-----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, RkD3laesVMoYUld0hEGD9s2HiP+oYX3NhFd1ff3oB5fWMQ01LrFL6oYGz5nK9zWr HC0dRJ7XnwrPuubWRVCzGw== 0000950136-98-001480.txt : 19980818 0000950136-98-001480.hdr.sgml : 19980818 ACCESSION NUMBER: 0000950136-98-001480 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980817 SROS: NONE 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: FL FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01044 FILM NUMBER: 98691889 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 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 OR [X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 0-21362 HARVARD INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) Florida 21-0715310 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3 Werner Way, Lebanon, New Jersey 08833 (Address of principal executive offices) (Zip code) (908) 437-4100 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- APPLICABLE ONLY TO REGISTRANTS 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 REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Title Outstanding Class A Common 7,026,437 Index HARVARD INDUSTRIES, INC. INDEX
PAGE PART I. FINANCIAL INFORMATION: ----- Item 1. Financial Statements: Consolidated Balance Sheets June 30, 1998 (Unaudited) and September 30, 1997 (Audited) ..................... 2 Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended June 30, 1998 and 1997 ............................. 3 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended June 30, 1998 and 1997 ....................................... 4 Notes to Consolidated Financial Statements -- (Unaudited) .......................... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................................................... 16 PART II. OTHER INFORMATION: Item 5. Other Information .......................................................... 20 Item 6. Exhibits and Reports on Form 8-K ........................................... 21 SIGNATURES ......................................................................... 22
HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS JUNE 30, 1998 AND SEPTEMBER 30, 1997 (IN THOUSANDS )
June 30, September 30, 1998 1997 ASSETS (Unaudited) (Audited) ----------- --------- Current assets: Cash and cash equivalents ........................................... $ 17,868 $ 9,212 Accounts receivable, net ............................................ 75,672 76,190 Inventories ......................................................... 31,473 54,218 Prepaid expenses and other current assets ........................... 5,908 7,602 --------- --------- Total current assets ........................................... 130,921 147,222 Property, plant and equipment, net ...................................... 115,915 132,266 Intangible assets, net .................................................. 3,229 4,417 Other assets, net ....................................................... 22,108 23,589 --------- --------- $ 272,173 $ 307,494 ========= ========= LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current liabilities: Current portion of Debtor-in-possession (DIP) loans ................. $ 45,696 $ 36,436 Current portion of Creditors Subordinated Term Loan ................. 25,000 -- Current portion of long-tem debt .................................... -- 1,748 Accounts payable .................................................... 21,108 32,267 Accrued expenses .................................................... 90,616 72,235 Income taxes payable ................................................ 3,950 2,440 --------- --------- Total current liabilities ...................................... 186,370 145,126 Liabilities subject to compromise ....................................... 401,249 397,319 DIP loans ............................................................... -- 51,035 Long-term debt .......................................................... -- 12,339 Postretirement benefits other than pensions ............................. 99,752 96,929 Other ................................................................... 23,920 27,237 --------- --------- Total liabilities .............................................. 711,291 729,985 --------- --------- 14 1/4% Pay-In-Kind Exchangeable Preferred Stock, (Includes $10,142 of undeclared accrued dividends) ................. 124,637 124,637 --------- --------- Shareholders' deficiency: Common Stock, $ 01 par value; 15,000,000 shares authorized; shares issued and outstanding: 7,026,437 at June 30, 1998 and at September 30, 1997 ................................. 70 70 Additional paid-in capital .......................................... 32,134 32,134 Additional minimum pension liability ............................... (3,665) (3,665) Foreign currency translation adjustment ............................. (2,644) (1,930) Accumulated deficit ................................................. (589,650) (573,737) --------- --------- Total shareholders' deficiency ................................. (563,755) (547,128) --------- --------- $ 272,173 $ 307,494 ========= =========
See accompanying Notes to Consolidated Financial Statements (Unaudited). HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF OPERATIONS THREE AND NINE MONTHS ENDED JUNE 30, 1998 AND 1997 (Unaudited) (IN THOUSANDS EXCEPT PER SHARE DATA)
Three months ended Nine months ended ---------------------- ---------------------- June 30, June 30, June 30, June 30, 1998 1997 1998 1997 --------- --------- --------- --------- Sales ........................................................................$ 169,234 $ 217,914 $ 572,625 $ 614,401 --------- --------- --------- --------- Costs and expenses: Cost of sales ............................................................ 156,361 211,609 542,174 612,043 Selling, general and administrative ...................................... 15,389 10,832 40,742 35,422 Interest expense (contractual interest of $11,521 and $38,262 for the three and nine months ended June 30, 1998, respectively) ............................................ 2,616 8,822 11,548 33,154 Impairment of long-lived assets and restructuring costs .................. 10,842 134,987 Gain on sale of operations ............................................... 397 -- (26,561) -- Amortization of goodwill ................................................. 396 396 1,188 8,052 Other (income) expense, net .............................................. 73 947 1,044 2,744 --------- --------- --------- --------- Total costs and expenses ............................................ 175,232 232,606 580,977 826,402 --------- --------- --------- --------- Loss before reorganization items and income taxes ............................ (5,998) (14,692) (8,352) (212,001) Reorganization items ......................................................... 1,144 13,232 7,045 13,232 --------- --------- --------- --------- Loss before income taxes ..................................................... (7,142) (27,924) (15,397) (225,233) Provision for income taxes ................................................... 171 367 516 1,380 --------- --------- --------- --------- Net loss .....................................................................$ (7,313) $ (28,291) $ (15,913) $(226,613) ========= ========= ========= ========= PIK preferred dividends and accretion (contractual amounts were $4,763 and $14,289 for the three and nine months ended June 30, 1998, respectively )............................................................$ -- $ 1,694 $ -- $ 10,142 --------- --------- --------- --------- Net loss attributable to common shareholders .................................$ (7,313) $ (29,985) $ (15,913) $(236,755) ========= ========= ========= ========= Basic and Diluted Loss per common share ..................................$ (1.04) $ (4.27) $ (2.26) $ (33.73) ========= ========= ========= ========= Weighted average number of common shares outstanding ..................... 7,026 7,024 7,026 7,019 ========= ========= ========= =========
HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED) (IN THOUSANDS )
1998 1997 --------- --------- Cash flows related to operating activities: Loss from continuing operations before reorganization items ................... $ (8,868) $(213,381) Add back (deduct) items not affecting cash and cash equivalents: -- -- Depreciation and amortization ............................................ 22,432 47,997 Impairment of long-lived assets and restructuring costs .................. 10,842 134,987 Gain on sale of operations ............................................... (26,561) Loss on disposition of property, plant and equipment ..................... 839 1,759 Postretirement benefits .................................................. 2,823 5,145 Write-off of deferred debt expense ....................................... -- 1,792 Senior notes interest accrued prior to chapter 11, not paid .............. -- 9,728 Changes in operating assets and liabilities of continuing operations, -- -- net of effects of divestitures and reorganization items: -- -- Accounts receivable ...................................................... (2,827) 13,236 Inventories .............................................................. 20,608 (1,338) Other current assets ..................................................... 1,694 (1,587) Accounts payable ......................................................... (11,027) (60,704) Accounts payable prepetition ............................................. (826) 82,246 Accrued expenses and income taxes payable ................................ 11,705 (12,992) Other, net ............................................................... 3,476 6,636 --------- --------- Net cash provided by operations before reorganization items .................. 24,310 13,524 Net cash used by reorganization items ......................................... (6,668) (1,224) --------- --------- Net cash provided by operations .............................................. 17,642 12,300 --------- --------- Cash flows related to investing activities: Acquisition of property, plant and equipment .................................. (12,543) (30,540) Cash flows related to discontinued operations ................................. -- 212 Net proceeds from sale of operations .......................................... 20,475 -- Proceeds from disposition of property, plant and equipment .................... -- 622 --------- --------- Net cash provided by (used in) investing activities ........................... 7,932 (29,706) --------- --------- Cash flows related to financing activities: Net payments under financing/credit agreement ................................. -- (38,834) Net borrowings (repayments) under DIP financing agreement ..................... (39,275) 68,931 Deferred DIP financing costs .................................................. -- (2,200) Proceeds of Creditors Subordinated Term Loan, net of financing costs of $ 2,500 22,500 -- Proceeds from sale of stock and exercise of stock options ..................... -- 32 Repayments of long-term debt .................................................. (88) (1,099) Pension fund payments pursuant to PBGC settlement agreement ................... -- (4,500) Payment of EPA settlements .................................................... (55) (1,723) --------- --------- Net cash provided by (used in) financing activities ........................... (16,918) 20,607 --------- --------- Net increase in cash and cash equivalents ........................................ 8,656 3,201 Cash and cash equivalents beginning of period ..................................... 9,212 1,107 --------- --------- Cash and cash equivalents end of period ........................................... $ 17,868 $ 4,308 ========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 (UNAUDITED) (IN THOUSANDS) NOTE 1 The interim consolidated financial statements are unaudited but, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results for the periods presented. The results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September 30, 1997 included in the Company's Annual Report on Form 10-K. NOTE 2 On May 8, 1997, Harvard Industries, Inc. and its domestic subsidiaries (all of whom are hereinafter sometimes designated the "Debtors") filed voluntary petitions for relief under chapter 11 ("chapter 11") of the Federal bankruptcy laws in the United States Bankruptcy Court for the District of Delaware (the "Court"). Under chapter 11, holders of most claims arising prior to the filing of the petitions for relief under the Federal bankruptcy laws are stayed from collecting on such claims while the Debtors continue business operations as debtors-in-possession ("DIP"). Additional claims may arise subsequent to the filing date resulting from rejection of executory contracts, including leases. Holders of pre-petition claims secured by liens against the Debtors' assets ("secured claims") also are stayed from enforcing their rights as secured creditors without leave of the Court. The Debtors have received approval from the Court to pay or otherwise honor certain pre-petition obligations, including certain employee wages, salaries and other compensation, employee benefits, reimbursable employee expenses and certain workers' compensation claims, as well as to continue pre-petition customer practices with respect to warranties, refunds and return policies. All proofs of claim were required to be filed against the Debtors by February 9, 1998 or be forever barred from assertion. The Debtors filed a plan of reorganization with the Court on July 10, 1998. The Court has given the Debtors until October 30, 1998 to formulate and file their plans of reorganization, and until January 28, 1999 to solicit plan acceptances thereto. In the event the plan is approved by the creditors and the Court, continuation of the Debtors' business after reorganization is dependent upon the success of future operations and the ability to meet obligations as they become due. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the chapter 11 proceedings and circumstances related thereto, including the Company's highly leveraged financial structure and recurring losses from operations as reflected in the consolidated statements of operations, such realization of assets and liquidation of liabilities is subject to substantial doubt. Management is unable to predict how and when the chapter 11 proceedings or the expenses associated therewith, which could be substantial, will be concluded. There can be no assurances that the liabilities of the Company will not be found in the chapter 11 proceedings to exceed the fair value of its assets. This would result in claims being provided for in the chapter 11 proceedings at less than 100% of their face value. It is impossible at this time to predict with certainty the actual recovery the creditors and shareholders will realize. The Company discontinued accruing interest on its 12% and 11 1/8% Notes (aggregating $300,000 of principal amount) and dividends on the PIK Preferred Stock since the date of filing under chapter 11. NOTE 3 In November 1997, the Company sold the Material Handling division of its Kingston-Warren subsidiary for approximately $18,000 of gross proceeds, of which $7,840 was applied to the scheduled DIP term loans' quarterly payments in November 1997 and February and May 1998 and $7,840 was applied to the final installment due May 1999. The balance of the proceeds was used to reduce the DIP revolving facility. The transaction resulted in a gain on sale of approximately $11,400 in the first quarter of fiscal 1998. In June 1998, the Company finalized the sale of its land, building and certain other assets related to the Harvard Interiors Furniture Division located in St. Louis, Missouri for aggregate proceeds of approximately $4,400. Of the proceeds, $830 was applied to the May 31, 1998 DIP quarterly term payment, $501 was applied to the August 31, 1998 payment, $1,330 was applied to the May 8, 1999 payment and the balance was applied to reduce the DIP revolving facility. The transaction resulted in a gain on sale of approximately $1,200, which was recorded in the second and third quarters of fiscal 1998. In June 1998, the Company sold its ESNA facility located in Union, New Jersey for $1,900. On July 30, 1998, the Company filed a motion in Bankruptcy Court for authority to sell substantially all of the assets of Doehler-Jarvis Greeneville, Inc. to Tennessee Aluminum Casting, L.L.C. ("TAC"). Pursuant to the terms of the Asset Purchase Agreement, TAC will pay $10,907 in cash to the Company, subject to certain adjustments. The sale to TAC is subject to the submission of higher or better offers. Management is in the process of winding down operations at the Company's Doehler-Jarvis Toledo, Inc. subsidiary. The Company has entered into agreements with General Motors and Ford to defray certain expenses and obtain certain assets and assume the related lease obligation with respect to the wind-down. Based on these agreements and the anticipated sale of assets, the Company believes that the net cost of the wind-down will not be material. Condensed operating data of operations designated for sale or wind-down (Harman Automotive, Harvard Interiors, Material Handling, Toledo, Greeneville and the Tiffin, Ohio facility of the Hayes-Albion subsidiary) are as follows: Three months ended Nine months ended June 30 June 30 1998 1997 1998 1997 ---------- --------- ---------- --------- Sales $ 42,163 $ 80,801 $ 196,309 $ 238,611 Gross profit (loss) 2,835 (3,136) 11,501 (12,843) Improvements in operating results are primarily a result of decreased depreciation expense due to the write down of property, plant and equipment at the Toledo and Greeneville facilities and at Harman Automotive in the fourth quarter of 1997 and the wind-down agreements with Ford and General Motors. NOTE 4 The Company failed to meet the fixed charge ratio financial covenant in connection with its DIP financing agreement during October and November 1997, and on December 29, 1997 obtained a waiver of such default from its lenders. On December 29, 1997, the Company entered into Amendment No. 1 Waiver and Consent (the "Amendment") to Post-Petition Loan and Security Agreement with its lenders whereby the lenders from December 29, 1997 waived all defaults or events of default which have occurred prior to such date from the failure to comply with the above financial covenant. The lenders also entered into the Amendment to replace the fixed charge ratio covenant with monthly consolidated EBITDA and consolidated tangible net worth covenants, commencing calculations at December 31, 1997. The Amendment requires the lenders' consent for capital expenditures in excess of $30,000 for the year ending September 30, 1998. The Company was in compliance with the EBITDA and consolidated tangible net worth covenants at June 30, 1998. The Company also entered into Amendment No. 2 and Consent to the Post-petition Loan and Security Agreement, dated January 27, 1998 (the "Amended DIP Financing Agreement"), pursuant to which the lenders consented to the term loan, discussed in Note 7, the creation of subordinated liens thereunder and to certain asset sales. In addition, the Amended DIP Financing Agreement presently provides for an availability reserve of $5,000 and will be eliminated upon the receipt by the lenders of not less than $15,000 from the sale or other disposition of the Toledo facility. The Company is required to use the Toledo fixed asset proceeds to prepay remaining installments, 50% in direct order and 50% in inverse order of their maturities. The term of the amended DIP Facility is the earlier of (i) May 8, 1999 or (ii) the date the line of credit is terminated or (iii) the earlier of the effective date a Plan of Reorganization is confirmed by an order of the bankruptcy court or (iv) the date on which any distributions are made under a Plan of Reorganization that is confirmed by order of a bankruptcy court. The Amended DIP Financing Agreement provides that any asset sale proceeds (other than Toledo proceeds) are to be used to pay pre-petition and revolving loans indebtedness so that after giving effect thereto the aggregate net availability is restored to its status immediately prior to the transaction giving rise to the proceeds; and then to prepay remaining installments in the order described above. The lenders have consented to certain minimum realizations from future asset sales, as follows: not less than $2,000 with respect to the sale of Harman Automotive, not less than $15,000 with respect to the sale or disposition of Toledo, and not less than $2,000 with respect to the sale of Harvard Interiors, all with prepayments of indebtedness to be effected in the manner set forth above. There is no assurance that such minimum realizations will be obtained. The Company entered into Amendment No. 3 to the Post-Petition Loan and Security Agreement, dated as of April 30, 1998, extending to May 31, 1998 the date upon which an agreement with Ford regarding the winddown of the Toledo facility is required to be approved by the Court. The Company entered into Amendment No. 4 to the Post-Petition Loan and Security Agreement, dated as of April 30, 1998, extending to June 30, 1998 the date upon which an agreement with Ford regarding the winddown of the Toledo facility is required to be approved by the Court. An agreement with Ford was signed on May 18, 1998 and approved by the Court on June 22, 1998. NOTE 5 During the nine months ended June 30, 1998, the Company recorded a $5,000 restructuring charge representing estimated shutdown costs, of which $2,500 related primarily to severance and moving costs associated with the move of the corporate headquarters from Tampa, Florida to Lebanon, New Jersey and approximately $2,500 was accrued for two senior executive officers to induce them to stay until the earlier of (i) the date of consummation of the plan of reorganization, plus, if requested by the Board, up to an additional 60 days beyond such date, (ii) the date of termination by the executive for good reason, death, disability or retirement or (iii) the termination by the Company of the executive's employment for any reason. During the nine months ended June 30, 1998, the Company recorded a charge of $5,842 consisting of the impairment of the property, plant and equipment of the Tiffin plant, which is being considered for sale or wind down, and the equipment and tooling for a platform that is being discontinued earlier than planned. NOTE 6 The Company entered into a Term Loan Agreement dated as of January 16, 1998 for a $25,000 post-petition term loan facility which is subordinated to the security interests under the existing DIP loans. The loan is payable on the earlier of May 8, 1999 or the date the existing DIP loan is terminated and bears interest at a rate per annum equal to the greater of (i) the highest per annum interest rate for term loans and revolving credit loans under the existing DIP loans plus 3% or (ii) 13%. The net proceeds of $22,500 from the loan were used to reduce the current balance of the revolver portion of the DIP loans. The financing costs of $2,500 were charged to interest expense. On July 31, 1998, the Company executed a commitment letter with Lehman Brothers Inc. and Lehman Commercial Paper Inc. (collectively "Lehman") for a credit facility to be provided by Lehman to the Company in an amount up to $165,000, which will be effective following confirmation and upon consummation of the Company's plan of reorganization. NOTE 7 Basic and diluted loss per share are computed by dividing net loss after deducting accrued dividends and accretion related to PIK Preferred Stock by the weighted average number of common shares outstanding. Options to purchase 836,571 shares of common stock are outstanding at June 30, 1998. No consideration was given in either period to equivalent shares related to stock options since such assumed exercise would be anti-dilutive. NOTE 8 The Company is also a party to various claims and routine litigation arising in the normal course of its business. 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. NOTE 9 Income taxes result principally from having operating profit in Canada, and thus being subject to Canadian taxes, and an operating loss in the U.S. for which benefit was not recognized. NOTE 10 Both the 12% Notes and the 11 1/8% Notes are guaranteed on a senior unsecured basis, pursuant to guarantees (the "Guarantees") by all of the Company's wholly-owned direct and certain of its wholly-owned indirect domestic subsidiaries (the "Guarantors"). Both Notes are unconditionally guaranteed, jointly and severally, on a senior unsecured basis, by each of the Guarantors under such Guarantor's guaranty (a "Guaranty"). Each Guaranty by a Guarantor is limited to an amount not to exceed the maximum amount that can be guaranteed by that Guarantor without rendering the Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer. As such, a Guaranty could be effectively subordinated to all other indebtedness (including guaranties and other contingent liabilities) of the applicable Guarantor, and, depending on the amount of such indebtedness, a Guarantor's liability on its Guaranty could be reduced to zero. 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 intercompany 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, 1998 and September 30, 1997 and condensed statements of operations and cash flows for the nine months ended June 30, 1998 and 1997. 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 nine months ended June 30, 1998 and 1997. 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. HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING BALANCE SHEET JUNE 30, 1998 (UNAUDITED) (IN THOUSANDS )
COMBINED COMBINED PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents ........................ $ 7,215 $ 9,333 $ 1,320 $ -- $ 17,868 Accounts receivable, net ......................... 184 71,096 4,392 -- 75,672 Inventories ...................................... 413 30,339 721 -- 31,473 Prepaid expenses and other current assets ........ 2,248 3,654 6 -- 5,908 --------- --------- --------- --------- --------- Total current assets ........................... 10,060 114,422 6,439 -- 130,921 Investment in subsidiaries ......................... (57,414) 11,847 -- 45,567 -- Property, plant and equipment, net ................. 2,847 105,239 7,829 -- 115,915 Intangible assets, net ............................. -- 3,229 -- -- 3,229 Intercompany receivables ( payables) ............... (27,555) 26,153 1,402 -- -- Other assets, net .................................. 21,153 955 -- -- 22,108 --------- --------- ========= ========= ========= ========= ========= $ (50,909) $ 261,845 $ 15,670 $ 45,567 $ 272,173 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Current portion of DIP loans ..................... $ -- $ 45,696 $ -- $ -- $ 45,696 Creditors Subordinated Term Loan ................. 25,000 -- -- -- 25,000 Accounts payable ................................. (36) 18,904 2,240 -- 21,108 Accrued expenses ................................. 23,179 67,606 (169) -- 90,616 Income taxes payable ............................. 1,083 1,453 1,414 -- 3,950 --------- --------- --------- --------- --------- Total current liabilities .................... 49,226 133,659 3,485 -- 186,370 Liabilities subject to compromise ( a ) ........... 336,418 64,831 -- -- 401,249 Postretirement benefits other than pensions ........ -- 99,752 -- -- 99,752 Other liabilities .................................. 2,565 21,017 338 -- 23,920 --------- --------- --------- --------- --------- Total liabilities ........................... 388,209 319,259 3,823 -- 711,291 --------- --------- --------- --------- --------- PIK Preferred Stock ................................ 124,637 -- -- -- 124,637 --------- --------- --------- --------- --------- Shareholders' equity (deficiency): Common stock and additional paid-in-capital ................................ 32,204 73,054 10 (73,064) 32,204 Additional minimum pension liability ............. (3,665) (3,659) -- 3,659 (3,665) Foreign currency translation adjustment .......... (2,644) (2,644) (2,644) 5,288 (2,644) Retained earnings (deficiency) ................... (589,650) (124,165) 14,481 109,684 (589,650) --------- --------- --------- --------- --------- Total shareholders' equity (deficiency) ........ (563,755) (57,414) 11,847 45,567 (563,755) ========= ========= ========= ========= ========= $ (50,909) $ 261,845 $ 15,670 $ 45,567 $ 272,173 ========= ========= ========= ========= =========
(a) Includes $309,728 senior notes payable and accrued interest which are subject to the guaranty of the combined guarantor subsidiaries. HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING BALANCE SHEET SEPTEMBER 30, 1997 (UNAUDITED) (IN THOUSANDS)
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ ASSETS Current assets: Cash and cash equivalents ............... $ 3,324 $ 5,376 $ 512 $ -- $ 9,212 Accounts receivable, net ................ 2,795 71,355 2,040 -- 76,190 Inventories ............................. 2,475 50,662 1,081 -- 54,218 Prepaid expenses and other current assets 1,698 5,904 -- -- 7,602 --------- --------- --------- --------- --------- Total current assets .................. 10,292 133,297 3,633 -- 147,222 Investment in Subsidiaries ................ (48,751) 12,138 -- 36,613 0 Property, plant and equipment, net ........ 3,878 119,164 9,224 -- 132,266 Intangible assets, net .................... -- 4,417 -- -- 4,417 Intercompany receivables ( payable) ....... (71,413) 66,140 5,273 0 0 Other assets .............................. 20,164 3,425 -- 23,589 --------- --------- --------- --------- --------- $ (85,830) $ 338,581 $ 18,130 $ 36,613 $ 307,494 ========= ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Current portion of DIP loans ............ $ 867 $ 35,569 $ -- $ -- $ 36,436 Current portion of long-term debt ....... -- 1,748 -- -- 1,748 Accounts payable ........................ 228 30,214 1,825 -- 32,267 Accrued expenses ........................ 16,088 55,959 188 -- 72,235 Income taxes payable .................... (1,751) 1,246 2,945 -- 2,440 --------- --------- --------- --------- --------- Total current liabilities ........... 15,432 124,736 4,958 -- 145,126 Liabilities subject to compromise(a) ...... 317,508 79,742 69 -- 397,319 DIP loans ................................. 705 50,330 51,035 Long-term debt ............................ 12,339 12,339 Postretirement benefits other than pensions -- 96,929 -- -- 96,929 Other ..................................... 3,016 23,256 965 -- 27,237 --------- --------- --------- --------- --------- Total liabilities .................. 336,661 387,332 5,992 0 729,985 --------- --------- --------- --------- --------- PIK Preferred ............................. 124,637 -- -- -- 124,637 --------- --------- --------- --------- --------- Shareholders' equity (deficiency): Common stock and additional paid-in-capital ....................... 32,204 73,054 10 (73,064) 32,204 Additional minimum pension liability .... (3,665) (3,659) -- 3,659 (3,665) Foreign currency translation adjustment . (1,930) (1,930) (1,930) 3,860 (1,930) Retained earnings (deficiency) .......... (573,737) (116,216) 14,058 102,158 (573,737) --------- --------- --------- --------- --------- Total shareholders' equity (deficiency) (547,128) (48,751) 12,138 36,613 (547,128) --------- --------- --------- --------- --------- $ (85,830) $ 338,581 $ 18,130 $ 36,613 $ 307,494 ========= ========= ========= ========= =========
(a) Includes $309,728 senior notes payable and accrued interest which are subject to the guaranty of the combined guarantor subsidiaries. F-37 HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING STATEMENT OF OPERATIONS NINE MONTHS ENDED JUNE 30, 1998 (Unaudited) (In thousands )
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Elimination 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 adminstrative 6,016 33,809 917 -- 40,742 Interest expense .................. 5,843 5,687 18 -- 11,548 Impairment of long-lived assets and restructuring costs ............. 5,000 5,842 -- -- 10,842 Gain on sale of operations ........ (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 reorganization items and income taxes ......... (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 Income (loss) ................ $ (15,913) $ (4,061) $ 686 $ 3,375 $ (15,913) ========= ========= ========= ========= =========
HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING STATEMENT OF OPERATIONS NINE MONTHS ENDED JUNE 30, 1997 ( Unaudited ) (In thousands )
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Elimination Consolidated --------- ------------ ------------ ----------- ------------ Sales ............................... $ 15,528 $ 574,526 $ 24,347 $ -- $ 614,401 --------- --------- --------- --------- --------- Costs and expenses: Cost of sales ..................... 16,543 573,230 22,270 -- 612,043 Selling, general and administrative 11,528 23,894 -- -- 35,422 Interest expense .................. 27,110 5,877 167 -- 33,154 Amortization of goodwill .......... -- 8,052 -- -- 8,052 Other (income) expense, net ....... 805 1,924 15 -- 2,744 Impairment of long-lived assets ... -- 134,987 -- -- 134,987 Equity in (income) loss of subsidiaries .................... 189,086 (49) -- (189,037) -- Allocated expenses ................ (16,163) 14,864 1,299 -- -- --------- --------- --------- --------- --------- Total costs and expenses ...... 228,909 762,779 23,751 (189,037) 826,402 --------- --------- --------- --------- --------- Income (loss) before income taxes and reorganization items ........... (213,381) (188,253) 596 189,037 (212,001) Reorganization items ................ (13,232) -- -- -- (13,232) --------- --------- --------- --------- --------- Income (loss) before income taxes ... (226,613) (188,253) 596 189,037 (225,233) Provision for income taxes .......... -- 833 547 -- 1,380 --------- --------- --------- --------- --------- Net income (loss) ................ $(226,613) $(189,086) $ 49 $ 189,037 $(226,613) ========= ========= ========= ========= =========
HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 1998 (UNAUDITED) (IN THOUSANDS )
COMBINED COMBINED PARENT GUARANTOR NON-GUARANTOR COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED ----------- ------------ ----------------- ----------- ------------ Cash flows related to operating activities: Loss from continuing 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 costs . 5,000 5,842 -- -- 10,842 Gain on sale of operations .............................. (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, net .............................................. 16,756 (11,870) (1,410) -- 3,476 -------- -------- -------- -------- -------- Net cash provided by (used in) continuing 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) continuing 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 operations ...................... 4,084 16,391 -- -- 20,475 -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities ........ 4,015 4,091 (174) -- 7,932 -------- -------- -------- -------- -------- Cash flows related to financing activities: Net borrowings (repayments) under DIP financing agreement . (1,572) (37,703) -- -- (39,275) Proceeds of Creditors Subordinated Term Loan, net of financing costs of $2,500 ................................. 22,500 -- -- -- 22,500 Repayments of long-term debt .............................. -- (88) -- -- (88) Payment 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 ======== ======== ======== ======== ========
HARVARD INDUSTRIES, INC. (DEBTOR-IN-POSSESSION) CONSOLIDATING STATEMENT OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 1997 ( UNAUDITED ) (IN THOUSANDS )
Combined Combined Parent Guarantor Non-Guarantor Company Subsidiaries Subsidiaries Elimination Consolidated ---------- ------------ ------------- ----------- ------------ Cash flows related to operating activities: Loss from continuing operations before reorganization items . $(213,381) $(189,086) $ 49 $ 189,037 $(213,381) Add back (deduct) items not affecting cash and cash equivalents: Equity in (income) loss of subsidiaries ................... 189,086 (49) -- (189,037) -- Depreciation and amortization ............................. 2,034 45,097 866 -- 47,997 Impairment of long-lived assets ........................... -- 134,987 -- -- 134,987 Loss on Disposition of property, plant and equipment and property held for sale ..................... -- 1,759 -- -- 1,759 Postretirement benefits ................................... -- 5,145 -- -- 5,145 Write-off of deferred debt expense ........................ 1,792 Senior notes interest accrued prior to chapter 11, not paid 9,728 Changes in operating assets and liabilities : Accounts receivable ....................................... 3,172 10,849 (785) -- 13,236 Inventories ............................................... 2,715 (6,586) 2,533 -- (1,338) Other current assets ...................................... (1,084) (503) -- -- (1,587) Accounts payable .......................................... (4,139) (56,940) 375 -- (60,704) Accounts payable prepetition .............................. 3,169 78,905 172 82,246 Accrued expenses and income taxes payable ................. (6,867) (5,236) (889) -- (12,992) Other, net ................................................ 1,879 4,790 (33) -- 6,636 --------- --------- --------- --------- --------- Net cash provided by (used in) continuing operations before reorganization items ..................................... (11,896) 23,132 2,288 -- 13,524 Net cash used by reorganization items ......................... (1,224) (1,224) --------- --------- --------- --------- --------- Net cash provided by (used in) continuing operations ......... (13,120) 23,132 2,288 0 12,300 --------- --------- --------- --------- --------- Cash flows related to investing activities: Acquisition of property, plant and equipment ................ (94) (29,084) (1,362) -- (30,540) Cash flows related to net assets of discountinued operations 212 -- -- -- 212 Proceeds from disposition of property, plant and equipment ....................................... -- 622 -- -- 622 --------- --------- --------- --------- --------- Net cash used in investing activities ......................... 118 (28,462) (1,362) -- (29,706) --------- --------- --------- --------- --------- Cash flows related to financing activities: Net payments under financing / credit agreement ............. (445) (38,389) -- -- (38,834) Net borrowings under DIP financing agreement ................ 1,278 67,653 68,931 Deferred DIP financing costs ................................ (2,200) (2,200) Proceeds from sale of stock / exercise of stock options ..... 32 -- -- -- 32 Repayments of long-term debt ................................ -- (1,099) -- -- (1,099) Pension fund payment pursuant to PBGC settlement agreement .. (4,500) -- -- -- (4,500) Payment of EPA settlements .................................. (1,074) (649) -- -- (1,723) Net changes in intercompany balances ........................ 21,718 (22,397) 679 -- 0 --------- --------- --------- --------- --------- Net cash provided by financing activities ..................... 14,809 5,119 679 -- 20,607 --------- --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents .......... 1,807 (211) 1,605 -- 3,201 Cash and cash equivalents : Beginning of period ......................................... (1,655) 4,367 (1,605) -- 1,107 --------- --------- --------- --------- --------- End of period ............................................... $ 152 $ 4,156 $ -- $ -- $ 4,308 ========= ========= ========= ========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION (In Thousands) 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 DIP 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, the inability to consummate successfully negotiations looking towards defraying certain costs in connection with the wind-down of the Toledo, Ohio facility, unanticipated developments in the bankruptcy proceedings and the impact thereof, as well as other pending litigation, 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 Three Months Ended June 30, 1998 Compared to Three Months Ended June 30,1997 The General Motors strike at the Flint Metal Center and Delphi East Parts Complex lasted for 54 days, ending on or about July 31, 1998. The strike's effect on Harvard Industries, Inc. and its subsidiaries is still being calculated as GM returns to work, but the loss should not exceed $30,000 in sales and $8,000 in income before taxes. The Company estimates that approximately $7,400 of sales and $1,700 of income before taxes were incurred in June, with the remainder estimated to occur in the fourth fiscal quarter. Sales. Sales decreased $48,680 from $217,914 to $169,234, or 22.3%. Aggregate sales for operations designated for sale or wind-down decreased $38,638 from $80,801 to $42,163, primarily due to the wind down. The remaining operations' sales decreased $10,042 from $137,113 to $127,071 primarily due to the GM strike. Gross Profit. The gross margin increased from 2.9% to 7.6%, or $6,568. The gross profit for operations designated for sale or wind-down amounted to $2,835 and $(3,136) in 1998 and 1997, respectively. The improvement was due mainly to a decrease of approximately $3,900 in depreciation resulting from the write-down of certain property, plant and equipment in the fourth quarter of 1997 and the favorable effect of the wind down agreements with Ford and GM. The increase in gross profit for the remaining operations was mainly due to improved operating efficiencies and approximately $1,500 from decreases in depreciation resulting from the write-down of certain property, plant and equipment in the fourth quarter of 1997 at the continuing operations of Doehler-Jarvis partially offset by the lower volumes at GM due to the strike. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased from $10,832 to $15,389. The increase reflects a $4,500 charge for the purchase and implementation of year 2000 compliant software. Interest Expense. Interest expense decreased from $8,822 to $2,616. However, but for giving effect to the discontinuance of accruing interest on the senior notes of $8,905 in 1998 and $5,102 in 1997 from the date of filing chapter 11, interest expense would have decreased by $2,405. This decrease resulted from lower borrowing levels. Gain on Sale of Operations. This includes an adjustment to the gain on the sale of the land, building and certain other assets of the Harvard Interiors' St. Louis facility. Other (Income) Expense, Net. The decrease of $874 was mainly due to a decrease in loss on disposal of machinery and equipment. Reorganization Items. These costs represent mainly professional fees incurred in connection with the bankruptcy proceedings. Provision for Income Taxes. The decrease in the provision for income taxes resulted from a decrease in operating profit in Canada. Net Loss. The net loss decreased from $28,291 to $7,313 for the reasons described above. Nine Months Ended June 30, 1998 Compared to Nine Months Ended June 30,1997 The General Motors strike at the Flint Metal Center and Delphi East Parts Complex lasted for 54 days, ending on or about July 31, 1998. The strike's effect on Harvard Industries, Inc. and its subsidiaries is still being calculated as GM returns to work, but the loss should not exceed $30,000 in sales and $8,000 in income before taxes. The Company estimates that approximately $7,400 of sales and $1,700 of income before taxes were incurred in June, with the remainder estimated to occur in the fourth fiscal quarter. Sales. Sales decreased $41,776 from $614,401 to $572,625, or 6.8%. Aggregate sales for the operations designated for sale or wind-down decreased approximately $42,302 from $238,611 to $196,309. The remaining operations' sales increased $526 from $375,790 to $376,316 as higher volumes to Caterpillar, Ford and other industrial customers offset the impact of the GM strike. Gross Profit. The gross margin increased from 0.4% to 5.3%, or $28,093. The gross profit (loss) for Operations designated for sale or wind-down amounted to $11,501 and $(12,843) in 1998 and 1997, respectively. The improvement was due mainly to a decrease of approximately $12,800 in depreciation resulting from the write-down of certain property, plant and equipment in the fourth quarter of 1997 and favorable impact of the winddown agreements with Ford and GM. The increase in gross profit for the remaining operations was mainly due to improved operating efficiencies and approximately $4,600 from decreases in depreciation resulting from the write-down of certain property, plant and equipment in the fourth quarter of 1997 at the continuing operations of Doehler-Jarvis partially offset by the impact of the GM strike. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased from $35,422 to $40,742. The increase reflects a $9,500 charge for the purchase and implementation of information systems and technology which, upon completion, is expected to make the Company's systems year 2000 compliant, offset by the prior period's charge of $4,000 relating to the termination and consulting and release agreement of a former executive. Interest Expense. Interest expense decreased from $33,154 to $11,548. However, but for giving effect to the discontinuance of accruing interest on the senior notes of $26,714 in 1998 and $5,102 in 1997 from the date of filing chapter 11, interest expense would have remained unchanged as financing fees of $2,500 relating to the post-petition term loan facility were offset by lower borrowing levels. Amortization of Goodwill. The decrease of $6,864 in goodwill amortization occurred because goodwill related to the acquisition of Doehler-Jarvis ceased March 31, 1997, when such goodwill was written-off as impaired. Impairment of Long-Lived Assets and Restructuring Costs. During the period, the Company recorded $5,000 in restructuring charges representing estimated shutdown and relocation costs of $2,500, relating primarily to severance and moving costs associated with the move of the corporate headquarters from Tampa, Florida to Lebanon, New Jersey, and approximately $2,500 for two senior executive officers to induce them to stay until the earliest of (i) the date of consummation of the plan of reorganization, plus, if requested by the Board, up to an additional 60 days beyond such date, (ii) the date of termination by the executive for good reason, death, disability or retirement or (iii) the termination by the Company of the executive's employment for any reason. In addition, the Company wrote-off as impaired substantially all the property, plant and equipment at Hayes-Albion's Tiffin, Ohio facility and the equipment and tooling for a platform that is being discontinued earlier than planned. During the nine months ended June 30, 1997, a charge of $134,987 was recorded for the impairment of long-lived assets at several subsidiaries. Gain on Sale of Operations. This includes the gain of $11,354 on the sale of the Material Handling division of the Company's Kingston-Warren subsidiary, the gain of $1,208 on the sale of the land, building and certain other assets of the Harvard Interiors' St. Louis facility and the gain of $13,999 on the transfer of certain assets at the Toledo facility and their related lease obligations to a third party. Other (Income) Expense, Net. The decrease of $1,700 was mainly due to a decrease in loss on disposal of machinery and equipment. Reorganization Items. These costs represent mainly professional fees incurred in connection with the bankruptcy proceedings. Provision for Income Taxes. The decrease in the provision for income taxes resulted from a decrease in operating profit in Canada. Net Loss. The net loss decreased from $226,613 to $15,913 for the reasons described above. LIQUIDITY AND CAPITAL RESOURCES For the nine months ended June 30, 1998, the Company had cash flow from operations of $17,642 as compared with a cash flow from operations of $12,300 for the nine months ended June 30, 1997. The 1998 cash flows improved due to increased profit margins, lower inventory levels and the timing of payments, but were negatively affected by payments of reorganization items and advance and accelerated payments to post-petition suppliers. The cash flow from operations in 1998, together with the proceeds of $20,475 from the sale of operations and the $22,500 proceeds from the creditors subordinated term loan was used primarily to fund capital expenditures of $12,543 and to repay DIP financing activities amounting to $39,275. Projected cash flows for the year ending September 30, 1998 contemplate spending $14,000 in reorganization items, $10,000 in restructuring charges and approximately $9,500 for new systems that are anticipated to make the Company's systems year 2000 compliant prior to the year 2000, resulting in negative cash flow from continuing operations. Additionally, capital expenditures of approximately $25,000 are contemplated for the year ending September 30, 1998. The Company, therefore, entered into a Term Loan Agreement, dated as of January 16, 1998, for a $25,000 post-petition term loan facility to allow greater borrowing availability for its ongoing operations. This facility is subordinated to the security interests under the existing DIP loans, is payable the earlier of May 8, 1999 or the date the existing DIP loan is terminated and bears interest at a rate per annum equal to the greater of (i) the highest per annum interest rate for term loans and revolving credit loans under the existing DIP loans plus 3% or (ii) 13%. The Company was required to pay facility and funding fees aggregating $2,500. The net proceeds were used to reduce the current balance of the revolver portion of the DIP loans. The Company did not meet the fixed charge ratio financial covenant of its DIP Facility during the months of October and November 1997. On December 29, 1997, the Company entered into Amendment No. 1 Waiver and Consent (the "Amendment") to Post-Petition Loan and Security Agreement with its lenders whereby the lenders from December 29, 1997 waived all defaults or events of default which have occurred prior to such date from the failure to comply with the above financial covenant. The lenders also entered into the Amendment to replace the fixed charge ratio covenant with monthly consolidated EBITDA and consolidated tangible net worth covenants commencing calculations at December 31, 1997. The Amendment requires the lenders' consent for capital expenditures in excess of $30,000 for the year ending September 30, 1998. The Company was in compliance with the EBITDA and consolidated tangible net worth covenants at June 30, 1998. The Company also entered into Amendment No. 2 and Consent to the Post-Petition Loan and Security Agreement, dated as of January 27, 1998, pursuant to which the lenders consented to the term loan, discussed above, the creation of subordinated liens thereunder and to certain asset sales. In addition, the Amended DIP Financing Agreement presently provides for an availability reserve of $5,000 and will be eliminated upon the receipt by the lenders of not less than $15,000 from the sale or other disposition of the Toledo facility. The Company is to use the Toledo proceeds to prepay remaining installments, 50% in direct order and 50% in inverse order of their maturities. As of August 7, 1998, the Company had availability to borrow funds in the amount of approximately $30,000 pursuant to the DIP revolving credit facility; at June 30, 1998 and August 7, 1998, the revolving credit facility had less than $100 outstanding. The Company is not permitted to borrow any money for funding any costs or expenses incurred in connection with the closing of the Doehler-Jarvis Toledo facility under both the DIP loan agreement and the subordinated loan agreement unless reimbursed or anticipated to be reimbursed. It is contemplated that the costs and expenses of the wind-down of the Doehler-Jarvis Toledo facility will be borne by two major customers, with whom definitive agreements have been reached. Year 2000 Compliance. Certain of the Company's information systems are not presently compliant with the requirements of the year 2000. The Company has committed the resources necessary to ensure that its critical information systems and technology infrastructure are "Year 2000 Compliant" before transactions for the year 2000 are expected. Certain of the Company's systems will be replaced with an "Enterprise Resource Planning" (ERP) solution, which the Company intends to implement shortly, and will be Year 2000 compliant and provide the Company with significantly enhanced manufacturing and business systems capability. PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION A. THE GENERAL MOTORS STRIKE The General Motors strike at the Flint Metal Center and Delphi East Parts Complex lasted for 54 days, ending on or about July 31, 1998. The strike's effect on Harvard Industries, Inc. and its subsidiaries is still being calculated as GM returns to work, but the loss should not exceed $30 million in sales and $8 million in income before taxes. The Company estimates that approximately $7.4 million of sales and $1.7 million of income before taxes were incurred in June, with the remainder estimated to occur in the fourth fiscal quarter. B. EXIT FINANCING On July 31, 1998, the Company executed a commitment letter with Lehman Brothers Inc. and Lehman Commercial Paper Inc. (collectively "Lehman") for a credit facility to be provided by Lehman to the Company in an amount up to $165,000,000, which will be effective following confirmation and upon consummation of the Company's Plan of Reorganization. C. FACILITY CLOSURES On July 30, 1998, the Company filed a motion in Bankruptcy Court for authority to sell substantially all of the assets of Doehler-Jarvis Greeneville, Inc. to Tennessee Aluminum Casting, L.L.C. ("TAC"). Pursuant to the terms of the Asset Purchase Agreement, TAC will pay $10,907,000 in cash to the Company, subject to certain adjustments. The sale to TAC is subject to the submission of higher and better offers. D. MANAGEMENT CHANGES The Company announced on July 16, 1998 that James B. Gray had been appointed President of Harvard Industries, Inc. Effective July 31, 1998, Roger L. Burtraw resigned his employment and officer position with the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 2. Financial Data Schedule (for SEC use only). A Plan of Reorganization and related Disclosure Statement, filed with the U. S. Bankruptcy Court for the District of Delaware on July 10, 1998 was reported on Form 8-K filed with the Commission on July 24, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARVARD INDUSTRIES, INC. _____ By:___________________________________________ Date Roger G. Pollazzi, Chief Operating Officer, _____ By:_____________________________________________________ Date Joseph J. Gagliardi, Senior Vice President Finance and Chief Financial Officer (Principal Financial Officer), EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule (for SEC use only). EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1998 OCT-01-1997 JUN-30-1998 17,868 0 75,672 0 31,473 130,921 235,846 119,931 272,173 186,370 0 124,637 0 70 (563,825) 272,173 572,625 572,625 542,174 542,174 0 0 11,548 (15,397) 516 (15,913) 0 0 0 (15,913) (2.26) (2.26) AMOUNT REPRESENTS BASIC EARNINGS PER SHARE.
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