Hawker accountants to express doubt about company’s future
Loss of $481.8 million in 2011 to be reported
When Hawker Beechcraft financial managers file their delayed Form 10-K with the Securities and Exchange Commission (SEC) in the next 45 days, it will contain a phrase from the company’s accounting firm expressing doubt about Hawker Beechcraft’s ability to “…continue as a going concern.” That can be mitigated by restructuring efforts based on successful negotiations with current lenders. The company recently received $120 million in new financing from three lenders.
The news of new funding was followed by reports in The New York Times and elsewhere that the aircraft manufacturer is preparing bankruptcy filings, despite the infusion of new cash. It is possible the bankruptcy filing will be based on the results of successful negotiations with Hawker Beechcraft lenders.
The phrase casting doubt on the company’s future is found near the bottom of an SEC Form 12b-25 filing asking for more time to file the 10-K. Here is the way Hawker Beechcraft officials reported it: “The Company anticipates that its Form 10-K for the year ended December 31, 2011 will include an explanatory paragraph from the Company’s independent registered public accounting firm expressing substantial doubt about its ability to continue as a going concern. The Company was in violation of its financial covenants under its credit agreement with its primary lenders as of December 31, 2011 and, as described in Part III above, has entered into a forbearance agreement and amendment to its credit agreement. The Company is in negotiations with its secured lenders and other key constituents regarding a comprehensive recapitalization. If the Company is unable develop a plan for and implement a comprehensive restructuring, or ensure sufficient liquidity to maintain operations, there can be no assurance that it will continue to operate as a going concern.”
That same document also included a now widely reported prediction that the company’s loss for 2011, to be included in the 10-K, will amount to $481.8 million. Here is the actual paragraph predicting the loss, although final calculations are not complete: “The Company anticipates reporting losses from operations of approximately $481.8 million (including restructuring and non-cash intangible asset impairment charges of $304.9 million) for fiscal 2011 compared to losses from operations of approximately $173.9 million (including restructuring and non-cash intangible asset impairment charges of $40.5 million) for fiscal 2010.”
While all this is happening, the company has increased compensation due to an inability to hire and retain staff as the company’s financial problems continue. The increases include financial and accounting personnel, where staff retention has been especially difficult. Previous compensation cuts to senior personnel last year were reversed in earlier filings this year, perhaps as a way to hold its top management structure together.
April 4, 2012