-----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, Er6V2UYjNHKiPe+3lpUG1hoIPTfD4inbfbkmd3p1kkfz5fent8OKtZGR7YBJPq/R Eu3ziwK16s5ZAACeZ+JwzA== 0001125282-01-501631.txt : 20010816 0001125282-01-501631.hdr.sgml : 20010816 ACCESSION NUMBER: 0001125282-01-501631 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 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: 1934 Act SEC FILE NUMBER: 001-01044 FILM NUMBER: 1714295 BUSINESS ADDRESS: STREET 1: 3 WERNER WAY #210 STREET 2: C/O HARVARD INDUSTRIES INC CITY: LEBANON STATE: NJ ZIP: 08833 BUSINESS PHONE: 9084374100 MAIL ADDRESS: STREET 1: 3 WERNER WAY #210 STREET 2: C/O HARVARD INDUSTRIES INC CITY: LEBANON STATE: NJ ZIP: 08833 FORMER COMPANY: FORMER CONFORMED NAME: HARVARD BREWING CO DATE OF NAME CHANGE: 19710315 10-Q 1 b313116_10q.txt QUARTERLY REPORT As filed with the Securities and Exchange Commission on August 14, 2001 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, 2001 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 4, 2001, was 9,978,094. 1 HARVARD INDUSTRIES, INC. INDEX Page ---- PART I. Financial Information: Item 1. Financial Statements: Consolidated Balance Sheets September 30, 2000 (Audited) and June 30, 2001 (Unaudited) Consolidated Statements of Operations (Unaudited) Three Months Ended June 30, 2001 Nine Months Ended June 30, 2001 Three Months Ended June 30, 2000 Nine Months Ended June 30, 2000 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended June 30, 2001 Nine Months Ended June 30, 2000 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 2 HARVARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS September 30, 2000 and JUNE 30, 2001 (in thousands of dollars)
ASSETS September 30, 2000 June 30, 2001 ------ ----------------------- ---------------- (Unaudited) CURRENT ASSETS: Cash and Cash equivalents $ 2,705 $ 2,471 Accounts receivable, net 32,742 28,661 Inventories 20,494 18,140 Prepaid expenses and other current assets 4,760 4,526 ----------------------- ---------------- Total current assets $ 60,701 $ 53,798 Property, plant and equipment, net 75,477 67,178 Intangible assets, net 134,965 103,006 Other assets, net 6,280 12,609 ----------------------- ---------------- Total assets $ 277,423 $ 236,591 ======================= ================
See accompanying notes to the consolidated financial statements. 3 HARVARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND June 30, 2001 (Unaudited) (in thousands of dollars)
September 30, June 30, LIABILITIES AND SHAREHOLDERS' EQUITY 2000 2001 ------------------------------------ ------------------ --------------- (Unaudited) CURRENT LIABILITIES: Short-term borrowings and current portion of long-term debt $ 4,599 $ 5,318 Accounts payable 32,738 20,925 Accrued expenses 35,147 27,036 Income taxes payable 975 1,896 ------------------ --------------- Total current liabilities $ 73,459 $ 55,175 Long Term Debt -- 26,250 Post-retirement benefits other than pensions 100,966 97,368 Other 60,930 55,551 ------------------ --------------- Total liabilities $ 235,355 $ 234,344 COMMITMENTS AND CONTINGENCIES -- -- SHAREHOLDERS' EQUITY Common stock $.01 par value; 50,000,000 shares authorized; 10,942,927 shares issued at September 30, 2000 and 10,550,083 shares issued at June 30, 2001 109 109 Additional paid-in capital 174,891 174,891 Accumulated deficit (127,770) (170,595) Cost of shares of common stock in treasury (813,006) shares at September 30, 2000 and 571,989 shares at June 30, 2001) (5,315) (2,039) Accumulated other comprehensive income 153 (119) ------------------ --------------- Total shareholders' equity 42,068 2,247 ------------------ --------------- Total liabilities and shareholders' equity $ 277,423 $ 236,591 ================== ===============
See accompanying notes to consolidated financial statements. 4 HARVARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS NINE MONTHS ENDED JUNE 30, 2000 AND NINE MONTHS ENDED JUNE 30, 2001 (UNAUDITED) (in thousands of dollars, except share and per share data)
Nine Nine Months Months Ended Ended June 30, June 30, 2000 2001 ------------ ----------- Sales $ 260,032 $ 178,796 Cost of sales 232,048 176,099 ------------ ----------- Gross profit 27,984 2,697 Selling, general and administrative expense 20,019 12,719 Amortization of intangible assets 31,963 31,959 Curtailment (Gain) -- (7,718) (Gain) on sale of operations (7,170) -- Interest expense 697 2,889 Other (income) expense, net 467 1,845 ------------ ----------- Loss before income taxes (17,992) (38,997) Provision for income taxes 1,250 979 ------------ ----------- Net loss $ (19,242) $ (39,976) ============ =========== Basic and diluted earnings per share Net loss per share $ (1.95) $ (4.13) ============ =========== Weighted average number of common shares outstanding 9,849,942 9,685,230 ============ ===========
See accompanying notes to consolidated financial statements. 5 HARVARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 AND THREE MONTHS ENDED JUNE 30, 2001 (UNAUDITED) (in thousands of dollars, except share and per share data)
Three Three Months Months Ended Ended June 30, June 30, 2000 2001 ----------- ----------- Sales $ 86,355 $ 54,573 Cost of sales 78,600 55,448 ----------- ----------- Gross profit (loss) 7,755 (875) Selling, general and administrative expense 6,686 3,090 Amortization of intangible assets 10,653 10,653 Curtailment (Gain) - (7,718) Interest expense 265 1,424 Other (income) expense, net (246) 592 ----------- ----------- Loss before income taxes (9,603) (8,916) Provision for income taxes 427 451 ----------- ----------- Net loss $ (10,030) $ (9,367) =========== =========== Basic and diluted earnings per share Net loss per share $ (1.01) $ (0.97) =========== =========== Weighted average number of common shares outstanding 9,900,334 9,647,787 =========== ===========
See accompanying notes to consolidated financial statements. 6 HARVARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED JUNE 30, 2000 AND NINE MONTHS ENDED JUNE 30, 2001 (UNAUDITED) (in thousands of dollars)
Nine Nine Months Months Ended Ended June 30, June 30, 2000 2001 ---------- ----------- CASH FLOWS RELATED TO OPERATING ACTIVITIES: Net loss $ (19,242) $ (39,976) Add back (deduct) items not affecting cash and cash equivalents - Depreciation 6,331 12,642 Amortization 32,143 32,411 (Gain) loss on sale of operations (7,170) 443 (Gain) loss on dispositions of property, plant and equipment 51 10 Curtailment (Gain), net -- (7,718) Changes in operating assets and liabilities Accounts receivable (7,722) 4,110 Inventories (856) 1,826 Other current assets (627) 234 Accounts payable 3,155 (11,813) Accrued expenses and income taxes payable (21,115) (7,190) Other noncurrent (2,243) (1,219) ------------ ---------- Net cash used in operations (17,295) (16,240) ------------ ---------- CASH FLOWS RELATED TO INVESTING ACTIVITIES: Acquisition of property, plant and equipment (12,413) (4,517) Proceeds from disposition of property, plant and equipment 50 -- Net proceeds from sale of operations 9,775 125 ------------- ----------- Net cash provided by (used in) investing activities (2,588) (4,392) ------------- -----------
7
Nine Nine Months Months Ended Ended June 30, June 30, 2000 2001 ---------- ----------- CASH FLOWS RELATED TO FINANCING ACTIVITIES: Net borrowings (repayments) under GECC credit facility 6,870 24,697 Repayment of GECC credit facility - (29,296) Net borrowings under CIT revolving credit facility - 1,568 Borrowings under CIT/Hilco term loans - 30,000 Deferred financing costs (750) (6,997) Sale of Treasury Stock - 426 Purchase of Treasury Stock (5,283) - ------------- ------------- Net cash (used in) provided by financing activities 837 20,398 ------------- ------------- Net increase (decrease) in cash and cash equivalents (19,046) (234) CASH AND CASH EQUIVALENTS, beginning of period: 21,840 2,705 ------------- ------------- CASH AND CASH EQUIVALENTS, end of period $ 2,794 $ 2,471 ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for: Interest $ 36 $ 1,646 Income taxes $ 3,087 $ 1,545 Non-cash financial activities: Sale of treasury stock - $ 421 Deferred financing costs - $ 2,725 ============= =============
See accompanying notes to consolidated financial statements. 8 HARVARD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of dollars, except share and per share data) (1) BASIS OF PRESENTATION: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and fresh start reporting adjustments) considered necessary for a fair presentation have been included. Operating results for the nine month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending September 30, 2001. The balance sheet at September 30, 2000 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, 2000. The consolidated financial statements included herein have been prepared assuming that the Company will continue as a going concern. The Company suffered a net loss of $(39,976) at June 30, 2001 and has an accumulated deficit of $(170,595). As discussed more fully in Note 4, the Company refinanced its outstanding revolving credit facility with a $75,000 credit facility including a revolving credit facility and senior secured and junior secured term loans. Management believes, based upon the results to date and projected results that funds available under the new credit facilities and other available sources will be sufficient to meet its cash requirements for the next twelve months. On November 24, 1998 (the "Effective Date") the Company emerged from Chapter 11 reorganization under the United States Bankruptcy Code. In connection with its emergence from Chapter 11 bankruptcy proceedings, the Company implemented "Fresh Start Reporting," as of November 29, 1998 (its normal interim closing date), as set forth in Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" (SOP 90-7), issued by the American Institute of Certified Public Accountants. "Fresh Start Reporting" was required because there was more than a 50% change in the ownership of the Company. Accordingly, all assets and liabilities were restated to reflect their respective fair values. 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. The reorganization value of the Company was determined to be $552,428 as of November 29, 1998. The portion of the reorganization value which cannot be attributed to specific tangible or identifiable intangible assets of the reorganized Company has been reported as "Reorganization value in excess of amounts allocable to identifiable assets." This intangible asset is being amortized using the straight-line method over 5 years. The Company selected a useful life of 5 years based on the Company's previous experience, methodologies employed by independent financial experts and the Company's turnaround business strategy. The Company continually evaluates whether changes have occurred that would require revision of the remaining estimated useful life of the reorganization value in excess of amounts allocable to identifiable assets or render such assets not recoverable. To determine if reorganization value in excess of amounts allocable to identifiable assets is recoverable, the Company compares the net carrying amounts to 9 undiscounted projected cash flows. If the reorganization asset is not recoverable, the Company would record an impairment based on the difference between the net carrying amount and fair value. (2) DISPOSITION OF BUSINESSES: Condensed operating data of operations disposed or being disposed of are as follows- Nine Months Nine Months Ended Ended June 30, June 30, 2000 2001 ----------------- ----------------- Sales $50,156 $27,606 Gross profit 1,351 (2,059) On December 21, 1999, the Company sold the land and building and certain machinery and equipment of the Ripley, Tennessee facility of its Hayes-Albion subsidiary for approximately $2,325 in cash. The Company recognized a gain of $1,109 on this transaction. On December 28, 1999, the Company sold its Farmington Hills facility for gross proceeds of $5,500 in cash and entered into a leaseback agreement with the buyer. The lease has been accounted for as an operating lease, with a term of eight years. The Company recognized a gain of $1,149 on this transaction and deferred $2,028 of gain to be amortized as a reduction of rent expense. On October 30, 2000, the Company announced its intention to close its Pottstown Precision Castings, Inc. plant operating in Pottstown, Pennsylvania during 2001. Despite the cooperation of its union, the United Auto Workers, and substantial investments in management and the physical plant, severe price competition in the aluminum die casting industry prevented the operation from establishing a profitable business. Severance and related costs for 64 salaried and 327 hourly employees of approximately $2,500 and facility related costs of approximately $2,000 were recognized as a component of cost of sales during the period ended December 31, 2000. As of June 30, 2001, severance and related payments of approximately $516 and approximately $342 of facility related payments have been made. Cash payments relating to the shutdown are anticipated to be completed by March 2002. Production ceased in June 2001. On November 8, 2000, the Company sold the plastic fan product line of its Hayes-Albion Jackson, Michigan facility for gross proceeds of $175 in cash and a future earnout of a maximum of $900 based on future revenues of the product line. The Company recorded a loss of $443 on this transaction based on cash proceeds received and will record gains on the future earnout, if any, as realized. On May 1, 2001, the Company announced its intention to close the Jackson, Michigan facility and move substantially all the production to its Bryan, Ohio facility. Severance and related costs for 69 hourly and 16 salaried employees of approximately $275 and facility-related costs of approximately $450 were recognized as a component of cost of sales during the period ended June 30, 2001. The relocation and closure plan is anticipated to be substantially completed by October 2001. As a result of the shutdown of the Pottstown, Pennsylvania facility, the Company is reassessing its continued investment in the aluminum die-casting business and is currently exploring strategic alternatives for its St. Louis, Missouri aluminum die-casting facility. Based on the expression of interest from third parties, management wrote down the carrying value of St. Louis facilities long-term assets by $3,000 to their estimated market value. 10 (3) INVENTORIES: Inventories consist of the following- June 30, September 30, 2001 2000 (Unaudited) ------------ ----------- Finished goods $ 7,748 $ 8,374 Work-in-process 2,819 1,357 Tooling 1,447 1,541 Raw materials 8,480 6,868 --------- --------- Total inventories $ 20,494 $ 18,140 ========= ========= (4) LONG-TERM DEBT AND CREDIT AGREEMENTS: On September 30, 1999, the Company put in place a new $50,000 revolving credit facility with General Electric Capital Corporation ("GECC"). The Facility was secured by substantially all of the assets of the Company. The interest rate was base rate (prime rate) plus 1.25% or LIBOR plus 2.50%. The facility was repaid in its entirety on June 4, 2001. The Company had $4,599 outstanding under this facility, in addition to $7,114 of letters of credit outstanding, as of September 30, 2000. Effective May 31, 2001, the Company entered into two new credit facilities. One facility, with the CIT Group/Business Credit Inc., Citicorp USA Inc. ("CIT/Citicorp"), provides for Senior Secured asset-based borrowings of up to $45,000 under a revolving credit facility and $20,000 of Senior Secured Term Loans. The other facility, with Hilco Capital LP ("Hilco"), provides for a Junior Secured Term Loan of $10,000. The revolving credit facility has a term of three (3) years and has an interest rate equal to the base rate (prime rate) plus 1.75%. The $10,000 Senior Secured Term Loan A has a term of two (2) years and an interest rate equal to the base rate plus 1.75%. Monthly installment payments of principal of approximately $208 are to be made in the fourth through sixth months following the closing date and monthly principal payments of approximately $521 are to be made in the seventh through the twenty-third months following the closing date with the balance of the loan due on the twenty-fourth month following the closing date. The $10,000 Senior Secured Term Loan B has a term of three (3) years and has an interest rate equal to the base rate plus 2.50%. Monthly installment payments of principal of approximately $417 are to be made in the twenty-fifth through the thirty-fifth months following the closing date with the balance of the loan due on the thirty-sixth month following the closing date. The $10,000 Junior Secured Term Loan has a term of three (3) years and has an interest rate equal to the base rate plus 7.00% but not less than 15.00% and PIK interest equal to 4% of the outstanding loan balance per annum. The loan is payable in full on the third (3) anniversary of the closing date. The proceeds from these facilities were used to repay the GECC credit facility in its entirety. The Company had $1,568 in outstanding borrowings under their revolving credit facility and $30,000 in long-term borrowings outstanding under the term loans, of which $3,750 was included in current maturities of long-term debt, in addition to $6,546 of letters of credit outstanding and approximately $22,304 of borrowing availability, as of June 30, 2001. In addition, Hilco and the Company entered into a security purchase agreement which gave Hilco the continuing right to acquire up to 5% of the outstanding common stock of the Company, on a fully-diluted basis, for a price of $0.01 per share and the right to purchase additional shares at the lesser of $0.85 per share or the sale price in a subsequent share issuance, if additional shares of the Company are issued, in order to maintain a 5% ownership interest in the Company. On June 4, 2001, Hilco acquired 500,996 shares of the Company's stock for par value (see Note 6). (5) RESTRUCTURING CHARGES: On November 30, 2000, the Company implemented a reduction in force of 31 salaried employees to adjust operations staffing levels to the current business volume. A restructuring charge relating to severance and related costs of $2,000 was recorded as a component of selling, general and administrative expense during the period ended December 31, 2000. As of June 30, 2001, related payments of approximately $434 have been made and the program should be completed by December 2001. 11 (6) EARNINGS PER COMMON SHARE: Basic EPS is calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated by dividing income available to common shareholders 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. Although on August 4, 2001, 9,978,094 of the Company's 50,000,000 authorized shares were outstanding, net of 571,989 shares of treasury stock, the Company's Chapter 11 Plan of Reorganization, which became effective on November 24, 1998, requires it to issue additional shares to certain claimants in the Bankruptcy case. The exact number of shares to be issued is presently unknown, as certain claims are unliquidated and others are disputed as to amount or validity. However, management estimates that approximately 500,000 additional shares will be issued in the process of resolving claims. The issuance of additional shares will not involve additional consideration, and therefore no accounting recognition other than the impact on outstanding share and per share amounts is expected. The Company's Plan of Reorganization also provides for holders of its Old Common Stock and PIK Preferred Stock to receive in the aggregate approximately 633,000 warrants, expiring November 23, 2003, permitting the purchase of new common shares at an exercise price of $41.67 per share. Seven members of the Company's Board of Directors have each been granted 20,000 shares which vest over five (5) years. A total of 120,000 options was issued as one director declined the grant. Seven members were granted 3,000 shares each on April 4, 2000, which vest immediately. A total of 141,000 shares were issued to directors. An incentive plan has been authorized by the Board of Directors providing for a grant of options to certain members of senior management. As of June 30, 2001, 1,845,000 shares have been awarded under this plan. All of the above options and warrants have been excluded from the computation of earnings per share as their effect would be antidilutive. On October 5, 1999, the Company used part of the proceeds of the sale of the assets of its Kingston-Warren subsidiary to purchase 762,000 shares of its common stock in a private transaction at an aggregate cost of approximately $4,999. The Company repurchased an additional 51,006 shares during the year ended September 30, 2000 at an aggregate cost of $316. The Company's Chapter 11 Plan of Reorganization ("Plan") incorporated an agreement with the Pension Benefit Guarantee Corporation ("PBGC"), requiring the Company to issue New Shares to the PBGC as security for Harvard's obligation to make required payments to its qualified defined benefit retirement plans. No monetary consideration was received by the Company in exchange for the issuance of the shares. The agreement provided that the PBGC would surrender all or part of the shares if Harvard paid the required amounts in a timely fashion for a period specified in the agreement. In May of 2000, the PBGC agreed, by amendment to the agreement, to surrender approximately 660,000 shares to the Company. Of the surrendered shares, 399,106 were cancelled and 259,949 were retained by the Company as treasury shares. On June 4, 2001, the Company sold 500,966 shares of stock, previously held in treasury, to Hilco for par value. As part of this transaction, a charge of approximately $2,850 was recorded to Accumulated Deficit and a Deferred Debt Discount of approximately $421 was recorded. The deferred debt discount is being amortized to interest expense over the life of the new credit facility. 12 (7) COMPREHENSIVE INCOME: Nine Months Nine Months Ended Ended June 30, June 30, 2000 2001 ------------- ------------ Net loss $ (19,242) $ (39,976) Other comprehensive income: Foreign currency translation adjustment (42) (272) ------------- ------------ Comprehensive income (loss) $ (19,284) $ (40,248) ============= ============ (8) CURTAILMENTS During the period ended June 30, 2001, the company recognized a curtailment gain of approximately $2,580 for Retiree Medical costs and a curtailment loss of approximately $280 for Pension costs relative to the shutdown of the Pottstown, Pennsylvania facility. In addition, the Company recognized a curtailment gain of approximately $5,418 for the termination of the Supplemental Executive Retirement Plan (SERP) for participating executives currently employed by the Company. (9) FUTURE ACCOUNTING REQUIREMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued FASB Statements Nos. 141 and 142 (FAS 141 and FAS 142), "Business Combinations" and "Goodwill and Other Intangible Assets". FAS 141 replaces APB16 and eliminates pooling-of-interests accounting prospectively. It also provides guidance on purchase accounting related to the recognition of intangible assets and accounting for negative goodwill. FAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under FAS 142, goodwill will be tested annually and whenever events or circumstances occur indicating that goodwill might be impaired. FAS 141 and FAS 142 are effective for all business combinations completed after June 30, 2001. Upon adoption of FAS 142, amortization of goodwill recorded for business combinations consummated prior to July 1, 2001 will cease, and intangible assets acquired prior to July 1, 2001 that do not meet the criteria for recognition under FAS 141 will be reclassified to goodwill. Companies are required to adopt FAS 142 for fiscal years beginning after December 15, 2001, and early adoption is permitted in some cases. The Company is not eligible for early adoption and will adopt FAS 142 on October 1, 2001, the beginning of fiscal 2002. In connection with the adoption of FAS 142, the Company will be required to perform a transitional goodwill impairment assessment. The Company has not yet determined the impact these standards will have on its results of operations and financial position. 13 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 In the fourth (4th) quarter of calendar 2000, the North American automotive industry experienced a significant decline in sales and as a result the OEMs have significantly reduced production schedules during the fourth (4th) quarter of calendar 2000 and the first (1st) and second (2nd) quarters of calendar 2001 to reduce their inventory levels. The current industry forecast, per JD Power and Associates, of North American production for cars and light trucks in calendar 2001 is approximately 16 million units, down from approximately 17.3 million units in calendar 2000, and the industry expects to recover from this inventory correction in the second half of calendar 2001. As a result of the shutdown of the Pottstown, Pennsylvania facility, the Company is reassessing its continued investment in the aluminum die-casting business and is currently exploring strategic alternatives for its St. Louis, Missouri aluminum die-casting facility. Based on the expression of interest from third parties, management has decided to write-down the carrying value of St. Louis long-term assets to their estimated market value. 14 Nine months ended June 30, 2000 compared to the nine months ended June 30, 2001. The following table is included solely for use in comparative analysis of results of operations, and to complement management's discussion and analysis. Certain reclasses have been made to present the results on a comparable basis. Nine Nine Months Months Ended Ended June 30, June 30, 2000 2001 ----------- ----------- Sales $260,032 $ 178,796 Cost of sales 232,048 170,874 --------- ---------- Gross profit 27,984 7,922 Selling, general and administrative expenses 20,019 10,719 --------- ---------- Operating income (a) 7,965 (2,797) Interest expense 697 2,889 Amortization of intangible assets 31,963 31,959 Restructuring charges -- 7,225 Curtailment (gain), net -- (7,718) (Gain) Loss on sale of operations (7,170) 443 Other (income) expense, net 467 1,402 --------- ---------- (Loss) before income taxes (17,992) (38,997) Provision for income taxes 1,250 979 --------- ---------- Net (loss) $(19,242) $ (39,976) ========= ========== (a) Includes depreciation expense of $6,331 and $12,642 for the periods ended June 30, 2000 and 2001 respectively. Sales. Consolidated sales decreased $81,236 from $260,032 to $178,796 or 31.2%. The sales decrease is due primarily to the overall slowdown in car, light truck and heavy truck demand in North America and the shutdown of the Pottstown facility. Gross Profit. The consolidated gross margin, expressed as a percentage of sales, decreased from 10.8% to 4.4%. The gross profit decreased by $20,062 primarily due to significantly reduced car, light truck and heavy truck volume and the resulting additional operational inefficiencies due to reduced capacity utilization. In addition, for the period ended June 30, 2001, the company recorded additional depreciation expense of approximately $2,900 to write down the carrying value of assets to be disposed of at the Pottstown and Jackson facilities to a lower estimated recovery value based on current market conditions for used equipment and additional depreciation expense of approximately $3,000 to write-down the carrying value of long-term assets at the St. Louis facility based on early indications of market value. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $20,019 to $10,719 primarily due to reductions in staffing and spending including compensation, travel and outside consulting for the period ended June 30, 2001 and non-recurring charges of $1,200 relating to a failed acquisition for the period ended June 30, 2000. Interest Expense. Interest expense increased from $697 to $2,889 as a result of higher borrowing levels and the higher cost of borrowing for the new credit facilities. 15 Restructuring Charges. During the period ended June 30, 2001 the Company recorded, as a component of cost of sales, restructuring charges of $4,500 for the shut-down of its Pottstown, Pennsylvania facility, and $725 for the shutdown of its Jackson, Michigan facility. In addition, during the period ended June 30, 2001, the Company recorded, as a component of Selling, General and Administrative expense, a charge of $2,000 for severance and related costs for a reduction in salaried support staff. Curtailment (Gain), net. During the period ended June 30, 2001, the Company recognized a curtailment (gain) of approximately $2,580 for Retiree Medical costs and a curtailment loss of approximately $280 for Pension costs relative to the shutdown of the Pottstown, Pennsylvania facility. In addition, the Company recognized a curtailment (gain) of approximately $5,418 for the termination of the Supplemental Executive Retirement Plan (SERP) for participating executives currently employed by the Company. (Gain) Loss on Sale of Operations. During the period ended June 30, 2000 the Company recorded a gain on the sale of the Ripley, Tennessee land and building of $1,190, a gain on the sale leaseback of the Farmington Hills, Michigan facility of $1,149, a gain of $362 on the sale of the Bolivar, Tennessee land and building and a $4,550 reduction to the loss on the sale of Kingston-Warren, recorded in September 1999, which represented a post-closing adjustment. During the period ended June 30, 2001 the Company recorded a loss on the sale of the plastic fan product line of $443. Net loss. Net (loss) increased from $(19,242) to $(39,976) for the reasons described above. 16 Three months ended June 30, 2000 compared to the three months ended June 30, 2001. The following table is included solely for use in comparative analysis of results of operations, and to complement management's discussion and analysis. Certain reclasses have been made to present the results on a comparable basis. Three Three Months Months Ended Ended June 30, June 30, 2000 2001 ----------- ----------- Sales $ 86,355 $ 54,573 Cost of sales 78,600 54,723 ---------- ---------- Gross profit 7,755 (150) Selling, general and administrative expenses 6,686 3,090 ---------- ---------- Operating income (loss)(a) 1,069 (3,240) Interest expense 265 1,424 Amortization of intangible assets 10,653 10,653 Restructuring charges - 725 Curtailment (gain), net - (7,718) Other (income) expense, net (246) 592 ---------- ---------- (Loss) before income taxes (9,603) (8,916) Provision for income taxes 427 451 ---------- ---------- Net (loss) $ 10,030 $ (9,367) ========== ========== (a) Includes depreciation expense of $2,100 and $8,109 for the periods ended June 30, 2000 and 2001 respectively. Sales. Consolidated sales decreased $31,782 from $86,355 to $54,573 or 36.8%. The sales decrease is due to the overall slowdown in North American car, light truck and heavy truck demand and the shutdown of the Pottstown facility. Gross Profit. The consolidated gross margin, expressed as a percentage of sales, decreased from 9.0% to (0.3)%. The gross profit decrease of $7,905 was due primarily to reduced car, light truck and heavy truck volume, additional depreciation expense of approximately $2,900 to write down the carrying value of assets to be disposed of at the Pottstown and Jackson facilities to a lower estimated recovery value based on current market conditions for used equipment and additional depreciation expense of approximately $3,000 to write-down the carrying value of long-term assets at the St. Louis facility based on early indications of market value for the facility partially offset by aggressive cost containment measures. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased from $6,686 to $3,090 primarily due to staff reductions and spending reductions including compensation, travel and outside consulting in the period ended June 30, 2001. Interest Expense. Interest expense increased from $265 to $1,424 due to higher borrowing levels resulting from lower business volume and the higher cost of borrowing for the new credit facilities. 17 Restructuring Charges. During the period ended June 30, 2001, the Company recognized, as a component of cost of sales, a charge of approximately $725 for the relocation and shutdown of its Jackson, Michigan facility (see Note 2). Curtailment (Gain), net. During the period ended June 30, 2001, the Company recognized a curtailment (gain) of approximately $2,580 for Retiree Medical costs and a curtailment loss of approximately $280 for Pension costs relative to the shutdown of the Pottstown, Pennsylvania facility. In addition, the Company recognized a curtailment (gain) of approximately $5,418 for the termination of the Supplemental Executive Retirement Plan (SERP) for participating executives currently employed by the Company. Net loss. Net (loss) decreased from $(10,030) to $(9,367) for the reasons described above. Liquidity and Capital Resources For the nine months ended June 30, 2001, the Company had cash (used by) operations of $(16,240) compared to cash (used by) operations of $(17,295) for the nine months ended June 30, 2000. The decrease was primarily due to reduced earnings due to lower volume offset by lower working capital requirements. Effective May 31, 2001, the Company entered into two new credit facilities. These include a loan and letter of credit facility with CIT/Citicorp that provides for a Senior Secured asset-based revolving credit facility for up to $45,000 and Senior Secured Term Loan borrowings of $20,000 and a Junior Secured Term Loan of $10,000 with Hilco (see Note 4). The proceeds from these facilities were used to pay off the GECC facility in its entirety. The Company had $31,568 outstanding under its CIT/Hilco facility in addition to $6,546 of letters of credit and had borrowing availability of approximately $22,304 as of June 30, 2001. Management believes, based upon the results to date and projected results, that funds available under the new credit facilities and other available sources will be sufficient to meet its cash requirements in the next twelve months. Capital Expenditures. Capital expenditures for property, plant and equipment for the nine month period ended June 30, 2001 were $4,517, principally for machinery and equipment required in the ordinary course of business. The Company is currently projecting to spend approximately $6,500 for machinery and equipment in 2001. The projected capital expenditures are required for new business and on-going cost savings programs necessary to maintain the Company's competitive position, and the balance is for normal replacement. The actual timing of capital expenditures for new business may be impacted by customer delays and acceleration of program launches and the Company's continual review of the priority of the timing of capital expenditures. Future Accounting Pronouncements - -------------------------------- See Note 9 of Notes to Consolidated Financial Statements. 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. PART II--OTHER INFORMATION Item 1. Legal Proceedings On June 11, 1999, Doehler-Jarvis, Inc. and Harvard Industries, Inc. (the "Companies") filed a declaratory judgment action in the United States District Court for the Eastern District of Pennsylvania seeking a declaration that the termination of certain insurance benefits, including health insurance benefits, to individuals on the seniority list when they retired from active or inactive employee status at Doehler-Jarvis facilities in Pottstown, Pennsylvania or Toledo, Ohio after July 16, 1999, and/or their eligible surviving spouses and/or eligible dependents does not violate the Employee Retirement Income Security Act ("ERISA") or any other law, applicable collective bargaining agreement, or contract. Thomas E. Kopystecki was named as the representative of the proposed class of defendants. 18 On June 23, 1999, John C. Gilbert, Eugene Appling, Robert A. LaClair, John E. Malkulan, Christiane J. Myers, Kenneth McKnight, Thomas F. Klejta, and Fern M. Yerger, on behalf of themselves and a class of persons similarly situated filed an action against the Companies in the United States District Court for the Northern District of Ohio seeking a declaration that the termination of insurance benefits violates ERISA and the Labor Management Relations Act ("LMRA") and seeking unspecified damages resulting from the anticipated termination of benefits. The Companies filed a motion to transfer the Ohio action to Pennsylvania because the Pennsylvania action was the first filed action and is the more convenient forum for the resolution of the issues. The United States District Court for the Eastern District of Pennsylvania dismissed the Pennsylvania action finding that the United States District Court for the Northern District of Ohio was a more appropriate venue. The motion by the Companies to transfer the Ohio action was denied. The U.S. District Court (N.D. Ohio) granted the retirees' Motion for Summary Judgement ordering the companies to continue the medical plan for retirees but denying the retirees damage claims. The companies filed an appeal with the U.S. 6th Circuit Court of Appeals. Based on information currently available, management of the Company believes, after consultation with legal counsel, that the result of such claims and litigation will not have a material adverse effect on the financial position or results of operations of the Company. Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information (a) Exhibits None (b) Reports on Form 8-K: The Company filed a current report on Form 8-K, dated June 14, 2001, disclosing a new $65,000 senior secured credit facility with the CIT Group/Business Credit, Inc. and CitiCorp USA, Inc., a $10,000 junior secured credit facility with Hilco Capital LP and the satisfaction and termination of the $45,000 senior secured credit facility with General Electric Capital Corporation. 19 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 14, 2001 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 --------- ----- /s/ Theodore W. Vogtman Executive Vice President and Chief --------------------------- Financial Officer (Principal Financial Theodore W. Vogtman Officer) /s/ Kevin L. B. Price Vice President, Controller and Treasurer --------------------------- (Principal Accounting Officer) Kevin L. B. Price 20 EX-99.27 3 b313116_ex99-27.txt FDS FINANCIAL DATA SCHEDULE ARTICLE 5 MULTIPLER 1000 CURRENCY US DOLLARS PERIOD-TYPE 9 MOS FISCAL-YEAR-END SEP-30-2001 PERIOD-START OCT-01-2000 PERIOD-END JUN-30-2001 CASH 2,471 SECURITIES 0 RECEIVABLES 28,661 ALLOWANCES 0 INVENTORY 18,140 CURRENT-ASSETS 53,798 PP&E 93,203 DEPRECIATION 26,025 TOTAL-ASSETS 236,591 CURRENT-LIABILITIES 55,175 BONDS 0 PREFERRED-MANDATORY 0 PREFERRED 0 COMMON 109 OTHER-SE 2,138 TOTAL-LIABILITY-AND-EQUITY 236,591 SALES 178,796 TOTAL-REVENUES 178,796 CGS 176,099 TOTAL-COSTS 188,818 OTHER-EXPENSES 26,086 LOSS-PROVISION 0 INTEREST-EXPENSE 2,889 INCOME-PRETAX (38,997) INCOME-TAX 979 INCOME-CONTINUING (39,976) DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME (39,976) EPS-BASIC (4.13) EPS-DILUTED (4.13) -----END PRIVACY-ENHANCED MESSAGE-----