Clarion Seeks To Refinance Debt To Stay Solvent

June 24, 2002
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HOLLAND – Clarion Technologies Inc. is working to restructure its long-term debt with senior lenders as it seeks to restructure itself and control costs in the wake of steep losses.

Clarion indicated in its quarterly report filed with the U.S. Securities and Exchange Commission that the company’s long-term viability hinges on its ability to restructure the debt.

The publicly-held Clarion said in SEC documents that the violation as of Sept. 29 of covenants in a senior credit agreement — which had been revised in April following a previous violation — included a “technical default,” although the company does not presently anticipate that its lenders will call in the debt and put it into default.

Ongoing efforts to restructure the plastics molding company, implement operational changes, cut overhead costs and secure additional funding will “provide us with sufficient capital resources to meet our needs through the anticipated refinancing of our senior credit facilities in the second quarter of 2002,” Clarion stated in its 10Q quarterly report filed with the SEC on Nov. 13.

“Long term viability of the company is dependent on the successful refinancing of this debt,” the report to the SEC stated.

A subsequent news release issued the following day painted a brighter picture, with Clarion looking toward “a more positive outlook for 2002” and the fourth quarter of 2001. The statement said the company is making headway in growing sales and controlling costs in the wake of slower sales and losses resulting from weak automotive sales and the outsourcing of its tool manufacturing business.

The Holland-based Clarion, founded in early 1999 and highly leveraged after being built through acquisitions, posted a third quarter net loss of $5.5 million, or 27 cents per share, on sales of $26.9 million. That compares with a loss of $2 million, or 12 cents per share, on sales of $31.3 million in the same period a year ago.

Year to date, Clarion has lost $24.6 million, or $1.12 per share, on sales of $83.4 million. The company lost $1.7 million on revenues of $85.5 million during the first nine months of 2000.

Clarion President Bill Beckman attributed the quarterly loss to slower automotive production that led to decreased plant utilization. The company did see improvements during the quarter in sales and cost-control efforts and believes that auto production will pick up in the coming months, Beckman said.

“We believe we are nearing the bottom of the production downturn, as the inventory levels of our major customers and the automakers have been reduced significantly since the beginning of the year. Therefore, we hold a more positive outlook for 2002,” he said in the earnings release.

Clarion operates five manufacturing facilities in Michigan, Ohio and South Carolina.

In response to the losses, Clarion this year has closed one of its two plants in Greenville, closed and relocated operations at its technical center in Jenison to other facilities, began outsourcing tool manufacturing, reduced production and administrative staff, eliminated unprofitable product lines, and is considering selling an additional manufacturing facility and the potential sale and lease-back of others.

Clarion this year also sidelined its strategy of growing through acquisitions and instead has “focused greatly” on controlling costs, improving efficiency, and winning new and transferred business, Beckman said. He noted that in the past six months, Clarion has been awarded new and transferred auto business of more than $32 million for 2002 and 2003.

“This direction should help make Clarion a much stronger company,” Beckman said.

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