operations designated for sale or wind-down decreased from $1,517 to ($2,377). After adjusting 1999 results for $4,513 of operating losses charged to loss contract reserves established in the fourth quarter of fiscal 1998, reported operating loss for 1999 would have been ($6,890). Gross (loss) increased by approximately $8,407 due to one-time tooling profits of approximately $1,900 in 1998 that did not recur in 1999 offset by significantly lower volume in 1999 as a result of the divestiture program. The increase of $17,752 in gross profit for the remaining operations was mainly due to improved operating efficiencies, strong light truck demand and management's focus on higher margin business. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $40,742 to $30,429 due to reduced levels of staffing and spending as a result of the reorganization program implemented by current management and the 1999 charge of $6,200 for the purchase and implementation of enterprise software compared to 1998 charges of $9,500 (see Year 2000 Readiness). Interest Expense. Interest expense decreased from $11,548 to $9,155 as a result of lower borrowing levels resulting from the cash generated by the sale or wind down of unprofitable businesses, a lower effective interest rate on post-emergence financing and improved working capital management. Amortization of Intangibles. Amortization of intangibles increased from $1,188 to $36,888 as a result of the amortization on the $314,901 reorganization asset, established as part of "Fresh Start Reporting," which is being amortized over five years. Restructuring Charges. During the period ended June 30, 1999, the Company recorded restructuring charges of $3,517 for the shut-down of its Ripley, Tennessee facility. In addition, the Company has reversed to income previously provided restructuring reserves related to the divestiture program, as contemplated under the Company's Plan of Reorganization, since the programs are now completed at lower than anticipated cost. These amounts aggregate to $3,605 and related primarily to Doehler-Jarvis Toledo and Harman Automotive. During the period ended June 30, 1998 the Company recorded $5,000 in restructuring charges for shutdown and relocation costs relating to the move of the corporate headquarters from Tampa, Florida to Lebanon, New Jersey and a $5,842 charge for the impairment write-off of certain property, plant and equipment. Gain on Sale of Operation. During the period ended June 30, 1998, the Company recognized a gain on the sale of the Material Handling Division of Kingston Warren of $11,354, a gain on the sale of the land, building and certain other assets of the Harvard Interiors, St. Louis facility of $1,208 and a gain of $13,999 on the transfer of certain assets at the Toledo facility and their related lease obligation to a third party. Other (Income) Expenses. Other (income) expense increased from $1,044 to ($1,060) due to rental income and a favorable legal settlement in the period ended June 30, 1999 as compared to a loss on the disposal of equipment in the period ended June 30, 1998. Reorganization Items. During the period ended June 30, 1999, the Company recognized, as part of "Fresh Start Reporting," charges that aggregated $50,431 for adjustments to reflect all assets and liabilities at their respective fair values. Reorganization charges during the period ended June 30, 1998 represent mainly professional fees incurred in connection with the bankruptcy proceedings. PRELIMINARY AND TENTATIVE Provision for Income Taxes. The Increase from $516 to $891 was principally due to higher earnings at the Company's Canadian subsidiary. Extraordinary Item. During the period ended June 30, 1999 an extraordinary gain of $206,363 was recorded for the forgiveness of debt that resulted from the reorganization of the Company in accordance with "Fresh Start Reporting." Net Income (Loss). The net income (loss) increased from ($15,913) to $124,073 for the reasons described above. Three months ended June 30, 1999 compared to the three months ended June 30, 1998. The following table is included solely for use in comparative analysis of results of operations and to complement management's discussion and analysis.
Three Months Ended ----------------------------------- June 30, June 30, 1999 1998 --------------- ---------------- Sales $129,908 $169,234 Cost of sales 114,610 156,361 --------------- ---------------- Gross profit 15,298 12,873 Selling, general and administrative expenses 11,777 15,389 --------------- ---------------- Operating income (loss) (a) 3,521 (2,516) Amortization of intangible assets 15,696 396 Restructuring charges (income) (88) - Interest expense 3,464 2,616 (Gain) on Sale of Operation - 397 Other (Income) Expense, Net (930) 73 --------------- ---------------- Income (loss) before Income Taxes, Reorganization Items and Extraordinary Item (14,621) (5,998) Reorganization Items - 1,144 Provision for Income Taxes (8) 171 Extraordinary Item - - --------------- ---------------- Net (loss) ($14,613) ($7,313) =============== ================
(a) Includes depreciation expense of $2,922 and $6,052 for the three months ended June 30, 1999 and June 30, 1998, respectively. Sales. Sales decreased $39,326 from $169,234 to $129,908 or 23.2%. Aggregate sales for the operations designated for sale or wind down decreased approximately $45,045 from $50,541 to $5,496 as the Company's divestiture program as contemplated under the Company's Plan of Reorganization nears completion. Sales for the remaining operations increased $5,719 from $118,693 to $124,412 as strong light truck demand was partially offset by the wind down of older programs. PRELIMINARY AND TENTATIVE Gross Profit. Gross profit, expressed as a percentage of sales, increased from 7.6% to 11.8%, or $2,425. The gross profit (loss) for operations designated for sale or wind-down decreased from $1,754 to ($1,572) After adjusting 1999 results for $746 of operating losses charged to loss contract reserves that were established in the fourth quarter of fiscal 1998 reported operating losses for 1999 would have been ($2,318). This gross profit decrease of approximately $4,072 was due primarily to significantly lower volume in 1999 as a result of the Company's divestiture program. The increase of $5,751 in gross profit for the remaining operations was mainly due to improved operating efficiencies, strong light truck demand and management's focus on higher margin business. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $15,389 to $11,777 primarily due to 1999 charges of $1,700 for the purchase and implementation of enterprise software compared to 1998 charges of $4,500 (see Year 2000 Readiness). Interest Expense. Interest expense increased from $2,616 to $3,464 as a result of temporary higher working capital requirements for the launch of several new car platforms. Amortization of Intangibles. Amortization of intangibles increased from $396 to $15,696 as a result of the amortization of the $314,901 reorganization asset, established as part of "Fresh Start Reporting," which is being amortized over five years. Restructuring Charges. During the period ended June 30, 1999, the Company recorded restructuring charges of $3,517 for the shut-down of its Ripley, Tennessee facility. In addition, the Company has reversed to income previously provided restructuring reserves related to the divestiture program, as contemplated under the Company's Plan of Reorganization, since the programs are now completed at lower than anticipated cost. These amounts aggregate to $3,605 and relate primarily to Doehler-Jarvis Toledo and Harman Automotive. Gain on Sale of Operations. The period ended June 30, 1998 included an adjustment to the gain on the sale of land, building and certain other assets of the Harvard Interiors' St. Louis facility. Other (Income) Expenses. Other (income) expense increased from $73 to ($930) due to rental income and a favorable legal settlement in the period ended June 30, 1999 as compared to a loss on the disposal of equipment in the period ended June 30, 1998. Reorganization Items. Reorganization charges during the period ended June 30, 1998 represent mainly professional fees incurred in connection with the bankruptcy proceedings. Provision for Income Taxes. The tax benefit of ($8) for the period ended June 30, 1999 was to adjust the estimated tax provision for the Canadian subsidiary. Net Income (Loss). The net (loss) increased from ($7,313) to ($14,613) for the reasons described above. Liquidity and Capital Resources On a pro forma basis, the cash flow (usage) for the two months ended November 29, 1998 (pre-confirmation) and the seven months ended June 30, 1999 (post-confirmation) have been combined for purposes of comparison to the nine months ended June 30, 1998. PRELIMINARY AND TENTATIVE For the nine months ended June 30, 1999, the Company had cash used in operations of ($3,563) compared to cash provided by operations of $17,642 for the nine months ended June 30, 1998. The decrease was due to an increase in financing, legal and professional fees and other payments related to the Company's emergence from Chapter 11 proceedings on November 24, 1998 in addition to significant expenditures related to its installation of a new management information system that will allow its critical information systems and technology infrastructure to be Year 2000 compliant. The prior year's results included an advance from a major customer to partially defray the cost of shutting down the Toledo, Ohio facility and also working capital reductions at facilities being shutdown. The Company emerged from Chapter 11 on November 24, 1998, repaid the DIP Facility, the Post-Petition Term Loan, and issued $25,000 of Senior Secured Notes and entered into a $115,000 Senior Credit facility. The Company had borrowing availability of approximately $43,500 as of June 30, 1999. Management anticipates having sufficient liquidity to conduct its activities in fiscal 1999 as result of the borrowing availability provided by these facilities. Continuation of the Company's business after reorganization is dependent upon the success of future operations, including execution of the Company's turnaround business strategy and the ability to meet obligations as they become due. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company had suffered recurring losses from operations and at June 30, 1999 had a net working capital deficit. These factors among others raise substantial doubt about the Company's ability to achieve successful future operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Year 2000 Compliance The Year 2000 issue is the result of many computer programs and imbedded chips being written using two digits rather than four to define the applicable year. Many of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If not addressed and completed on a timely basis, failure of the Company's computer systems to process Year 2000 related data correctly could have a material adverse effect on the Company's financial condition and results of operations. Failures of this kind could, for example, lead to incomplete or inaccurate accounting, supplier and customer order processing or recording errors in inventories or other assets and the disruption of its manufacturing process as well as transactions with third parties. If not addressed, the potential risks to the Company include financial loss, legal liability and interruption to business. Year 2000 Readiness During the summer of 1997, the Company undertook an evaluation of its critical information systems and technology infrastructure for Year 2000 compliance and functionality. The Company determined as a result of its evaluation that its computer systems and related software applications lacked the Year 2000 compliance and functionality needed to support the Company's operations. Based upon such determination, the Company decided to replace (i) its computer hardware with new hardware and peripheral equipment, and (ii) its computer software with Enterprise Resource Planning ("ERP") software. PRELIMINARY AND TENTATIVE During the fourth quarter of 1997, the Company's cross-functional Year 2000 compliance team (consisting of members of the Company's materials management, scheduling, manufacturing, marketing, engineering, information technology, cost accounting and finance divisions) selected the "System 21" and "Future 3" ERP software of JBA International as the software to replace the Company's existing software. In January 1998, the Company engaged a consulting firm to provide project management for the implementation of the new ERP software system. The Company's ERP implementation project consists of five phases, as follows: Phase I--Analysis. Document Harvard's business strategy and current processes at pilot sites (including various plants and the corporate accounting and finance offices), design future processes and conduct Company-wide integration meetings in order to obtain input from both the management and staff of all operating plants. This phase commenced in February 1998 and was completed in April 1998. Phase II--Design. Designate a general corporate pilot site, determine improvements to planned systems to achieve full utilization of System 21 software capabilities and design methods to implement such improvements. Phase II commenced in April 1998 and ended in June 1998. Phase III--Construction. Begin conference room pilot programs at designated pilot sites, develop and approve policies and procedures and design training and education materials. Phase III commenced in June 1998 and ended in August 1998. Phase IV--Implementation at Pilot Sites and Finance Division. Provide training and education, implementation support and post-implementation reviews at pilot sites. Phase IV commenced in July 1998 and ended in October 1998. Phase V--Implementation Roll-out. Provide training and education, implementation support and post-implementation reviews at all other sites. As of July 31, 1999, the Company had successfully implemented ERP software at all facilities except one, which is scheduled for installation by October 1999, and the system is being utilized for most financial functions. Concurrent with the implementation of the new ERP software system, the Company completed an inventory of millennium-sensitive information technology ("IT") equipment (manufacturing, engineering, lab and measurement equipment, IT infrastructure, general office equipment and electronic data interchange ("EDI") interfaces). Components of such equipment containing microprocessors were identified and are being tested for correct date processing. The Company estimates that the final verification of date processing capabilities of components containing microprocessors will be completed on or about September 30, 1999. Surveys. Even if the changes made by the Company are successful, the Company remains at risk from Year 2000 failures caused by third parties. The Company's purchasing organization has evaluated systems in place for the supply of many of the raw materials, services and other items, the disruption of which could have an impact upon the Company's operations. Although various suppliers and utilities have not yet responded to the Company's requests for information, based upon the responses received, the Company does not currently foresee any significant interruptions of its business arrangements due to Year 2000 issues. PRELIMINARY AND TENTATIVE Nevertheless, failure by key suppliers or utilities to complete Year 2000 compliance work in a timely manner could have a material adverse effect on certain of the Company's operations. Examples of problems that could result from the failure by third parties with whom the Company interacts to remediate Year 2000 problems include, in the case of utilities, service failures such as power, telecommunications, elevator operations and loss of security access control and, in the case of suppliers, failures to satisfy orders on a timely basis and to process orders correctly. Additionally, general uncertainty regarding the success of remediation may cause many suppliers to reduce their activities temporarily as they assess and address their Year 2000 efforts in 1999. This could result in a general reduction in available supplies in late 1999 and early 2000. Management cannot predict the magnitude of any such reduction or its impact on the Company's financial results. There can be no assurance that the systems of other companies on which the Company's systems rely will be converted in a timely fashion, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company's consolidated financial statements. Remediation costs. The Company expects to spend approximately $14,000 to address issues related to Year 2000 compliance and functionality, including $2,400 for new software, $2,000 for new hardware (mainframe, personal computers and infrastructure wiring), $4,200 for software implementation and $5,400 for project management consultants. Approximately $13,900 of such amount has been spent through June 30, 1999. The source of such funds was working capital loans. The balance of the remediation costs are expected to be incurred through September 1999. The Company does not believe that the payment of such costs will have a material impact on the Company's financial position or results of operations. Contingency plans. The Company is currently installing a backup hardware system to supplement the Company's hardware in the event of Year 2000 failures. The Company also plans to conduct a strategy session during the summer of 1999 to evaluate the necessity of preparing any additional contingency plans for addressing the consequences of possible Year 2000 failures. Quantitative and Qualitative Disclosure About Market Risk Management does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that are required to be disclosed. PRELIMINARY AND TENTATIVE PART II--OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to various claims and routine litigation arising in the normal course of its business. Obligations of the Company in respect of litigation arising out of activities prior to the Petition Date, will be discharged in accordance with the Plan of Reorganization. Based on information currently available, management of the Company believes, after consultation with legal counsel, that the result of such claims and litigation will not have a material adverse effect on the financial position or results of operations of the Company. On June 11, 1999, Doehler-Jarvis, Inc. and Harvard Industries, Inc. (the "Companies") filed a declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania seeking a declaration that the termination of certain insurance benefits, including health insurance benefits, to individuals on the seniority list when they retired from active or inactive employee status at Doehler-Jarvis facilities in Pottstown, Pennsylvania or Toledo, Ohio after July 16, 1999, and/or their eligible surviving spouses and/or eligible dependents does not violate the Employee Retirement Income Security Act ("ERISA") or any other law, applicable collective bargaining agreement, or contract. Thomas E. Kopystecki was named as the representative of the proposed class of defendants. The response to the complaint is due on August 3, 1999. Based on information currently available, management of the Company believes, after consultation with legal counsel, that the result of such claims and litigation will not have a material adverse effect on the financial position or results of operations of the Company. On June 23, 1999, John C. Gilbert, Eugene Appling, Robert A. LaClair, John E. Malkulan, Christiane J. Myers, Kenneth McKnight, Thomas F. Klejta, and Fern M. Yerger, on behalf of themselves and a class of persons similarly situated filed an action against the Companies in the United States District Court for the Northern District of Ohio seeking a declaration that the termination of insurance benefits violates ERISA and the Labor Management Relations Act ("LMRA") and seeking unspecified damages resulting from the anticipated termination of benefits. The Companies filed a motion to transfer the Ohio action to Pennsylvania because the Pennsylvania action was the first filed action and is the more convenient forum for the resolution of the issues. The motion is presently pending before the Court. Based on information currently available, management of the Company believes, after consultation with legal counsel, that the result of such claims and litigation will not have a material adverse effect on the financial position or results of operations of the Company. Item 2. Changes in Securities On May 8, 1997 ("Petition Date"), Harvard filed a petition for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware. On November 24, 1998, the Company substantially consummated its First Amended Modified Consolidated Plan Under Chapter 11 of The Bankruptcy Code dated August 19, 1998 and emerged from bankruptcy. The Plan of Reorganization provided that New Common Stock, New Junior Secured Debentures and the New Warrants issued under the Plan of Reorganization may be resold by the holders thereof without registration unless any such holder is deemed to be an "underwriter" with respect to such securities, as defined in Section 1145(b)(1) of the Bankruptcy Code. On November 24, 1998, the Company issued $25,000 of 14-1/2% Senior Secured Notes due September 1, 2003. The Notes were issued pursuant to its Chapter 11 Plan of Reorganization and subject to an exemption from the registration requirements of the Securities Act of 1933 (and of equivalent state PRELIMINARY AND TENTATIVE securities or "blue sky" laws) provided by Section 1145(a)(1) of the Bankruptcy Code. The Notes were issued to Lehman Brothers, as initial purchaser, and resold pursuant to Rule 144A to Qualified Institutional Buyers (as defined in such Rule) for an aggregate purchase price of $25,000,000, of which $1,000,000 was retained by Lehman Brothers, as underwriter's discount, and $24,000,000 was received by the Company. On or about November 24, 1998, in reliance upon Section 3(a)(7) of the Securities Act and Section 1145(a)(1) of the Bankruptcy Code and pursuant to the confirmed Plan of Reorganization, the Company issued 8,240,295 shares of New Common Stock, in the aggregate, to holders of allowed unsecured claims in the Company's bankruptcy proceeding. For the period of April 28, 1999 through June 29, 1999 an additional 1,670,785 shares in the aggregate were issued pursuant to the Plan of Reorganization without any additional monetary consideration. In addition, on and after November 24, 1998, warrants to purchase an aggregate of approximately 626,200 shares of New Common Stock have been issued pursuant to the confirmed Plan of Reorganization and in reliance upon Section 3(a)(7) of the Securities Act and Section 1145(a)(1) of the Bankruptcy Code, to holders of the Company's formerly outstanding shares of common and preferred stock, which were canceled pursuant to the Plan of Reorganization. The warrants are exercisable until November 23, 2003 to purchase shares of New Common Stock at an exercise price of $41.67 per share. The shares of New Common Stock and warrants issued pursuant to the Plan of Reorganization were issued without cash or other consideration. See Footnote 5 for the financial impact of the Plan of Reorganization on registered securities. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information The Company announced on May 11, 1999 that it continues to look at potential acquisitions to diversify its industrial base and it has retained Lehman Brothers, Inc. to assist in exploring alternatives with respect to the assets of its Kingston-Warren subsidiary including the possible divestiture of substantially all those assets. Since that date the Company has had discussions with various potential purchasers and is engaged in continued negotiations with one such possible purchaser. However, there are no assurances that any definitive agreement will be reached with that or any other purchaser. At such time as the Company and a purchaser have reached agreement on purchase price and other essential terms and conditions, the Company will make an appropriate announcement or filing. See Footnote 1 for information related to Emergence from Chapter 11 Reorganization Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (27) Financial Data Schedule (for electronic submission only) (b) Reports on Form 8-K: PRELIMINARY AND TENTATIVE SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: August ____, 1999 HARVARD INDUSTRIES, INC. By: /s/ ROGER G. POLLAZZI ---------------------------------- Roger G. Pollazzi Chairman of the Board Chief Executive Officer and Director 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.
Signature Title Date --------- ----- ---- /s/ THEODORE W. VOGTMAN Executive Vice President and Chief August ___, 1999 - ----------------------- Financial Officer (Principal Financial Theodore W. Vogtman Officer) /s/ KEVIN L. B. PRICE Vice President, Controller and Treasurer August ___, 1999 - --------------------- (Principal Accounting Officer) Kevin L. B. Price
EX-27 2 FINANCIAL DATA SCHEDULE
5 1000 3-MOS SEP-30-1999 APR-01-1999 JUN-30-1999 7,303 0 50,713 0 26,011 88,306 132,203 8,831 123,372 107,178 0 0 0 95 141,488 496,602 129,908 129,908 114,610 114,610 0 0 3,464 (14,621) (8) (14,613) 0 0 0 (14,613) (1.62) 0
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