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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 29, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 0-5485
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ENVIRODYNE INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-2677354
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Harger Road, Suite 190, Oak Brook, Illinois 60521
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 571-8800
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Warrants to Purchase Common Stock
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
----- -----
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
As of March 20, 1995, the aggregate market value of the voting
stock held by non-affiliates of the registrant was $50,867,497.
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
----- -----
As of March 20, 1995, there were 13,515,000 shares outstanding
of the registrant's Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III is incorporated by
reference from the registrant's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this report.
PART I
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ITEM 1. BUSINESS
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(a) General development of business:
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General
Envirodyne Industries, Inc. is a Delaware corporation organized in
1970. As used herein, the "Company" means Envirodyne Industries,
Inc. and its subsidiaries. The Company, through Viskase
Corporation (Viskase), is the leading producer of cellulosic
casings used in preparing and packaging processed meat products and
is a major producer of heat shrinkable plastic bags and specialty
films for packaging and preserving fresh and processed meat
products, poultry and cheeses. The Company is also a leading
domestic and international manufacturer of plasticized polyvinyl
chloride (PVC) films, primarily for use in packaging food items.
Through Sandusky Plastics, Inc. (Sandusky), the Company is a
producer of thermoformed and injection molded plastic containers,
used in the packaging of cultured dairy and delicatessen products,
and of horticultural trays and inserts. Finally, through Clear
Shield National, Inc. (Clear Shield), the Company is a major
domestic producer of disposable plastic cutlery, drinking straws,
custom dining kits and related products.
On January 7, 1993, Envirodyne and certain of its subsidiaries
(collectively, the Debtors) filed petitions under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division (Bankruptcy
Court). On December 31, 1993, the Debtors consummated a plan of
reorganization (Plan of Reorganization) and emerged from
bankruptcy. For additional information regarding the Plan of
Reorganization, see Part IV, Item 14, Note 1 of Notes to
Consolidated Financial Statements.
(b) Financial information about industry segments:
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Reference is made to Part IV, Item 14, Note 16 of Notes to
Consolidated Financial Statements.
(c) Narrative description of business:
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The Company's operations include food packaging products (Viskase
and Sandusky) and disposable foodservice supplies (Clear Shield).
VISKASE
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General
Viskase developed the basic process for producing cellulosic
casings and began commercial production in 1925. Since that time,
Viskase has been the leading worldwide producer of cellulosic
casings. In 1964 Viskase entered the specialty films business.
Since then, it has continued to introduce new specialty films
products to customers in the fresh and processed meat, poultry and
cheese industries. Viskase also manufactures and sells PVC plastic
film for wrapping fresh meats, poultry and other products.
Cellulosic Casings
Cellulosic casing products are used in the production of processed
meat and poultry products, such as hot dogs, salami and bologna.
To manufacture these products, meat is stuffed into the casings
prior to smoking and cooking. The casings, which are non-edible,
serve to hold the shape of the product during these processes. For
certain products, such as hot dogs, the casings are removed and
discarded prior to retail sale. Casings made of regenerated
cellulose were developed by Viskase to replace casings made of
animal intestines. Cellulosic casings generally afford greater
uniformity, lower cost and greater reliability of supply.
The production of regenerated cellulose casings generally involves
three principal steps: production of a viscose slurry from wood
pulp, extrusion of a continuous tube during the regeneration
process, and "shirring" of the final product. Shirring is a highly
technical process of folding or compressing the casing in tubular
form for subsequent use in high-speed stuffing machines. The
production of regenerated cellulose involves a complex and
continuous series of chemical and manufacturing processes, and
Viskase believes that its facilities and expertise in the manufac-
turing of extruded cellulose are important factors in maintaining
its product quality and operating efficiencies.
Viskase's product line includes both NOJAX (R) cellulosic casings
for small sausage products such as hot dogs and paper-reinforced
cellulosic casings for large sausages, salami, hams and other
processed meat products. Reinforced cellulosic casings are known
in the meat industry as fibrous casings.
Specialty Film Products
Since developing a technology for the extrusion of bioriented
plastic films in 1964, Viskase has continued to expand its product
line of heat shrinkable bags made from its specialty films. These
shrinkable bags are sold under the brand name PERFLEX (R).
Viskase's shrinkable plastic bags are used by major poultry, fresh
and processed meat and cheese producers to package and preserve
their products during wholesale and retail distribution.
Viskase produces single layer and multilayer heat shrinkable
plastic bags. Single layer film bags are used primarily to protect
fresh and frozen whole turkeys and chickens from moisture loss and
handling damage. Multilayer film bags, referred to in the food
industry as "barrier bags," are made of layers of coextruded films,
each of which contributes a special property. For example,
individual layers can provide mechanical strength or can reduce the
transmission of moisture, oxygen or ultraviolet light and can
protect bagged products, such as fresh meats, from weight loss and
spoilage.
As part of its service orientation, Viskase also provides graphic
art and design services to its customers. Viskase's ability to
print on the bags and films directly with designs, illustrations
and text in up to eight colors further enhances the appeal of its
customers' products.
PVC and Other Film Products
Viskase manufactures PVC stretch and single layer shrink films
under the Filmco ((R) brand name, used for wrapping grocery
products and for packaging foods. In Europe, Viskase also converts
oriented polypropylene films for use in packaging bakery goods and
manufactures rigid food packaging materials made from oriented
polystyrene.
International Operations
Viskase has seven manufacturing facilities located outside the
continental United States, in Beauvais, France; Thaon, France;
Lindsay, Ontario, Canada; Sedgefield, England (Great Britain);
Swansea, Wales (Great Britain); Guarulhos, Brazil and Nuevo Laredo,
Mexico.
The aggregate of domestic exports and net sales of foreign
operations represents approximately 42% of Viskase's total net
sales.
International sales and operations may be subject to various risks
including, but not limited to, possible unfavorable exchange rate
fluctuations, political instability, governmental regulations
(including import and export controls), restrictions on currency
repatriation, embargoes, labor relations laws and the possibility
of governmental expropriation. Viskase's foreign operations
generally are subject to taxes on the repatriation of funds.
International operations in certain parts of the world may be
subject to international balance of payments difficulties which may
raise the possibility of delay or loss in the collection of
accounts receivable from sales to customers in those countries.
Viskase believes that its allowance for doubtful accounts makes
adequate provision for the collectibility of its receivables.
Management believes that growth potential exists for many of
Viskase's products outside the United States and that Viskase is
well positioned to participate in these markets.
Sales and Distribution
Viskase has a broad base of customers, with no single customer
accounting for more than 5% of sales. Viskase sells its products
in virtually every country in the world. In the United States,
Viskase has a staff of technical sales representatives responsible
for sales to fresh meat, processed meat and poultry producers.
Approximately 50 distributors market Viskase products to customers
in Europe, Africa, Asia, and Latin America. Its products are
marketed through its own subsidiaries in the United Kingdom,
Germany, France, Italy, Brazil, Mexico and Australia.
In the United States, Viskase sells its PVC film products primarily
to the retail grocery industry through packaging material
distributors, food wholesalers and a direct sales force.
Additionally the sales organization is supported by a technical
service group. The United Kingdom operation sells directly and
through distributors, primarily to the retail grocery and
foodservice industries in Europe.
In the United States, Viskase operates casings service centers in
Santa Fe Springs, California; Atlanta, Georgia; and Bensalem,
Pennsylvania, as well as service centers within the Chicago,
Illinois, and Pauls Valley, Oklahoma, plants. In Europe, Viskase
operates casings service centers in Milan, Italy and Pulheim,
Germany. Viskase also operates a service center in Brisbane,
Australia. These service centers provide finishing, inventory and
delivery services to Viskase customers.
Competition
Viskase is the world's leading producer of cellulosic casings and
is a major producer of films. Viskase seeks to maintain a
competitive advantage by introducing new products having superior
performance characteristics over competitive products, by
responding quickly to customer product requirements, by providing
customers with assistance in production or formulation problems, by
producing niche products to fill particular individual customer
requirements, by providing technical support services to its
customers and by manufacturing products having outstanding quality
and performance. From time to time, Viskase experiences reduced
market share or reduced profits due to price competition.
Viskase's principal competitors in cellulosic casings are Teepak,
Inc. and Viscofan, S.A. (located in Spain). Some of the other
important competitors in the cellulosic casings industry are Kalle
Niederlassung der Hoechst AG located in Germany; Wolff Walsrode AG,
a wholly-owned subsidiary of Bayer AG, located in Germany; Oy Visko
AB located in Finland; Celanese Mexicana located in Mexico; and
Trificel located in Brazil.
In the specialty films area, the largest producer of heat
shrinkable bags is the Cryovac Division of W.R. Grace & Company.
Cryovac developed heat shrinkable films and a vacuumizing process
for applying them in the early 1960's. Cryovac sells bags on a
worldwide basis to all segments of the food industry, including
meat and poultry producers. American Can Company, a subsidiary of
Pechiney Corp., is another competitor in the specialty films area.
Management believes that Viskase is in the number two position in
the world behind Cryovac in the sale of heat shrinkable bags.
In the PVC films area, major competitors in the U.S. and Europe
include Borden, Inc., Huntsman Film Products Corporation and Anchor
Plastics, which may have substantially greater financial and other
resources than those of the Company.
Research and Development; Customer Support
Viskase's continuing emphasis on research and development is
central to its ability to maintain industry leadership. In
particular, Viskase focuses on the development of new products that
increase customers' operating efficiency, reduce their operating
costs and expand their markets. Viskase's projects include
development of new processes and products to improve its
manufacturing efficiencies. Viskase's research scientists,
engineers and technicians are engaged in continuing product and
equipment development and also provide direct technical and
educational support to its customers.
Viskase founded its Food Science and Quality Institute (Institute)
in 1941 to assist the meat and poultry industry in the development
of new food items and more efficient production and packaging
methods using Viskase products. The Institute's staff works
closely with Viskase's sales and marketing professionals providing
responsible, high-quality technical service to, and support of,
Viskase customers. The Institute is able to reproduce customers'
products and processes in order to help customers to solve their
problems and to experiment with new foods and production
techniques. The Institute conducts Meat Science Seminars that are
attended by Viskase customers and production, research and quality
assurance personnel, as well as food scientists from leading
academic institutions.
Seasonality
Historically, domestic sales and profits of Viskase have been
seasonal in nature, increasing in the spring and summer months and
again near the year-end holiday season. Sales of specialty films
to the fresh meat industry and sales outside of the United States
follow a relatively stable pattern throughout the year. Sales of
PVC films experience only minor seasonality with sales generally
increasing during the second and third quarters.
Raw Materials
Raw materials used by Viskase include cellulose (from wood pulp),
fibrous paper, petroleum based resins, plasticizers and various
other chemicals. Viskase generally purchases its raw materials
from a single or small number of suppliers with whom it maintains
good relations. Certain primary and alternative sources of supply
are located outside the United States. Viskase believes, but there
can be no assurance, that adequate alternative sources of supply
currently exist for all of Viskase's raw materials or raw material
substitutes that Viskase could modify its processes to utilize.
SANDUSKY
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Sandusky is a leading producer of thermoformed and injection molded
plastic containers, used in the packaging of cultured dairy and
delicatessen products, and of horticultural trays and inserts.
Sandusky sells a majority of its products to dairy product
manufacturers for packaging items such as yogurt and cottage cheese
and to supermarkets for in-store packaging of take-home foods. The
containers are normally custom printed in various colors with
product identification, company names, logos, nutritional informa-
tion and universal product codes in accordance with the customers'
requirements. Sandusky and its predecessors had been the principal
supplier to Scott Paper Company (Scott) of containers for its
premoistened baby wipes. During 1993, Scott notified Sandusky of
its intention to purchase containers from other suppliers, and the
change was completed in September 1994. Sandusky closed its
Clayton, Delaware facility, which was primarily dedicated to the
production of baby wipe containers, in December 1994, and is
consolidating its manufacturing operations at its Sandusky, Ohio
facility.
Sandusky sells directly to its dairy and non-food customers through
its sales and marketing group. Delicatessen containers and
horticultural products are sold both directly and through
commissioned brokers. Sandusky markets its products primarily in
the northeastern, southern and midwestern regions of the United
States. Plastic container sales are somewhat seasonal in nature,
with slightly higher delicatessen container sales in late spring
and summer and higher dairy sales in the fourth quarter.
All of Sandusky's thermoformed and injection molded products are
produced at its two Sandusky, Ohio plants. Thermoforming is a
process by which plastic resin pellets are melted and extruded into
sheet stock, which is then heated and formed into finished
containers, lids and trays. Injection molding is a process by
which polypropylene and polyethylene pellets are melted and
injected at high pressure into precision molds to produce a
finished container. The principal raw materials used by Sandusky
are prime high impact polystyrene, polypropylene and polyethylene
resins, which currently are available from several domestic
sources.
The dairy and delicatessen containers industry is highly
fragmented. Sandusky competes in the manufacture and sale of dairy
and delicatessen containers with several domestic manufacturers of
thermoformed and injection molded plastic containers. Major
competitive factors in the dairy and delicatessen container
business are price, quality and customer service. Major
competitive factors in the specialized thermoformed container
business are price and technical and customer service capabilities.
CLEAR SHIELD
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Clear Shield, headquartered in Wheeling, Illinois, is a major
domestic producer of disposable plastic cutlery, drinking straws,
custom dining kits and related foodservice products. Clear Shield
is one of the largest producers of plastic cutlery and drinking
straws in the United States. These products are sold primarily to
institutional users, comprising principally major fast-food
restaurant chains, schools, and hospitals, and also to consumers
through retail outlets. Sales are made under registered trade
names including CLEAR SHIELD (R) and CARNIVAL (R). Institutional
customers include such leading fast-food chains as McDonald's
Corporation, Burger King Corporation, Taco Bell, Hardee's, KFC
Restaurants and Pizza Hut.
Clear Shield's products are produced at plants in Wheeling,
Illinois; Leominster, Massachusetts; and Shreveport, Louisiana.
Plastic cutlery is made by melting polystyrene or polypropylene
beads, which are then injected into specially designed custom molds
within high-speed injection molding machines. Drinking straws are
made by extruding molten polypropylene through specially designed
dies within high-speed extrusion machines. Certain completed
products are then specially wrapped using high-speed wrapping
machines. Raw materials used in the manufacturing process
currently are available from alternative sources. Raw material
costs, in particular of polystyrene and polypropylene, are a major
portion of Clear Shield's production costs. Although Clear Shield
is generally able to pass on most raw material cost increases to
customers, there can be a delay which varies by customer and
market.
Sales are made predominantly in the United States, primarily east
of the Rocky Mountains, using Clear Shield's own sales force
augmented by a network of non-exclusive, independent sales rep-
resentatives. The majority of Clear Shield's sales, consisting of
bulk and individually packaged products for institutional users,
generally is not seasonal. Sales of retail packaged products are
seasonal, however, with the highest sales and operating profits
historically being achieved in the second and third quarters.
While competitive pricing generally is of key importance, Clear
Shield also competes by emphasizing responsive service to
customers, by maintaining consistent quality in its products and by
capitalizing on its efficient and flexible operations. These
efficiencies stem largely from proprietary improvements to the
manufacturing process, high-volume manufacturing facilities and a
flexible work force that enable Clear Shield to produce and ship
more than 50 million items per working day.
Clear Shield's primary competitors include several major
corporations, some of which are larger and better capitalized than
Clear Shield and, in some cases, offer a wider product line than
Clear Shield. Clear Shield's competitors periodically engage in
aggressive price discounting to gain business. Clear Shield
believes, however, that such market conditions will not result in
any long-term material loss of business for Clear Shield, although
its profit margins may be affected from time to time.
General Business Matters
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Employees
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The Company generally maintains productive and amicable
relationships with its 4,900 employees worldwide. One of Viskase's
domestic plants, located in Loudon, Tennessee, is unionized, and
all of its Canadian and European plants have unions. From time to
time union organization efforts have occurred at other individual
plant locations. Unions represent a total of approximately 1,500
of Viskase's 4,000 employees. None of Clear Shield's approximate
525 employees is represented by a union. Certain of the hourly
production personnel of Sandusky's Ohio thermoforming facility are
members of a union.
Trademarks and Patents
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Viskase holds patents on many of its major technologies, including
those used in its manufacturing processes and the technology
embodied in products sold to its customers. Because it believes
its ongoing market leadership depends heavily upon its technology,
Viskase vigorously protects and defends its patents against
infringement by competitors on an international basis. Viskase, as
part of its research and development program, has developed and
expects to continue to develop new proprietary technology and has
licensed proprietary technology from third parties. Management
believes these activities will enable Viskase to maintain its com-
petitive position. Viskase also owns numerous trademarks and
registered tradenames that are used actively in marketing its
products. Viskase periodically licenses its process and product
patents to competitors to generate royalty income.
The other Company operations also own trademarks and tradenames
that are used actively in marketing products. Sandusky has patents
on new product developments, but, with the exception of Viskase,
patent protection is not currently material to any of the opera-
tions as now conducted.
Research and Development
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Research and development costs are expensed as incurred and, on a
consolidated basis, totaled $16,852,000, $15,216,000 and
$12,323,000 for 1994, 1993 and 1992, respectively. The majority of
such costs are attributable to Viskase's extensive research and
development program.
Viskase believes it has achieved and maintained its position as a
leading producer of cellulosic casings and as a major domestic
producer of specialty films for packaging meats through significant
expenditures on research and development. The Company expects to
continue its research and development efforts. The
commercialization of certain of these product and process
applications and related capital expenditures to achieve
commercialization may require substantial financial commitments in
future periods. Should these activities be curtailed or if capital
resources are not available to develop its projects, Viskase's
ability to maintain its present market share could be materially
impaired.
Environmental Regulations
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In manufacturing its products, the Company employs certain
hazardous chemicals and generates toxic and hazardous wastes. The
use of these chemicals and the disposal of such waste is subject to
stringent regulation by several governmental entities, including
the United States Environmental Protection Agency (USEPA) and
similar state, local and foreign environmental control entities.
The Company is subject to various environmental, health and safety
laws, rules and regulations including those of the United States
Occupational Safety and Health Administration and USEPA. These
laws, rules and regulations are subject to amendment and to future
changes in public policy or interpretation, which may affect the
operations of the Company. The Company uses its best reasonable
efforts to comply with promulgated laws, rules and regulations and
participates in the rulemaking process.
For several years prior to 1989, Viskase was involved in regulatory
proceedings before the Illinois Pollution Control Board (IPCB) in
which the IPCB sought to adopt air pollution control requirements
applicable to emissions of volatile organic material (VOM) from
sources located in the Chicago metropolitan area. The IPCB was
required to adopt such regulations pursuant to provisions of the
Clean Air Act requiring states to promulgate State Implementation
Plans (SIP's) providing for reduction of VOM emissions. Such
regulations must require sources to control their emissions using
"reasonably available control technology" (RACT). The IPCB
ultimately adopted a RACT regulation for Viskase's Chicago facility
that did not require installation of additional control technology
and did not impose substantial compliance costs with respect to the
facility.
In addition, the USEPA proposed rules for controlling VOM emissions
in the Chicago area on December 27, 1989. Viskase submitted
extensive comments in response to the regulatory proposal. Among
those comments was that the rules do not constitute RACT with
respect to Viskase's Chicago facility. On June 29, 1990, the USEPA
promulgated the rules in substantially the same form as had been
proposed. For most sources, the "effective date" of the rule was
July 30, 1990, and the compliance date was one year thereafter.
Although the USEPA stated that the rules would apply to Viskase, it
has extended the effective date of the rules for Viskase
indefinitely to provide the USEPA with enough time to fully
consider the rules as applied to Viskase.
In 1991, pursuant to certain amendments to the federal Clean Air
Act, the Illinois Environmental Protection Agency (IEPA) proposed
to the IPCB emissions control rules that were virtually identical
to the federal regulations. Viskase submitted comments on the
proposed rules that pointed out that the IPCB had previously
adopted a site-specific rule for Viskase. Therefore, Viskase
requested that the IPCB exempt Viskase from the proposed new rules.
The IPCB granted Viskase's request and then submitted the proposed
rules, which included an exemption for Viskase, to the USEPA for
review. The USEPA subsequently commented on the proposed rules,
but made no mention of the exemption for Viskase. The IPCB then
promulgated the rules, including the exemption for Viskase. The
final IPCB rules were submitted to the USEPA for its formal
approval as part of the state's SIP.
During its technical review of the SIP, the USEPA objected to
certain provisions of the Illinois rules and requested that the
IEPA incorporate revisions. The revised rules, which the IPCB
submitted to the USEPA in mid-1993, codify the stay as to the
effective date and compliance date of the rules previously granted
to Viskase.
In late 1994, the USEPA proposed a revision to the federal
implementation plan. The proposed USEPA rule would be virtually
identical to the site-specific rule applicable to Viskase that was
adopted by the IPCB, the only difference relating to monitoring
requirements. Viskase believes that it can comply with the USEPA
proposed rules, and submitted comments on the proposed rule urging
its adoption. Viskase is optimistic that the proposed USEPA rule
will be promulgated as proposed, although if the proposed rule is
not adopted it is possible that USEPA action might result in
significant costs at the Chicago facility or might result in
significant changes in the operation of this facility. Management
believes that this matter will be resolved without material impact
on the Company and does not expect that any such costs or changes
associated with the Chicago facility would have a material adverse
effect on the consolidated financial statements of the Company.
Clear Shield has been designated along with numerous other entities
as a potentially responsible party (PRP) under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA) in
connection with an EPA-supervised cleanup of a waste disposal site
in Palmer, Massachusetts. A steering committee of PRP's has been
formed to represent and pursue the interest of the PRP's with
respect to the site. Clear Shield's predecessor is alleged to have
shipped used motor oils to the site during the years 1977 and 1978.
Although theoretically any one PRP can be held liable for the
entire cost of investigating and cleaning up a contaminated site,
as a practical matter, such costs are usually allocated among
several PRP's. Management believes that the resolution of this
matter will not have a material effect on the Company.
Certain of the Company's facilities are or may become potentially
responsible parties with respect to other off-site waste disposal
facilities.
The Economic Development Administration, an agency of the United
States Department of Commerce (EDA), and the USEPA filed a proof of
claim in the Envirodyne bankruptcy case relating to recovery of
environmental response costs incurred or to be incurred in
connection with certain real property located at 2701 East 106th
Street, Chicago, Illinois, the former location (the Site) of the
operations of the subsidiaries of the Company constituting the
former steel and mining segment. Navistar International
Transportation Corp. (Navistar Transportation), which was the
previous owner of the Site also filed a proof of claim in the
Envirodyne bankruptcy case in an unspecified amount with respect to
environmental liabilities at the Site. The parties have agreed in
principle, subject to the negotiation of a definitive settlement
agreement, Bankruptcy Court approval and public comment pursuant to
regulations applicable to EDA and USEPA, to settle the claims
against Envirodyne through the payment of $5,000 to the USEPA and
the issuance of 64,460 shares of Common Stock to Navistar
Transportation. In the event that the settlement is not completed,
Envirodyne believes that it has valid defenses to the claims and
will continue its objections to the claims. To the extent that
USEPA, EDA or Navistar Transportation were able to establish
liability and damages as to their respective proofs of claim, such
parties would receive Common Stock under the Plan of Reorganization
in satisfaction of such claims. See Part IV, Item 14, Note 1 of
Notes to Consolidated Financial Statements.
As noted above, new environmental and health and safety laws can
impose significant compliance costs, including two forthcoming
rules. Under the Clean Air Act Amendments of 1990, various
industries, including casings manufacturers, will be required to
meet air emissions standards for certain chemicals based on use of
the "maximum achievable control technology" (MACT). MACT standards
for casings manufacture have not yet been proposed or promulgated;
therefore, at this time no estimate of the cost of complying with
MACT standards can be made. Such rules, however, will likely
impose similar costs on all casings manufacturers in the United
States.
Under the Resource Conservation and Recovery Act (RCRA),
regulations have been recently proposed that would, in come cases,
impose additional effluent limitations on wastewater discharged
from wastewater treatment systems employing surface impoundments.
In addition, RCRA regulations to be proposed in the future may
impose design and/or operating requirements on such impoundments.
Two of Viskase's plants use surface impoundments. The Company is
currently assessing the potential impact of the proposed
regulations.
Various state, local and foreign governments have enacted or are
considering enacting laws, rules or regulations concerning the
disposal of plastic products. While such legislative action has
had a minor effect on certain product sales and may have further
effect in the future, the Company is not aware of any existing
legislative action that it currently expects to have a material
adverse effect on the Company.
(d) Financial information about foreign and domestic operations
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and export sales
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Reference is made to Part IV, Item 14, Note 16 of Notes to
Consolidated Financial Statements.
EXECUTIVE OFFICERS OF THE REGISTRANT
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The following table sets forth the names and ages of the Company's
executive officers, together with the positions with the Company
held by such executive officers and a summary of their recent
business experience. Under the Company's Amended and Restated By-
Laws, the Company's officers are elected for such terms as may be
determined from time to time by the Board of Directors.
Name, Age and Office Business Experience
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Donald P. Kelly, 73, Mr. Kelly has been Chairman of the
Chairman of the Board, Board, President, and Chief
President and Chief Executive Officer of the Company
Executive Officer since May 1989. Mr. Kelly has
also served as President and
Chief Executive Officer of
D.P. Kelly & Associates, L.P.
("DPK"), a management services and
private investment firm, since
November 1988.
F. Edward Gustafson, 53, Mr. Gustafson has been Executive
Executive Vice President Vice President and Chief Operating
and Chief Operating Officer of the Company since May
Officer 1989. Mr. Gustafson was President
of Viskase from February 1990 to
August 1994. Mr. Gustafson has
also served as Executive Vice
President and Chief Operating
Officer of DPK since November
1988.
J.S. Corcoran, 52, Mr. Corcoran has been Executive
Executive Vice President Vice President and Chief Financial
and Chief Financial Officer of the Company since May
Officer 1989. Mr. Corcoran has also
served as Executive Vice
President and Chief Financial
Officer of DPK since November
1988.
Stephen M. Schuster, 38, Mr. Schuster has been Vice
Vice President, Secretary President, Secretary and General
and General Counsel Counsel of the Company since May
1989. Mr. Schuster has also
served as Vice President and
General Counsel of DPK since
January 1989.
ITEM 2. PROPERTIES
----------
VISKASE FACILITIES
LOCATION SQUARE FEET PRIMARY USE
- -------------- ----------- --------------
Manufacturing Facilities
Aurora, Ohio 73,000 PVC film production
Barceloneta, Puerto Rico 156,000 Idle plant facilities
held for sale
Beauvais, France (a) 235,000 Casings production and
finishing
Centerville, Iowa 223,000 Specialty films
production and
finishing
Chicago, Illinois 991,000 Casings production,
administra-
tion and research
Guarulhos, Brazil 81,000 Specialty films
production and
casings finishing
Huntsville, Alabama 27,000 Idle plant facilities
held for sale
Kentland, Indiana 125,000 Casings finishing
Lindsay, Ontario, Canada 269,000 Casings finishing and
specialty
films finishing
Loudon, Tennessee 250,000 Casings production
Nuevo Laredo, Mexico (a) 22,000 Casings finishing
Osceola, Arkansas 223,000 Casings production and
finishing
Pauls Valley, Oklahoma 110,000 Casings finishing,
specialty films
production and
finishing
Sedgefield, England 132,000 PVC and rigid OPS
production and
OPP conversion
Swansea, Wales (Great Britain) 77,000 Specialty films
production and
finishing
Swansea, Wales (a) 28,000 Administrative
facilities
Thaon, France 239,000 Casings production
and finishing
Service Centers
Atlanta, Georgia (a)
Bensalem, Pennsylvania
Brisbane, Australia (a)
Chicago, Illinois
Milan, Italy
Pauls Valley, Oklahoma
Pulheim, Germany (a)
Santa Fe Springs, California
Headquarters
Worldwide: Chicago, Illinois
Europe: Paris, France (a)
- ---------------------------------
(a) Leased. All other properties are owned by the respective
company or its subsidiaries.
CLEAR SHIELD FACILITIES
LOCATION SQUARE FEET PRIMARY USE
- ------------------------ ----------- ----------------
Leominster, Massachusetts 135,000 Cutlery, straws
and combination
kits
Shreveport, Louisiana 148,000 Cutlery, straws
and combination
kits
Wheeling, Illinois (two plants) 260,000 Cutlery, straws
and combination
kits; Headquarters
SANDUSKY FACILITIES
LOCATION SQUARE FEET PRIMARY USE
- ------------------------ ----------- ----------------
Sandusky, Ohio 195,000 Manufacturing;
Headquarters
Sandusky, Ohio 31,000 Warehouse
Sandusky, Ohio (a) 97,000 Warehouse
Sandusky, Ohio (a) 90,000 Manufacturing
Clayton, Delaware (a) 81,000 Vacant
- ------------------------
(a) Leased. All other properties are owned by the respective
company or its subsidiaries.
The Company's headquarters are located in leased facilities in Oak
Brook, Illinois. The Company believes that its properties
generally are suitable and adequate to satisfy the Company's
present and anticipated needs. The Company's United States real
property collateralizes the Company's obligations under various
financing arrangements. For a discussion of these financing
arrangements, refer to Part IV, Item 14, Note 8 of Notes to
Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Lumpkin Litigation
- -------
On February 17, 1989, a complaint was filed against Envirodyne in
the United States District Court for the Northern District of
Illinois (District Court) by a plaintiff class consisting of former
union employees of WSC Corp. (WSC). WSC was a wholly-owned
subsidiary of EDC Holding Company (EDC) whose operations consisted
of the former steel and mining segment (SMD) of Navistar
International Corp. (Navistar). EDC, then a wholly-owned
subsidiary of Envirodyne, acquired SMD from Navistar in 1977 and
transferred the SMD assets to WSC and to other wholly-owned
subsidiaries of EDC. In 1980, EDC and WSC filed voluntary
bankruptcy petitions and halted operations. The plaintiffs are
seeking to recover from Envirodyne certain pension and other
benefits allegedly owed by WSC under a collective bargaining
agreement to which WSC (but not Envirodyne) was a party. The
complaint seeks to hold Envirodyne directly liable for these
benefits on an alter ego theory of liability. The plaintiffs seek
(1) damages under the WSC 1977-1980 collective bargaining agreement
of $80 million to $100 million (less the amount of the plaintiffs'
$14.8 million received in settlement of litigation with Navistar),
(2) unspecified equitable relief under ERISA Section 502, and (3)
other compensatory damages and punitive damages, unspecified in
amount, under ERISA Section 502 and Section 301 of the Labor
Management Relations Act.
After the bankruptcy of EDC and WSC, the same plaintiff class now
suing Envirodyne brought suit against Navistar for recovery of the
same benefits now claimed against Envirodyne. In determining
whether a settlement agreement in the Navistar case released
Envirodyne from the liabilities asserted, the United States Court
of Appeals for the Seventh Circuit (Court of Appeals) held that the
interpretation of the settlement agreement would require lower
court findings of fact with respect to the parties' intent in
entering into the settlement agreement. In addition, the Court of
Appeals commented on the legal principles that would be applicable
to the plaintiffs' alter ego claim. While the Court of Appeals
observed that concerns for corporate form should be secondary to
the congressional intent of ERISA to provide for pension benefits,
the Court proceeded to note that to be successful the plaintiffs
must establish the presence of two factors: firstly, that there was
a unity of interest and ownership such that the separate corporate
identities of Envirodyne and the two subsidiaries no longer
existed; and, secondly, that recognition of separate corporate
existence would sanction a fraud or promote injustice.
The Lumpkin litigation was stayed by the commencement of the
-------
Envirodyne bankruptcy case in January 1993. Envirodyne and the
plaintiffs are currently participating in a District Court
mediation process to attempt to resolve the case. Because the
claims relating to the Lumpkin litigation arose prior to the
-------
commencement of the Envirodyne bankruptcy case, such claims are
subject to the Plan of Reorganization. Accordingly, to the extent
that the plaintiffs in the Lumpkin litigation were able to
-------
establish liability and damages, the plaintiffs would under the
Plan of Reorganization receive Common Stock in satisfaction of such
damages. For a description of the amount of Common Stock to which
Envirodyne general unsecured creditors were generally entitled,
refer to Part IV, Item 14, Note 1 of Notes to Consolidated
Financial Statements. Therefore, although the Company denies
liability in the Lumpkin litigation, and in the absence of
-------
successful mediation or other settlement negotiations will continue
to vigorously defend the case, an adverse finding of liability and
damages in the case could result in substantial dilution to the
holders of the Common Stock.
Indemnification Claims
Litigation has been initiated with respect to events arising out of
the Envirodyne bankruptcy case and the 1989 acquisition of
Envirodyne by Emerald Acquisition Corporation (Emerald) with
respect to which, although Envirodyne is not presently a party to
such litigation, certain defendants have asserted indemnity rights
against Envirodyne.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company
-------------------------------------------------------------
Inc, Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald
- ----------------------------------------------------------------
P. Kelly, Charles K. Bobrinskoy, James L. Massey, William Rifkind
- -----------------------------------------------------------------
and Michael Zimmerman, Case No. 93 A 1616, United States
- ---------------------
Bankruptcy Court for the Northern District of Illinois, Eastern
Division, ARTRA Group Incorporated (ARTRA) alleges breach of
fiduciary duty and tortious inference in connection with the
negotiation and consummation of the Plan of Reorganization. In
ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc,
- -----------------------------------------------------------------
Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P.
- --------------------------------------------------------------
Kelly, Charles K. Bobrinskoy and Michael Zimmerman, Case No. 93 L
- --------------------------------------------------
2198, Circuit Court of the Eighteenth Judicial Circuit, DuPage
County, Illinois, ARTRA alleges negligence, breach of fiduciary
duty, fraudulent misrepresentation and deceptive business practices
in connection with the 1989 acquisition of Envirodyne by Emerald.
The plaintiff seeks damages in the total amount of $136,200,000
plus interest and punitive damages of $408,600,000. D.P. Kelly &
Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkind and
Zimmerman have asserted common law and contractual rights of
indemnity against Envirodyne for attorneys' fees, costs and any
ultimate liability relating to the claims set forth in the
complaints. Envirodyne is continuing its evaluation of the merits
of the indemnification claims against Envirodyne and the underlying
claims in the litigation. Upon the undertaking of D.P. Kelly &
Associates, L.P. to repay such funds in the event it is ultimately
determined that there is no right to indemnity, Envirodyne is
advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for
the payment of legal fees in the case pending before the Bankruptcy
Court. Although the case is in a preliminary stage and the Company
is not a party thereto, the Company believes that the plaintiff's
claims raise similar factual issues to those raised in the
Envirodyne bankruptcy case which, if resolved in a manner similar
to that in the Envirodyne bankruptcy case, would render it
difficult for the plaintiff to establish liability. Accordingly,
the Company believes that the indemnification claims would not have
a material adverse effect upon the business or financial position
of the Company, even if the claimants were successful in
establishing their right to indemnification.
Treatment of Untendered Shares Under Plan of Reorganization
Certain of Envirodyne's stockholders prior to the acquisition of
Envirodyne by Emerald failed to exchange their certificates
representing old Envirodyne common stock for the $40 per share cash
merger consideration specified by the applicable acquisition
agreement. In the Envirodyne bankruptcy case, Envirodyne is
seeking to equitably subordinate the interests of the holders of
untendered shares, in which event such holders would receive no
distribution pursuant to the Plan of Reorganization. The
Bankruptcy Court granted Envirodyne's motion for summary judgment
to equitably subordinate the holders of untendered shares. Certain
holders have appealed the summary judgment to the United States
District Court for the Northern District of Illinois. If such
holders were ultimately successful, Envirodyne believes that the
maximum number of shares of Common Stock that it would be required
to issue to such claimants is approximately 106,000.
Other
For a description of certain environmental matters affecting the
Company, refer to Part I, Item 1, "Environmental Regulations."
In August 1993, Clear Shield received a subpoena from the Antitrust
Division of the United States Department of Justice relating to a
grand jury investigation of the disposable plastic cutlery
industry. Clear Shield has cooperated fully with the
investigation.
The Company and its subsidiaries are involved in various other
legal proceedings arising out of its business, none of which is
expected to have a material adverse effect upon its business or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
-----------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
(a) Market Information. Envirodyne's Common Stock is traded in
------------------
the over-the-counter market on the Nasdaq SmallCap Market. Trading
on the Nasdaq SmallCap Market began after the December 31, 1993
consummation of the Plan of Reorganization. The high and low
closing bid prices of the Common Stock during 1994 are set forth in
the following table. Such prices reflect interdealer prices without
markup, markdown or commissions and may not represent actual
transactions.
QUARTER ENDED HIGH LOW
------------------ ------ -------
March 31, 1994 $10.88 $7.00
June 30, 1994 8.63 3.50
September 29, 1994 5.50 4.13
December 29, 1994 5.63 3.38
(b) Holders. As of March 20, 1995, there were approximately 126
-------
holders of record of Envirodyne's Common Stock.
(c) Dividends. Envirodyne has never paid a cash dividend on
---------
shares of its Common Stock. The payment of dividends is restricted
by the terms of various financing agreements to which the Company
is a party. The Company has no present intention of paying
dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Post-
consummation Pre-consummation
------------ -----------------------------------------------------------------
January 1 January 1 December December January 1
to to 27, 1991 to 28, 1990 to
December December December December December
29, 1994 (1) 31, 1993 (1) 31, 1992 26, 1991 27, 1990
------------ ------------ ------------ ----------- ----------
(in thousands, except for per share amounts)
Net sales $599,029 $587,385 $ 575,705 $ 543,969 $ 544,138
(Loss) before extra-
ordinary gain (loss) (2)(3) (3,612) (98,195) (36,996) (29,253) (15,174)
Income (loss) including extra-
ordinary gain (loss) (4)(5) (3,612) 85,589 (36,996) (31,755) (15,174)
Per share (loss)
before extraordinary
gains (loss) (2)(3) (.27) (306,859) (115,613) (91,416) (47,419)
Per share income (loss)
including extraordinary
gain (loss) (4)(5) (.27) 267,466 (115,613) (99,234) (47,419)
Cash and cash equivalents
and time deposits 7,289 7,743 14,062 16,075 29,133
Working capital (6) 91,727 82,440 (736,643) (708,064) 87,683
Total assets 896,636 867,680 1,026,962 1,086,457 1,062,508
Debt obligations:
Short-term debt (7) 25,798 15,610 40,365 34,937 42,670
Long-term debt reclassified
as current 758,300 792,557
Long-term debt 489,358 482,379 12,524 18,833 761,606
Stockholders' equity (deficit) 135,349 135,000 (83,545) (40,303) (8,275)
Cash dividends none none none none none
(1) Due to the implementation of the Plan of Reorganization and Fresh Start Reporting,
financial statements including outstanding shares for the new restructured company
(effective December 31, 1993) are not comparable to those of the prior years.
(Refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements.)
(2) Includes $5.8 million of income (net of book tax provision) in 1994 from the settlement
of a patent infringement suit.
(3) Includes $104,745 of Reorganization items, net, in 1993. (Refer to Part IV, Item 14,
Note 1 of Notes to Consolidated Financial Statements.)
(4) Includes an extraordinary gain of $183,784 in 1993 from the implementation of the Plan
of Reorganization. (Refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial
Statements.)
(5) Includes an extraordinary loss on debt extinguishment in 1991.
(6) Includes $758,300 and $792,557 of long-term debt reclassified as current at
December 31, 1992 and December 26, 1991, respectively.
(7) Includes current portion of long-term debt.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
The accompanying management's discussion and analysis of financial
condition and results of operations should be read in conjunction
with the following table:
January 1 January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
------------ ----------- ------------
(in thousands)
Net sales:
Food packaging products $530,179 $522,363 $513,777
Disposable foodservice supplies 68,996 66,383 62,918
Other and eliminations (146) (1,361) (990)
-------- -------- --------
$599,029 $587,385 $575,705
======== ======== ========
Operating income:
Food packaging products $ 48,145 $ 53,432 $ 66,949
Disposable foodservice supplies 6,514 5,223 5,913
Other and eliminations (5,982) (5,023) (5,656)
-------- -------- --------
$ 48,677 $ 53,632 $ 67,206
======== ======== ========
Depreciation and amortization under
capital lease and amortization of
intangibles expense:
Food packaging products $47,207 $ 46,715 $ 43,857
Disposable foodservice supplies 4,125 5,624 5,402
Corporate and other 55 59 51
-------- -------- --------
$ 51,387 $ 52,398 $ 49,310
======== ======== ========
Capital expenditures:
Food packaging products $ 28,534 $ 37,673 $ 26,618
Disposable foodservice supplies 4,012 3,100 2,387
Corporate and other 20 114 13
-------- -------- --------
$32,566 $ 40,887 $ 29,018
======== ======== ========
Results of Operations
- ---------------------
The Company's 1994 net sales were $599 million, which represented
a 2.0% increase over the prior year's sales of $587.4 million.
Net sales in 1994 for Viskase increased 2.5% over the prior year
due to the impact of increased film sales and foreign currency
translation. Sandusky's sales declined 8.1% due to the reduction in
the baby wipe container sales partially offset by an increase in
dairy and deli container volumes. Clear Shield's net sales
increased 3.9% primarily due to the impact of third and fourth
quarter price increases combined with some volume increases in the
wrapped cutlery and retail product lines.
Operating income for 1994 was $48.7 million, which represented a
decline of $5.0 million from the prior year. Pro forma operating
income for 1993, giving effect to fresh start reporting and the
implementation of the Plan of Reorganization with the related
financing as if such events had taken place on January 1, 1993, was
$54.6 million. The decline in gross margin in 1994 is due to the
impact of price competition in dairy and deli containers and in
foreign markets, reduced baby wipe container sales and increased
resin prices. Operating income in 1994 benefitted from a $9.5
million settlement of a patent infringement suit. Selling, general
and administrative expenses in 1994 include $1.6 million of
additional patent legal expenses, expansion in Central and South
America, additional corporate costs relating to increased insurance
and other costs associated with Envirodyne's status as a public
company following its emergence from bankruptcy, as well as
increased expenditures on research and development.
In 1995 another competitor in small diameter casings entered the
United States market. Management believes there will be some impact
as a result of increased competition in this segment of the market,
but has yet to determine its full extent.
During 1993, Scott notified Sandusky of its intention to purchase
containers from other suppliers, and the change was completed in
September 1994. Sandusky closed its Clayton, Delaware facility,
which was primarily dedicated to the production of baby wipe
containers, in December 1994, and is consolidating its
manufacturing operations at its Sandusky, Ohio facility.
Net interest expense for 1994 totaled $49.2 million, which
represented an increase of $18.9 million from 1993. The 1994 net
interest expense includes $22.5 million of interest expense on the
new 10-1/4% Senior Notes due 2001 (10-1/4% Senior Notes) versus
$1.3 million of interest expense for the first six days of 1993 on
the 14-1/2% Senior Discount Notes (amortization of discount), 14%
Senior Subordinated Debentures, 13-1/2% Subordinated Notes and the
11-1/4% Pay-in-Kind Notes. As of January 7, 1993, interest expense
on those debt issues was no longer recorded due to the Envirodyne
bankruptcy case. The 1994 net interest expense benefitted from a
lower effective interest rate on the domestic term loan and
revolving credit facility.
Other income (expense) of $1.7 million and $(5.5) million in 1994
and 1993, respectively, includes net foreign currency translation
gains (losses) of $2.7 million and $(4.6) million, respectively.
The 1994 and 1993 tax provisions consisted of the provisions on
income from the U.S. and foreign subsidiaries. Due to the permanent
differences in the U.S. resulting from non-deductible
reorganization expenses and amortization and foreign losses for
which no tax benefit is provided, a provision of $4.8 million and
$12.0 million, respectively, was provided on income (loss) before
income taxes and extraordinary items of $1.2 million and $(86.2)
million, respectively, for 1994 and 1993. The 1992 period effective
tax benefit rate of 27% for income taxes resulted from the benefit
of U.S. losses partially offset by the provision related to income
from foreign subsidiaries. Domestic cash income taxes paid in 1994,
1993 and 1992 were $1,510,000, $91,000 and $2,027,000,
respectively. Foreign cash income taxes paid in 1994, 1993 and 1992
were $3,548,000, $1,063,000 and $3,131,000, respectively.
The 1993 reorganization items of $104.7 million consisted of $4.1
million for the write-off of deferred financing fees on the bank
credit agreement, $14.9 million for legal, financial advisory and
other fees incurred in connection with the Envirodyne bankruptcy
case and $85.7 million of adjustment to the fair value of assets
and liabilities due to the reorganization and adoption of Fresh
Start Reporting (refer to Part IV, Item 14, Note 1 of Notes to
Consolidated Financial Statements). Fees and expenses associated
with renegotiation of debt of $3.9 million in 1992 consist of
legal, financial advisory and other fees.
The 1993 extraordinary gain of $183.8 million results from the
reorganization cancellation of indebtedness offset by the fair
value of debt and equity issued and is net of a tax provision of
$8.3 million. For a further discussion, refer to Part IV, Item 14,
Note 1 of Notes to Consolidated Financial Statements.
The Company's 1993 net sales were $587.4 million, which represented
a 2.0% increase over the prior year's sales of $575.7 million.
Net sales in 1993 for Viskase were comparable to the prior year.
Sandusky's sales increased by 26.3% due to container volume
increases resulting from the liquidation of a major competitor
offset partially by the effects of intense price competition. Clear
Shield's net sales increased 5.5% due to strong volumes across all
major product lines offset partially by competitive price
conditions.
Operating income for 1993 was $53.6 million, which represented a
decline of $13.6 million from the prior year. The decline in
operating income resulted from intense price competition in
containers and large diameter casings as well as price pressure in
European, Latin American, Japanese and Canadian markets. The
Company also recorded an additional $2 million of before tax
expense for postretirement benefits due to the adoption on January
1, 1993 of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." For further discussion, refer to Part IV, Item 14, Note
10 of Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
- -------------------------------
Envirodyne and certain of its subsidiaries are parties to a
$195,000,000 Credit Agreement (Credit Agreement) with a group of
banks and financial institutions (Lenders). The Credit Agreement
provides for a $100,000,000 term loan facility, a $65,000,000
domestic revolving credit facility and a $30,000,000 amortizing
multicurrency revolving credit facility. Borrowings are subject to
borrowing base availability.
The Company expects to have sufficient funds available from cash
flow from operations and borrowings to meet its liquidity needs.
The availability of funds under the domestic and multicurrency
revolving credit facilities are subject to a borrowing base
limitation measured by certain assets of the Company. The available
borrowing capacity under the Credit Agreement was approximately $41
million at December 29, 1994.
The Company and the Lenders entered into an amendment of the Credit
Agreement as of January 24, 1995 easing certain financial covenants
and permanently waiving the event of default arising from the
ownership by the Malcolm I. Glazer Trust (Trust) of more than 30%
of the Company's Common Stock, provided that the Trust's ownership
does not later exceed 49% of the Company's outstanding Common
Stock. The Company is currently in compliance with the terms of the
Credit Agreement, including the financial covenants. In the event
that the Company is unable to maintain compliance with the
covenants, it will be necessary to seek a waiver or amendment of
such covenants from the respective lenders. There can be no
assurance that the Company will be able to obtain such waivers or
amendments.
Capital expenditures totaled $32.6 million during 1994. This
represents an $8.3 million decrease from 1993 capital expenditure
levels. The decreased level of capital expenditures in 1994 was
principally related to the completion of both the second phase of
the European expansion program and initial productive capacity
investment program in Brazil during the prior year. In 1995 and
future years, capital expenditures are expected to be approximately
$30 million annually.
The Company acquired the minority shareholder's interest in
Viskase's Brazilian subsidiary for $4.2 million during the first
quarter of 1994.
The Company has spent approximately $12 million to $17 million
annually on research and development programs, including product
and process development, and on new technology development during
each of the past three years, and the 1995 research and development
and product introduction expenses are expected to be approximately
$16 million. Among the projects included in the current research
and development efforts is the application of certain patents and
technology recently licensed by Viskase to the manufacture of
cellulosic casings. The commercialization of these applications and
the related fixed asset expense associated with such
commercialization may require substantial financial commitments in
future periods.
The Company is contemplating the private placement of up to $175
million principal amount of senior secured notes. Up to $50 million
of the proceeds of the private placement are expected to be used to
finance the purchase, in the open market or in private
transactions, of 10-1/4% Senior Notes, subject to price and market
conditions, while the rest of the proceeds would be used to repay
the Company's domestic term loan facility, reduce the amount of the
Company's revolving credit obligations and pay the fees and
expenses of the private placement. The Company may reduce the
amount of the private placement by up to $50 million if the Company
is unable to purchase the 10-1/4% senior notes at prices acceptable
to the Company. No assurance can be given that the Company will
consummate the contemplated private placement, what the terms and
conditions of the private placement would be, or whether the
proceeds of the private placement would be used as the Company
currently expects.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------
Financial statements and supplementary financial information
meeting the requirements of Regulation S-X are listed in the index
to financial statements and schedules, as included under Part IV,
Item 14 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
There were no disagreements on accounting and financial disclosure
required to be disclosed under this item.
PART III
----------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by this Item is set forth in the Company's
definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days
after the end of the fiscal year covered by this report (Proxy
Statement) in the section entitled "Election of Directors," in the
last paragraph of the section entitled "Security Ownership" and in
the third paragraph of the section entitled "Certain Relationships
and Related Transactions," and is incorporated herein by reference
to the Proxy Statement. For information regarding executive
officers of the Company, see the information set forth under
"Executive Officers of the Registrant" in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this Item is set forth in the Proxy
Statement in the section entitled "Compensation of Directors and
Executive Officers" and is incorporated herein by reference to the
Proxy Statement. The information set forth in the Proxy Statement
in the sections entitled "Compensation Committee Report on
Executive Compensation" and "Performance Graph" is not required by
this Item and is not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
The information required by this Item is set forth in the Proxy
Statement in the section entitled "Security Ownership" (except for
the last paragraph thereof) and is incorporated herein by reference
to the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
The information required by this Item is set forth in the Proxy
Statement in the section entitled "Certain Relationships and
Related Transactions" and is incorporated by reference to the Proxy
Statement. See also Part IV, Item 14, Note 15 of Notes to
Consolidated Financial Statements.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
------------------------------------------------------
FORM 8-K
--------
(a) 1. Financial statements: PAGE
--------------------
Report of independent accountants 27
Consolidated balance sheets, December 29, 1994 and
December 31, 1993
Consolidated statements of operations, for January 1 to
December 29, 1994 (Post-consummation);
January 1 to December 31, 1993 (Pre-consummation);
and December 27, 1991 to December 31, 1992 (Pre-
consummation);
Consolidated statements of stockholders' equity (deficit),
for January 1 to December 29, 1994 (Post-consummation);
January 1 to December 31, 1993 (Pre-consummation);
and December 27, 1991 to December 31, 1992 (Pre-
consummation);
Consolidated statements of cash flows, for January 1 to
December 29, 1994 (Post-consummation);
January 1 to December 31, 1993 (Pre-consummation);
and December 27, 1991 to December 31, 1992 (Pre-
consummation);
Notes to consolidated financial statements 32
(a) 2. Financial statement schedules for the periods January 1 to
----------------------------------------------------------
December 29, 1994; January 1 to December 31, 1993; and
------------------------------------------------------
December 27, 1991 to December 31, 1992:
--------------------------------------
II Valuation and qualifying accounts
V Property, plant and equipment
VI Accumulated depreciation, depletion and
amortization of property, plant and equipment
IX Short-term borrowings
X Supplementary income statement information
Schedules other than those listed are omitted because they are not
required, are not applicable, or because equivalent information has
been included in the financial statements and notes thereto or
elsewhere herein.
(b) Exhibits:
--------
Exhibit No. Description of Exhibits
- ---------- ---------------------------------------------------
2.1 Debtors First Amended Joint Plan of Reorganization as
Twice Modified dated December 15, 1993 of Envirodyne
Industries, Inc. and certain of its subsidiaries
(incorporated herein by reference to Exhibit 2 to Form
8-K filed January 19, 1994 of Envirodyne Industries,
Inc.) *
3.1 Amended and Restated Certificate of Incorporation of
Envirodyne Industries, Inc. (incorporated herein by
reference to Exhibit 3.1 to Form 8-K filed January 19,
1994, of Envirodyne Industries, Inc.). *
3.2 Amended and Restated By-Laws of Envirodyne Industries,
Inc. (incorporated herein by reference to Exhibit 3.2
to Form 8-K filed February 21, 1995 of Envirodyne
Industries, Inc.). *
4.1 Indenture dated as of December 31, 1993 between
Envirodyne Industries, Inc. and Bankers Trust Company,
as Trustee, relating to the 10-1/4% Notes Due 2001 of
Envirodyne Industries, Inc. including form of 10-1/4%
Note Due 2001 (incorporated herein by reference to
Exhibit 4.1 to Form 8-K filed January 19, 1994 of
Envirodyne Industries, Inc.). *
4.2 Warrant Agreement dated as of December 31, 1993 between
Envirodyne Industries, Inc. and Bankers Trust Company,
as Warrant Agent, relating to the Warrants to Purchase
Common Stock of Envirodyne Industries, Inc., including
form of Warrant to Purchase Common Stock (incorporated
herein by reference to Exhibit 4.2 to Form 8-K filed
January 19, 1994 of Envirodyne Industries, Inc.). *
10.1 Credit Agreement dated as of December 31, 1993 among
Envirodyne Industries, Inc. and certain of its
subsidiaries, various financial institutions as
lenders, and Continental Bank N.A. (now Bank of America
Illinois), Citibank International PLC and Citicorp
North America, Inc., as the agents for such lenders
(incorporated herein by reference to Exhibit 99.1 to
Form 8-K filed January 19, 1994 of Envirodyne
Industries, Inc.). *
10.2 Amendment No. 1 and Waiver dated as of January 24, 1995
by and among Envirodyne Industries, Inc. and certain of
its subsidiaries, various financial institutions or
lenders, and Bank of America NT & SA and Citicorp North
America, Inc. as the agents for such lenders
(incorporated herein by reference to Exhibit 2 to Form
8-K filed February 15, 1995 of Envirodyne Industries,
Inc.). *
10.3 Participation Agreement dated as of December 18, 1990
among Viskase Corporation, as Lessee, Envirodyne
Industries, Inc., as Guarantor, General Electric
Capital Corporation, as Owner Participant, and The
Connecticut National Bank, as Owner Trustee
(incorporated herein by reference to Exhibit 10.24 to
Form 8-K, filed January 22, 1991, of Envirodyne
Industries, Inc.). *
10.4 Lease Agreement dated as of December 18, 1990 between
The Connecticut National Bank, Owner Trustee, as Lessor
and Viskase Corporation, as Lessee (incorporated herein
by reference to Exhibit 10.25 to Form 8-K, filed
January 22, 1991, of Envirodyne Industries, Inc.). *
10.5 Appendix A; Definitions relating to the Participation
Agreement, the Lease and the Ground Lease (incorporated
herein by reference to Exhibit 10.26 to Form 8-K, filed
January 22, 1991, of Envirodyne Industries, Inc.). *
10.6 Ground Lease dated as of December 18, 1990 between
Viskase Corporation, as Ground Lessor, and The
Connecticut National Bank, as Ground Lessee
(incorporated herein by reference to Exhibit 10.27 to
Form 8-K, filed January 22, 1991, of Envirodyne
Industries, Inc.). *
10.7 Guaranty Agreement dated as of December 18, 1990, among
Envirodyne Industries, Inc.; Clear Shield National,
Inc.; Sandusky Plastics of Delaware, Inc.; Viskase
Sales Corporation, all as Guarantors; The Connecticut
National Bank, as Owner Trustee; and General Electric
Capital Corporation, as Owner Participant (incorporated
herein by reference to Exhibit 10.28 to Form 8-K, filed
January 22, 1991, of Envirodyne Industries, Inc.). *
10.8 Trust Agreement dated as of December 18, 1990 between
General Electric Capital Corporation, as Owner
Participant, and The Connecticut National Bank, as
Owner Trustee (incorporated herein by reference to
Exhibit 10.29 to Form 8-K, filed January 22, 1991, of
Envirodyne Industries, Inc.). *
10.9 Amended and Restated Management Services Agreement
Dated December 31, 1993 between Envirodyne Industries,
Inc. and D.P. Kelly and Associates, L.P. (incorporated
herein by reference to Exhibit 99.2 to Form 8-K filed
January 19, 1994 of Envirodyne Industries, Inc.). + *
10.10 Envirodyne Industries, Inc. 1993 Stock Option Plan
(incorporated herein by reference to Exhibit 10.10 to
Form 10-K filed March 29, 1994 of Envirodyne
Industries, Inc.). + *
10.11 Envirodyne Industries, Inc. Corporate Office
Management Incentive Plan for Fiscal Year 1994. +
10.12 Envirodyne Industries, Inc. Long-Term Incentive Plan
(incorporated herein by reference to Exhibit 10.34 to
Form 10-Q for the fiscal quarter ended June 27, 1991,
filed August 12, 1991, of Envirodyne Industries,
Inc.). + *
10.13 Envirodyne Industries, Inc. Parallel Envirodyne Non-
Qualified Thrift Plan (incorporated herein by
reference to Exhibit 10.35 to Form 10-Q for the fiscal
quarter ended June 27, 1991, filed August 12, 1991, of
Envirodyne Industries, Inc.). + *
11.1 Statement re computation of per share earnings.
21.1 Subsidiaries of the registrant.
* Previously filed, incorporated by reference.
+ Management contract or compensatory plan or arrangement.
(c) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed by the Company during the fourth
quarter of fiscal 1994.
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.
ENVIRODYNE INDUSTRIES, INC.
--------------------------
(Registrant)
By: /s/
--------------------------
Donald P. Kelly
Chairman, Chief Executive
Officer and President
By: /s/
---------------------------
J.S. Corcoran
Executive Vice President and
Chief Financial Officer
By: /s/
---------------------------
Sandra L. Musachia
Controller
Date: March 23, 1995
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 on this 23rd day of
March 1995.
/s/ s/
- ------------------------------- ----------------------------
Robert N. Dangremond (Director) Gregory R. Page (Director)
/s/ /s/
- ------------------------------- -----------------------------
F. Edward Gustafson (Director) Mark D. Senkpiel (Director)
/s/
- -------------------------------
Michael E. Heisley (Director)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Envirodyne Industries, Inc.
We have audited the consolidated financial statements and the
financial statement schedules of Envirodyne Industries, Inc. and
Subsidiaries listed in Item 14(a) of this Form 10-K. These
financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in Note 1 to the consolidated financial statements, on
December 31, 1993, the Company completed a comprehensive financial
restructuring through the implementation of reorganization under
Chapter 11 of the United States Bankruptcy Code and applied fresh
start reporting.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Envirodyne Industries, Inc. and Subsidiaries as of
December 29, 1994 and December 31, 1993, and the consolidated
results of their operations and their cash flows for the period
January 1 to December 29, 1994 (Post-consummation) and January 1 to
December 31, 1993 and December 27, 1991 to December 31, 1992 (Pre-
consummation), in conformity with generally accepted accounting
principles. In addition, the schedules referred to above, when
considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information
required to be included therein.
Coopers & Lybrand L.L.P.
Chicago, Illinois
March 15, 1995
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 29, December 31,
1994 1993
----------- -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 7,289 $ 7,743
Receivables, net 86,868 72,516
Inventories 110,483 98,824
Other current assets 19,466 17,538
-------- --------
Total current assets 224,106 196,621
Property, plant and equipment,
including those under
capital lease 506,099 455,554
Less accumulated depreciation
and amortization 35,761
-------- --------
Property, plant
and equipment, net 470,338 455,554
Deferred financing costs 9,143 8,989
Other assets 47,181 50,765
Excess reorganization value 145,868 155,751
-------- --------
$896,636 $867,680
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including
current portion
of long-term debt
and obligation
under capital lease $ 25,798 $ 15,610
Accounts payable 34,335 37,524
Accrued liabilities 72,246 61,047
-------- --------
Total current liabilities 132,379 114,181
Long-term debt including obligation
under capital lease 489,358 482,379
Accrued employee benefits 56,217 53,622
Deferred and noncurrent
income taxes 83,333 78,565
Minority interest in
consolidated subsidiary 3,933
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
13,515,000 shares issued and
outstanding at December 29, 1994,
and 13,500,000 shares
at December 31, 1993 135 135
Paid in capital 134,865 134,865
Accumulated (deficit) (3,612)
Cumulative foreign currency
translation adjustments 3,961
-------- --------
Total stockholders'
equity 135,349 135,000
-------- --------
$896,636 $867,680
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
January 1, January 1, December 27,
to to 1991 to,
December December December
29, 1994 31, 1993 31, 1992
-------------- ------------ --------------
(in thousands, except for number of shares and per share amounts)
NET SALES $599,029 $587,385 $575,705
COSTS AND EXPENSES
Cost of sales 432,746 416,410 398,876
Selling, general
and administrative 111,451 101,632 94,076
Patent infringement
settlement income 9,457
Amortization of intangibles
and excess reorganization value 15,612 15,711 15,547
-------- -------- --------
OPERATING INCOME 48,677 53,632 67,206
Interest income 307 931 964
Interest expense 49,514 31,190 106,522
Other expense (income), net (1,668) 5,540 8,699
Fees and expenses associated
with renegotiation of debt 3,945
Minority interest in loss of subsidiary 50 717
-------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAXES, REORGANIZATION ITEMS
AND EXTRAORDINARY ITEMS 1,188 18,550 (50,996)
Reorganization items, net 104,745
-------- -------- --------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEMS 1,188 (86,195) (50,996)
Income tax provision (benefit) 4,800 12,000 (14,000)
-------- -------- --------
(LOSS) BEFORE
EXTRAORDINARY ITEMS (3,612) (98,195) (36,996)
Extraordinary gain,
net of tax 183,784
-------- -------- --------
NET INCOME (LOSS) $(3,612) $ 85,589 $(36,996)
======= ======== ========
WEIGHTED AVERAGE
COMMON SHARES 13,500,703 320 320
========== === ===
PER SHARE AMOUNTS:
(LOSS) BEFORE
EXTRAORDINARY ITEMS $(.27) $(306,859) $(115,613)
===== ========= =========
NET INCOME (LOSS) $(.27) $267,466 $(115,613)
===== ======== =========
The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
Cumulative
Retained Foreign Currency Total
Common Paid in Earnings Translation Stockholders'
Stock Capital (Deficit) Adjustments Equity (Deficit)
--------- ------------- ------------- ---------------- ----------------
Balance December 26, 1991 $ 1 $12,900 $(61,780) $ 8,576 $(40,303)
Net (loss) (36,996) (36,996)
Translation adjustments (6,246) (6,246)
----- -------- -------- ------ --------
Balance December 31, 1992 1 12,900 (98,776) 2,330 (83,545)
Net income 85,589 85,589
Translation adjustments (2,044) (2,044)
Cancellation of
preconsummation
Common Stock (1) (12,900) (12,901)
Elimination of accumulated
deficit and cumulative
foreign currency
translation adjustments 13,187 (286) 12,901
----- -------- ------- ------- --------
$ 0 $ 0 $ 0 $ 0 $ 0
=======================================================================================================================
Issuance of new
Common Stock $135 $134,865 $135,000
---- -------- --------
Balance December 31, 1993 135 134,865 135,000
Net (loss) $(3,612) (3,612)
Translation adjustments $3,961 3,961
----- -------- ------- ------ --------
Balance December 29, 1994 $135 $134,865 $(3,612) $3,961 $135,349
==== ======== ======= ====== ========
Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the stockholders' equity at and
subsequent to December 31, 1993 is not comparable to the prior years. (Refer to Note 1 of Notes to Consolidated Financial
Statements.)
The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 1, January 1, December 27,
to to 1991 to
December December December
29, 1994 31, 1993 31, 1992
------------ ------------ -------------
(in thousands)
Cash flows from operating activities:
(Loss) before extraordinary gain $(3,612) $(98,195) $(36,996)
Extraordinary gain 183,784
------- -------- --------
Net income (loss) (3,612) 85,589 (36,996)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
under capital lease 35,775 36,687 33,763
Amortization of intangibles and excess
reorganization value 15,612 15,711 15,547
Amortization of deferred financing
fees and discount 1,569 2,418 30,820
Increase (decrease) in deferred and
noncurrent income taxes (52) 9,547 (14,994)
Foreign currency transaction loss (gain) (3,465) 3,380 5,089
Loss (gain) on sales of property,
plant and equipment (9) 650 2,089
Reorganization items and
fresh start reporting (79,039)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (11,257) (1,319) 1,747
Decrease (increase) in inventories (10,548) 4,163 6,527
Decrease (increase) in other current assets (1,607) (2,152) 1,137
Increase in accounts payable and
accrued liabilities 3,774 15,894 41,130
Other (2,894) 672 2,564
------- ------- --------
Total adjustments 26,898 6,612 125,419
------- ------- --------
Net cash provided by operating activities
before reorganization expense 23,286 92,201 88,423
Net cash used for reorganization items (14,929)
Cash flows from investing activities:
Capital expenditures (32,566) (40,887) (29,018)
Proceeds from sale of property,
plant and equipment 359 124 173
Investments and advances to affiliated companies (4,990)
Purchase of minority interest in subsidiary (4,200)
Proceeds from sale of time deposits in Puerto Rico 6,600
------- ------- --------
Net cash (used in) investing activities (36,407) (40,763) (27,235)
Cash flows from financing activities:
Proceeds from revolving loan
and long-term borrowings 37,668 106,003 3
Deferred financing costs (1,608) (9,779) (12)
Repayment of revolving loan, long-term borrowings
and capital lease obligations (22,617) (138,736) (57,439)
------- ------- --------
Net cash provided by (used in)
financing activities 13,443 (42,512) (57,448)
Effect of currency exchange rate changes on cash (776) (316) 847
------- ------- --------
Net increase (decrease) in cash and cash equivalents (454) (6,319) 4,587
Cash and cash equivalents at beginning of period 7,743 14,062 9,475
------- ------- --------
Cash and cash equivalents at end of period $ 7,289 $ 7,743 $ 14,062
======= ======= ========
- -----------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $43,484 $28,001 $31,461
Income taxes paid $5,058 $1,154 $5,158
The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CHAPTER 11 REORGANIZATION PROCEEDINGS
On January 6, 1993, a group of bondholders filed an involuntary
petition for reorganization of Envirodyne Industries, Inc. under
Chapter 11 of the U.S. Bankruptcy Code. On January 7, 1993 Viskase
Corporation, Viskase Sales Corporation, Viskase Holding
Corporation, Clear Shield National, Inc., Sandusky Plastics of
Delaware, Inc., Sandusky Plastics, Inc. and Envirodyne Finance
Company each filed voluntary petitions under Chapter 11 of the U.S.
Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division (the Bankruptcy
Court). On December 17, 1993, the Bankruptcy Court confirmed the
First Amended Joint Plan of Reorganization as twice modified (Plan
of Reorganization) with respect to Envirodyne Industries, Inc.
(Envirodyne) and certain of its subsidiaries. The Plan of
Reorganization was consummated and Envirodyne and certain of its
subsidiaries emerged from Chapter 11 on December 31, 1993
(Effective Date). For accounting purposes, the Plan of
Reorganization was deemed to be effective as of December 31, 1993.
Pursuant to the Plan of Reorganization, Envirodyne's shares of
common stock that were outstanding prior to the effective date were
canceled. Emerald Acquisition Corporation, the sole stockholder of
Envirodyne prior to the consummation of the bankruptcy, received no
distribution pursuant to the Plan of Reorganization. The Plan of
Reorganization provided for the initial issuance of approximately
13,500,000 new shares of Envirodyne common stock (subject to
adjustment), warrants to purchase an additional 1,500,000 shares
and distributions to major creditors as follows:
- Holders of the Envirodyne's former Senior Discount Notes Due
1997 (14.5%) (Old Discount Notes) with an accreted value as
of January 6, 1993 of $200,838,211 became entitled to receive
a pro rata portion of $219,262,000 principal amount of
10-1/4% Senior Notes Due 2001 (10-1/4% Notes).
- Holders of Envirodyne's former $200,000,000 principal amount
of 14% Senior Subordinated Debentures Due 2001 (Old 14%
Debentures), with accrued but unpaid interest through January
6, 1993 of $42,812,000 became entitled to receive a pro rata
portion of 12,142,737 shares of the Envirodyne common stock,
par value $.01 per share, representing in the aggregate
approximately 89.95% of the common stock initially issued
pursuant to the Plan of Reorganization.
- Holders of the Envirodyne's former $91,350,000 principal
amount of 13-1/2% Subordinated Notes Due 1996 (Old 13-1/2%
Notes), with accrued but unpaid interest through January 6,
1993 of $13,603,842 became entitled to receive a pro rata
portion of (i) 903,625 shares of Envirodyne common stock,
representing in the aggregate approximately 6.69% of the
common stock initially issued pursuant to the Plan of
Reorganization, and (ii) warrants (Warrants) to purchase
1,500,000 shares of common stock. The Warrants were issued
pursuant to a Warrant Agreement dated as of December 31, 1993
between Envirodyne and Bankers Trust Company, as Warrant
Agent. The Warrants are exercisable at any time until
December 31, 1998 at an exercise price of $17.25 per share.
The number of shares of common stock for which a Warrant is
exercisable, and the exercise price of the Warrants, are
subject to adjustment upon the occurrence of certain events.
In addition, holders of Old 13-1/2% Notes, other than Salomon
Brothers Inc (Salomon Brothers) and certain of its
affiliates, who elected to grant a limited release to Salomon
Brothers and its affiliates pursuant to the Plan of
Reorganization, of all claims arising out of the 1989
leveraged buyout acquisition of Envirodyne, the Old 13-1/2%
Notes or Envirodyne, were entitled to share ratably in
445,928 shares of common stock, representing in the aggregate
approximately 3.30% of the common stock initially issued
pursuant to the Plan of Reorganization.
- Holders of allowed general unsecured claims of Envirodyne (as
opposed to subsidiaries of Envirodyne) became entitled to
receive 32.28 shares of common stock for each $500 amount of
their prepetition claims, or a total of 8,070 shares of
common stock, representing .06% of the common stock initially
issued pursuant to the Plan of Reorganization. These claims
totaled approximately $125,000. If the allowed amount of
general unsecured claims of Envirodyne exceeds $125,000, for
example upon the resolution of disputed claims, additional
shares of common stock will have to be issued to the holders
of allowed general unsecured claims of Envirodyne in order to
provide equitable allocation of value among Envirodyne's
unsecured creditors under the Plan of Reorganization. Such
additional shares of common stock would be distributed with
respect to allowed general unsecured claims of Envirodyne as
follows: (i) approximately 2.58 additional shares per $500 in
claims in the event allowed general unsecured claims of
Envirodyne are between $125,000 and $25,000,000; (ii)
approximately 5.61 additional shares per $500 in claims in
the event allowed general unsecured claims of Envirodyne are
between $25,000,000 and $50,000,000; (iii) approximately 9.22
additional shares per $500 in claims in the event allowed
general unsecured claims of Envirodyne are between
$50,000,000 and $75,000,000; and (iv) approximately 13.58
additional shares per $500 in claims in the event allowed
general unsecured claims of Envirodyne are between
$75,000,000 and $100,000,000. Refer to Note 11 for a
discussion of disputed claims which, if determined adversely
to Envirodyne, would result in the issuance of common stock.
- Holders of Envirodyne subsidiary allowed trade claims were
paid in full.
- Salomon Brothers Holding Company Inc 11.25% Pay-in-Kind Notes
issued by Envirodyne with an accreted value as of January 6,
1993 of $5,658,000 were canceled.
The contracts constituting the sale and leaseback transaction with
General Electric Capital Corporation were assumed by the relevant
Envirodyne subsidiaries under the Plan of Reorganization with minor
changes thereto.
The Chapter 11 filing was related only to the Company's domestic
operations and did not include the foreign subsidiaries and various
inactive domestic subsidiaries.
The Company accounted for the reorganization using the principles
of fresh start reporting in accordance with the American Institute
of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization under the
Bankruptcy Code." Accordingly, all assets and liabilities have been
restated to reflect their reorganization value, which approximates
fair value.
The reorganization value of the Company's equity of $135,000,000
was based on the consideration of many factors and various
valuation methods, including discounted cash flows, comparable
multiples of earnings and other applicable measurements and
valuation techniques believed by management and its financial
advisors to be representative of the Company's business and
industry. The excess of the reorganization value over the fair
value of net assets and liabilities is reported as excess
reorganization value and is being amortized over a fifteen-year
period.
The reorganization and the adoption of Fresh Start Reporting
resulted in the following adjustments to the Company's Consolidated
Statement of Operations for the period January 1 to December 31,
1993:
Income
Reorganization Items (Expense)
-------------------- ---------
Legal, financial advisory and other fees
associated with the Chapter 11 proceedings $(14,929)
Write-off of deferred financing fees
associated with the Bank Credit Agreement (4,071)
Write-off of existing excess investment
over net assets acquired, net of excess
reorganization value recorded, and fair
market value adjustments to assets
and liabilities (85,745)
-------
$(104,745)
=========
Extraordinary Gain
------------------
Accreted value of the Old Discount Notes
less unamortized deferred financing $197,379
Principal amount of Old 14% Debentures
plus accrued interest less
unamortized deferred financing 237,125
Principal amount of Old 13-1/2% Notes
plus accrued interest less
unamortized deferred financing 103,918
Accreted value of 11-1/4% Pay-in-Kind Notes
due to Related Party 5,658
Envirodyne untendered shares 2,176
Envirodyne general unsecured
creditors allowed claims 90
Principal amount of 10-1/4% Notes exchanged
for Old Discount Notes (219,262)
Fair value of equity exchanged for
Old 14% Debentures, Old 13-1/2% Notes
and Envirodyne unsecured claims (135,000)
---------
Extraordinary gain before tax provision 192,084
Tax provision on extraordinary
gain (refer to Note 13) 8,300
--------
Extraordinary gain net of taxes $183,784
========
Had the Fresh Start reporting and the Plan of Reorganization been
implemented with the related financing at the beginning of 1993,
the pro forma Envirodyne consolidated statement of operations would
have been as follows:
(in thousands, except for number of
shares and per share amounts)
Pro forma January 1
to
December 31, 1993
-------------------
(unaudited)
Net sales $587,385
Cost of sales 415,498
Selling, general and administrative 101,632
Amortization of intangibles and excess
reorganization cost 15,612
--------
Operating income 54,643
Interest income 931
Interest expense 51,198
Other expense (income), net 5,540
Minority interest in loss of subsidiary 717
--------
Income before income taxes (447)
Income tax provision 6,140
-------
Net (loss) $(6,587)
=======
Weighted average common shares 13,500,703
Net (loss) per share $(.49)
=====
The pro forma information reflects the changes in interest cost and
depreciation and amortization due to the implementation of the Plan
of Reorganization and Fresh Start Reporting.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of presentation
---------------------
Effective in 1990 Envirodyne adopted a 52/53 week fiscal year
ending on the last Thursday of December. The 1993 financial
statements include December 31, 1993 in order to present the effect
of the consummation of the Plan of Reorganization.
(B) Principles of consolidation
---------------------------
The consolidated financial statements include the accounts of
Envirodyne Industries, Inc. and its subsidiaries (the Company).
Reclassifications have been made to the prior year's financial
statement to conform to the 1994 presentation.
(C) Cash equivalents
----------------
For purposes of the statement of cash flows, the Company considers
cash equivalents to consist of all highly liquid debt investments
purchased with an initial maturity of approximately three months or
less. Due to the short-term nature of these instruments, the
carrying values approximate the fair market value. Cash equiva-
lents include $821,000 and $1,757,000 of short-term investments at
December 29, 1994 and December 31, 1993, respectively.
(D) Inventories
-----------
Domestic inventories are valued primarily at the lower of last-in,
first-out (LIFO) cost or market. Remaining amounts, primarily
foreign, are valued at the lower of first-in, first-out (FIFO) cost
or market.
(E) Property, plant and equipment
-----------------------------
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets ranging from 3 to 32
years. Upon retirement or other disposition, cost and related
accumulated depreciation are removed from the accounts, and any
gain or loss is included in results of operations. Effective
December 31, 1993 and in conjunction with the Fresh Start
Reporting, property, plant and equipment was reported at the
estimated fair value (refer to Note 1).
(F) Deferred financing costs
------------------------
Deferred financing costs are amortized on a straight-line basis
over the expected term of the related debt agreement.
(G) Patents
-------
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
(H) Excess reorganization value and excess investment over net
----------------------------------------------------------
assets acquired, net
--------------------
Excess reorganization value is amortized on the straight-line
method over 15 years.
Cost in excess of net assets acquired, net was amortized on a
straight-line method over 40 years in fiscal years 1993 and 1992.
The Company continues to evaluate the recoverability of excess
reorganization value based on projected and discounted cash flows
of the operating business units.
(I) Pensions
--------
The North American operations of Viskase and the Company's
operations in Europe have defined benefit retirement plans covering
substantially all salaried and full time hourly employees. Pension
cost is computed using the projected unit credit method.
The Company's funding policy is consistent with funding
requirements of the applicable federal and foreign laws and
regulations.
(J) Postretirement benefits other than pensions
-------------------------------------------
The North American operations of Viskase have postretirement health
care and life insurance benefits. Effective January 1, 1993,
postretirement benefits other than pensions are accounted for in
accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions." Prior year's financial statements
were accounted for using the pay-as-you-go method.
(K) Postemployment benefits
-----------------------
Effective December 31, 1993 and in conjunction with the Fresh Start
Reporting, the Company adopted SFAS No. 112 "Employers Accounting
for Postemployment Benefits." The impact of adopting SFAS No. 112
was not material.
(L) Income taxes
------------
Income taxes were accounted for in accordance with SFAS No. 109
for the years ended December 29, 1994 and December 31, 1993.
(M) Net income (loss) per share
---------------------------
Net income (loss) per share of common stock is based upon the
weighted average number of shares of common stock outstanding
during the year. No effect has been given to options outstanding
under the Company's stock option plans and warrants issued pursuant
to the Plan of Reorganization as their effect is anti-dilutive.
(N) Revenue recognition
-------------------
Sales to customers are recorded at the time of shipment net of
discounts and allowances.
(O) Foreign currency contracts
--------------------------
The Company has entered into forward foreign exchange contracts to
hedge certain foreign currency transactions on a continuing basis
for periods consistent with its committed foreign currency
exposures. The effect of this practice is to minimize the effect
of foreign exchange rate movements on the Company's operating
results. The Company's hedging activities do not subject the
Company to exchange rate risk because gains and losses on these
contracts offset losses and gains on the transactions being hedged.
The cash flows from forward contracts accounted for as hedges of
identifiable transactions or events are classified consistent with
the cash flows from the transactions or events being hedged.
3. RECEIVABLES
Receivables consisted primarily of trade accounts receivable and
were net of allowances for doubtful accounts of $2,136,000 and
$2,872,000 at December 29, 1994, and at December 31, 1993,
respectively.
4. INVENTORIES
Inventories consisted of:
December 29, December 31,
1994 1993
------------ ------------
(in thousands)
Raw materials $ 20,358 $17,477
Work in process 37,613 34,158
Finished products 52,512 47,189
-------- -------
$110,483 $98,824
======== =======
Approximately 55% and 60% of the Company's inventories at December
29, 1994, and December 31, 1993, respectively, were valued at LIFO.
These LIFO values exceeded current manufacturing cost by
approximately $7,000,000 and $11,000,000 at December 29, 1994, and
December 31, 1993, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
December 29, December 31,
1994 1993
------------ -----------
(in thousands)
Property, plant and equipment:
Land and improvements $ 15,930 $ 15,288
Buildings and improvements 76,202 60,867
Machinery and equipment 256,621 213,099
Construction in progress 20,178 29,132
Capital lease:
Machinery and equipment 137,168 137,168
-------- --------
$506,099 $455,554
======== ========
Maintenance and repairs charged to costs and expenses for 1994,
1993, and 1992 aggregated $33,045,000, $32,636,000 and $31,747,000,
respectively. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets ranging from 3 to 32
years.
6. OTHER ASSETS
Other assets were comprised of:
December 29, December 31,
1994 1993
----------- -----------
(in thousands)
Patents $50,000 $50,000
Less accumulated amortization 5,000
------- -------
Patents, net 45,000 50,000
Other 2,181 765
------- -------
$47,181 $50,765
======= =======
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
7. ACCRUED LIABILITIES
Accrued liabilities were comprised of:
December 29, December 31,
1994 1993
----------- -----------
(in thousands)
Compensation and employee benefits $33,521 $30,712
Taxes, other than on income 6,454 4,956
Accrued interest 3,630 235
Accrued volume and sales discounts 11,958 9,309
Accrued reorganization fees and expenses 3,167 7,011
Other 13,516 8,824
------- -------
$72,246 $61,047
======= =======
8. DEBT OBLIGATIONS
As described in Note 1, Chapter 11 Reorganization Proceedings,
Envirodyne and certain of its domestic Subsidiaries emerged from
Chapter 11 on December 31, 1993.
The $219,262,000 principal amount of 10-1/4% Notes were issued
pursuant to an Indenture dated as of December 31, 1993 (10-1/4%
Note Indenture) between Envirodyne and Bankers Trust Company, as
Trustee. The 10-1/4% Notes are the unsecured senior obligations of
Envirodyne, bear interest at the rate of 10-1/4% per annum, payable
on each June 1 and December 1, and mature on December 1, 2001. The
10-1/4% Notes are redeemable, in whole or from time to time in
part, at the option of Envirodyne, at the percentages of principal
amount specified below plus accrued and unpaid interest to the
redemption date, if the 10-1/4% Notes are redeemed during the
12-month period commencing on January 1 of the following years:
Year Percentage
---- ----------
1995 105%
1996 104%
1997 103%
1998 102%
1999 101%
2000 and thereafter 100%
The 10-1/4% Note Indenture contains covenants with respect to
Envirodyne and its subsidiaries limiting (subject to a number of
important qualifications), among other things, (i) the ability to
pay dividends on or redeem or repurchase capital stock, (ii) the
incurrence of indebtedness, (iii) certain affiliate transactions
and (iv) the ability of the Company to consolidate with or merge
with or into another entity or to dispose of substantially all its
assets.
In connection with the consummation of the Plan of Reorganization,
Envirodyne and certain of its subsidiaries (Borrowers) entered into
a Credit Agreement dated December 31, 1993 (Credit Agreement) with
the lenders party thereto (Lenders) and with Bank of America
Illinois (formerly Continental Bank N.A.), Citibank International
PLC and Citicorp North America, Inc., as agents for the Lenders.
The Credit Agreement provides for a $195,000,000 facility,
consisting of a $100,000,000 domestic term loan facility, a
$65,000,000 domestic revolving credit facility (which includes a
$27,000,000 domestic letter of credit facility) and a $30,000,000
amortizing multicurrency revolving credit facility (which includes
a $3,000,000 multicurrency letter of credit facility). The
commitment under the amortizing multicurrency revolver was
$27,800,000 at December 29, 1994. The initial borrowings under the
Credit Agreement were used (i) to pay indebtedness under the
Postpetition Credit Agreement dated as of February 5, 1993 among
the Debtors, the lenders party thereto (DIP Lenders) and
Continental Bank N.A., as agent for the DIP Lenders, (ii) to pay
indebtedness under certain foreign credit facilities, (iii) to pay
the claims of subsidiary trade creditors under the Plan of
Reorganization and (iv) to pay certain fees and expenses relating
to the Plan of Reorganization and the Credit Agreement.
Obligations under the Credit Agreement are collateralized by
substantially all of the assets of Envirodyne and its domestic
subsidiaries and by the pledge of the capital stock of
substantially all of Envirodyne's subsidiaries. Availability of
funds under the Credit Agreement is subject to a borrowing base
measured by certain assets of Envirodyne and its subsidiaries.
The available borrowing capacity under the Credit Agreement was
approximately $41 million at December 29, 1994.
Borrowings under the domestic term loan facility and the domestic
revolving credit facility bear interest, at the Company's election,
at a rate per annum equal to (i) the Bank of America Illinois base
rate plus 1.5% or (ii) the Eurodollar rate plus 2.75%, subject to
step downs of up to 0.5% if the Company meets certain debt and
interest coverage tests. The domestic term loan facility
terminates on December 31, 1999 and is subject to quarterly
repayments of principal as follows:
Calendar Quarterly Total Repayment
Year Repayment Amount for Calendar Year
--------- ---------------- -----------------
1995 $2,775,000 $11,100,000
1996 4,075,000 16,300,000
1997 4,450,000 17,800,000
1998 4,625,000 18,500,000
1999 6,300,000 25,200,000
The domestic revolving credit facility expires on December 31,
1999, with a commitment fee of 0.5% per annum on the unused portion
of the commitment. The domestic letter of credit facility expires
December 16, 1999, with fees on the outstanding amount of the
domestic letters of credit of 0.25% per annum to the issuers and
2.5% per annum to the domestic Lenders, subject to step downs of up
to 0.5% if the Company meets certain debt and interest coverage
tests.
The multicurrency revolving credit facility permits borrowings in
U.S. Dollars, German Marks, French Francs or Pounds Sterling at an
interest rate per annum equal to the applicable Eurocurrency rate
plus 2.75%, subject to step downs of up to 0.5% if the Company
meets certain debt and interest coverage tests. The multicurrency
revolving credit facility expires on December 31, 1999 and the
commitments thereunder are subject to mandatory quarterly
reductions as follows:
Calendar Quarterly Total Reduction
Year Commitment Reduction for Calendar Year
-------- -------------------- -----------------
1995 $ 500,000 $2,000,000
1996 950,000 3,800,000
1997 1,075,000 4,300,000
1998 1,150,000 4,600,000
1999 775,000 3,100,000
There is a commitment fee of 0.5% per annum on the unused portion
of the multicurrency revolving credit facility. The multicurrency
letter of credit facility expires December 16, 1999, with fees on
the outstanding amount of the multicurrency letters of credit of
0.25% per annum to the issuers and 2.5% per annum to the
multicurrency Lenders, subject to step downs of up to 0.5% if the
Company meets certain debt and interest coverage tests.
Envirodyne's obligations under the Credit Agreement bear interest
at rates that are expected to fluctuate over time. Envirodyne is
required under the Credit Agreement to enter into interest rate
protection agreements with respect to a significant portion of the
amounts outstanding from time to time thereunder. Envirodyne has
entered into $50 million of interest rate protection agreements
that cap the Company's LIBOR interest component (excludes spread)
at an average rate of 6.50% until January 1997. The fair value of
interest rate cap agreements is estimated by obtaining quotes from
banks. At December 29, 1994, the carrying amount and estimated
fair value of interest rate cap agreements were $1,174,000 and
$1,432,000, respectively.
The Borrowers have made certain representations and have agreed to
certain covenants that restrict the operations of the Borrowers and
their subsidiaries' businesses. Among other things, the Borrowers
may not, with limited exceptions, place liens on their properties
or assets, incur additional indebtedness, make dividend or other
distributions on capital stock, make investments (other than cash
equivalent investments), merge or consolidate with any other
person, dispose of assets outside the ordinary course of business
or exceed stated levels of capital expenditures. The Credit
Agreement also contains a number of financial covenants, including
covenants relating to cash flow, interest and fixed charge coverage
ratios, net worth and debt to cash flow levels.
Unless cured within any applicable grace period, events of default
include failure to pay principal, interest or other amounts due to
the Lenders, a material breach of a representation or warranty,
certain events related to employee benefit plans, certain events of
bankruptcy or insolvency, defaults or other indebtedness having a
principal amount in the aggregate in excess of $5,000,000, failure
to discharge judgments in an amount in excess of $5,000,000, a
change of control (as defined) and failure to comply with
covenants, including the financial covenants described above.
The Company and the Lenders entered into an amendment of the Credit
Agreement as of January 24, 1995 easing certain financial covenants
and permanently waiving the event of default arising from the
ownership by the Malcolm I. Glazer Trust (Trust) of more than 30%
of the Company's Common Stock, provided that the Trust's ownership
does not later exceed 49% of the Company's outstanding Common
Stock. The Company is currently in compliance with the terms of
the Credit Agreement, including the financial covenants.
Outstanding short-term and long-term debt consisted of:
December December
29, 1994 31, 1993
--------- --------
(in thousands)
Short-term debt, current maturity
of long-term debt, and capital
lease obligation:
Current maturity of
Bank Term Loan (8.0%) $11,100 $ 8,325
Current maturity of
Viskase Capital Lease Obligation 5,450 4,940
Current maturity of
Viskase Limited Term Loan (5.9%) 1,882 1,679
Other 7,366 666
------- -------
Total short-term debt $25,798 $15,610
======= =======
Long-term debt:
Bank Credit Agreement:
Term Loan due 1999 (8.0%) $80,575 $ 91,675
Revolving Loan due 1999 (8.9%) 32,524 5,999
10.25% Senior Notes due 2001 219,262 219,262
Viskase Capital Lease Obligation 147,194 152,644
Viskase Limited Term Loan (5.9%) 8,466 9,233
Other 1,337 3,566
-------- --------
Total long-term debt $489,358 $482,379
======== ========
The fair value of the Company's debt obligation (excluding capital
lease obligation) is estimated based upon the quoted market prices
for the same or similar issues or on the current rates offered to
the Company for the debt of the same remaining maturities. At
December 29, 1994, the carrying amount and estimated fair value of
debt obligations (excluding capital lease obligation) were $362,512
and $298,926, respectively.
On December 28, 1990, Viskase and GECC entered into a sale and
leaseback transaction. The sale and leaseback of assets included
the production and finishing equipment at Viskase's four domestic
casing production and finishing facilities. The facilities are
located in Chicago, Illinois; Loudon, Tennessee; Osceola, Arkansas
and Kentland, Indiana. Viskase, as the Lessee under the relevant
agreements, will continue to operate all of the facilities. The
lease has been accounted for as a capital lease.
The principal terms of the sale and leaseback transaction include:
(a) a 15 year basic lease term (plus selected renewals at
Viskase's option); (b) annual rent payments in advance beginning in
February 1991; and (c) a fixed price purchase option at the end of
the basic 15 year term and fair market purchase options at the end
of the basic term and each renewal term. Further, the Lease
Documents contain covenants requiring maintenance by the Company of
certain financial ratios and restricting the Company's ability to
pay dividends, make payments to affiliates, make investments and
incur indebtedness.
Annual rental payments under the Lease will be approximately $19.2
million through 1997, $21.4 million in 1998 and $23.5 million
through the end of the basic 15-year term. Viskase is required to
provide credit support consisting of a standby letter of credit in
an amount up to one year's rent through at least 1997. This credit
support can be reduced up to $4,000,000 currently if the Company
achieves and maintains certain financial ratios. As of December
29, 1994, the Company had met the required financial ratios and the
letter of credit has been reduced by $4,000,000. The latter can be
further reduced in 1997 or eliminated after 1998 if the Company
achieves and maintains certain financial ratios. Envirodyne and
its other principal subsidiaries guaranteed the obligations of
Viskase under the Lease.
The following is a schedule of minimum future lease payments under
capital lease together with the present value of the net minimum
lease payments as of December 29, 1994:
Year ending December (000's)
---------------
1995 $ 19,227
1996 19,227
1997 19,227
1998 21,363
1999 23,499
Thereafter 140,994
--------
Net minimum lease payments 243,537
Less:
Amount representing interest (90,893)
--------
$152,644
========
The 1995 rental payment of $19,227,000 was paid on February 28,
1995. Principal payments under the capital lease obligation for
the years ended 1995 through 1999 range from approximately $5
million to $13 million.
Aggregate maturities of remaining long-term debt for each of the
next five fiscal years are (in thousands):
Total
---------
1995 $20,897
1996 23,258
1997 26,305
1998 34,870
1999 33,982
9. OPERATING LEASES
The Company has operating lease agreements for machinery, equipment
and facilities. The majority of the facilities leases require the
Company to pay maintenance, insurance and real estate taxes.
Future minimum lease payments for operating leases that have
initial or remaining noncancelable lease terms in excess of one
year as of December 29, 1994, are (in thousands):
1995 $4,748
1996 2,876
1997 1,175
1998 747
1999 287
Total thereafter ------
Total minimum lease payments $9,833
======
Total rent expense during 1994, 1993 and 1992 amounted to
$5,982,000, $5,401,000, and $5,673,000, respectively.
10. RETIREMENT PLANS
The Company and its subsidiaries have defined contribution and
defined benefit plans varying by country and subsidiary.
At December 29, 1994, the North American operations of Viskase
maintained several non-contributory defined benefit retirement
plans. The Viskase plans cover substantially all salaried and
full-time hourly employees, and benefits are based on final average
compensation and years of credited service.
As of the Viskase acquisition date, the former owner assumed the
liability for the accumulated benefit obligation under its plans.
The effect of expected future compensation increases on benefits
accrued is recorded as a liability on the Company's consolidated
balance sheet.
PENSIONS - NORTH AMERICA:
Net pension cost for the Viskase North American plans consisted of:
January 1, January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
----------- ----------- -----------
(in thousands)
Service cost - benefits earned
during the year $3,662 $3,186 $3,031
Interest cost on projected
benefit obligation 4,249 4,000 3,578
Actual (gain) loss on plan assets 874 (2,306) (1,168)
Net amortization and deferral (3,696) (74) (1,026)
------ ------ ------
Net pension cost $5,089 $4,806 $4,415
====== ====== ======
The amounts included in the consolidated balance sheet for the
North American plans of Viskase were:
December 29, December 31,
1994 1993
----------- ------------
(in thousands)
Actuarial present value of
benefit obligation:
Vested benefits $39,165 $34,233
Nonvested benefits 4,316 3,369
------- -------
Accumulated benefit obligation 43,481 37,602
Effect of projected future
compensation increases 16,651 23,896
------- -------
Projected benefit obligation 60,132 61,498
Plan assets at fair value,
primarily listed stocks
and investment grade
corporate bonds 33,678 31,736
------- -------
Amount underfunded 26,454 29,762
Unrecognized gain (loss) 3,778
Unrecognized prior service costs 71
------- --------
Accrued liability included in
consolidated balance sheet $30,303 $29,762
======= =======
Assumed discount rate 8.0% 7.0%
Assumed long-term compensation factor 5.0% 4.5%
Assumed long-term return on plan assets 8.5% 8.0%
SAVINGS PLANS:
The Company also has defined contribution savings and similar
plans, which vary by subsidiary, and, accordingly, are available to
substantially all full-time U.S. employees not covered by
collective bargaining agreements. The Company's aggregate
contributions to these plans are based on eligible employee
contributions and certain other factors. The Company expense for
these plans was $2,109,000, $2,026,000 and $2,001,000 in 1994,
1993, and 1992, respectively.
INTERNATIONAL PLANS:
The Company maintains various pension and statutory separation pay
plans for its European employees. The expense for these plans in
1994, 1993 and 1992 was $1,043,000, $864,000 and $515,000,
respectively. As of their most recent valuation dates, in plans
where vested benefits exceeded plan assets, the actuarially
computed value of vested benefits exceeded those plans' assets by
approximately $1,902,000; conversely, plan assets exceeded the
vested benefits in certain other plans by approximately $1,708,000.
OTHER POSTRETIREMENT BENEFITS:
The Company provides postretirement health care and life insurance
benefits to Viskase's North American employees. The Company does
not fund postretirement health care and life benefits in advance,
and has the right to modify these plans in the future.
Effective January 1, 1993, the company adopted the provisions of
SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires that the expected cost
of these benefits must be charged to expense during the years that
the employee renders service. In connection with the 1989
acquisition of the Company, an accrual of $15,000,000 had been
recorded for the estimated postretirement benefits liability at the
acquisition date. On January 1, 1993, an additional liability and
transition obligation was recorded. Fresh Start accounting results
in the write-off of the transition obligation and statement of the
liability for postretirement health care and life insurance
benefits at fair value. Net periodic postretirement benefit cost
for 1994 and 1993 includes the following components:
Medical Life Total
---------------- ---------------- ----------------
1994 1993 1994 1993 1994 1993
------- ------ ------ ------ ------ ------
(in thousands)
Components of net periodic
postretirement benefit cost:
Service cost - benefits earned
during the current year $ 511 $ 417 $176 $176 $ 687 $ 593
Interest cost - on accumulated
postretirement benefit
obligation 1,208 1,150 442 437 1,650 1,587
Amortization of unrecognized
transition obligation 142 53 195
------ ------ ---- ---- ------ ------
Net periodic benefit cost $1,719 $1,709 $618 $666 $2,337 $2,375
====== ====== ==== ==== ====== ======
Actuarial present value
benefit obligations:
Retirees $ 6,836 $ 6,488 $2,184 $2,170 $ 9,020 $ 8,658
Fully eligible active participants 2,238 2,358 2,435 2,586 4,673 4,944
Other active participants 7,660 8,075 1,612 1,767 9,272 9,842
------- ------- ------ ------ ------- -------
Total 16,734 16,921 6,231 6,523 22,965 23,444
Unrecognized gains 979 581 1,560
------- ------- ------ ------ ------- -------
Accumulated postretirement
benefit obligation $17,713 $16,921 $6,812 $6,523 $24,525 $23,444
======= ======= ====== ====== ======= =======
Assumed discount rate 8.00%
Assumed medical trend rate 11.00% in 1995 decreasing to 6.50% in 2004
Assumed long-term compensation factor 5.00%
The postretirement benefit obligation was determined by application
of the terms of the various plans, together with relevant actuarial
assumptions. The effect of a 1% annual increase in these assumed
cost trend rates would increase the accumulated postretirement
benefit obligation at December 29, 1994 and December 31, 1993 by
$198,000 and $215,000, respectively, and the service and interest
cost components for 1994 and 1993 by a total of $22,000 and
$13,000, respectively.
11. CONTINGENCIES
A class action lawsuit by former employees of subsidiary
corporations comprising most of the Company's former steel and
mining division (SMD) was pending as of the commencement of the
bankruptcy case in which the plaintiffs are seeking substantial
damages. The Company and the plaintiffs are currently
participating in a mediation process to attempt to resolve the
case. Envirodyne denies liability and in the absence of successful
mediation or other settlement negotiations will continue to
vigorously defend these claims. However, inasmuch as the Plan of
Reorganization provides for the issuance of common stock with
respect to prepetition Envirodyne general unsecured claims (refer
to Note 1), an adverse finding of liability and damages could
result in substantial dilution to the holders of the common stock.
Litigation has been initiated with respect to events arising out of
the bankruptcy cases and the 1989 acquisition of Envirodyne by
Emerald with respect to which, although Envirodyne is not presently
a party to such litigation, certain defendants have asserted
indemnity rights against Envirodyne. In ARTRA Group Incorporated
------------------------
v. Salomon Brothers Holding Company Inc, Salomon Brothers Inc,
- --------------------------------------------------------------
D.P. Kelly & Associates, L.P., Donald P. Kelly, Charles K.
- ----------------------------------------------------------
Bobrinskoy, James L. Massey, William Rifkind and Michael
- --------------------------------------------------------
Zimmerman, Case No. 93 A 1616, United States Bankruptcy Court for
- ---------
the Northern District of Illinois, Eastern Division (Bankruptcy
Court), ARTRA Group Incorporated (ARTRA) alleges breach of
fiduciary duty and tortious inference in connection with the
negotiation and consummation of the Plan of Reorganization. In
ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc,
- ----------------------------------------------------------------
Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P.
- --------------------------------------------------------------
Kelly, Charles K. Bobrinskoy and Michael Zimmerman, Case No. 93
- --------------------------------------------------
L 2198, Circuit Court of the Eighteenth Judicial Circuit, County of
DuPage, State of Illinois, ARTRA alleges negligence, breach of
fiduciary duty, fraudulent misrepresentation and deceptive business
practices in connection with the 1989 acquisition of Envirodyne by
Emerald. The plaintiff seeks damages in the total amount of
$136,200,000 plus interest and punitive damages of $408,600,000.
D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy,
Massey, Rifkind and Zimmerman have asserted common law and
contractual rights of indemnity against Envirodyne for attorneys'
fees, costs and any ultimate liability relating to the claims set
forth in the complaints. Upon the undertaking of D.P. Kelly &
Associates, L.P. to repay such funds in the event it is ultimately
determined that there is no right to indemnity, Envirodyne is
advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for
the payment of legal fees in the case pending before the Bankruptcy
Court. Although the case is in a preliminary stage and the Company
is not a party thereto, the Company believes that the plaintiff's
claims raise similar factual issues to those raised in the
bankruptcy cases which, if adjudicated in a manner similar to that
in the bankruptcy cases, would render it difficult for the
plaintiff to establish liability. Accordingly, the Company
believes that the indemnification claims would not have a material
adverse effect upon the business or financial position of the
Company, even if the claimants were ultimately successful in
establishing their right to indemnification.
In the Envirodyne bankruptcy case the United States Environmental
Protection Agency (USEPA), the Economic Development Authority
(EDA), and Navistar International Transportation Corp. (Navistar
Transportation) filed proofs of claim with respect to unreimbursed
environmental response costs at the location of the former SMD
operations. The parties have agreed in principle, subject to the
negotiation of a definitive settlement agreement, Bankruptcy Court
approval and public comment pursuant to regulations applicable to
EDA and USEPA, to settle the claims against Envirodyne through the
payment of $5,000 to the USEPA and the issuance of 64,460 shares of
common stock to Navistar Transportation. In the event that the
settlement is not completed, Envirodyne believes that it has valid
defenses to the claims and will continue its objections to the
claims. To the extent that USEPA, EDA or Navistar Transportation
were able to establish liability and damages as to their respective
proofs of claim, such parties would receive Common Stock under the
Plan of Reorganization in satisfaction of their claims.
Certain of Envirodyne's stockholders prior to the acquisition of
Envirodyne by Emerald failed to exchange their certificates
representing old Envirodyne common stock for the $40 per share cash
merger consideration specified by the applicable acquisition
agreement. In the Envirodyne bankruptcy case, Envirodyne is
seeking to equitably subordinate the interests of the holders of
untendered shares, in which event such holders would receive no
distribution pursuant to the Plan of Reorganization. The
Bankruptcy Court granted Envirodyne's motion for summary judgment
to equitably subordinate the holders of untendered shares. Certain
holders have appealed the summary judgment to the United States
District Court for the Northern District of Illinois. If such
holders were ultimately successful, Envirodyne believes that the
maximum number of shares of common stock that it would be required
to issue to such claimants is approximately 106,000.
In August 1993, Clear Shield National, Inc. received a subpoena
from the Antitrust Division of the United States Department of
Justice relating to a grand jury investigation of the disposable
plastic cutlery industry. Clear Shield National, Inc. has
cooperated fully with the investigation.
The Company and its subsidiaries are involved in various legal
proceedings arising out of Its business and other environmental
matters, none of which is expected to have a material adverse
effect upon its results of operations, cash flows or financial
position.
12. CAPITAL STOCK, PAID IN CAPITAL, AND WARRANTS
Authorized shares of preferred stock ($.01 par value per share) and
common stock ($.01 par value per share) for the reorganized
Envirodyne are 25,000,000 shares and 50,000,000 shares,
respectively. 13,515,000 shares of common stock were issued and
outstanding as of December 29, 1994. In accordance with the Plan
of Reorganization, an additional 15,000 shares of common stock were
issued to the general unsecured creditors of Envirodyne during
1994. (Refer to Note 1.)
Prior to the December 31, 1993 reorganization, the authorized
shares of preferred stock and common stock were 1,000 shares and
320 shares, respectively.
Envirodyne issued 1,500,000 warrants pursuant to the Plan of
Reorganization. Each warrant is exercisable at any time until
December 31, 1998 for one share of common stock at an exercise
price of $17.25 per share. The exercise price and the number of
shares of common stock for which a warrant is exercisable are
subject to adjustment upon the occurrence of certain events.
The Plan of Reorganization provides for the issuance of common
stock to general unsecured creditors of Envirodyne. As of the date
hereof, certain parties have made claims as general unsecured
creditors of Envirodyne the allowance of which Envirodyne has
denied. To the extent that such parties are successful in
establishing the allowance of their claims, they would be entitled
to receive common stock in satisfaction of such claims, which would
result in dilution to the existing holders of the common stock.
(Refer to Note 11.)
13. INCOME TAXES
The provision (benefit) for income taxes consisted of:
January 1, January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
----------- ----------- -----------
(in thousands)
Current:
Federal $ 200
Foreign 4,652 $2,453 $994
State and local
------ ------- --------
4,852 2,453 994
------ ------- --------
Deferred:
Federal (194) 17,188 (13,206)
Foreign 128 (1,434) 174
State and local 14 2,093 (1,962)
------ ------- --------
(52) 17,847 (14,994)
------ ------- --------
$4,800 $20,300 $(14,000)
====== ======= ========
The income tax expense for the 1993 period was allocated between
loss before extraordinary gain for $12,000,000 and to the
extraordinary gain for $8,300,000.
A reconciliation from the statutory federal tax rate to the
consolidated effective tax rate follows:
January 1, January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
----------- ----------- -----------
(in thousands)
Statutory federal tax rate 35.0% 35.0% (34.0)%
Increase (decrease) in tax
rate due to:
State and local taxes
net of related federal
tax benefit .8 1.3 (2.5)
Net effect of taxes
relating to foreign
operations 140.3 1.5 1.6
Intangibles amortization 214.1 2.3 5.8
U.S. alternative
minimum tax
Non-taxable debt
discharge income,
fresh start accounting
and other bankruptcy
related expenses (22.9)
Tax rate changes 1.7
Other 13.8 .3 1.7
----- ----- ----
Consolidated effective
tax rate 404.0% 19.2% (27.4)%
===== ==== =====
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1994 are as follows:
Temporary Difference Tax Effected
------------------------------- -----------------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
------------ --------------- ------------- ---------------
Depreciation basis differences $319,256 $120,418
Inventory basis differences 31,456 12,268
Intangible basis differences 40,226 15,688
Lease transaction $152,644 $59,531
Pension and healthcare 53,589 20,936
Reserves 23,579 9,196
Foreign exchange and other 8,806 71,255 3,128 27,750
-------- -------- -------- --------
$238,618 $462,193 $ 92,791 $176,124
======== ======== ======== ========
At December 29, 1994, the Company had $11,066,000 of undistributed
earnings of foreign subsidiaries considered permanently invested
for which deferred taxes have not been provided.
At December 29, 1994, the Company had federal income tax net
operating loss carryforwards of approximately $36 million. Such
losses will expire in the year 2008, if not previously utilized.
In addition the Company has alternative minimum tax credit
carryforwards of $3.5 million. Alternative minimum tax credits
have an indefinite carryforward period. Significant limitations on
the utilization of the net operating loss carryforwards and the
alternative minimum tax credit carryforwards exist under federal
income tax rules and thus these carryforwards have not been
realized for financial statement purposes due to these limitations.
Domestic earnings or (losses) after extraordinary gain or loss and
before income taxes were approximately $(7,705,000), $107,622,000
and $(50,300,000) in 1994, 1993 and 1992, respectively. Foreign
earnings or (losses) before income taxes were approximately
$8,893,000, $(1,733,000) and $(700,000) in 1994, 1993 and 1992,
respectively.
The Company joins in filing a U.S. consolidated federal income tax
return including all of its domestic subsidiaries.
14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred and totaled
$16,852,000, $15,216,000 and $12,323,000, for 1994, 1993, and 1992,
respectively.
15. RELATED PARTY TRANSACTIONS
During each of 1994, 1993 and 1992, the Company paid DPK $770,000
for management services. In fiscal 1994, 1993 and 1992, the
Company made payments of approximately $560,000, $354,000 and
$681,000, respectively, to an affiliate of DPK for the use of a jet
aircraft on an as-needed basis.
During fiscal 1994, 1993, and 1992, the Company purchased product
and services from affiliates of DPK in the amounts of approximately
$1,367,000, $941,000 and $285,000, respectively. During fiscal
1994, 1993, and 1992, the Company sublet office space from DPK for
which it paid approximately $151,000, $150,000 and $150,000,
respectively, in rent.
During fiscal 1994, the Company advanced funds to and made payments
on behalf of DPK and Donald P. Kelly in the amount of $118,000 for
legal fees related to the litigation involving ARTRA GROUP
Incorporated (refer to Note 11).
16. BUSINESS SEGMENT INFORMATION AND GEOGRAPHIC AREA INFORMATION
Envirodyne primarily manufactures and sells polymeric food casings
and plastic packaging films and containers (food packaging
products) and disposable foodservice supplies. The Company's
operations are primarily in North America and Europe. Intercompany
sales and charges (including royalties) have been reflected as
appropriate in the following information. Other income for 1994,
1993, and 1992 includes net foreign exchange transaction gains
(losses) of approximately $2,707,000, $(4,631,000), and
$(7,568,000), respectively.
Business Segment Information
- ----------------------------
January 1 January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
----------- ----------- ------------
(in thousands)
Net sales:
Food packaging products $530,179 $522,363 $513,777
Disposable foodservice
supplies 68,996 66,383 62,918
Other and eliminations (146) (1,361) (990)
-------- -------- --------
$599,029 $587,385 $575,705
======== ======== ========
Earnings before income taxes:
Operating income:
Food packaging products $ 48,145 $ 53,432 $ 66,949
Disposable foodservice
supplies 6,514 5,223 5,913
Unallocated expenses,
net - primarily corporate (5,982) (5,023) (5,656)
-------- -------- --------
48,677 53,632 67,206
Interest expense, net 49,207 30,259 105,558
Other expense (income), net (1,668) 5,540 8,699
Fees and expenses associated
with renegotiation of debt 3,945
Minority interest in
loss of subsidiary 50 717
-------- -------- --------
$ 1,188 $18,550 $(50,996)
======== ======== ========
Identifiable assets:
Food packaging products $814,731 $790,125 $911,834
Disposable foodservice
supplies 71,530 64,879 89,753
Corporate and other,
primarily cash equivalents 10,375 12,676 25,375
-------- -------- --------
$896,636 $867,680 $1,026,962
======== ======== ==========
Depreciation and amortization
under capital lease and
amortization of
intangibles expense:
Food packaging products $47,207 $46,715 $ 43,857
Disposable foodservice
supplies 4,125 5,624 5,402
Corporate and other 55 59 51
-------- -------- --------
$51,387 $52,398 $ 49,310
======== ======== ==========
Capital expenditures:
Food packaging products $28,534 $37,673 $ 26,618
Disposable foodservice
supplies 4,012 3,100 2,387
Corporate and other 20 114 13
------- ------- --------
$32,566 $40,887 $ 29,018
======= ======= ========
Geographic Area Information
- ---------------------------
January 1, January 1, December 27,
to to 1991 to
December 29, December 31, December 31,
1994 1993 1992
----------- ----------- -----------
(in thousands)
Net sales:
North/South American
operations $423,049 $426,644 $409,831
European operations 184,395 164,717 171,844
Other and eliminations (8,415) (3,976) (5,970)
-------- -------- --------
$599,029 $587,385 $575,705
======== ======== ========
Operating profit:
North/South American
operations $28,124 $37,495 $48,263
European operations 20,553 16,137 18,943
-------- -------- --------
$48,677 $53,632 $67,206
======== ======== ========
Identifiable assets:
North/South American
operations $667,358 $669,240 $ 804,203
European operations 229,278 198,440 222,759
-------- -------- ----------
$896,636 $867,680 $1,026,962
======== ======== ==========
The total assets and net assets of foreign businesses were
approximately $275,067 and $106,662 at December 29, 1994.
17. QUARTERLY DATA (Unaudited)
Quarterly financial information for 1994 is as follows (in
thousands, except for per share amounts):
First Second Third Fourth
Fiscal 1994 Quarter Quarter Quarter Quarter Annual
- ----------- -------- -------- -------- -------- --------
Net Sales $142,593 $150,788 $151,883 $153,765 $599,029
Operating
Income 9,710 18,739 9,755 10,473 48,677
Net income
(loss) (2,507) 3,448 (3,261) (1,292) (3,612)
Net income
per share (0.19) 0.26 (0.24) (0.10) (0.27)
The second quarter operating income benefitted from a $9.5 million
settlement of a patent infringement suit.
Net income per share amounts are computed independently for each of
the quarters presented using weighted average shares outstanding
during each quarter.
18. STOCK OPTIONS
At December 29, 1994, the Company had outstanding options under the
1993 Stock Option Plan. Options were issued to certain employees
to purchase shares at not less than the fair market value of the
shares on the grant date. The plan options generally vest in three
equal annual amounts beginning one year from the grant date and
expire ten years from the grant date.
Stock option activity for the year ended December 29, 1994, was:
Number of
Option Option Price
Shares Per Share
----------- ------------
Outstanding, December 31, 1993 0 -
Granted 402,020 $5.06
Exercised - -
Terminated (13,100) 5.06
-------
Outstanding, December 29, 1994 388,920 5.06
=======
At December 29, 1994, none of the option grants were exercisable
because the grants are conditioned upon the approval of the 1993
Stock Option Plan by the Company's stockholders at the 1995 annual
meeting.
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value and estimated fair
value as of December 29, 1994 of the Company's financial
instruments. (Refer to Notes 2 and 8.)
Carrying Estimated
Value Fair Value
-------- ----------
(in thousands)
Assets:
Cash and equivalents $ 7,289 $ 7,289
Foreign currency contracts 4,614 4,649
Interest rate agreements 1,174 1,432
Liabilities:
Long-term debt
(excluding capital lease) 362,512 298,926
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Provision Balance
Beginning Charged to at End
Description of Period Expense Write-offs Recoveries Other(1) of Period
----------- ---------- ----------- ---------- ---------- ---------
1994 for the year ended
December 29
Allowance for
doubtful accounts $2,872 $ 939 $(1,824) $ 21 $ 128 $2,136
1993 for the year ended
December 31
Allowance for
doubtful accounts 2,175 1,166 (334) 70 (205) 2,872
1992 for the year ended
December 31
Allowance for
doubtful accounts 1,999 817 (473) 15 (183) 2,175
1994 for the year ended
December 29
Reserve for obsolete
and slow moving
inventory 5,425 2,936 (3,123) 115 5,353
1993 for the year ended
December 31
Reserve for obsolete
and slow moving
inventory 3,178 4,973 (2,660) (66) 5,425
1992 for the year ended
December 31
Reserve for obsolete
and slow moving
inventory 3,116 2,607 (2,426) (12) (107) 3,178
(1) Foreign currency translation.
SCHEDULE V
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
for the period January 1, 1994 to December 29, 1994
(in thousands)
Balance at Balance at
Beginning Additions End
Description of Period at Cost Retirements Other(1) of Period
- ----------- ----------- --------- ----------- ----------- -----------
Land and improvements $ 15,288 $ 18 $ (57) $ 681 $ 15,930
Buildings and improvements 60,867 2,591 12,744 76,202
Machinery and equipment 213,099 37,323 (570) 6,769 256,621
Construction in progress 29,132 (7,366) (1,588) 20,178
Equipment under capital lease 137,168 137,168
-------- ------- ------- -------- --------
$455,554 $32,566 $ (627) $ 18,606 $506,099
======== ======= ======= ======== ========
(1) Includes the final fresh start adjustments to reflect the Company's property, plant and equipment including
those under capital lease at the estimated fair value at December 31, 1993 (refer to Part IV, Item 14, Note 1
of the Notes to Consolidated Financial Statements) and $7,782,000 due to foreign currency translation.
SCHEDULE V
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
for the period January 1, 1993 to December 31, 1993
(in thousands)
Balance at Balance at
Beginning Additions End
Description of Period at Cost Retirements Other(1) of Period
- ----------- ----------- --------- ----------- ----------- -----------
Land and improvements $ 16,249 $ 314 $ (71) $ (1,204) $ 15,288
Buildings and improvements 68,094 4,499 (418) (11,308) 60,867
Machinery and equipment 264,428 25,619 (3,226) (73,722) 213,099
Construction in progress 23,308 10,455 (4,631) 29,132
Equipment under capital lease 171,461 (34,293) 137,168
-------- ------- ------- -------- --------
$543,540 $40,887 $(3,715) $(125,158) $455,554
======== ======= ======= ========= ========
(1) Includes fresh start adjustments to reflect the Company's property, plant and equipment including those under capital
lease at the estimated fair value at December 31, 1993 (refer to Part IV, Item 14, Note 1 of the Notes to Consolidated
Financial Statements) and $(6,700,000) due to foreign currency translation.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE V
PROPERTY, PLANT AND EQUIPMENT
for the period December 26, 1991 to December 31, 1992
(in thousands)
Balance at Balance at
Beginning Additions End
Description of Period at Cost Retirements Other(1) of Period
----------- ------------ --------- ----------- ---------- -----------
Land and improvements $ 17,727 $ 97 $ (102) $ (1,473) $ 16,249
Buildings and improvements 71,584 2,295 (12) (5,773) 68,094
Machinery and equipment 237,446 41,665 (4,328) (10,355) 264,428
Construction in progress 38,013 (15,039) 334 23,308
Equipment under capital lease 171,461 171,461
-------- ------- ------- -------- --------
$536,231 $29,018 $(4,442) $(17,267) $543,540
======== ======= ======= ======== ========
(1) Includes $(15,524,000) due to foreign currency translation.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
for the period January 1, 1994 to December 29, 1994
(in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Retirements Other (1) of Period
----------- ----------- ----------- ----------- ---------- -----------
Land and improvements $ 0 $ 176 $ 64 $ 240
Buildings and improvements 0 2,389 $ (2) 752 3,139
Machinery and equipment 0 21,779 (178) (650) 20,951
Equipment under capital lease 0 11,431 11,431
------- ------- ----- ---- -------
$ 0 $35,775 $(180) $166 $35,761
======= ======= ===== === =======
(1) Includes the final fresh start adjustments at December 31, 1993 (refer to Part IV,
Item 14, Note 1 of Notes to Consolidated Financial Statements) and includes $101,000
due to foreign currency translation.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
for the period January 1, 1993 to December 31, 1993
(in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses (2) Retirements Other (1) of Period
----------- ----------- ------------ ----------- ---------- -----------
Land and improvements $ 820 $ 184 $ (18) $ (986) $ 0
Buildings and improvements 8,144 2,226 (99) (10,271) 0
Machinery and equipment 59,313 25,841 (2,809) (82,345) 0
Equipment under capital lease 22,862 11,431 (34,293) 0
------- ------- ------- --------- -----
$91,139 $39,682 $(2,926) $(127,895) $ 0
======= ======= ======= ========= =====
(1) Includes fresh start adjustments to reflect the elimination of accumulated depreciation and amortization at December
31, 1993 (refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements) and includes $(1,988,000)
due to foreign currency translation.
(2) Excludes approximately $(3,000,000) amortization of the deferred gain on capital lease.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE VI
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
for the period December 26, 1991 to December 31, 1992
(in thousands)
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses (2) Retirements Other (1) of Period
----------- ----------- ------------ ----------- ---------- -----------
Land and improvements $ 642 $ 206 $ (22) $ (6) $ 820
Buildings and improvements 6,312 2,086 (3) (251) 8,144
Machinery and equipment 41,242 23,034 (2,224) (2,739) 59,313
Equipment under capital lease 11,431 11,431 22,862
------- ------- ------- ------- -------
$59,627 $36,757 $(2,249) $(2,996) $91,139
======= ======= ======= ======= =======
(1) Includes $(2,235,000) due to foreign currency translation.
(2) Excludes approximately $(3,000,000) amortization of the deferred gain on capital lease.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE IX
SHORT-TERM BORROWINGS
for the fiscal years ended December 29, 1994, December 31, 1993 and December 31, 1992
(dollars in thousands)
Year End Maximum Average Weighted
Category of Weighted Amount Amount Average
Aggregate Balance at Average Outstanding Outstanding Interest Rate
Short-Term End of Interest During the During the During the
Borrowings (1),(5) Period Rate Period Period (2) Period (3)
-------------------- ----------- ---------- ------------ ------------ -------------
1994 European facilities (4) $4,901 7.14% $5,703 $2,612 9.53%
1993 European facilities (4) $242 9.50% $5,641 $4,121 10.29%
1992 European facilities (4) $4,194 10.15% $7,854 $5,854 10.47%
(1) Reference is made to Note 8 of Notes to Consolidated Financial Statements for a discussion
of general terms of short-term borrowings.
(2) Average amount outstanding during the period is based on month end balances.
(3) Weighted average interest rate during the period is based on interest expense
applicable to average amounts outstanding during the period.
(4) Consists of seven working capital facilities of the Company's European subsidiaries,
which individually and in the aggregate are immaterial.
(5) The above schedule does not include long-term debt reclassified to current.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands)
Amortization
Description Expense
----------- ------------
1994 for the year ended December 29
Intangibles and excess
reorganization value $15,612
Deferred financing costs 1,569
1993 for the year ended December 31
Intangibles and excess investment
over net assets acquired 15,711
Deferred financing costs 1,948
1992 for the year ended December 31
Intangibles and excess investment
over net assets acquired 15,547
Deferred financing costs 3,795