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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 28, 1995
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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 26, 1996, the aggregate market value of the voting
stock held by non-affiliates of the registrant was $44,654,582.
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 26, 1996, there were 14,479,721 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. The market positions of the
Company's subsidiaries set forth in this Form 10-K represent
management's belief based upon internally generated information. No
independent marketing information has been used to confirm the
stated market position.
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 21 of Notes to
Consolidated Financial Statements.
(c) Narrative description of business:
---------------------------------
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,
management believes that 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 film 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 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 manufacturing 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 46% 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, Russia, 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
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, Pulheim, Germany, and Moscow, Russia. 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., located in the U.S. and Belgium, and Viscofan, S.A., located
in Spain and Brazil. 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; and
Celanese Mexicana located in Mexico.
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. These competitors 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 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, principally consisting of major quick serve
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 quick serve restaurant chains as
McDonald's Corporation, Burger King Corporation, Taco Bell,
Hardee's, KFC Restaurants and Pizza Hut. In addition, retail
customers include Wal-Mart Stores, Inc.; The Kroger Co. and other
major retail companies.
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 that 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
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 514
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 $11,034,000, $16,852,000, and
$15,216,000 for 1995, 1994 and 1993, 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 are 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.
Certain of the Company's facilities are or may become potentially
responsible parties with respect to other off-site waste disposal
facilities.
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 manufacturers 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
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operations and export sales
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Reference is made to Part IV, Item 14, Note 21 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.
On January 7, 1993, Envirodyne and its major domestic subsidiaries
filed petitions under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code"). On December 31, 1993, Envirodyne and
the debtor subsidiaries consummated a plan of reorganization and
emerged from bankruptcy. In addition, Emerald Acquisition
Corporation (Emerald), the sole stockholder of Envirodyne prior to
Envirodyne's emergence from bankruptcy, filed a petition under
Chapter 11 of the Bankruptcy Code on August 20, 1993. The Emerald
case is still pending before the Bankruptcy Court.
In addition to the positions with Envirodyne held by the persons
specified below for the periods indicated, Mr. Kelly has served as
a director and executive officer of Emerald, and Messrs. Gustafson,
Corcoran and Schuster have served as executive officers of Emerald,
since May 1989.
Name, Age and Office Business Experience
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Donald P. Kelly, 74, Mr. Kelly has been a director and Chairman of the Board, President,
Chairman of the Board, and Chief Executive Officer of the Company since May 1989.
President and Chief Mr. Kelly has also served as President and Chief Executive Officer
Executive Officer of D.P. Kelly & Associates, L.P. ("DPK"), a management services and private
investment firm, since November 1988.
F. Edward Gustafson, 54, Mr. Gustafson has been Executive Vice President and Chief Operating
Executive Vice President Officer of the Company since May 1989 and a director of the
and Chief Operating Company since December 1993. Mr. Gustafson was President of
Officer 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, 53, Mr. Corcoran has been Executive Vice President and Chief Financial
Executive Vice President Officer of the Company since May 1989. Mr. Corcoran has also
and Chief Financial served as Executive Vice President and Chief Financial Officer of
Officer DPK since November 1988.
Stephen M. Schuster, 39, Mr. Schuster has been Vice President, Secretary and General Counsel
Vice President, Secretary of the Company since May 1989. Mr. Schuster has also served as
and General Counsel Vice President and General Counsel of DPK since January 1989.
Gordon S. Donovan, 42, Mr. Donovan has been Treasurer of the Company since November
Vice President, Treasurer 1989 and was elected Vice President in May 1995.
and Assistant Secretary
ITEM 2. PROPERTIES
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VISKASE FACILITIES
LOCATION SQUARE FEET PRIMARY USE
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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,
administration
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 Idle plant facilities
held for sale
Headquarters
Worldwide: Chicago, Illinois
Europe: Paris, France (a)
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(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
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(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 9 of Notes to Consolidated
Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
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Lumpkin Litigation
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In March 1996 the Company completed a settlement resolving all
claims of the former union employees of its former steel and mining
subsidiary, WSC Corp. Under the settlement of Frank Lumpkin, et al.
--------------------
v. Envirodyne Industries, Inc., the Company was released and
- -----------------------------
discharged from all claims in exchange for 900,000 shares of
Envirodyne common stock without any admission or finding of
liability or wrongdoing.
In February 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 were 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 sought to hold Envirodyne directly liable for these
benefits on an alter ego theory of liability. The plaintiffs sought
(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.
The Lumpkin litigation was stayed by the commencement of the
-------
Envirodyne bankruptcy case in January 1993. During 1995 Envirodyne
and the plaintiffs participated in a 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 were subject to the Plan of
Reorganization.
Indemnification Claims
Litigation is pending 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 breach of fiduciary duty, fraudulent and
negligent misrepresentation and breach of contract in connection
with the 1989 acquisition of Envirodyne by Emerald. The plaintiff
seeks damages in the total amount of $136.2 million plus interest
and punitive damages of $408.6 million. 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 Company is not a party to either case, the Company
believes that the plaintiff's claims raise similar factual issues
to those raised in the Envirodyne bankruptcy case which, if
adjudicated 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 sought to
equitably subordinate the claims of the holders of untendered
shares, so that such holders would not receive a distribution under
the Plan of Reorganization. The Bankruptcy Court granted
Envirodyne's motion for summary judgment and equitably subordinated
the claims of the holders of untendered shares to the claims of
other general unsecured creditors. Certain of the affected holders
appealed and both the U.S. District Court and the U.S. Seventh
Circuit Court of Appeals affirmed the Bankruptcy Court decision.
The time period for further appeal has not passed. Envirodyne
believes that, even in the event of further appeal, if any, and
reversal of the prior decisions, the maximum number of shares of
common stock that it would be required to issue to such claimants
is approximately 106,000.
Other
Clear Shield National, Inc. and some of its employees have received
subpoenas from the Antitrust Division of the United States Department
of Justice relating to a grand jury investigation of the disposable
plastic cutlery industry. The U.S. Department of Justice has advised
a former officer and an existing employee that they are targets of
the investigation. Both individuals were invited to appear and
testify before the grand jury but both declined. Clear Shield
National is cooperating fully with the investigation.
In February 1996 Clear Shield National and three other plastic
cutlery manufacturers were named as defendants in the following
three civil complaints: Eisenberg Brothers, Inc., on behalf of
--------------------------------------
itself and all others similarly situated, v. Amcel Corp., Clear
- ---------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark
- ------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Civil Action No. 96-728,
- -----------------------------------
United States District Court for the Eastern District of
Pennsylvania; St. Cloud Restaurant Supply Company v. Amcel Corp.,
-------------------------------------------------
Clear Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark
- ------------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Case No. 96C 0777, United
- -----------------------------------
States District Court for the Northern District of Illinois,
Eastern Division; and Servall Products, Inc., on behalf of itself
-------------------------------------------
and all others similarly situated, v. Amcel Corporation, Clear
- --------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corporation and Benchmark
- ------------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Civil Action No. 96-1116,
- -----------------------------------
United States District Court for the Eastern District of
Pennsylvania. Each of the complaints alleges, among other things,
that from October 1990 through April 1992 the defendants unlawfully
conspired to fix the prices at which plastic cutlery would be sold.
The Company has informed the plaintiffs that such claims as they
relate to Clear Shield were discharged by the order of the
Bankruptcy Court and Plan of Reorganization and that the plaintiffs
are permanently enjoined from pursuing legal action to collect
discharged claims.
On February 27, 1996, the plaintiff in the St. Cloud case
---------
voluntarily dismissed the action without prejudice and refiled its
action in the U.S. District Court for the Eastern District of
Pennsylvania but did not name Clear Shield National as a defendant.
On March 14, 1996, Eisenberg Brothers Inc. filed a motion in Clear
Shield National's Bankruptcy proceeding in the U.S. Bankruptcy
Court for the Northern District of Illinois, Eastern Division.
Eisenberg Brothers Inc.'s motion contends that the Bankruptcy
Court's order did not discharge the plaintiff's claim.
For a description of certain environmental matters affecting the
Company, refer to Part I, Item 1, "Environmental Regulations."
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. The high and
low closing bid prices of the Common Stock during 1995 and 1994 are
set forth in the following table. Such prices reflect interdealer
prices without markup, markdown or commissions and may not
represent actual transactions.
1995 First Quarter Second Quarter Third Quarter Fourth Quarter
- ------ ------------- -------------- ------------- --------------
High $4.88 $4.75 $4.88 $4.63
Low 3.50 3.75 4.13 2.88
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
- ------ ------------- -------------- ------------- --------------
High $10.88 $8.63 $5.50 $5.63
Low 7.00 3.50 4.13 3.38
(b) Holders. As of March 22, 1996, there were approximately
-------
123 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
---------------------------------- -----------------------------------------------
December January 1 January 1 December December
30, 1994 to to to 27, 1991 to 28, 1990 to
December December December December December
28, 1995 (1) 29, 1994 (1) 31, 1993 (1) 31, 1992 26, 1991
------------ ------------ ------------ ----------- ----------
(in thousands, except for per share amounts)
Net sales $650,212 $599,029 $587,385 $ 575,705 $ 543,969
(Loss) before extra-
ordinary gain (loss) (2)(3) (17,323) (3,612) (98,195) (36,996) (29,253)
Income (loss) including extra-
ordinary gain (loss) (4)(5) (21,519) (3,612) 85,589 (36,996) (31,755)
Per share (loss)
before extraordinary
gains (loss) (2)(3) (1.28) (.27) (306,859) (115,613) (91,416)
Per share income (loss)
including extraordinary
gain (loss) (4)(5) (1.59) (.27) 267,466 (115,613) (99,234)
Cash and equivalents
and time deposits 30,325 7,289 7,743 14,062 16,075
Working capital (6) 121,725 91,727 82,440 (736,643) (708,064)
Total assets 899,567 896,636 867,680 1,026,962 1,086,457
Debt obligations:
Short-term debt (7) 12,504 25,798 15,610 40,365 34,937
Long-term debt reclassified
as current 758,300 792,557
Long-term debt 530,181 489,358 482,379 12,524 18,833
Stockholders' equity (deficit) 117,096 135,349 135,000 (83,545) (40,303)
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 charges of $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 1995 and
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:
December 30, January 1 January 1
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
(in thousands)
Net sales:
Food packaging products $574,266 $530,179 $522,363
Disposable foodservice
supplies 76,138 68,996 66,383
Other and eliminations (192) (146) (1,361)
-------- -------- --------
$650,212 $599,029 $587,385
======== ======== ========
Operating income:
Food packaging products $39,183 $ 48,145 $ 53,432
Disposable foodservice
supplies 4,959 6,514 5,223
Other and eliminations (6,007) (5,982) (5,023)
-------- -------- --------
$38,135 $ 48,677 $ 53,632
======== ======== ========
Depreciation and amortization
under capital lease and
amortization of
intangibles expense:
Food packaging products $51,404 $47,207 $ 46,715
Disposable foodservice
supplies 4,581 4,125 5,624
Corporate and other 76 55 59
-------- -------- --------
$56,061 $ 51,387 $ 52,398
======== ======== ========
Capital expenditures:
Food packaging products $30,744 $ 28,534 $ 37,673
Disposable foodservice
supplies 3,687 4,012 3,100
Corporate and other 34 20 114
-------- -------- --------
$34,465 $32,566 $ 40,887
======== ======== ========
Results of Operations
- ---------------------
The Company's 1995 net sales were $650.2 million, which represented
an 8.5% increase over the prior year's sales of $599.0 million.
Net sales in 1995 for Viskase increased 10.4% over the prior year
due to the expansion of European, Latin American and Asian Pacific
sales, selected price increases, increased worldwide film sales,
combined with the favorable effects of foreign currency
translation.
External factors affected casing sales in both the domestic and
foreign markets. These included a general softness in hot dog sales
in the U.S. and a weakening of processed meat sales in Europe. In
addition, Viscofan, S.A., a Spanish small diameter casing producer
entered the U.S. market in November 1994. Although the Company has
yet to experience significant volume loss to Viscofan, management
believes that Viskase will experience further pricing pressures as
a result of Viscofan's entrance into the domestic market.
Sandusky's sales declined 15% due to an 11% reduction in dairy and
deli container sales combined with the loss of Scott Paper
Company's premoistened baby wipe container business. The loss in
container sales is primarily attributed to a shift in demand from
thermoformed to injection molded containers. The Company has added
and will add additional injection molding equipment in 1996 to
increase capacity. This effort is expected to substantially
contribute to improving the Company's competitiveness in this
market.
Clear Shield's net sales increased 10.4% primarily due to selling
price increases along with an increase in the retail product group
sales volume.
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 for 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 1995 was $38.1 million, which represented a
decline of $10.5 million from the prior year. Operating income in
1994 benefitted from a net $8.7 million settlement of a patent
infringement suit. The decline in gross margins in 1995 was due to
price competition in domestic and foreign markets, lower casing
volumes, continued effect of resin price increases through the
third quarter of 1995, primarily at Clear Shield and Sandusky, and
loss of dairy and deli container and baby wipe container volume.
Operating income in 1995 reflected increased selling, general and
administrative expenses resulting from strategic expansion in
foreign markets including Europe, Latin America and Australia,
partially offset by lower research and development costs and the
consolidation of Sandusky's manufacturing operations. 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 Reorgniazation with the related financing as if such
events had taken place on January 1, 1993, was $54.6 million. The
decline in gross margins in 1994 was due to the impact of price
competition in dairy and deli containers and in foreign markets,
reduced by baby wipe container sales and increased resin prices.
Selling, general and administrative expenses in 1994 included $1.6
million of additional patent legal expenses (approximately $.8
million of which were legal expenses related to the $9.5 million
patent infringement litigation settlement), 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.
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 has consolidated its
manufacturing operations at its Sandusky, Ohio thermoforming
facility.
Net interest expense for 1995 totaled $56.7 million, which
represented an increase of $7.5 million from 1994. The increase is
attributable equally to an increase in borrowing levels and an
increased weighted interest rate during 1995.
Other income (expense) of $(1.7) million and $1.7 million in 1995
and 1994, respectively, includes net foreign currency translation
gains (losses) of $(.1) million and $2.7 million, respectively.
The extraordinary loss represents the write-off of unamortized
financing fees related to the Company's senior secured bank
facility that was refinanced by a private placement. The
extraordinary loss of $4.2 million is net of a tax benefit of $2.6
million. (Refer to Part IV, Item 14, Note 9 of Notes to
Consolidated Financial Statements.)
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 exchange
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
additional exchange risk because gains and losses on these
contracts offset losses and gains on the transactions being hedged.
The cash flows from forward contracts are classified consistent
with the cash flows from the transactions or events being hedged.
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," was issued in March 1995 and established
financial accounting and reporting standards for the impairment of
long-lived assets and certain identifiable intangibles to be
disposed of. The Company's adoption of this statement in 1995 did
not have a significant impact on the Company's income from
continuing operations nor cash flows.
The 1995 tax benefit consisted of the benefit of U.S. losses
partially offset by the provision related to income from foreign
subsidiaries. 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
amortization and foreign losses for which no tax benefit is
provided, a benefit of $2.9 million and a provision of $4.8
million, respectively, was provided on income (loss) before income
taxes and extraordinary items of $(20.2) million and $1.2 million,
respectively, for 1995 and 1994. Domestic cash income taxes paid in
1995, 1994 and 1993 were $640 thousand, $1.5 million and $91
thousand, respectively. Foreign cash income taxes paid in 1995,
1994 and 1993 were $4.3 million, $3.5 million, and $1.1 million,
respectively. The U.S. tax benefit is recorded as a reduction of
the deferred tax liability and does not result in a refund of
income taxes.
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).
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
11 of Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
- -------------------------------
Cash and equivalents increased by $23.0 million during the fiscal
year ended December 28, 1995. Cash flows provided by operating
activities of $39.0 million and cash flows provided by financing
activities of $18.7 million exceeded cash flows used in investing
activities of $34.4 million. Cash flows provided by operating
activities were principally attributable to the effect of
depreciation and amortization and a decrease in operating assets
and liabilities offset by the Company's loss from operations. Cash
flows provided by financing activities were principally
attributable to issuance of the Company's senior secured notes net
of the repayment of the Company's senior secured bank credit
facility, Viskase's capital lease obligation and Viskase Limited's
term loan. Cash flows used in investing activities consist
principally of capital expenditures for property, plant and
equipment.
On June 20, 1995, Envirodyne completed the sale of $160 million
aggregate principal amount of senior secured notes to certain
institutional investors in a private placement. The senior secured
notes were issued pursuant to an indenture dated June 20, 1995
(Indenture) and consist of (i) $151.5 million of 12% Senior Secured
Notes due 2000 and (ii) $8.5 million of Floating Rate Senior
Secured Notes due 2000 (collectively, the Senior Secured Notes).
Envirodyne used the net proceeds of the offering primarily to (i)
repay the Company's $86.1 million domestic term loan, (ii) repay
the $68.3 million of obligations under the Company's domestic and
foreign revolving loans and (iii) pay transaction fees and
expenses. Concurrently with the June 20, 1995 private placement,
Envirodyne entered into a new $20 million domestic revolving credit
facility (Revolving Credit Facility) and a new $28 million letter
of credit facility (Letter of Credit Facility). The Senior Secured
Notes and the obligations under the Revolving Credit Facility and
the Letter of Credit Facility are guaranteed by Envirodyne's
significant domestic subsidiaries and secured by a collateral pool
(Collateral Pool) comprised of: (i) all domestic accounts
receivable (including intercompany receivables) and inventory; (ii)
all patents, trademarks and other intellectual property (subject to
non-exclusive licensing agreements); (iii) substantially all
domestic fixed assets (other than assets subject to a lease
agreement with General Electric Capital Corporation); and (iv) a
senior pledge of 100% of the capital stock of Envirodyne's
significant domestic subsidiaries and 65% of the capital stock of
Viskase S.A. Such guarantees and security are shared by the holders
of the Senior Secured Notes and the holders of the obligations
under the Revolving Credit Facility on a pari passu basis pursuant
to an intercreditor agreement. Pursuant to such intercreditor
agreement, the security interest of the holders of the obligations
under the Letter of Credit Facility has priority over all other
liens on the Collateral Pool.
The Company finances its working capital needs through a
combination of cash generated through operations and borrowings
under the Revolving Credit Facility. The availability of funds
under the Revolving Credit Facility is subject to the Company's
compliance with certain covenants (which are substantially similar
to those included in the Indenture), to borrowing base limitations
measured by accounts receivable and inventory of the Company and to
reserves which may be established in the discretion of the lenders.
Currently, there are no drawings under the Revolving Credit
Facility. The available borrowing capacity under the Revolving
Credit Facility was $20 million at December 28, 1995.
The Company anticipates that its operating cash flow will be
sufficient to meet its operating expenses and to service its
interest payments on the Senior Secured Notes and its other
outstanding indebtedness. The Company will be required to satisfy
its $80 million mandatory redemption obligation with respect to the
Senior Secured Notes in 1999 and to pay the remaining principal
amount of the Senior Secured Notes in 2000. Additionally, the
Company's 10.25% Notes, of which $219.3 million principal amount is
outstanding, will mature in December 2001. The Company expects that
in order to make these payments it will be required to pursue one
or more alternative strategies, such as refinancing its
indebtedness, selling additional equity capital, reducing or
delaying capital expenditures, or selling assets. There can be no
assurance that any of these strategies could be effected on
satisfactory terms, if at all.
Capital expenditures for fiscal 1995 and 1994 totaled $34.4 million
and $32.6 million, respectively. Capital expenditures for 1996 are
expected to be approximately $34 million and in future years $31
million.
The Company has entered into interest rate agreements that cap $50
million of interest rate exposures at an average LIBOR rate of
6.50% until January 1997. These interest rate cap agreements were
entered into under terms of the senior bank financing that was
repaid on June 20, 1995. Interest expense includes $613 thousand of
amortization of interest rate cap premium during the fiscal year
ended December 28, 1995. The Company has not received any payments
under the interest rate protection agreements.
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 $11 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 1996 research and development
and product introduction expenses are expected to be approximately
$10 million. Among the projects included in the current research
and development efforts is the application of certain patents and
technology 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.
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 20 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
Consolidated balance sheets, December 28, 1995 and
December 29, 1994
Consolidated statements of operations, for December 30,
1994 to December 28, 1995 (Post-consummation);
January 1 to December 29, 1994 (Post-consummation);
and January 1 to December 31, 1993 (Pre-consummation);
Consolidated statements of stockholders' equity (deficit),
for December 30, 1994 to December 28, 1995
(Post-consummation); January 1 to December 29, 1994
(Post-consummation); and January 1 to December 31, 1993
(Pre-consummation);
Consolidated statements of cash flows, for December
30, 1994 to December 28, 1995 (Post-consummation);
January 1 to December 29, 1994 (Post-consummation);
and January 1 to December 31, 1993 (Pre-consummation);
Notes to consolidated financial statements
(a) 2. Financial statement schedules for the periods December 30,
---------------------------------------------------------
1994 to December 28, 1995; January 1 to December 29, 1994;
---------------------------------------------------------
and January 1 to December 31, 1993:
----------------------------------
II Valuation and qualifying accounts
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) Reports on Form 8-K. On December 13, 1995, Envirodyne filed
-------------------
a Current Report on Form 8-K to disclose the settlement
agreement relating to Frank Lumpkin, et al. v. Envirodyne
-----------------------------------
Industries, Inc.
---------------
(c) Exhibits:
--------
Exhibit No Description of Exhibits Page
- ---------- ------------------------------------------
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.). *
4.3 Indenture dated as of June 20, 1995 (the
"Indenture") between Envirodyne Industries, Inc.
and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by
reference to Exhibit 4.3 to the Registration
Statement on Form S-4 of Envirodyne Industries,
Inc. filed July 20, 1995). *
4.4 Forms of the Notes issued pursuant to the
Indenture (included in Exhibit 4.3). *
4.5 Exchange and Registration Rights Agreement dated
as of June 20, 1995 between Envirodyne
Industries, Inc. and the purchasers of the Notes
(incorporated by reference to Exhibit 4.5 to the
Registration Statement on Form S-4 of Envirodyne
Industries, Inc. filed July 20, 1995). *
4.6 Guaranty Agreement, dated as of June 20, 1995,
made by Clear Shield National, Inc., Sandusky
Plastics, Inc., Sandusky Plastics of Delaware,
Inc., Viskase Corporation, Viskase Holding
Corporation and Viskase Sales Corporation, in
favor of BT Commercial Corporation, as
Collateral Agent (incorporated by reference to
Exhibit 4.6 to the Registration Statement on
Form S-4 of Envirodyne Industries, Inc. filed
July 20, 1995). *
4.7 Pledge Agreement, dated as of June 20, 1995, made
by Envirodyne Industries, Inc. to BT Commercial
Corporation, as Collateral Agent (incorporated
by reference to Exhibit 4.7 to Amendment No. 2
to the Registration Statement on Form S-4 of
Envirodyne Industries, Inc. filed September 21,
1995). *
4.8 Security Agreement, dated as of June 20, 1995,
made by Envirodyne Industries, Inc. in favor of
BT Commercial Corporation, as Collateral Agent
(incorporated by reference to Exhibit 4.8 to
Amendment No. 2 to the Registration Statement on
Form S-4 of Envirodyne Industries, Inc. filed
September 21, 1995). *
4.9 Form of Subsidiary Security Agreement, dated as
of June 20, 1995, made by each applicable
Subsidiary in favor of BT Commercial
Corporation, as Collateral Agent (incorporated
by reference to Exhibit 4.9 to Amendment No. 2
to the Registration Statement on Form S-4 of
Envirodyne Industries, Inc. filed September 21,
1995). *
4.10 Intellectual Property Security Agreement, dated
as of June 20, 1995, made by Viskase Corporation
in favor of BT Commercial Corporation, as
Collateral Agent (incorporated by reference to
Exhibit 4.10 to Amendment No. 2 to the
Registration Statement on Form S-4 of Envirodyne
Industries, Inc. filed September 21, 1995). *
4.11 First Supplemental Indenture, dated as of October
13, 1995, between Envirodyne Industries, Inc.
and Shawmut Bank Connecticut, National
Association, as Trustee (incorporated by
reference to Exhibit 4.11 to Amendment No. 3 to
the Registration Statement on Form S-4 of
Envirodyne Industries, Inc. filed October 17,
1995). *
10.1 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.). *
10.2 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.). *
10.3 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.). *
10.4 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.). *
10.5 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.). *
10.6 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.). *
10.7 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.). + *
10.8 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.). + *
10.9 Envirodyne Industries, Inc. Corporate Office
Management Incentive Plan for Fiscal Year 1995. +
10.10 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.). + *
10.11 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.). + *
10.12 Note Agreement, dated as of June 20, 1995,
between Envirodyne Industries, Inc. and each of
the purchasers identified therein (incorporated by
reference to Exhibit 10.10 to the Registration
Statement on Form S-4 of Envirodyne Industries,
Inc. filed July 20, 1995). *
10.13 Letter Agreement, dated as of June 20, 1995,
between Envirodyne Industries, Inc. and certain
purchasers of the Notes (incorporated by reference
to Exhibit 10.11 to the Registration Statement on
Form S-4 of Envirodyne Industries, Inc. filed July
20, 1995). *
10.14 Revolving Credit Agreement, dated as of June 20,
1995, between Envirodyne Industries, Inc. and The
Prudential Insurance Company of America
(incorporated by reference to Exhibit 10.12 to the
Registration Statement on Form S-4 of Envirodyne
Industries, Inc. filed July 20, 1995). *
10.15 Credit Agreement, dated as of June 20, 1995,
among Envirodyne Industries, Inc., the lenders
identified therein and BT Commercial Corporation,
as Agent (incorporated by reference to Exhibit
10.13 to the Registration Statement on Form S-4 of
Envirodyne Industries, Inc. filed July 20, 1995). *
10.16 Intercreditor and Collateral Agency Agreement,
dated as of June 20, 1995, among BT Commercial
Corporation, The Prudential Insurance Company of
America, Shawmut Bank Connecticut, National
Association, and certain other parties identified
therein (incorporated by reference to Exhibit
10.14 to the Registration Statement on Form S-4 of
Envirodyne Industries, Inc. filed July 20, 1995). *
10.17 GECC Intercreditor Agreement, dated as of June
20, 1995, among BT Commercial Corporation, General
Electric Capital Corporation, Shawmut Bank
Connecticut, National Association, Envirodyne
Industries, Inc. and Viskase Corporation
(incorporated by reference to Exhibit 10.15 to the
Registration Statement on Form S-4 of Envirodyne
Industries, Inc. filed July 20, 1995). *
10.18 First Amendment under Revolving Credit Agreement,
dated as of June 20, 1995, between Envirodyne
Industries, Inc. and The Prudential Insurance
Company of America (incorporated by reference to
Exhibit 10.16 to Amendment No. 3 to the
Registration Statement on Form S-4 of Envirodyne
Industries, Inc. filed October 17, 1995). *
10.19 Amendment No. 1 to Credit Agreement, dated as of
June 20, 1995, between Envirodyne Industries, Inc.
and BT Commercial Corporation, individually and as
agent (incorporated by reference to Exhibit 10.17
to Amendment No. 3 to the Registration Statement
on Form S-4 of Envirodyne Industries, Inc. filed
October 17, 1995). *
11.1 Statement re computation of per share earnings. **
21.1 Subsidiaries of the registrant. **
23.1 Consent of Independent Accountants **
* Previously filed, incorporated by reference.
** Filed herewith
+ Management contract or compensatory plan or
arrangement.
(d) Financial statement schedules required by Regulation S-X.
--------------------------------------------------------
Index to financial statements of Viskase Holding Corporation and
subsidiaries.
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
Date: March 27, 1996
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 indicated on this 27th day of
March 1996.
/s/ /s/
- ------------------------------ -----------------------------
Robert N. Dangremond (Director) Michael E. Heisley (Director)
/s/ /s/
- ------------------------------ -----------------------------
Avram A. Glazer (Director) Gregory R. Page (Director)
/s/ /s/
- ------------------------------ -----------------------------
Malcolm I. Glazer (Director) Mark D. Senkpiel (Director)
/s/
- ------------------------------
F. Edward Gustafson (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 28, 1995 and December 29, 1994, and the consolidated results
of their operations and their cash flows for the period December 30,
1994 to December 28, 1995 and January 1 to December 29, 1994
(Post-consummation) and January 1 to December 31, 1993
(Pre-consummation), in conformity with generally accepted accounting
principles. In addition, in our opinion 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 26, 1996
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 28, December 29,
1995 1994
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 30,325 $ 7,289
Receivables, net 89,454 86,868
Inventories 99,474 110,483
Other current assets 21,646 19,466
-------- --------
Total current assets 240,899 224,106
Property, plant and equipment,
including those under
capital leases 545,491 506,099
Less accumulated depreciation
and amortization 75,987 35,761
-------- --------
Property, plant and
equipment, net 469,504 470,338
Deferred financing costs 8,090 9,143
Other assets 45,589 47,181
Excess reorganization value 135,485 145,868
-------- --------
$899,567 $896,636
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including
current portion of long-term
debt and obligations
under capital leases $ 12,504 $ 25,798
Accounts payable 39,117 34,335
Accrued liabilities 67,553 72,246
-------- --------
Total current liabilities 119,174 132,379
Long-term debt including obliga-
tions under capital leases 530,181 489,358
Accrued employee benefits 55,626 56,217
Deferred and noncurrent income taxes 77,490 83,333
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
13,579,460 shares issued and
outstanding at
December 28, 1995 and
13,515,000 shares at
December 29, 1994 136 135
Paid in capital 134,864 134,865
Accumulated (deficit) (25,131) (3,612)
Cumulative foreign currency
translation adjustments 7,227 3,961
-------- --------
Total stockholders' equity 117,096 135,349
-------- --------
$899,567 $896,636
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
52 weeks 52 weeks 52 weeks
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
(in thousands, except for number of shares
and per share amounts)
NET SALES $650,212 $599,029 $ 587,385
Patent infringement settlement income 9,457
COSTS AND EXPENSES
Cost of sales 485,048 435,760 418,692
Selling, general and administrative 111,230 108,437 99,350
Amortization of intangibles and
excess reorganization value 15,799 15,612 15,711
-------- -------- --------
OPERATING INCOME 38,135 48,677 53,632
Interest income 670 307 931
Interest expense 57,336 49,514 31,190
Other expense (income), net 1,710 (1,668) 5,540
Minority interest in loss of subsidiary 50 717
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES,
REORGANIZATION ITEMS
AND EXTRAORDINARY ITEMS (20,241) 1,188 18,550
Reorganization items, net 104,745
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS (20,241) 1,188 (86,195)
Income tax provision (benefit) (2,918) 4,800 12,000
-------- -------- --------
(LOSS) BEFORE EXTRAORDINARY ITEMS (17,323) (3,612) (98,195)
Extraordinary gain (loss), net of tax (4,196) 183,784
-------- -------- --------
NET INCOME (LOSS) $(21,519) $ (3,612) $ 85,589
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES 13,516,771 13,500,703 320
========== ========== ===
PER SHARE AMOUNTS:
(LOSS) BEFORE EXTRAORDINARY ITEMS $ (1.28) $ (.27) $(306,859)
======== ========== =========
NET INCOME (LOSS) $ (1.59) $ (.27) $ 267,466
======== ========== =========
Due to the implementation of the Plan of Reorganization and Fresh Start
Reporting, the consolidated statement of operations for the fiscal years
ended December 28, 1995 and December 29, 1994 are not comparable to the
fiscal year ended December 31, 1993. (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 STOCKHOLDERS' EQUITY (DEFICIT)
Cumulative
Foreign Total
Currency Stockholders'
Common Paid in Accumulated Translation Equity
Stock Capital (Deficit) Adjustments (Deficit)
------ ------- ----------- ----------- ----------
(in thousands)
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
Net (loss) (21,519) (21,519)
Issuance of Common Stock 1 (1)
Translation adjustments 3,266 3,266
---- -------- -------- ------- --------
Balance December 28, 1995 $136 $134,864 $(25,131) $7,227 $117,096
==== ======== ======== ====== ========
Due to the implementation of the Plan of Reorganization and
Fresh Start Reporting, the stockholders' equity for the fiscal
years ended December 28, 1995 and December 29, 1994 are not
comparable to the fiscal year ended December 31, 1993. (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
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
(in thousands)
Cash flows from operating activities:
(Loss) before extraordinary item $(17,323) $ (3,612) $ (98,195)
Extraordinary gain (loss) (4,196) 183,784
-------- -------- ---------
Net income (loss) (21,519) (3,612) 85,589
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortization
under capital leases 40,262 35,775 36,687
Amortization of intangibles and
excess reorganization value 15,799 15,612 15,711
Amortization of deferred financing
fees and discount 2,196 1,569 2,418
Increase (decrease) in deferred
and noncurrent income taxes (6,450) (52) 9,547
Loss on debt extinguishment 6,778
Foreign currency transaction loss (gain) (1,233) (3,465) 3,380
Loss (gain) on sales of property,
plant and equipment 73 (9) 650
Reorganization items and
fresh start reporting (79,039)
Changes in operating assets
and liabilities:
Accounts receivable (839) (11,257) (1,319)
Inventories 12,741 (10,548) 4,163
Other current assets (1,837) (1,607) (2,152)
Accounts payable and
accrued liabilities (1,670) 3,774 15,894
Other (5,334) (2,894) 672
-------- -------- ---------
Total adjustments 60,486 26,898 6,612
-------- -------- ---------
Net cash provided by
operating activities before
reorganization expense 38,967 23,286 92,201
Net cash used for
reorganization items (14,929)
-------- -------- ---------
Total net cash provided by
operating activities 38,967 23,286 77,272
Cash flows from investing activities:
Capital expenditures (34,465) (32,566) (40,887)
Proceeds from sale of property,
plant and equipment 86 359 124
Purchase of minority interest
in subsidiary (4,200)
-------- -------- ---------
Net cash (used in) investing
activities (34,379) (36,407) (40,763)
Cash flows from financing activities:
Proceeds from revolving loan and
long-term borrowings 207,922 37,668 106,003
Deferred financing costs (7,887) (1,608) (9,779)
Repayment of revolving loan,
long-term borrowings and
capital lease obligations (181,375) (22,617) (138,736)
-------- -------- ---------
Net cash provided by (used in)
financing activities 18,660 13,443 (42,512)
Effect of currency exchange
rate changes on cash (212) (776) (316)
-------- -------- ---------
Net increase (decrease) in cash
and equivalents 23,036 (454) (6,319)
Cash and equivalents at
beginning of period 7,289 7,743 14,062
-------- -------- ---------
Cash and equivalents at end of period $30,325 $ 7,289 $ 7,743
======= ======== =========
- ---------------------------------------------------------------------------------------------------
Supplemental cash flow information and
noncash investing and financing activities:
Interest paid $55,030 $ 43,484 $ 28,001
Income taxes paid $ 4,895 $ 5,058 $ 1,154
Capital lease obligations
(machinery and equipment) $ 2,081
Due to the implementation of the Plan of Reorganization and Fresh Start
Reporting, the consolidated statement of cash flows for the fiscal years
ended December 28, 1995 and December 29, 1994 are not comparable to the
fiscal year ended December 31, 1993. (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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. CHAPTER 11 REORGANIZATION PROCEEDINGS (dollars in thousands)
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 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 became entitled to receive a pro
rata portion of $219,262 principal amount of 10 1/4% Senior
Notes Due 2001 (10 1/4% Notes).
-- Holders of Envirodyne's former $200,000 principal amount of
14% Senior Subordinated Debentures Due 2001 (Old 14%
Debentures), with accrued but unpaid interest through
January 6, 1993 of $42,812 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 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
$13,604 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 five hundred
dollars 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. If
the allowed amount of general unsecured claims of Envirodyne
exceeds $125, 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 five hundred dollars in claims in the
event allowed general unsecured claims of Envirodyne are
between $125 and $25,000; (ii) approximately 5.61 additional
shares per five hundred dollars in claims in the event
allowed general unsecured claims of Envirodyne are between
$25,000 and $50,000; (iii) approximately 9.22 additional
shares per five hundred dollars in claims in the event
allowed general unsecured claims of Envirodyne are between
$50,000 and $75,000; and (iv) approximately 13.58 additional
shares per five hundred dollars in claims in the event
allowed general unsecured claims of Envirodyne are between
$75,000 and $100,000. Refer to Note 23 for discussion on
certain settled claims and open 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 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 was
based on the consideration of many factors and various valuation
methods, including discounted cash flows and comparable multiples of
earnings valuation techniques believed by management and its
financial advisors to be representative of the Company's business and
industry. Factors considered by the Company included the following:
. Forecasted operating and cash flow results which gave effect
to the estimated impact of debt restructuring and other
operational reorganization.
. Discounted residual value at the end of the forecasted period
based on the capitalized cash flows for the last year of that
period.
. Competition and general economic considerations.
. Projected sales growth.
. Potential profitability.
. Seasonality and working capital requirements.
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 Company continues
to evaluate the recoverability of excess reorganization value based
on the operating performance and expected future undiscounted cash
flows of the operating business units.
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
(Expense)
Reorganization Items
- ----------------------- -------------
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 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 417,780
Selling, general and administrative 99,350
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. NATURE OF BUSINESS
Envirodyne manufactures food packaging products and foodservice
supplies through three primary operating subsidiaries - Viskase,
Sandusky and Clear Shield. The operations of these subsidiaries are
primarily in North and South America and Europe. Viskase is a 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, 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, the Company is a major
domestic producer of disposable plastic cutlery, drinking straws,
custom dining kits and related products.
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 56% 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.
All of Sandusky's and Clear Shield's operations are located in the
United States.
Sales and Distribution
Viskase sells its products in virtually every country in the world
with principal markets in North America, Europe, Latin America and
Asia Pacific. 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, Russia, 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
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, Pulheim, Germany, and Moscow, Russia. Viskase also operates a
service center in Brisbane, Australia. These service centers provide
finishing, inventory and delivery services to Viskase customers.
Sandusky's and Clear Shield's sales are predominantly in the United
States.
Competition
Viskase is one of the world's leading producers of cellulosic casings
and a major producer of films. From time to time, Viskase experiences
reduced market share or reduced profits due to price competition;
however, management believes that such market conditions will not
result in any long-term material loss of business.
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'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
management 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.
3. 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 years' financial
statements to conform to the 1995 presentation.
(C) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
(D) Cash equivalents (dollars in thousands)
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 equivalents include
$24,536 and $821 of short-term investments at December 28, 1995 and
December 29, 1994, respectively.
(E) 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.
(F) 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).
(G) Deferred financing costs
Deferred financing costs are amortized on a straight-line basis over
the expected term of the related debt agreement. Amortization of
deferred financing costs is classified as interest expense.
(H) Patents
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
The carrying value of patents is periodically reviewed by the Company
and impairments are recognized when the expected undiscounted future
operating cash flows derived from such patents is less than the
carrying value. If impairment is identified, valuation techniques
deemed appropriate under the particular circumstances will be used to
determine the asset's fair value. The loss will be measured based on
the excess of carrying value over the determined fair value. The
review for impairment is performed at least on a quarterly basis.
(I) Excess reorganization value and excess investment over net
assets acquired, net
Excess reorganization value is amortized on the straight-line method
over 15 years. Accumulated amortization of excess reorganization
value totaled $20 million and $10 million at December 28, 1995, and
December 29, 1994, respectively.
Cost in excess of net assets acquired, net was amortized on a
straight-line method over 40 years in fiscal 1993.
The Company continues to evaluate the recoverability of excess
reorganization value based on operating performance and undiscounted
cash flows of the operating business units. Impairment will be
recognized when the expected undiscounted future operating cash flows
derived from such intangible is less than its carrying value. If
impairment is identified, valuation techniques deemed appropriate
under the particular circumstances will be used to determine the
intangible's fair value. The loss will be measured based on the
excess of carrying value over the determined fair value. The review
for impairment is performed at least on a quarterly basis.
(J) 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.
(K) 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."
(L) 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.
(M) Income taxes
Income taxes are accounted for in accordance with SFAS No. 109. Tax
provisions and benefits are recorded at statutory rates for taxable
items included in the consolidated statements of operations
regardless of the period for which such items are reported for tax
purposes. Deferred income taxes are recognized for temporary
differences between financial statement and income tax bases of
assets and liabilities for which income tax benefits will be realized
in future years.
(N) 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.
(O) Revenue recognition
Sales to customers are recorded at the time of shipment net of
discounts and allowances.
(P) Foreign currency contracts
The Company maintains a hedging program to partially hedge its
forecasted foreign currency revenue cash flows. The hedging program
principally addresses revenue cash flows within its European
operations. The foreign exchange contracts are denominated
predominantly in the major European currencies and have varying
maturities up to eighteen months. 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 additional 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.
(Q) Stock-based compensation
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" encourages, but does not require, companies
to recognize compensation expense for grants of stock, stock options
and other equity instruments to employees based on new fair value
acounting rules. Although expense recognition for employee stock-
based compensation is not mandatory, SFAS 123 requires companies that
choose not to adopt the new fair value accounting to disclose pro
forma net income and earnings per share under the new method. This
new accounting principle is effective for the Company's fiscal year
ending December 26, 1996. The Company believes that adoption is not
expected to have a material impact on its financial condition as the
Company will not adopt the fair value accounting, but will instead
comply with the disclosure requirements.
4. RECEIVABLES (dollars in thousands)
Receivables consisted primarily of trade accounts receivable and were
net of allowances for doubtful accounts of $3,224 and $2,136 at
December 28, 1995, and at December 29, 1994, respectively.
Envirodyne has a broad base of customers, with no single customer
accounting for more than 5% of sales.
5. INVENTORIES (dollars in thousands)
Inventories consisted of:
December 28, December 29,
1995 1994
----------- -----------
Raw materials $17,150 $20,358
Work in process 32,800 37,613
Finished products 49,524 52,512
------- --------
$99,474 $110,483
======= ========
Approximately 54% and 55% of the Company's inventories at
December 28, 1995, and December 29, 1994, respectively, were valued
at LIFO. These LIFO values exceeded current manufacturing cost by
approximately $4,000 and $7,000 at December 28, 1995, and
December 29, 1994, respectively. Inventories were net of reserves for
obsolete and slow moving inventory of $3,818 and $5,353 at
December 28, 1995, and December 29, 1994, respectively.
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.
The principal raw materials used by Sandusky and Clear Shield are
thermoplastic resins, which are readily available from several
domestic sources.
6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands)
December 28, December 29,
1995 1994
----------- -----------
Property, plant and equipment:
Land and improvements $ 16,369 $ 15,930
Buildings and improvements 81,767 76,202
Machinery and equipment 292,176 256,621
Construction in progress 15,938 20,178
Capital leases:
Machinery and equipment 139,241 137,168
-------- --------
$545,491 $506,099
======== ========
Maintenance and repairs charged to costs and expenses for 1995, 1994,
and 1993 aggregated $33,227, $33,045 and $32,636, respectively.
Depreciation is computed on the straight-line method over the
estimated useful lives of the assets ranging from 3 to 32 years.
7. OTHER ASSETS (dollars in thousands)
Other assets were comprised of:
December 28, December 29,
1995 1994
----------- -----------
Patents $50,000 $50,000
Less accumulated amortization 10,000 5,000
------- -------
Patents, net 40,000 45,000
Other 5,589 2,181
------- -------
$45,589 $47,181
======= =======
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
8. ACCRUED LIABILITIES (dollars in thousands)
Accrued liabilities were comprised of:
December 28, December 29,
1995 1994
----------- -----------
Compensation and employee benefits $31,997 $33,521
Taxes, other than on income 6,535 6,454
Accrued interest 2,535 3,630
Accrued volume and sales discounts 13,218 11,958
Accrued reorganization fees
and expenses 2,027 3,167
Other 11,241 13,516
------- -------
$67,553 $72,246
======= =======
9. DEBT OBLIGATIONS (dollars in thousands)
On June 20, 1995, Envirodyne completed the sale of $160,000 aggregate
principal amount of senior secured notes (Senior Secured Notes) to
certain institutional investors in a private placement. The senior
secured notes were issued pursuant to an indenture dated June 20,
1995 (Indenture) and consist of (i) $151,500 of 12% Senior Secured
Notes due 2000 and (ii) $8,500 of Floating Rate Senior Secured Notes
due 2000 (collectively, the Senior Secured Notes). Envirodyne used
the net proceeds of the offering primarily to (i) repay the Company's
$86,125 domestic term loan, (ii) repay the $68,316 of obligations
under the Company's domestic and foreign revolving loans and (iii)
pay transaction fees and expenses. Concurrently with the June 20,
1995 placement, Envirodyne entered into a new $20,000 domestic
revolving credit facility (Revolving Credit Facility) and a new
$28,000 letter of credit facility (Letter of Credit Facility). The
Senior Secured Notes and the obligations under the Revolving Credit
Facility and the Letter of Credit Facility are guaranteed by
Envirodyne's significant domestic subsidiaries and secured by a
collateral pool (Collateral Pool) comprised of: (i) all domestic
accounts receivable (including intercompany receivables) and
inventory; (ii) all patents, trademarks and other intellectual
property (subject to non-exclusive licensing agreements); (iii)
substantially all domestic fixed assets (other than assets subject to
a lease agreement with General Electric Capital Corporation); and
(iv) a senior pledge of 100% of the capital stock of Envirodyne's
significant domestic subsidiaries and 65% of the capital stock of
Viskase S.A. Such guarantees and security are shared by the holders
of the Senior Secured Notes and the holders of the obligations under
the Revolving Credit Facility on a pari passu basis pursuant to an
intercreditor agreement. Pursuant to such intercreditor agreement,
the security interest of the holders of the obligations under the
Letter of Credit Facility has priority over all other liens on the
Collateral Pool.
The Company finances its working capital needs through a combination
of cash generated through operations and borrowings under the
Revolving Credit Facility. The availability of funds under the
Revolving Credit Facility is subject to the Company's compliance with
certain covenants (which are substantially similar to those included
in the Indenture), borrowing base limitations measured by accounts
receivable and inventory of the Company and reserves which may be
established at the discretion of the lenders. Currently, there are no
drawings under the Revolving Credit Facility. The available borrowing
capacity under the Revolving Credit Facility was $20 million at
December 28, 1995.
The Company recognized an extraordinary loss of $6,778 representing
the write-off of deferred financing fees related to the June 20, 1995
debt refinancing. The extraordinary loss, net of applicable income
taxes of $2,582, was included in the Company's Statement of
Operations for the quarter ended June 29, 1995.
The $151,500 tranche of Senior Secured Notes bears interest at a rate
of 12% per annum and the $8,500 tranche bears interest at a rate
equal to the six month London Interbank Offered Rate (LIBOR) plus 575
basis points. The current interest rate on the floating rate tranche
is approximately 11.4%. The interest rate on the floating rate
tranche is reset semi-annually on June 15 and December 15. Interest
on the Senior Secured Notes is payable each June 15 and December 15.
On June 15, 1999, $80,000 of the aggregate principal amount of the
Senior Secured Notes is subject to a mandatory redemption. The
remaining principal amount outstanding will mature on June 15, 2000.
In the event the Company has Excess Cash Flow (as defined) in excess
of $5,000 in any fiscal year, beginning with fiscal 1995, Envirodyne
will be required to make an offer to purchase Senior Secured Notes
together with any borrowed money obligations outstanding under the
Revolving Credit Facility, on a pro rata basis, in an amount equal to
the Excess Cash Flow at a purchase price of 100% plus any accrued
interest to the date of purchase. There was no Excess Cash Flow for
fiscal 1995.
The Senior Secured Notes are redeemable, in whole or from time to
time in part, at Envirodyne's option, at the greater of (i) the
outstanding principal amount or (ii) the present value of the
expected future cash flows from the Senior Secured Notes discounted
at a rate equal to the Treasury Note yield corresponding closest to
the remaining average life of the Senior Secured Notes at the time of
prepayment plus 100 basis points; plus accrued interest thereon
----
to the date of purchase.
Upon the occurrence of a Change of Control (which includes the
acquisition by any person of more than 50% of Envirodyne's Common
Stock), each holder of the Senior Secured Notes has the right to
require the Company to repurchase such holder's Senior Secured Notes
at a price equal to the greater of (i) the outstanding principal
amount or (ii) the present value of the expected cash flows from the
Senior Secured Notes discounted at a rate equal to the Treasury Note
yield corresponding closest to the remaining average life of the
Senior Secured Notes at the time of prepayment plus 100 basis points;
plus accrued interest thereon to the date of purchase.
- ----
The 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
or redeem or repurchase common stock, (ii) the incurrence of
indebtedness, (iii) the creation of liens, (iv) certain affiliate
transactions and (v) the ability to consolidate with or merge into
another entity and to dispose of assets.
Borrowings under the Revolving Credit Facility bear interest at a
rate per annum equal to the three month London Interbank Offered Rate
(LIBOR) on the first day of each calendar quarter plus 300 basis
points. The Revolving Credit Facility expires on June 20, 1998.
Envirodyne has entered into interest rate agreements that cap $50
million of interest rate exposure at an average LIBOR rate of 6.50%
until January 1997. These interest rate cap agreements were entered
into under terms of the senior bank financing that was repaid on June
20, 1995. Interest expense includes $613 of amortization of the
interest rate cap premium during fiscal 1995. Envirodyne has not
received any payments under the interest rate protection agreements.
The Letter of Credit Facility expires on June 20, 1998. Fees on the
outstanding amount of letters of credit are 2.0% per annum, with an
issuance fee of 0.5% on the face amount of the letter of credit.
There is a commitment fee of 0.5% per annum on the unused portion of
the Letter of Credit Facility.
Had the refinancing taken place at the beginning of 1995, the pro
forma Envirodyne consolidated statement of operations would have
been:
(in thousands, except for number of shares and per share amounts)
Pro forma December 30, 1994
to December 28, 1995
---------------------------
Net sales $650,212
Cost of sales 485,048
Selling, general and administrative 111,230
Amortization of intangibles and
excess reorganization cost 15,799
--------
Operating income 38,135
Interest income 670
Interest expense 60,213
Other expense (income), net 1,710
--------
(Loss) before income taxes (23,118)
Income tax (benefit) (4,040)
---------
Net (loss) $ (19,078)
=========
Weighted average common shares 13,516,771
Net (loss) per share $(1.41)
======
The pro forma information reflects the change in interest expense and
related tax effect due to the issuance of $160 million principal
amount of Senior Secured Notes and the refinancing of the Company's
bank debt.
The $219,262 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 twelve-month period commencing on
January 1 of the following years:
Year Percentage
- ------ ----------
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.
Outstanding short-term and long-term debt consisted of:
December December
28, 1995 29, 1994
---------- ---------
Short-term debt, current maturity of
long-term debt and capital lease
obligations:
Current maturity of Bank Term Loan $11,100
Current maturity of Viskase Capital
Lease Obligation $ 6,012 5,450
Current maturity of Viskase Limited
Term Loan (4.7%) 2,033 1,882
Other 4,459 7,366
------- -------
Total short-term debt $12,504 $25,798
======= =======
Long-term debt:
Bank Credit Agreement:
Term Loan due 1999 $ 80,575
Revolving Loan due 1999 32,524
12% Senior Secured Notes due 2000 $160,000
10.25% Senior Notes due 2001 219,262 219,262
Viskase Capital Lease Obligation 141,182 147,194
Viskase Limited Term Loan (4.7%) 7,115 8,466
Other 2,622 1,337
-------- --------
Total long-term debt $530,181 $489,358
======== ========
The fair value of the Company's debt obligation (excluding capital
lease obligations) 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 28, 1995, the carrying amount and estimated fair value of
debt obligations (excluding capital lease obligations) were $393,432
and $318,053, respectively.
The average interest rate on short-term borrowing during 1995 was
10.1%.
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. Sales proceeds on the
sale-leaseback transaction were $171.5 million; proceeds were used to
repay approximately $154 million of bank debt and a $15 million
convertible note outstanding at the time. 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 million currently if the Company
achieves and maintains certain financial ratios. As of December 28,
1995, the Company had met the required financial ratios and the
letter of credit has been reduced by $4 million. The letter 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 1996 GECC lease payment of $19,227 was paid on February 28, 1996.
Principal payments under the capital lease obligations for the years
ended 1996 through 2000 range from approximately $6 million to
$14 million.
The following is a schedule of minimum future lease payments under
the capital lease obligations together with the present value of the
net minimum lease payments as of December 28, 1995:
Year ending December
1996 $ 19,714
1997 19,658
1998 21,636
1999 23,766
2000 23,766
Thereafter 118,028
--------
Net minimum lease payments 226,568
Less: Amount representing interest (77,315)
--------
$149,253
========
Aggregate maturities of remaining long-term debt for each of the next
five fiscal years are:
Total
-------
1996 $ 9,019
1997 9,418
1998 12,313
1999 95,477
2000 95,669
10. OPERATING LEASES (dollars in thousands)
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 28, 1995, are:
1996 $3,033
1997 2,291
1998 1,708
1999 588
2000 375
Total thereafter
------
Total minimum lease payments $7,995
======
Total rent expense during 1995, 1994 and 1993 amounted to $6,749,
$5,982 and $5,401, respectively.
11. RETIREMENT PLANS
The Company and its subsidiaries have defined contribution and
defined benefit plans varying by country and subsidiary.
At December 28, 1995, 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. The Company's policy is
to fund the minimum actuarially computed annual contribution required
under the Employee Retirement Income Security Act of 1974 (ERISA).
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 (dollars in thousands):
Net pension cost for the Viskase North American plans consisted of:
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
Service cost -- benefits
earned during the year $3,238 $ 3,662 $ 3,186
Interest cost on projected
benefit obligation 4,794 4,249 4,000
Actual (gain) loss on
plan assets (7,012) 874 (2,306)
Net amortization and deferral 4,086 (3,696) (74)
------ ------- -------
Net pension cost $5,106 $ 5,089 $ 4,806
====== ======= =======
The amounts included in the consolidated balance sheet for the North
American plans of Viskase were:
December 28, December 29,
1995 1994
----------- -----------
Actuarial present value of
benefit obligation:
Vested benefits $45,208 $39,165
Nonvested benefits 4,435 4,316
------- -------
Accumulated benefit obligation 49,643 43,481
Effect of projected future
compensation increases 16,566 16,651
------- -------
Projected benefit obligation 66,209 60,132
Plan assets at fair value,
primarily listed stocks and investment
grade corporate bonds 43,190 33,678
------- -------
Amount underfunded 23,019 26,454
Unrecognized gain (loss) 7,578 3,778
Unrecognized prior service costs 63 71
------- -------
Accrued liability included
in consolidated balance sheet $30,660 $30,303
======= =======
Assumed discount rate 7.5% 8.0%
Assumed long-term compensation factor 4.5% 5.0%
Assumed long-term return on plan assets 8.5% 8.5%
SAVINGS PLANS (dollars in thousands):
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 $2,134, $2,109 and
$2,026 in 1995, 1994, and 1993, respectively.
INTERNATIONAL PLANS (dollars in thousands):
The Company maintains various pension and statutory separation pay
plans for its European employees. The expense for these plans in
1995, 1994 and 1993 was $1,383, $1,043 and $864, 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 $2,856;
conversely,
plan assets exceeded the vested benefits in certain other plans by
approximately $2,346.
OTHER POSTRETIREMENT BENEFITS (dollars in thousands):
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 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 on a prospective basis for $6,500. The transaction
obligation was to be amortized over 20 years. Subsequently, Fresh
Start Reporting resulted 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 1995 and 1994 includes the following
components:
Medical Life Total
-------------------- ------------------- --------------------
1995 1994 1995 1994 1995 1994
------- -------- ------- -------- ------ --------
Components of net periodic
postretirement
benefit cost:
Service cost -- benefits earned
during the current year $413 $ 511 $ 162 $ 176 $ 575 $ 687
Interest cost -- on accumulated post-
retirement benefit obligation 1,182 1,208 472 442 1,654 1,650
Amortization of unrecognized transition
benefit (73) (17) (90)
------- -------- -------- ------- ------- --------
Net periodic benefit cost $1,522 $ 1,719 $ 617 $ 618 $2,139 $ 2,337
======= ======== ======== ======= ======= ========
Actuarial present value of
benefit obligations:
Retirees $6,937 $ 6,836 $ 2,745 $2,184 $ 9,682 $ 9,020
Fully eligible active participants 2,309 2,238 2,409 2,435 4,718 4,673
Other active participants 7,411 7,660 1,624 1,612 9,035 9,272
------- -------- -------- ------- ------- --------
Total 16,657 16,734 6,778 6,231 23,435 22,965
Unrecognized gains 1,616 979 622 581 2,238 1,560
Unrecognized prior service costs (109) (109)
------- -------- -------- ------- ------- --------
Accumulated postretirement
benefit obligation $18,164 $17,713 $ 7,400 $6,812 $25,564 $24,525
======= ======== ======== ======= ======= ========
Assumed discount rate 7.50%
Assumed medical trend rate 11.00% in 1995 decreasing to 6.50% in 2004
Assumed long-term compensation factor 4.50%
(/TABLE>
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 28, 1995 and December 29, 1994 by
$178 and $198, respectively, and the service and interest cost
components for 1995 and 1994 by a total of $16 and $22,
respectively.
EMPLOYEE RELATIONS
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. Employees at
the Company's European plants are unionized with negotiations
occurring at both local and national levels. Contracts have
recently been reached with certain of the European unions. Based on
past experience and current conditions, the Company does not expect
a protracted work stoppage to occur; however, national events
outside of the Company's control may give rise to such risk. 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 514 employees are
represented by unions. Certain of the hourly production personnel
at Sandusky's Ohio thermoforming facility are members of a union.
As of December 28, 1995, approximately 1,675 of the Company's
employees are covered by collective bargaining agreements that will
expire within one year.
12. INCOME TAXES (dollars in thousands)
The provision (benefit) for income taxes consisted of:
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -------------
Current:
Federal $ 200
Foreign $ 950 4,652 $ 2,453
State and local
------ ------ -------
$ 950 4,852 2,453
------ ------ -------
Deferred:
Federal (7,219) (194) 17,188
Foreign 2,098 128 (1,434)
State and local (1,329) 14 2,093
------- ------ -------
(6,450) (52) 17,847
------- ------ -------
$(5,500) $4,800 $20,300
======= ====== =======
The income tax benefit for the 1995 period was allocated between
loss before extraordinary loss for $2,918 and to the extraordinary
loss for $2,582.
The income tax expense for the 1993 period was allocated between
loss before extraordinary gain for $12,000 and to the extraordinary
gain for $8,300.
A reconciliation from the statutory federal tax rate to the
consolidated effective tax rate follows:
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -------------
Statutory federal tax rate (35.0)% 35.0% 35.0%
Increase (decrease)
in tax rate due to:
State and local taxes net
of related federal
tax benefit (3.2) .8 1.3
Net effect of taxes
relating to foreign
operations .8 140.3 1.5
Intangibles amortization 9.4 214.1 2.3
Non-taxable debt discharge
income, fresh start
accounting
and other bankruptcy
related expenses (22.9)
Other 7.6 13.8 2.0
---- ----- -----
Consolidated effective
tax rate (20.4)% 404.0% 19.2%
===== ===== =====
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1995 are as follows:
Temporary Difference Tax Effected
-------------------------- ---------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
------------ ------------ ------------ ------------
Depreciation basis differences $296,263 $113,094
Inventory basis differences 28,097 10,976
Intangible basis differences 37,603 14,665
Lease transaction $147,194 $57,406
Pension and healthcare 56,545 22,067
Employee benefits accruals 13,544 5,282
Valuation allowances 3,209 1,252
Other accruals and reserves 6,673 2,602
Foreign exchange and other 648 70,720 216 27,580
-------- -------- ------- --------
$227,813 $432,683 $88,825 $166,315
-------- -------- ------- --------
At December 28, 1995, the Company had $11,136 of undistributed
earnings of foreign subsidiaries considered permanently invested
for which deferred taxes have not been provided.
At December 28, 1995, the Company had federal income tax net
operating loss carryforwards of approximately $28 million. Such
losses will expire in the year 2009, 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.
Domestic earnings or (losses) after extraordinary gain or loss and
before income taxes were approximately $(30,138), $(7,705) and
$107,622 in 1995, 1994 and 1993, respectively. Foreign earnings or
(losses) before income taxes were approximately $3,118, $8,893 and
$(1,733) in 1995, 1994 and 1993, respectively.
The Company joins in filing a U.S. consolidated federal income tax
return including all of its domestic subsidiaries.
13. COMMITMENTS
As of December 28, 1995, the Company had capital expediture
commitments outstanding of approximately $3.7 million.
14. CONTINGENCIES (dollars in thousands)
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 were seeking substantial
damages. In March 1996, Envirodyne completed a settlement of the
lawsuit under which Envirodyne was released and discharged from all
claims in exchange for 900,000 shares of Envirodyne common stock
without any admission or finding of liability or wrongdoing.
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 breach of fiduciary duty,
fraudulent and negligent misrepresentation and breach of contract
in connection with the 1989 acquisition of Envirodyne by Emerald.
The plaintiff seeks damages in the total amount of $136.2 million
plus interest and punitive damages of $408.6 million. 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 Company is not a party to either case, 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.
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 sought to
equitably subordinate the claims of the holders of untendered
shares, so that such holders would not receive a distribution under
the Plan of Reorganization. The Bankruptcy Court granted
Envirodyne's motion for summary judgment and equitably subordinated
the claims of the holders of untendered shares to the claims of
other general unsecured creditors. Certain of the affected holders
appealed and both the U.S. District Court and the U.S. Seventh
Circuit Court of Appeals affirmed the Bankruptcy Court decision.
The time period for further appeal has not passed. Envirodyne
believes that, even in the event of further appeal, if any, and
reversal of the prior decisions, the maximum number of shares of
common stock that it would be required to issue to such claimants
is approximately 106,000.
Clear Shield National, Inc. and some of its employees have received
subpoenas from the Antitrust Division of the United States
Department of Justice relating to a grand jury investigation of the
disposable plastic cutlery industry. The U.S. Department of Justice
has advised a former officer and an existing employee that they are
targets of the investigation. Both individuals were invited to
appear and testify before the grand jury but both declined. Clear
Shield National is cooperating fully with the investigation.
In February 1996 Clear Shield National and three other plastic
cutlery manufacturers were named as defendants in the following
three civil complaints: Eisenberg Brothers, Inc., on behalf of
--------------------------------------
itself and all others similarly situated, v. Amcel Corp., Clear
- ---------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark
- ------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Civil Action No. 96-728,
- -----------------------------------
United States District Court for the Eastern District of
Pennsylvania; St. Cloud Restaurant Supply Company v. Amcel Corp.,
-------------------------------------------------
Clear Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark
- ------------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Case No. 96C 0777, United
- -----------------------------------
States District Court for the Northern District of Illinois,
Eastern Division; and Servall Products, Inc., on behalf of itself
-------------------------------------------
and all others similarly situated, v. Amcel Corporation, Clear
- --------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corporation and Benchmark
- ------------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Civil Action No. 96-1116,
- -----------------------------------
United States District Court for the Eastern District of
Pennsylvania. Each of the complaints alleges, among other things,
that from October 1990 through April 1992 the defendants unlawfully
conspired to fix the prices at which plastic cutlery would be sold.
The Company has informed the plaintiffs that such claims as they
relate to Clear Shield were discharged by the order of the
Bankruptcy Court and Plan of Reorganization and that the plaintiffs
are permanently enjoined from pursuing legal action to collect
discharged claims.
On February 27, 1996, the plaintiff in the St. Cloud case
---------
voluntarily dismissed the action without prejudice and refiled its
action in the U.S. District Court for the Eastern District of
Pennsylvania but did not name Clear Shield National as a defendant.
On March 14, 1996, Eisenberg Brothers Inc. filed a motion in Clear
Shield National's Bankruptcy proceeding in the U.S. Bankruptcy
Court for the Northern District of Illinois, Eastern Division.
Eisenberg Brothers Inc.'s motion contends that the Bankruptcy
Court's order did not discharge the plaintiff's claim.
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.
15. 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. 13,579,460 shares of common stock were issued and
outstanding as of December 28, 1995. In accordance with the Plan of
Reorganization, an additional 64,460 shares of common stock and
15,000 shares of common stock were issued to the general unsecured
creditors of Envirodyne during 1995 and 1994, respectively. (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, exercisable at any time until December 31, 1998.
Each warrant was initially exercisable for one share of common
stock at an initial exercise price of $17.25 per share. The
exercise price and the number of shares of common stock for which
a warrant is exercisable were adjusted as a result of the issuance
of certain shares of Envirodyne after the consummation of the Plan
of Reorganization, including the issuance of shares in settlement
of the SMD lawsuit discussed in Note 14. Under terms of the warrant
agreement, the exercise price has been adjusted from $17.25 to
$16.08 per share and the number of common shares for which each
warrant is exercisable has been adjusted from 1.000 share to 1.073
shares.
16. STOCK OPTIONS
At December 28, 1995, 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, subject to the acceleration
of exercisability upon the occurrence of certain events. Such an
acceleration event occurred in both November 1994 and August 1995.
During 1995, each non-employee director of the Company received
options to purchase 2,000 shares of stock at not less than the fair
market value of the shares on the date of grant. The non-employee
director options are fully exercisable upon issuance. Pursuant to
the 1993 Stock Option Plan, on the date of each subsequent annual
meeting of stockholders, non-employee directors will automatically
be granted non-qualified options to purchase 1,000 shares of Common
Stock at an option exercise price equal to the fair market value of
a share of Common Stock on the date of grant.
Stock option activity for the years ended December 28, 1995 and
December 29, 1994 were:
Number of
Option Option Price
Shares Per Share
--------- ------------
Outstanding, December 31, 1993
Granted 402,020 $5.06
Exercised
Terminated (13,100) 5.06
-------
Outstanding, December 29, 1994 388,920 5.06
Granted 97,200 5.06
Exercised
Terminated (61,890) 5.06
-------
Outstanding, December 28, 1995 424,230 5.06
=======
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (dollars in thousands)
The following table presents the carrying value and estimated fair
value as of December 28, 1995 of the Company's financial
instruments. (Refer to Notes 3 and 9.)
Carrying Estimated
Value Fair Value
-------- -----------
Assets:
Cash and equivalents $ 30,325 $ 30,325
Foreign currency contracts 3,397 3,377
Interest rate agreements 561 3
Liabilities:
Long-term debt (excluding capital leases) 393,432 318,053
18. PATENT LITIGATION SETTLEMENT (dollars in thousands)
In 1989 certain competitors of Viskase filed a declaratory action
challenging the validity and enforceability of a Viskase patent
relating to casings used in the manufacture of food products. In
May 1994, the trial court upheld the validity and enforceability of
the Viskase patent and found infringement of the patent. Before the
trial on damages was conducted, Viskase entered into agreements to
settle the claims and grant licenses to the competitors. Under the
terms of these agreements Viskase received $9,457 for past
infringement and advance royalties and established royalty rates
for future patent use.
19. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands)
Research and development costs are expensed as incurred and totaled
$11,034, $16,852 and $15,216, for 1995, 1994, and 1993,
respectively.
20. RELATED PARTY TRANSACTIONS (dollars in thousands)
During fiscal 1995, 1994 and 1993, the Company paid DPK $770 for
management services. In fiscal 1995, 1994 and 1993, the Company
made payments of approximately $156, $560 and $354, respectively,
to an affiliate of DPK for the use of a jet aircraft on an
as-needed basis.
During fiscal 1995, 1994, and 1993, the Company purchased product
and services from affiliates of DPK in the amounts of approximately
$1,537, $1,367 and $941, respectively. During fiscal 1995, 1994,
and 1993, the Company sublet office space from DPK for which it
paid approximately $151, $151 and $150, respectively, in rent.
During fiscal 1995, the Company reimbursed a non-affiliated medical
plan in the aggregate amount of $79,344 for medical claims of
Messrs. Kelly, Gustafson and Corcoran.
During fiscal 1995 and 1994, the Company advanced funds to and made
payments on behalf of DPK and Donald P. Kelly in the amounts of
approximately $52 and $118, respectively, for legal fees related to
the litigation involving ARTRA Group Incorporated (refer to
Note 14).
21. BUSINESS SEGMENT INFORMATION AND GEOGRAPHIC
AREA INFORMATION (dollars in thousands)
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/South America and Europe.
Intercompany sales and charges (including royalties) have been
reflected as appropriate in the following information. Other income
for 1995, 1994, and 1993 includes net foreign exchange transaction
gains (losses) of approximately $(61), $2,707, and $(4,631),
respectively.
Business Segment Information
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
Net sales:
Food packaging products $574,266 $530,179 $522,363
Disposable foodservice supplies 76,138 68,996 66,383
Other and eliminations (192) (146) (1,361)
-------- -------- --------
$650,212 $599,029 $587,385
======== ======== ========
Earnings before income taxes:
Operating income:
Food packaging products $39,183 $ 48,145 $ 53,432
Disposable foodservice supplies 4,959 6,514 5,223
Unallocated expenses, net
-- primarily corporate (6,007) (5,982) (5,023)
-------- -------- --------
38,135 48,677 53,632
Interest expense, net 56,666 49,207 30,259
Other expense (income), net 1,710 (1,668) 5,540
Minority interest in
loss of subsidiary 50 717
-------- -------- --------
$(20,241) $ 1,188 $ 18,550
======== ======== ========
Identifiable assets:
Food packaging products $796,655 $814,731 $790,125
Disposable foodservice supplies 69,812 71,530 64,879
Corporate and other,
primarily cash equivalents 33,100 10,375 12,676
-------- -------- --------
$899,567 $896,636 $867,680
======== ======== ========
Depreciation and amortization
under capital lease and
amortization of intangibles expense:
Food packaging products $51,404 $ 47,207 $ 46,715
Disposable foodservice supplies 4,581 4,125 5,624
Corporate and other 76 55 59
-------- -------- --------
$56,061 $ 51,387 $ 52,398
======== ======== ========
Capital expenditures:
Food packaging products $30,744 $ 28,534 $ 37,673
Disposable foodservice supplies 3,687 4,012 3,100
Corporate and other 34 20 114
-------- -------- --------
$34,465 $ 32,566 $ 40,887
======== ======== ========
Geographic Area Information
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ----------- -----------
Net sales:
North/South American operations $440,539 $423,049 $426,644
European operations 213,618 184,395 164,717
Other and eliminations (3,945) (8,415) (3,976)
-------- -------- --------
$650,212 $599,029 $587,385
======== ======== ========
Operating profit:
North/South American operations $23,028 $ 28,124 $ 37,495
European operations 15,373 20,553 16,137
Other and eliminations (266)
-------- -------- --------
$38,135 $ 48,677 $ 53,632
======== ======== ========
Identifiable assets:
North/South American operations $677,377 $667,358 $669,240
European operations 219,802 229,278 198,440
Other and eliminations 2,388
======== ======== ========
$899,567 $896,636 $867,680
======== ======== ========
The total assets and net assets of foreign businesses were approximately
$282,383 and $107,023 at December 28, 1995.
22. QUARTERLY DATA (unaudited)
Quarterly financial information for 1995 and 1994 is as follows (in
thousands, except for per share amounts):
First Second Third Fourth
Fiscal 1995 Quarter Quarter Quarter Quarter Annual
- ---------------- -------- -------- -------- -------- --------
Net Sales $155,824 $165,184 $166,688 $162,516 $650,212
Operating Income 8,689 10,089 8,653 10,704 38,135
Net income (loss) (3,895) (7,513) (4,475) (5,636) (21,519)
Net income (loss)
per share (0.29) (0.56) (0.33) (0.42) (1.59)
The second quarter net (loss) includes an extraordinary loss of
$(4.2) million on debt extinguishment.
Net income (loss) per share amounts are computed independently for
each of the quarters presented using weighted average shares
outstanding during each quarter. The sum of the quarterly per share
amounts in 1995 do not equal the total for the year because of
rounding and 1995 stock issuances, as shown on the Consolidated
Statement of Stockholders' Equity.
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 (loss)
per share (0.19) 0.26 (0.24) (0.10) (0.27)
The 1994 second quarter operating income benefitted from a
$9.5 million settlement of a patent infringement suit.
Net income (loss) per share amounts are computed independently for
each of the quarters presented using weighted average shares
outstanding during each quarter.
23. SUBSEQUENT EVENTS (dollars in thousands)
On February 23, 1996, the United States Bankruptcy Court for the
Northern District of Illinois, Eastern District entered an order
approving a settlement agreement resolving all claims of the former
union employees of Wisconsin Steel Company which shut down in March
1980. Under terms of the approved settlement of Frank Lumpkin, et
-----------------
al. v. Envirodyne Industries, Inc. (Lumpkin) and without any
- --------------------------------- -------
admission or finding of liability or wrongdoing, Envirodyne was
released and discharged from all claims in exchange for 900,000
shares of common stock. The distribution is in accordance with the
terms of Envirodyne's Plan of Reorganization under which common
stock was distributed to Envirodyne's general unsecured creditors
in satisfaction of their allowed claims (Refer to Note 1).
The Company issued additional shares of common stock for the
Lumpkin settlement and to the holders of general unsecured claims
- -------
of Envirodyne (as opposed to the subsidiaries of Envirodyne) under
terms of the Plan of Reorganization. The total number of shares
outstanding after issuance of common stock for the Lumpkin
-------
settlement and for additional distribution to holders of general
unsecured claims of Envirodyne is 14,479,721.
Under terms of the Plan of Reorganization, Envirodyne issued
warrants to purchase 10% of the fully diluted common stock. The
issuance of common stock pursuant to the Lumpkin settlement,
-------
together with other issuances of common stock since the
consummation of the Plan of Reorganization, caused an adjustment to
the exercise price of the warrants and the number of shares of
common stock for which a warrant is exercisable. The exercise price
was adjusted from $17.25 to $16.08 per share and the number of
common shares for which each warrant is exercisable was adjusted
from 1.000 share to 1.073 shares.
On March 15, 1996 the United States Court of Appeals for the
Seventh Circuit affirmed the decisions of the U.S. District Court
and the Bankruptcy Court to equitably subordinate the claims of
holders of untendered shares to claims of the other general
unsecured creditors (refer to Note 14). The time period for further
appeal has not passed. Envirodyne believes that even in the event
of further appeal, if any, and reversal of the prior decisions, the
maximum number of shares of common stock that it would be required
to issue to such claimants is approximately 106,000.
24. SUBSIDIARY GUARANTORS
Envirodyne's payment obligations under the Senior Secured Notes are
fully and unconditionally guaranteed on a joint and several basis
(collectively, Subsidiary Guarantees) by Viskase Corporation,
Viskase Holding Corporation, Viskase Sales Corporation, Clear
Shield National, Inc., Sandusky Plastics, Inc. and Sandusky
Plastics of Delaware, Inc., each a direct or indirect wholly-owned
subsidiary of Envirodyne and each a "Guarantor." These subsidiaries
represent substantially all of the operations of Envirodyne
conducted in the United States. The remaining subsidiaries of
Envirodyne generally are foreign subsidiaries or otherwise relate
to foreign operations.
The obligations of each Guarantor under its Subsidiary Guarantee
are the senior obligation of such Guarantor, and are
collateralized, subject to certain permitted liens, by
substantially all of the domestic assets of the Guarantor and, in
the case of Viskase Holding Corporation, by a pledge of 65% of the
capital stock of Viskase S.A. The Subsidiary Guarantees and
security are shared with the lenders under the Revolving Credit
Agreement on a pari passu basis and are subject to the priority
interest of the holders of obligations under the Letter of Credit
Facility, each pursuant to an intercreditor agreement.
The following consolidating condensed financial data illustrate the
composition of the combined Guarantors. No single Guarantor has any
significant legal restrictions on the ability of investors or
creditors to obtain access to its assets in the event of default on
the Subsidiary Guarantee other than its subordination to senior
indebtedness described above. Separate financial statements of the
Guarantors are not presented because management has determined that
these would not be material to investors. Based on the book value
and the market value of the pledged securities of Viskase
Corporation, Viskase Sales Corporation, Clear Shield National,
Inc., Sandusky Plastics, Inc. and Sandusky Plastics of Delaware,
Inc., these Subsidiary Guarantors do not constitute a substantial
portion of the collateral and, therefore, the separate financial
statements of these subsidiaries have not been provided. Separate
audited financial statements of Viskase Holding Corporation are
being filed within.
Investments in subsidiaries are accounted for by the parent and
Subsidiary Guarantors on the equity method for purposes of the
supplemental consolidating presentation. Earnings of subsidiaries
are therefore reflected in the parent's and Subsidiary Guarantors'
investment accounts and earnings. The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and
transactions.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations (1) Total
------------- ------------- ------------- ---------------- -------------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 18,013 $ 486 $ 11,826 $ 30,325
Receivables and advances, net 52,462 70,458 57,082 $ (90,548) 89,454
Inventories 63,355 38,233 (2,114) 99,474
Other current assets 176 12,364 9,106 21,646
-------- -------- -------- --------- --------
Total current assets 70,651 146,663 116,247 (92,662) 240,899
Property, plant and equipment including
those under capital lease 261 394,813 150,417 545,491
Less accumulated depreciation
and amortization 150 55,620 20,217 75,987
-------- -------- -------- --------- --------
Property, plant and equipment, net 111 339,193 130,200 469,504
Deferred financing costs 7,048 1,042 8,090
Other assets 43,720 1,869 45,589
Investment in subsidiaries 77,766 133,634 (211,400)
Excess reorganization value 94,968 40,517 135,485
-------- -------- -------- --------- --------
$155,576 $758,178 $289,875 $(304,062) $899,567
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $6,407 $6,097 $ 12,504
Accounts payable and advances $ 80 78,848 50,737 $ (90,548) 39,117
Accrued liabilities 8,126 37,488 21,939 67,553
-------- -------- -------- --------- --------
Total current liabilities 8,206 122,743 78,773 (90,548) 119,174
Long-term debt including obligation
under capital lease 379,262 143,198 7,721 530,181
Accrued employee benefits 51,345 4,281 55,626
Deferred and noncurrent income taxes 34,088 17,507 25,895 77,490
Intercompany loans (383,076) 340,000 43,083 (7)
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
13,579,460 shares issued and
outstanding 136 3 32,738 (32,741) 136
Paid in capital 134,864 103,955 87,871 (191,826) 134,864
Accumulated earnings (deficit) (25,131) (27,752) 2,334 25,418 (25,131)
Cumulative foreign currency
translation adjustments 7,227 7,179 7,179 (14,358) 7,227
-------- -------- -------- --------- --------
Total stockholders' equity 117,096 83,385 130,122 (213,507) 117,096
-------- -------- -------- --------- --------
$155,576 $758,178 $289,875 $(304,062) $899,567
======== ======== ======== ========= ========
(1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations (1) Total
(in thousands)
----------- ------------ ------------ ------------- --------------
ASSETS
Current assets:
Cash and equivalents $ 555 $ 1,853 $ 4,881 $ 7,289
Receivables and advances, net 33,508 63,949 49,378 $ (59,967) 86,868
Inventories 68,719 43,725 (1,961) 110,483
Other current assets 181 12,999 6,286 19,466
-------- -------- -------- --------- --------
Total current assets 34,244 147,520 104,270 (61,928) 224,106
Property, plant and equipment including
those under capital lease 189 367,880 138,030 506,099
Less accumulated depreciation
and amortization 55 26,739 8,967 35,761
-------- -------- -------- --------- --------
Property, plant and equipment, net 134 341,141 129,063 470,338
Deferred financing costs 8,062 1,081 9,143
Other assets 45,757 1,424 47,181
Investment in subsidiaries 91,576 116,360 (207,936)
Excess reorganization value 102,230 43,638 145,868
-------- -------- -------- --------- --------
$134,016 $753,008 $279,476 $(269,864) $896,636
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 11,100 $ 7,720 $6,978 $ 25,798
Accounts payable and advances 726 53,193 40,383 $ (59,967) 34,335
Accrued liabilities 10,254 36,634 25,358 72,246
-------- -------- -------- --------- --------
Total current liabilities 22,080 97,547 72,719 (59,967) 132,379
Long-term debt including obligation
under capital lease 327,437 147,898 14,023 489,358
Accrued employee benefits 52,248 3,969 56,217
Deferred and noncurrent income taxes 29,006 31,927 22,400 83,333
Intercompany loans (379,856) 340,000 39,856
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
13,515,000 shares issued and
outstanding 135 4 32,608 (32,612) 135
Paid in capital 134,865 87,805 87,440 (175,245) 134,865
Accumulated earnings (deficit) (3,612) (8,333) 2,549 5,784 (3,612)
Cumulative foreign currency
translation adjustments 3,961 3,912 3,912 (7,824) 3,961
-------- -------- -------- --------- --------
Total stockholders' equity 135,349 83,388 126,509 (209,897) 135,349
-------- -------- -------- --------- --------
$134,016 $753,008 $279,476 $(269,864) $896,636
======== ======== ======== ========= ========
(1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ----------- ------------ -------------
(in thousands)
NET SALES $417,756 $267,212 $(34,756) $650,212
COSTS AND EXPENSES
Cost of sales 312,419 207,232 (34,603) 485,048
Selling, general and administrative $6,004 65,318 39,908 111,230
Amortization of intangibles and
excess reorganization value 12,466 3,333 15,799
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (6,004) 27,553 16,739 (153) 38,135
Interest income 203 12 455 670
Interest expense 40,081 13,902 3,353 57,336
Intercompany interest expense (income) (38,218) 34,007 4,211
Management fees (income) (8,086) 6,377 1,709
Other expense (income), net (2,400) 52 4,058 1,710
Equity Loss (income) in subsidiary 19,571 216 (19,787)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (16,749) (26,989) 3,863 19,634 (20,241)
Income tax provision (benefit) 1,264 (7,570) 3,388 (2,918)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (18,013) (19,419) 475 19,634 (17,323)
Extraordinary loss, net of tax 3,506 690 4,196
-------- -------- -------- --------- --------
NET (LOSS) $(21,519) $ (19,419) $ (215) $ 19,634 $(21,519)
======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
----------- ------------- --------------- -------------- ---------------
(in thousands)
Net cash provided by (used in)
operating activities $ (13,276) $ 32,242 $20,001 $ 38,967
Cash flows from investing activities:
Capital expenditures (34) (27,842) (6,589) (34,465)
Proceeds from sale of property, plant
and equipment 39 47 86
-------- -------- -------- --------- --------
Net cash (used in)
investing activities (34) (27,803) (6,542) (34,379)
Cash flows from financing activities:
Proceeds from revolving loan and
long term borrowings 164,000 1,706 42,216 207,922
Deferred financing costs (6,721) (1,166) (7,887)
Repayment of revolving loan, long-term
borrowings and capital lease
obligations (123,275) (7,512) (50,588) (181,375)
Increase (decrease) in Envirodyne loan (3,236) 3,236
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 30,768 (5,806) (6,302) 18,660
Effect of currency exchange rate changes
on cash (212) (212)
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents 17,458 (1,367) 6,945 23,036
Cash and equivalents at beginning
of period 555 1,853 4,881 7,289
-------- -------- -------- --------- --------
Cash and equivalents at end
of period $18,013 $ 486 $11,826 $30,325
======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------- -------------- ---------------
(in thousands)
NET SALES $406,988 $220,787 $(28,746) $599,029
Patent infringement settlement income 9,457 9,457
COSTS AND EXPENSES
Cost of sales 295,356 168,891 (28,487) 435,760
Selling, general and administrative $6,015 71,092 31,330 108,437
Amortization of intangibles and
excess reorganization value 12,266 3,346 15,612
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (6,015) 37,731 17,220 (259) 48,677
Interest income 13 46 248 307
Interest expense 31,937 14,124 3,453 49,514
Intercompany interest expense (income) (35,077) 31,170 3,907
Management fees (income) (7,400) 6,544 856
Other expense (income), net (3,448) 7 1,923 (150) (1,668)
Equity loss (income) in subsidiary 8,392 (2,549) (5,843)
Minority interest in loss of subsidiary 50 50
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (406) (11,519) 7,329 5,784 1,188
Income tax provision 3,206 (3,186) 4,780 4,800
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(3,612) $ (8,333) $2,549 $ 5,784 $ (3,612)
======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------- -------------- ---------------
(in thousands)
Net cash provided by (used in)
operating activities $(1,414) $13,575 $11,125 $23,286
Cash flows from investing activities:
Capital expenditures (20) (21,666) (10,880) (32,566)
Proceeds from sales of property,
plant and equipment 239 120 359
Purchase of minority interest
in subsidiary (4,200) (4,200)
-------- -------- -------- --------- --------
Net cash (used in)
investing activities (20) (25,627) (10,760) (36,407)
Cash flows from financing activities:
Proceeds from revolving loan and
long term borrowings 27,600 10,068 37,668
Deferred financing costs (1,608) (1,608)
Repayment of revolving loan,
long-term borrowings and
capital lease obligations (8,325) (5,180) (9,112) (22,617)
Increase (decrease) in Envirodyne loan (16,608) 17,163 (555)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 1,059 11,983 401 13,443
Effect of currency exchange rate
changes on cash (776) (776)
-------- -------- -------- --------- --------
Net (decrease) in cash and equivalents (375) (69) (10) (454)
Cash and equivalents
at beginning of period 930 1,922 4,891 7,743
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 555 $ 1,853 $4,881 $7,289
======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------- -------------- ---------------
(in thousands)
NET SALES $408,872 $195,291 $(16,778) $587,385
COSTS AND EXPENSES
Cost of sales 283,743 151,694 (16,745) 418,692
Selling, general and administrative $5,021 65,992 28,337 99,350
Amortization of intangibles and
excess reorganization value 13,170 2,541 15,711
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (5,021) 45,967 12,719 (33) 53,632
Interest income 1 20 910 931
Interest expense 10,388 14,589 6,213 31,190
Intercompany interest expense (income) (21,970) 61,416 (39,446)
Management fees (income) (7,600) 6,748 852
Other expense (income), net 3,432 (86) 2,194 5,540
Minority interest in subsidiary 717 717
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES, REORGANI-
ZATION ITEMS AND EXTRAORDINARY ITEM 10,730 (35,963) 43,816 (33) 18,550
Reorganization items, net 92,745 12,000 104,745
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (82,015) (47,963) 43,816 (33) (86,195)
Income tax provision (benefit) (1,430) (4,442) 17,872 12,000
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (80,585) (43,521) 25,944 (33) (98,195)
Extraordinary gain, net of tax 183,784 183,784
-------- -------- -------- --------- --------
NET INCOME (LOSS) $103,199 $ (43,521) $ 25,944 $ (33) $ 85,589
======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------- -------------- ---------------
(in thousands)
Net cash provided by
operating activities
before reorganization expense $24,623 $ 33,840 $33,738 $ 92,201
Net cash used for reorganization items (2,929) (12,000) (14,929)
-------- -------- -------- --------- --------
Net cash provided by
operating activities 21,694 21,840 33,738 77,272
Cash flows from investing activities:
Capital expenditures (114) (27,289) (13,484) (40,887)
Proceeds from sale of property,
plant and equipment 4 120 124
-------- -------- -------- --------- --------
Net cash (used in)
investing activities (114) (27,285) (13,364) (40,763)
Cash flows from financing activities:
Proceeds from revolving loan and
long term borrowings 100,000 6,003 106,003
Deferred financing costs (8,659) (1,120) (9,779)
Repayment of revolving loan,
long-term borrowings and
capital lease obligations (103,100) (4,698) (30,938) (138,736)
Increase (decrease) in Envirodyne loan (8,891) 10,519 (1,628)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities (20,650) 5,821 (27,683) (42,512)
Effect of currency exchange rate
changes on cash (316) (316)
-------- -------- -------- --------- --------
Net increase (decrease) in
cash and equivalents 930 376 (7,625) (6,319)
Cash and equivalents at
beginning of period 1,546 12,516 14,062
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 930 $ 1,922 $ 4,891 $ 7,743
======== ======== ======== ========= ========
Financial Statement Schedules Required by Regulation S-X
- --------------------------------------------------------
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements:
- ---------------------------------
Report of independent accountants
Consolidated balance sheets, December 28, 1995 and
December 29, 1994
Consolidated statements of operations, for December 30, 1994 to
December 28, 1995 (Post-consummation);
January 1 to December 29, 1994 (Post-consummation);
and January 1 to December 31, 1993 (Pre-consummation);
Consolidated statements of stockholders' equity (deficit),
for December 30, 1994 to December 28, 1995 (Post-consummation);
January 1 to December 29, 1994 (Post-consummation);
and January 1 to December 31, 1993 (Pre-consummation);
Consolidated statements of cash flows, for December 30, 1994 to
December 28, 1995 (Post-consummation);
January 1 to December 29, 1994 (Post-consummation);
and January 1 to December 31, 1993 (Pre-consummation);
Notes to consolidated financial statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Viskase Holding Corporation
We have audited the consolidated financial statements and
the financial statement schedules of Viskase Holding Corporation
and Subsidiaries. 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, Envirodyne Industries, Inc. and
its domestic subsidiaries 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 Viskase Holding Corporation and Subsidiaries
as of December 28, 1995 and December 29, 1994, and the consolidated
results of their operations and their cash flows for the period
December 30, 1994 to December 28, 1995 and January 1 to
December 29, 1994 (Post-consummation) and January 1 to December 31,
1993 (Pre-consummation), in conformity with generally accepted
accounting principles. In addition, in our opinion 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 26, 1996
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 28, December 29,
1995 1994
--------------- -------------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 11,826 $ 6,201
Receivables, net 53,022 46,834
Receivables, affiliates 51,829 48,138
Inventories 38,233 43,725
Other current assets 9,106 6,515
-------- --------
Total current assets 164,016 151,413
Property, plant and equipment 150,417 138,030
Less accumulated depreciation 20,217 8,967
-------- --------
Property, plant and equipment, net 130,200 129,063
Deferred financing costs 1,042 1,081
Other assets 1,869 1,424
Excess reorganization value 40,517 43,638
-------- --------
$337,644 $326,619
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 6,097 $ 6,978
Accounts payable 13,720 15,479
Accounts payable and
advances, affiliates 54,152 43,233
Accrued liabilities 21,942 25,358
-------- --------
Total current liabilities 95,911 91,048
Long-term debt 7,721 14,023
Accrued employee benefits 4,281 3,969
Deferred and noncurrent income taxes 25,895 22,400
Intercompany loans 81,094 77,866
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value,
1,000 shares authorized;
100 shares issued and outstanding
Paid in capital 103,463 103,463
Retained earnings 12,100 9,938
Cumulative foreign currency
translation adjustments 7,179 3,912
-------- --------
Total stockholders' equity 122,742 117,313
-------- --------
$337,644 $326,619
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
52 weeks 52 weeks 52 weeks
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
------------ ----------- -----------
(in thousands, except for number of shares
and per share amounts)
NET SALES $267,212 $220,787 $195,291
Patent infringement settlement income 9,457
COSTS AND EXPENSES
Cost of sales 207,232 168,891 151,694
Selling, general and administrative 36,288 27,654 25,171
Amortization of intangibles and
excess reorganization value 3,333 3,346 2,541
-------- -------- --------
OPERATING INCOME 20,359 30,353 15,885
Interest income 455 248 910
Interest expense 3,353 3,453 6,213
Intercompany interest expense 4,199 3,861 6,084
Management fees 1,709 856 852
Other expense (income), net 3,754 2,518 1,723
Minority interest in loss of subsidiary 50 717
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 7,799 19,963 2,640
Income tax provision 4,947 10,025 2,645
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2,852 9,938 (5)
Extraordinary loss, net of tax 690
-------- -------- --------
NET INCOME (LOSS) $2,162 $ 9,938 $ (5)
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES 100 100 100
=== === ===
PER SHARE AMOUNTS:
NET INCOME (LOSS) $ 21,620 $ 99,380 $ (50)
======== ======== ========
Due to the implementation of the Plan of Reorganization and
Fresh Start Reporting, the consolidated statement of operations
for the fiscal years ended December 28, 1995 and December 29, 1994
are not comparable to the fiscal year ended December 31, 1993.
(Refer to Note 1 of Notes to Consolidated Financial Statements.)
The accompanying notes are an integral part of the consolidated
financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Cumulative
Foreign
Currency Total
Common Paid in Retained Translation Stockholder's
Stock Capital Earnings Adjustments Equity
------ --------- ----------- ----------- -------------
(in thousands)
Balance December 31, 1992 $20,119 $79,458 $(2,356) $97,221
Net (loss) (5) (5)
Capital contributions 4,295 4,295
Fresh start revaluation adjustments 58,272 58,272
Translation adjustments (2,044) (2,044)
Elimination of Viskase Holding
Corporation accumulated earnings (79,453) 4,400 (75,053)
==========================================================================================================
Balance December 31, 1993 $82,686 $ 0 $ 0 $82,686
Net income 9,938 9,938
Capital contributions 16,056 16,056
Fresh start revaluation adjustments 4,721 4,721
Translation adjustments 3,912 3,912
-------- ------- ------- --------
Balance December 29, 1994 $103,463 $ 9,938 $3,912 $117,313
Net income 2,162 2,162
Translation adjustments 3,267 3,267
-------- ------- ------- --------
Balance December 28, 1995 $103,463 $12,100 $ 7,179 $122,742
======== ======= ======= ========
Due to the implementation of the Plan of Reorganization and Fresh Start
Reporting, the stockholders' equity for the fiscal years ended December 28,
1995 and December 29, 1994 are not comparable to the fiscal year ended
December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial
Statements.)
The accompanying notes are an integral part of the consolidated financial
statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 30, January 1, January 1,
1994 to to to
December 28, December 29, December 31,
1995 1994 1993
----------- ------------ -----------
(in thousands)
Cash flows from operating activities:
Income (loss) before extraordinary item $ 2,852 $ 9,938 $ (5)
Extraordinary loss 690
------- ------- --------
Net income (loss) 2,162 9,938 (5)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 11,202 9,018 11,024
Amortization of intangibles and excess reorganization value 3,333 3,346 2,541
Amortization of deferred financing fees and discount 208 210 935
Increase (decrease) in deferred and noncurrent income taxes 2,098 128 (1,436)
Loss on debt extinguishment 1,030
Foreign currency transaction loss (gain) 159 (68)
Loss (gain) on sales of property, plant and equipment 30 32 424
Changes in operating assets and liabilities:
Accounts receivable (4,441) (9,076) (3,055)
Accounts receivable, affiliates (5,183) (18,214) 9,373
Inventories 7,224 (8,895) (1,467)
Other current assets (2,144) (1,462) (461)
Accounts payable and accrued liabilities (6,926) 8,314 3,219
Accounts payable, affiliates 10,719 21,739 13,359
Other (790) 288 (908)
------- ------- --------
Total adjustments 16,519 5,428 33,480
------- ------- --------
Net cash provided by operating activities 18,681 15,366 33,475
Cash flows from investing activities:
Capital expenditures (6,589) (10,880) (13,484)
Proceeds from sale of property, plant and equipment 47 120 120
Investments and advances to affiliated companies
Purchase of minority interest in subsidiary (4,200)
------- ------- --------
Net cash (used in) investing activities (6,542) (14,960) (13,364)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 42,216 10,068 6,003
Deferred financing costs (1,166) (1,120)
Repayment of revolving loan and long-term borrowings (50,588) (9,112) (30,938)
Increase (decrease) in Envirodyne loan and advances 3,236 (555) (1,628)
------- ------- --------
Net cash provided by (used in) financing activities (6,302) 401 (27,683)
Effect of currency exchange rate changes on cash (212) (776) (316)
------- ------- --------
Net increase (decrease) in cash and equivalents 5,625 31 (7,888)
Cash and equivalents at beginning of period 6,201 6,170 14,058
------- ------- --------
Cash and equivalents at end of period $ 11,826 $ 6,201 $ 6,170
======== ======== ========
- ------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $1,919 $ 1,808 $ 4,403
Income taxes paid $4,255 $ 3,548 $ 1,063
Due to the implementation of the Plan of Reorganization and Fresh Start
Reporting, the consolidated statement of cash flows for the fiscal years
ended December 28, 1995 and December 29, 1994 are not comparable to the
fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to
Consolidated Financial Statements.)
Supplemental schedule of noncash investing and financing activities:
Fiscal 1993
- ------------
Viskase Holding Corporation's capital increased by $4.3 million due to the
forgiveness of an Envirodyne loan.
Viskase Holding Corporation contributed capital consisting of $160 thousand
of equipment to Viskase Brasil Embalagens Ltda.
Fiscal 1994
- ------------
Viskase S.A. and its subsidiary Viskase Canada Inc.'s capital increased by
$16 million due to the forgiveness of an Envirodyne loan.
Viskase Corporation transferred equipment totaling $1.5 million, $174
thousand and $2.1 million to Viskase S.A., Viskase de Mexico S.A. de C.V.,
and Viskase Brasil Embalagens Ltda, respectively.
Fiscal 1995
- -----------
Viskase Corporation transferred equipment totaling $497 thousand to Viskase
S.A.
Viskase Holding Corporation contributed capital consisting of $250 thousand
of equipment to Viskase de Mexico S.A. de C.V.
The accompanying notes are an integral part of the consolidated
financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
Viskase Holding Corporation is a wholly owned subsidiary of Viskase Corporation.
Viskase Corporation, in turn, is a wholly owned subsidiary of Envirodyne
Industries, Inc. Viskase Holding Corporation serves as the direct or indirect
parent company for the majority of Viskase Corporation's non-domestic
operations. These subsidiaries are as follows:
Name of Subsidiary Parent of Subsidiary Country of Business
- ------------------------------ --------------------------- ---------------------
Viskase Brasil Embalagens Ltda. Viskase Holding Corporation Brazil
Viskase Australia Limited Viskase Holding Corporation Australia
Viskase de Mexico S.A. de C.V. Viskase Holding Corporation Mexico
Viskase S.A. Viskase Holding Corporation France
Viskase Gmbh Viskase S.A. Germany
Viskase SPA Viskase S.A. Italy
Viskase Canada Inc. Viskase S.A. Canada
Viskase ZAO Viskase S.A. Russia
Viskase Holdings Limited Viskase S.A. United Kingdom
Filmco International Limited Viskase Holdings Limited United Kingdom
Viskase Limited Viskase Holdings Limited United Kingdom
Viskase (UK) Limited Viskase Limited United Kingdom
Envirodyne S.A.R.L. Viskase (UK) Limited France
Viskase Holding Corporation conducts its operations through its
subsidiaries and, for the most part, has no assets or liabilities
other than its investments, accounts receivable and payable with
affiliates, and intercompany loan and advances.
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, several
of the subsidiaries of Envirodyne Industries, Inc., including
Viskase Holding Corporation, 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). None of the subsidiaries of
Viskase Holding Corporation entered into Chapter 11. 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, including Viskase Holding Corporation.
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.
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 was
based on the consideration of many factors and various valuation
methods, including discounted cash flows and comparable multiples
of earnings valuation techniques believed by management and its
financial advisors to be representative of the Company's business
and industry. Factors considered by the Company included the
following:
. Forecasted operating and cash flow results which gave effect
to the estimated impact of debt restructuring and other
operational reorganization.
. Discounted residual value at the end of the forecasted period
based on the capitalized cash flows for the last year of that
period.
. Competition and general economic considerations.
. Projected sales growth.
. Potential profitability.
. Seasonality and working capital requirements.
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 Company
continues to evaluate the recoverability of excess reorganization
value based on the operating performance and expected future
undiscounted cash flows of the operating business units.
The reorganization and the adoption of Fresh Start Reporting
resulted in no material adjustments to the Company's Consolidated
Statement of Operations for the period January 1 to December 31,
1993.
2. NATURE OF BUSINESS
Viskase Holding Corporation's subsidiaries manufacture food
packaging products. The operations of these subsidiaries are
primarily in Europe and South and North America. Through its
subsidiaries, the Company is a 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
international manufacturer of plasticized polyvinyl chloride (PVC)
films, primarily for use in packaging food items.
International Operations
Viskase Holding Corporation's subsidiaries have 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.
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 Holding Corporation'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 Holding Corporation believes that its subsidiaries' allow-
ance 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 Holding Corporation's subsidiaries' principal markets are
in Europe, Latin America, North America and Asia Pacific.
The United Kingdom operation sells its PVC films directly and
through distributors, primarily to the retail grocery and
foodservice industries in Europe.
In Europe, Viskase Holding Corporation's subsidiaries operate
casings service centers in Milan, Italy, Pulheim, Germany, and
Moscow, Russia. The Company also operates a service center in
Brisbane, Australia. These service centers provide finishing,
inventory and delivery services to customers. The subsidiaries also
use outside distributors to market their products to customers in
Europe, Africa, Asia and Latin America.
Competition
From time to time, Viskase Holding Corporation's subsidiaries
experience reduced market share or reduced profits due to price
competition; however, management believes that such market
conditions will not result in any long-term material loss of
business.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of presentation
Effective in 1990 Envirodyne Industries, Inc. adopted a 52/53 week
fiscal year ending on the last Thursday of December. Viskase
Holding Corporation's 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 reflect the accounts of
Viskase Holding Corporation and its subsidiaries. All significant
intercompany transactions and balances between and among Viskase
Holding Corporation and its subsidiaries have been eliminated in
the consolidation.
Reclassifications have been made to the prior years' financial
statements to conform to the 1995 presentation.
(C) Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
(D) Cash equivalents (dollars in thousands)
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 equivalents
include $8,074 and $821 of short-term investments at December 28,
1995 and December 29, 1994, respectively.
(E) Inventories
Inventories, primarily foreign, are valued at the lower of
first-in, first-out (FIFO) cost or market.
(F) 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.
(G) Deferred financing costs
Deferred financing costs are amortized on a straight-line basis
over the expected term of the related debt agreement. Amortization
of deferred financing costs is classified as interest expense.
(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 1993.
The Company continues to evaluate the recoverability of excess
reorganization value based on operating performance and
undiscounted cash flows of the operating business units. Impairment
will be recognized when the expected undiscounted future operating
cash flows derived from such intangible is less than its carrying
value. If impairment is identified, valuation techniques deemed
appropriate under the particular circumstances will be used to
determine the intangible's fair value. The loss will be measured
based on the excess of carrying value over the determined fair
value. The review for impairment is performed at least on a
quarterly basis.
(I) Pensions
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 foreign laws and regulations.
(J) 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.
(K) Income taxes
Income taxes are accounted for in accordance with SFAS No. 109. Tax
provisions and benefits are recorded at statutory rates for taxable
items included in the consolidated statements of operations
regardless of the period for which such items are reported for tax
purposes. Deferred income taxes are recognized for temporary
differences between financial statement and income tax bases of
assets and liabilities for which income tax benefits will be
realized in future years.
(L) 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.
(M) Revenue recognition
Sales to customers are recorded at the time of shipment net of
discounts and allowances.
(N) Foreign currency contracts
The Company maintains a hedging program to partially hedge its
forecasted foreign currency revenue cash flows. The hedging program
principally addresses revenue cash flows within its European
operations. The foreign exchange contracts are denominated
predominantly in the major European currencies and have varying
maturities up to eighteen months. 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 additional 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.
(O) Stock-based compensation
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" encourages, but does not require,
companies to recognize compensation expense for grants of stock,
stock options and other equity instruments to employees based on
new fair value acounting rules. Although expense recognition for
employee stock-based compensation is not mandatory, SFAS 123
requires companies that choose not to adopt the new fair value
accounting to disclose pro forma net income and earnings per share
under the new method. This new accounting principle is effective
for the Company's fiscal year ending December 26, 1996. The Company
believes that adoption is not expected to have a material impact on
its financial condition as the Company will not adopt the fair
value accounting, but will instead comply with the disclosure
requirements.
4. RECEIVABLES (dollars in thousands)
Receivables consisted primarily of trade accounts receivable and
were net of allowances for doubtful accounts of $2,256 and $1,364
at December 28, 1995, and at December 29, 1994, respectively.
5. INVENTORIES (dollars in thousands)
Inventories consisted of:
December 28, December 29,
1995 1994
----------- -----------
Raw materials $ 5,299 $ 5,778
Work in process 13,342 13,975
Finished products 19,592 23,972
------- -------
$38,233 $43,725
======= =======
Inventories were net of reserves for obsolete and slow moving
inventory of $1,331 and $1,686 at December 28, 1995 and
December 29, 1994, respectively.
6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands)
December 28, December 29,
1995 1994
----------- -----------
Property, plant and equipment:
Land and improvements $ 5,319 $ 4,982
Buildings and improvements 30,236 28,588
Machinery and equipment 114,212 103,293
Construction in progress 283 1,167
Capital Leases:
Machinery and equipment 367
-------- --------
$150,417 $138,030
======== ========
Maintenance and repairs charged to costs and expenses for 1995,
1994, and 1993 aggregated $10,288, $10,748 and $9,782,
respectively. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets ranging from 3 to
32 years.
7. ACCRUED LIABILITIES (dollars in thousands)
Accrued liabilities were comprised of:
December 28, December 29,
1995 1994
----------- -----------
Compensation and employee benefits $ 9,446 $10,408
Taxes, other than on income 1,585 2,006
Accrued volume and sales discounts 5,320 5,445
Other 5,591 7,499
------- -------
$21,942 $25,358
======= =======
8. DEBT OBLIGATIONS (dollars in thousands)
As described in Note 1, Chapter ll Reorganization Proceedings,
Envirodyne and certain of its domestic Subsidiaries (including
Viskase Holding Corporation) emerged from Chapter 11 on December
31, 1993.
On June 20, 1995, Envirodyne completed the sale of $160,000
aggregate principal amount of senior secured notes to certain
institutional investors in a private placement. The senior secured
notes were issued pursuant to an indenture dated June 20, 1995
(Indenture) and consist of (i) $151,500 of 12% Senior Secured Notes
due 2000 and (ii) $8,500 of Floating Rate Senior Secured Notes due
2000 (collectively, the Senior Secured Notes). Envirodyne used the
net proceeds of the offering primarily to (i) repay the Company's
$86,125 domestic term loan, (ii) repay the $68,316 of obligations
under the Company's domestic and foreign revolving loans and (iii)
pay transaction fees and expenses. Concurrently with the June 20,
1995 placement, Envirodyne entered into a new $20,000 domestic
revolving credit facility (Revolving Credit Facility) and a new
$28,000 letter of credit facility (Letter of Credit Facility). The
Senior Secured Notes and the obligations under the Revolving Credit
Facility and the Letter of Credit Facility are guaranteed by
Envirodyne's significant domestic subsidiaries and secured by a
collateral pool (Collateral Pool) comprised of: (i) all domestic
accounts receivable (including intercompany receivables) and
inventory; (ii) all patents, trademarks and other intellectual
property (subject to non-exclusive licensing agreements); (iii)
substantially all domestic fixed assets (other than assets subject
to a lease agreement with General Electric Capital Corporation);
and (iv) a senior pledge of 100% of the capital stock of
Envirodyne's significant domestic subsidiaries and 65% of the
capital stock of Viskase S.A. Such guarantees and security are
shared by the holders of the Senior Secured Notes and the holders
of the obligations under the Revolving Credit Facility on a pari
passu basis pursuant to an intercreditor agreement. Pursuant to such
intercreditor agreement, the security interest of the holders of the
obligations under the Letter of Credit Facility has priority over all
other liens on the Collateral Pool.
The Company finances its working capital needs through a
combination of cash generated through operations and borrowings
local unsecured credit facilities and intercompany loans.
The Company recognized an extraordinary loss of $1,030 representing
the write-off of deferred financing fees related to the June 20,
1995 debt refinancing. The extraordinary loss, net of applicable
income taxes of $340, was included in the Company's Statement of
Operations for the quarter ended June 29, 1995.
The Viskase Limited term facility is with a foreign financial
institution. The term facility, which is collateralized by
substantially all of the assets of Viskase Limited, bears a
variable interest rate and is payable in 16 equal semiannual
installments that began in December 1992.
Outstanding short-term and long-term debt consisted of:
December 28, December 29,
1995 1994
----------- -----------
Short-term debt and current
maturity of long-term debt:
Current maturity of Viskase
Limited Term Loan (4.7%) $2,033 $ 1,882
Other 4,064 5,096
------ -------
Total short-term debt $6,097 $ 6,978
====== =======
Long-term debt:
Bank Credit Agreement:
Multicurrency Loan
due 1999 (8.9%) 4,924
Viskase Limited Term
Loan (4.7%) 7,115 8,466
Other 606 633
====== =======
Total long-term debt $7,721 $14,023
====== =======
The fair value of the Company's debt 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 fair value of debt
obligations approximated their carrying value.
Aggregate maturities of remaining long-term debt for each of the
next five fiscal years are:
Total
------
1996 $2,612
1997 2,383
1998 2,233
1999 2,033
2000 1,016
9. OPERATING LEASES (dollars in thousands)
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 28, 1995, are:
1996 $1,357
1997 1,092
1998 886
1999 450
2000 372
Total thereafter
------
Total minimum lease payments $4,157
======
Total rent expense during 1995, 1994 and 1993 amounted to $3,750,
$2,350 and $2,140, respectively.
10. RETIREMENT PLANS (dollars in thousands)
The Company maintains various pension and statutory separation pay
plans for its European employees. The expense for these plans in
1995, 1994 and 1993 was $1,383, $1,043 and $864, 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
$2,856; conversely, plan assets exceeded the vested benefits in
certain other plans by approximately $2,346.
The Company's postretirement benefits are not material.
11. CONTINGENCIES (dollars in thousands)
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. INCOME TAXES (dollars in thousands)
The provision (benefit) for income taxes consisted of:
December 30, January 1, January 1,
1994 to to to
December 29, December 29, December 31,
1995 1994 1993
------------ ----------- -----------
Current:
Federal $1,316 $4,479 $ 1,368
Foreign 950 4,652 2,453
State and local 243 766 258
------ ------ -------
2,509 9,897 4,079
------ ------ -------
Deferred:
Federal
Foreign 2,098 128 (1,434)
State and local
------ ----- -------
2,908 128 (1,434)
------- ------- ------
$ 4,607 $10,025 $2,645
======= ======= ======
A reconciliation from the statutory federal tax rate to the
consolidated effective tax rate follows:
December 30, January 1, January 1,
1994 to to to
December 29, December 29, December 31,
1995 1994 1993
------------ ----------- -----------
Statutory federal tax rate 35.0% 35.0% 35.0%
Increase (decrease)
in tax rate due to:
State and local taxes net
of related federal
tax benefit 2.3 2.5 6.4
Net effect of taxes
relating to foreign
operations 30.4 11.1 61.6
Other .4 1.6 (2.8)
----- ---- -----
Consolidated effective
tax rate 68.1% 50.2% 100.2%
==== ==== =====
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities for 1995
are as follows:
Temporary Difference Tax Effected
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
Assets Liabilities Assets Liabilities
------- ----------- ------ -----------
Depreciation basis
differences $72,219 $25,717
Pension and healthcare 600 220
Other accruals, reserves,
and other $ 648 399 $ 216 174
----- ------- ----- -------
$ 648 $73,218 $ 216 $26,111
===== ======= ===== =======
At December 28, 1995, the Company had $11,136 of undistributed
earnings of foreign subsidiaries considered permanently invested
for which deferred taxes have not been provided.
Domestic earnings or (losses) after extraordinary gain or loss and
before income taxes were approximately $3,937, $12,634 and $4,373
in 1995, 1994 and 1993, respectively. Foreign earnings or (losses)
before income taxes were approximately $2,832, $7,329 and $(1,733)
in 1995, 1994 and 1993, respectively.
13. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands)
Research and development costs are expensed as incurred and totaled
$1,106, $1,562 and $1,180, for 1995, 1994, and 1993, respectively.
14. RELATED PARTY TRANSACTIONS (dollars in thousands)
Intercompany loans and advances:
- -------------------------------
December 28, December 29,
1995 1994
----------- -----------
Viskase S.A. 12% promissory note
due to Envirodyne $25,142
Viskase S.A. promissory note
due to Envirodyne 17,440 $35,249
Accrued interest on Viskase S.A.
promissory note 83 1,688
Viskase United Kingdom Limited
promissory note
due to Envirodyne,
including accrued interest 419 2,919
Advances:
Envirodyne to Viskase S.A.
Viskase Corporation to
Viskase Holding Corporation 38,010 38,010
------- -------
$81,094 $77,866
======= =======
The Viskase S.A. 12% promissory note due to Envirodyne is payable
on demand. Interest is payable semiannually on June 30 and December
31.
The Viskase S.A. promissory note due to Envirodyne is payable on
demand and bears interest at a rate of 10.00%. Interest is payable
semiannually on June 30 and December 31.
The $2.5 million Viskase United Kingdom Limited promissory note due
to Envirodyne is payable on demand and bears interest at a rate of
8.00%. The promissory note was repaid in 1995.
The Viskase Corporation advance to Viskase Holding Corporation is
payable on demand.
License Agreements
- ------------------
Viskase Holding Corporation has been granted the right to license
Viskase Corporation's patents and technology pursuant to a license
agreement between Viskase Corporation and Viskase Holding
Corporation.
Intercompany transactions:
- -------------------------
In 1995, 1994 and 1993, the Company paid $1,022, $756 and $752,
respectively, to Viskase Corporation for management services.
During 1995, 1994 and 1993, the Company accrued $687, $100 and
$100, respectively, payable to Envirodyne for management services.
During 1995, 1994 and 1993, the Company purchased semi-finished and
finished inventory from Viskase Sales Corporation in the amount of
$26,953, $23,114 and $15,439, respectively. In addition, during
1995, 1994 and 1993, the Company had sales of inventory to Viskase
Sales Corporation in the amount of $7,329, $5,632 and $1,338,
respectively.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value and estimated fair
value as of December 28, 1995 of the Company's financial
instruments. (Refer to Notes 3 and 8.)
Carrying Estimated
Value Fair Value
-------- -----------
Assets:
Cash and equivalents $11,826 $11,826
Foreign currency contracts 3,397 3,377
Liabilities:
Long-term debt 7,721 7,721
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
1995 for the year ended
December 28
Allowance for
doubtful accounts $2,136 $1,403 $ (472) $ 6 $151 $3,224
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
1995 for the year ended
December 28
Reserve for obsolete and
slow moving inventory 5,353 1,264 (2,868) 69 3,818
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
(1) Foreign currency translation.