<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 19, 1996
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-4219 C-74-1339132
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1717 ST. JAMES PLACE
SUITE 550
HOUSTON, TEXAS 77056
(Address of principal executive offices)
(713) 940-6100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 5. OTHER EVENTS
On June 19, 1996, Zapata Corporation, a Delaware corporation
("Zapata"), purchased 818,006 shares of common stock, par value $0.01
per share ("Envirodyne Common Stock"), of Envirodyne Industries, Inc.,
a Delaware corporation ("Envirodyne"), in a brokerage transaction
(which settled on June 24, 1996) at a purchase price of $4.165 per
share, including brokerage commissions. Also, on June 19, 1996,
Zapata contracted to acquire, at a purchase price of $4.125 per share,
all the shares of Envirodyne Common Stock held by a holder of 900,000
shares of Envirodyne Common Stock, subject to reductions in the number
of shares held by such holder (estimated not to exceed 30,000 shares)
effected prior to the closing of the transaction, which is to occur no
later than June 30, 1996. Upon the closing of such transaction
(assuming that 870,000 shares of Envirodyne Common Stock are acquired
in such transaction and based upon the most recently available filing
by Envirodyne with the Securities and Exchange Commission), Zapata
will own approximately 40.6% of the outstanding shares of Envirodyne
Common Stock. For additional information with respect to Envirodyne,
reference is made to the audited consolidated financial statements of
Envirodyne and subsidiaries as of December 28, 1995 and December 29,
1994 and for the 52-week periods ended December 28, 1995, December 29,
1994 and December 31, 1993 and to the unaudited interim consolidated
financial statements of Envirodyne and subsidiaries as of March 28,
1996 and for the three months ended March 28, 1996 and March 30, 1995,
all of which are included as an exhibit to this Current Report on Form
8-K and are incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS.
Exhibit 23 - Consent of independent accountants.
Exhibit 99 - Financial statements of Envirodyne Industries, Inc.
and subsidiaries, including independent accountant's
report.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ZAPATA CORPORATION
By: /s/ Joseph L. von Rosenberg III
----------------------------------
Joseph L. von Rosenberg III
Executive Vice President, General
Counsel and Corporate Secretary
Date: June 24, 1996
2
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
23 Consent of independent accountants.
99 Financial statements of Envirodyne Industries, Inc. and
subsidiaries, including independent accountant's report.
</TABLE>
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Zapata Corporation of Form S-3 (File No. 33-68034) and on Form S-8's (File
Nos. 33-19085 and 33-45251) of our reports, which include explanatory paragraphs
discussing the comprehensive financial restructuring through implementation of
reorganization under Chapter 11 of the United States Bankruptcy Code, dated
March 26, 1996, on our audits of the consolidated financial statements and
financial statement schedules of Envirodyne Industries, Inc. and subsidiaries
as of December 28, 1995 and December 29, 1994 and 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) and the consolidated
financial statements and financial statement schedules of Viskase Holding
Corporation and subsidiaries as of December 28, 1995 and December 29, 1994, and
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), which reports are included in this Form 8-K.
Coopers & Lybrand L.L.P.
Chicago, Illinois
June 21, 1996
<PAGE> 1
AUDITED FINANCIAL STATEMENTS
<PAGE> 2
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
F-1
<PAGE> 3
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
(in thousands)
<S> <C> <C>
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 obligations
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
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 4
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C>
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
========== =========== =========
</TABLE>
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.
F-3
<PAGE> 5
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN TOTAL
CURRENCY STOCKHOLDERS'
COMMON PAID IN ACCUMULATED TRANSLATION EQUITY
STOCK CAPITAL (DEFICIT) ADJUSTMENTS (DEFICIT)
------ -------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
====== ======== ========= ======== ==========
</TABLE>
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.
F-4
<PAGE> 6
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
----------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
</TABLE>
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.
F-5
<PAGE> 7
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
F-6
<PAGE> 8
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:
o Forecasted operating and cash flow results which gave effect
to the estimated impact of debt restructuring and other
operational reorganization.
o Discounted residual value at the end of the forecasted period
based on the capitalized cash flows for the last year of that
period.
o Competition and general economic considerations.
o Projected sales growth.
o Potential profitability.
o 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.
F-7
<PAGE> 9
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:
<TABLE>
<CAPTION>
INCOME
(EXPENSE)
---------
<S> <C>
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
=========
</TABLE>
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)
<TABLE>
<CAPTION>
PRO FORMA
JANUARY 1 To
DECEMBER 31, 1993
-----------------
(UNAUDITED)
<S> <C>
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)
==========
</TABLE>
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.
F-8
<PAGE> 10
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.
F-9
<PAGE> 11
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
F-10
<PAGE> 12
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.
F-11
<PAGE> 13
(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.
F-12
<PAGE> 14
5. INVENTORIES (DOLLARS IN THOUSANDS)
Inventories consisted of:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,150 $ 20,358
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,800 37,613
Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,524 52,512
--------- ---------
$ 99,474 $ 110,483
========= =========
</TABLE>
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)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
========== ==========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
========== ==========
</TABLE>
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
F-13
<PAGE> 15
8. ACCRUED LIABILITIES (DOLLARS IN THOUSANDS)
Accrued liabilities were comprised of:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
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
F-14
<PAGE> 16
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)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 30, 1994
TO
DECEMBER 28, 1995
-----------------
<S> <C>
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)
==========
</TABLE>
F-15
<PAGE> 17
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:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . 104%
1997 . . . . . . . . . . . . . . . . . . . . . . . . 103%
1998 . . . . . . . . . . . . . . . . . . . . . . . . 102%
1999 . . . . . . . . . . . . . . . . . . . . . . . . 101%
2000 and thereafter . . . . . . . . . . . . . . . . . 100%
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
========= ==========
</TABLE>
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.
F-16
<PAGE> 18
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:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER
--------------------
<S> <C>
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
========
</TABLE>
Aggregate maturities of remaining long-term debt for each of the next
five fiscal years are:
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,019
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,418
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,313
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,477
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,669
</TABLE>
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:
<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,033
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,291
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,708
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Total thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . .
------
Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . $7,995
======
</TABLE>
Total rent expense during 1995, 1994 and 1993 amounted to $6,749, $5,982
and $5,401, respectively.
F-17
<PAGE> 19
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:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
========= ======= =======
</TABLE>
F-18
<PAGE> 20
The amounts included in the consolidated balance sheet for the North
American plans of Viskase were:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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%
</TABLE>
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
F-19
<PAGE> 21
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:
<TABLE>
<CAPTION>
MEDICAL LIFE TOTAL
---------------- ----------------- ------------------
1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
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.
F-20
<PAGE> 22
12. INCOME TAXES (DOLLARS IN THOUSANDS)
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
======= ========= ========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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%
===== ===== ======
</TABLE>
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1995 are as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCE TAX EFFECTED
--------------------------- ----------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
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
======== ======== ======= ========
</TABLE>
F-21
<PAGE> 23
12. INCOME TAXES (DOLLARS IN THOUSANDS)--(CONTINUED)
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
F-22
<PAGE> 24
14. CONTINGENCIES (DOLLARS IN THOUSANDS)--(CONTINUED)
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
F-23
<PAGE> 25
15. CAPITAL STOCK, PAID IN CAPITAL, AND WARRANTS--(CONTINUED)
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:
<TABLE>
<CAPTION>
NUMBER OF
OPTION OPTION PRICE
SHARES PER SHARE
---------- -------------
<S> <C> <C>
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
==========
</TABLE>
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.)
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- ------------
<S> <C> <C>
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
</TABLE>
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
F-24
<PAGE> 26
18. PATENT LITIGATION SETTLEMENT (DOLLARS IN THOUSANDS)--(CONTINUED)
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.
F-25
<PAGE> 27
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
----------- ---------- -----------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
F-26
<PAGE> 28
GEOGRAPHIC AREA INFORMATION
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
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):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1995 QUARTER QUARTER QUARTER QUARTER ANNUAL
- ----------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
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.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
FISCAL 1994 QUARTER QUARTER QUARTER QUARTER ANNUAL
- ----------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
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)
</TABLE>
The 1994 second quarter operating income benefitted from a $9.5 million
settlement of a patent infringement suit.
F-27
<PAGE> 29
22. QUARTERLY DATA (UNAUDITED)--(CONTINUED)
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
F-28
<PAGE> 30
24. SUBSIDIARY GUARANTORS--(CONTINUED)
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.
F-29
<PAGE> 31
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, 1995
---------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS(1) TOTAL
------ ------------ ------------ --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
=========== =========== =========== =========== =========
</TABLE>
- ---------------------
(1) Elimination of intercompany receivables, payables and investment accounts.
F-30
<PAGE> 32
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 29, 1994
---------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS(1) TOTAL
----------- ------------ ------------ --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
=========== =========== =========== =========== ========
</TABLE>
- ---------------------
(1) Elimination of intercompany receivables, payables and investment accounts.
F-31
<PAGE> 33
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 28, 1995
-----------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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)
=========== ========= =========== =========== =========
</TABLE>
F-32
<PAGE> 34
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 28, 1995
---------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------ ------------ ------------ ------------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
========= ========== =========== =========== ========
</TABLE>
F-33
<PAGE> 35
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 29, 1994
---------------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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)
========== ========== ========== =========== ==========
</TABLE>
F-34
<PAGE> 36
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 29, 1994
---------------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
----------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
========== ========== ========== =========== ==========
</TABLE>
F-35
<PAGE> 37
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
--------------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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,
REORGANIZATION 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
=========== =========== =========== =========== =========
</TABLE>
F-36
<PAGE> 38
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------------------
GUARANTOR NONGUARANTOR CONSOLIDATED
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
-------- ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
========= ========== ========= ========== =========
</TABLE>
F-37
<PAGE> 39
Financial statement schedules required by Regulation S-X
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements:
<TABLE>
<S> <C>
Report of independent accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-39
Consolidated balance sheets, December 28, 1995 and December 29, 1994 . . . . . . . . . . . . . . . . . . . F-40
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); . . . . . . . . . . . . . . . . . . . . . . . . . F-41
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); . . . . . . . . . . . . . F-42
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); . . . . . . . . . . . . . . . . . . . . . . . F-43
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-44
</TABLE>
F-38
<PAGE> 40
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
F-39
<PAGE> 41
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
---------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
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
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-40
<PAGE> 42
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C>
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)
========== ========= =========
</TABLE>
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.
F-41
<PAGE> 43
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY TOTAL
COMMON PAID IN RETAINED TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENTS EQUITY
----- ------- -------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
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
======== ======== ======== =========
</TABLE>
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.
F-42
<PAGE> 44
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1 JANUARY 1
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
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
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
</TABLE>
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.
F-43
<PAGE> 45
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:
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY PARENT OF SUBSIDIARY COUNTRY OF BUSINESS
- ------------------ -------------------- -------------------
<S> <C> <C>
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
</TABLE>
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:
o Forecasted operating and cash flow results which gave effect to the
estimated impact of debt restructuring and other operational
reorganization.
F-44
<PAGE> 46
o Discounted residual value at the end of the forecasted period based on
the capitalized cash flows for the last year of that period.
o Competition and general economic considerations.
o Projected sales growth.
o Potential profitability.
o 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' 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 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.
F-45
<PAGE> 47
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.
F-46
<PAGE> 48
(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
F-47
<PAGE> 49
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 accounting 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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
Raw materials.......................................................... $ 5,299 $ 5,778
Work in process........................................................ 13,342 13,975
Finished products ..................................................... 19,592 23,972
------- -------
$38,233 $43,725
======= =======
</TABLE>
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.
F-48
<PAGE> 50
6. PROPERTY, PLANT AND EQUIPMENT (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
======== ========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
======= =======
</TABLE>
8. DEBT OBLIGATIONS (DOLLARS IN THOUSANDS)
As described in Note 1, Chapter 11 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.
F-49
<PAGE> 51
8. DEBT OBLIGATIONS (DOLLARS IN THOUSANDS)--(CONTINUED)
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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
------------ ------------
<S> <C> <C>
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
====== =======
</TABLE>
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:
<TABLE>
<CAPTION>
TOTAL
-------
<S> <C>
1996 ........................................................................... $2,612
1997 ........................................................................... 2,383
1998 ........................................................................... 2,233
1999 ........................................................................... 2,033
2000 ........................................................................... 1,016
</TABLE>
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:
<TABLE>
<S> <C>
1996 ........................................................................ $1,357
1997 ........................................................................ 1,092
1998 ........................................................................ 886
1999 ........................................................................ 450
2000 ........................................................................ 372
Total thereafter ............................................................
------
Total minimum lease payments ................................................ $4,157
======
</TABLE>
Total rent expense during 1995, 1994 and 1993 amounted to $3,750, $2,350
and $2,140, respectively.
F-50
<PAGE> 52
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:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 29, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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 .............................................. 2,098 128 (1,434)
Foreign ..............................................
------- ------- ------
State and local ...................................... 2,908 128 (1,434)
------- ------- ------
$ 4,607 $10,025 $2,645
======= ======= ======
</TABLE>
A reconciliation from the statutory federal tax rate to the consolidated
effective tax rate follows:
<TABLE>
<CAPTION>
DECEMBER 30, JANUARY 1, JANUARY 1,
1994 TO TO TO
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
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%
==== ==== ======
</TABLE>
F-51
<PAGE> 53
12. INCOME TAXES (DOLLARS IN THOUSANDS)--(CONTINUED)
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1995 are as follows:
<TABLE>
<CAPTION>
TEMPORARY DIFFERENCE TAX EFFECTED
------------------------------ ------------ -------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
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
===== ======= ===== =======
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 28, DECEMBER 29,
1995 1994
----------- -----------
<S> <C> <C>
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
======= =======
</TABLE>
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.
F-52
<PAGE> 54
14. RELATED PARTY TRANSACTIONS (DOLLARS IN THOUSANDS)--(CONTINUED)
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.)
<TABLE>
<CAPTION>
CARRYING ESTIMATED
VALUE FAIR VALUE
-------- -----------
<S> <C> <C>
Assets:
Cash and equivalents. . . . . . . . . . . $11,826 $11,826
Foreign currency contracts. . . . . . . . 3,397 3,377
Liabilities:
Long-term debt. . . . . . . . . . . . . . 7,721 7,721
</TABLE>
F-53
<PAGE> 55
SCHEDULE II
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD EXPENSE WRITE-OFFS RECOVERIES OTHER(1) OF PERIOD
- ----------- ---------- ----------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------------------
(1) Foreign currency translation.
F-54
<PAGE> 56
UNAUDITED INTERIM FINANCIAL STATEMENTS
F-55
<PAGE> 57
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
---------------- ---------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 23,002 $ 30,325
Receivables, net 86,348 89,454
Inventories 105,239 99,474
Other current assets 32,073 21,646
-------- --------
Total current assets 246,662 240,899
Property, plant and equipment,
including those under capital leases 549,638 545,491
Less accumulated depreciation
and amortization 86,604 75,987
-------- --------
Property, plant and equipment, net 463,034 469,504
Deferred financing costs 7,448 8,090
Other assets 44,327 45,589
Excess reorganization value 132,889 135,485
-------- --------
$894,360 $899,567
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current portion
of long-term debt and obligations
under capital leases $ 12,014 $ 12,504
Accounts payable 41,429 39,117
Accrued liabilities 78,851 67,553
-------- --------
Total current liabilities 132,294 119,174
Long-term debt including obligations
under capital leases 523,113 530,181
Accrued employee benefits 55,944 55,626
Deferred and noncurrent income taxes 73,156 77,490
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,479,721 shares issued and
outstanding at March 28, 1996 and
13,579,460 shares at December 28, 1995 145 136
Paid in capital 134,855 134,864
Accumulated (deficit) (31,058) (25,131)
Cumulative foreign currency
translation adjustments 5,911 7,227
-------- --------
Total stockholders' equity 109,853 117,096
-------- --------
$894,360 $899,567
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-56
<PAGE> 58
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
March 28, March 30,
1996 1995
--------------- --------------
(in thousands, except for number
of shares and per share amounts)
<S> <C> <C>
NET SALES $159,736 $155,824
COSTS AND EXPENSES
Cost of sales 119,709 114,955
Selling, general
and administrative 26,642 28,270
Amortization of intangibles
and excess reorganization value 4,091 3,910
-------- ---------
OPERATING INCOME 9,294 8,689
Interest income 391 64
Interest expense 14,876 13,434
Other expense (income), net 3,036 (591)
-------- ---------
(LOSS) BEFORE INCOME TAXES (8,227) (4,090)
Income tax provision (benefit) (2,300) (195)
-------- ---------
NET (LOSS) $ (5,927) $ (3,895)
======== =========
WEIGHTED AVERAGE
COMMON SHARES 13,737,748 13,515,000
PER SHARE AMOUNTS:
NET (LOSS) $(.43) $ (.29)
===== =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-57
<PAGE> 59
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
March 28, March 30,
1996 1995
------------- --------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (5,927) $ (3,895)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization under capital lease 10,974 9,986
Amortization of intangibles and excess
reorganization value 4,091 3,910
Amortization of deferred financing fees and discount 579 549
Increase (decrease) in deferred and
noncurrent income taxes (3,866) (907)
Foreign currency transaction loss (gain) 47 (1,586)
(Gain) on sales of property, plant and equipment (2)
Changes in operating assets and liabilities:
Accounts receivable 2,307 (438)
Inventories (6,212) (12,192)
Other current assets (10,558) (10,615)
Accounts payable and accrued liabilities 14,243 254
Other 191 398
-------- --------
Total adjustments 11,794 (10,641)
-------- --------
Net cash provided by operating activities 5,867 (14,536)
Cash flows from investing activities:
Capital expenditures (6,543) (7,631)
Proceeds from sale of property, plant and equipment 49
-------- -------
Net cash (used in) investing activities (6,494) (7,631)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 42,249
Deferred financing costs (464)
Repayment of revolving loan, long-term borrowings
and capital lease obligation (7,202) (19,973)
-------- --------
Net cash provided by financing activities (7,202) 21,812
Effect of currency exchange rate changes on cash 506 275
-------- --------
Net (decrease) in cash and equivalents (7,323) (80)
Cash and equivalents at beginning of period 30,325 7,289
-------- --------
Cash and equivalents at end of period $ 23,002 $ 7,209
======== ========
- ----------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $13,379 $16,330
Income taxes paid $ 453 $ 1,405
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-58
<PAGE> 60
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
----------- ---------------
<S> <C> <C>
Raw materials $ 17,605 $ 17,150
Work in process 32,695 32,800
Finished products 54,939 49,524
-------- -------
$105,239 $ 99,474
======== ========
</TABLE>
Approximately 56% of the inventories at March 28, 1996 were valued at Last-In,
First-Out (LIFO). These LIFO values exceeded current manufacturing cost by
approximately $5 million at March 28, 1996.
2. DEBT OBLIGATIONS (dollars in thousands)
On June 20, 1995, Envirodyne Industries, Inc. (Envirodyne or the Company)
completed the sale of $160,000 aggregate principal amount of senior secured
notes pursuant to an indenture dated June 20, 1995 (Indenture) consisting 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 refinance senior
bank debt and pay transaction fees and expenses. Concurrently with the June 20,
1995 financing, Envirodyne entered into a $20,000 domestic revolving credit
facility (Revolving Credit Facility) and a $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 March
28, 1996.
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
F-59
<PAGE> 61
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 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 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, Envirodyne is 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 $153
of amortization of the interest rate cap premium during the three-month period
ended March 28, 1996. 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.
F-60
<PAGE> 62
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)
<TABLE>
<CAPTION>
Pro Forma Three Months
Ended March 30, 1995
------------------------
<S> <C>
Net sales $155,824
Cost of sales 114,955
Selling, general and administrative 28,270
Amortization of intangibles and
excess reorganization cost 3,910
--------
Operating income 8,689
Interest income 64
Interest expense 14,981
Other expense (income), net (591)
--------
(Loss) before income taxes (5,637)
Income tax (benefit) (798)
--------
Net (loss) $ (4,839)
========
Weighted average common shares 13,515,000
Net (loss) per share $(.36)
=====
</TABLE>
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:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996 104%
1997 103%
1998 102%
1999 101%
2000 and thereafter 100%
</TABLE>
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
F-61
<PAGE> 63
another entity or to dispose of substantially all its assets.
Outstanding short-term and long-term debt consisted of:
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
---------- ------------
<S> <C> <C>
Short-term debt, current maturity of long-term
debt, and capital lease obligation:
Current maturity of Viskase Capital Lease Obligation $ 6,633 $ 6,012
Current maturity of Viskase Limited Term Loan (4.7%) 1,977 2,033
Other 3,404 4,459
-------- ---------
Total short-term debt $12,014 $12,504
======= =======
Long-term debt:
12% Senior Secured Notes due 2000 $160,000 $160,000
10.25% Senior Notes due 2001 219,262 219,262
Viskase Capital Lease Obligation 134,549 141,182
Viskase Limited Term Loan (4.7%) 6,917 7,115
Other 2,385 2,622
-------- ---------
Total long-term debt $523,113 $530,181
======== ========
</TABLE>
The fair value of the Company's debt obligation (excluding capital lease
obligation) is estimated based upon the quoted market prices for the same or
similar issues or upon the current rates offered to the Company for the debt of
the same remaining maturities. At March 28, 1996 the carrying amount and
estimated fair value of debt obligations (excluding capital lease obligation)
were $391,974 and $348,818, respectively.
On December 28, 1990, Viskase and GECC entered into a sale and leaseback
transaction. The sale and leaseback of assets included the production and
finishing equipment at Viskase's four domestic casing production and finishing
facilities. The facilities are located in Chicago, Illinois; Loudon,
Tennessee; Osceola, Arkansas and Kentland, Indiana. Viskase, as the Lessee
under the relevant agreements, continues to operate all of the facilities. The
lease has been accounted for as a capital lease.
The principal terms of the sale and leaseback transaction include: (a) a
15-year basic lease term (plus selected renewals at Viskase's option), (b)
annual rent payments in advance beginning in February 1991, and (c) a fixed
price purchase option at the end of the basic 15-year term and fair market
purchase options at the end of the basic term and each renewal term. Further,
the Lease Documents contain covenants requiring maintenance by the Company of
certain financial ratios and restricting the Company's ability to pay dividends,
make payments to affiliates, make investments and incur indebtedness.
Annual rental payments under the Lease will be approximately $19.2 million
through 1997, $21.4 million in 1998 and $23.5 million through the end of the
basic 15-year term. Viskase is required to provide credit support consisting of
a standby letter of credit in an amount up to one year's rent through at least
1997.
F-62
<PAGE> 64
This credit support can be reduced up to $4 million currently if the Company
achieves and maintains certain financial ratios. As of March 28, 1996 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 rental payment of $19,227 was paid on February 28, 1996. Principal
payments under the capital lease obligation for the years ended 1996 through
1999 range from approximately $6 million to $14 million.
Aggregate maturities of remaining long-term debt for each of the next five
fiscal years are:
<TABLE>
<CAPTION>
Total
---------------
<S> <C>
1996 $ 9,019
1997 9,418
1998 12,313
1999 95,477
2000 95,669
</TABLE>
F-63
<PAGE> 65
3. 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 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 (Bankruptcy Court), ARTRA
Group Incorporated (ARTRA) alleges breach of fiduciary duty and tortious
inference in connection with the negotiation and consummation of Envirodyne's
plan of reorganization (Plan of Reorganization) in 1993. 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.
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 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
F-64
<PAGE> 66
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.
4. CAPITAL STOCK, PAID IN CAPITAL, AND WARRANTS
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.
F-65
<PAGE> 67
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 the terms of the Plan of Reorganization. The
total number of shares outstanding after issuance of common stock for the
Lumpkin settlement and for the additional distribution to holders of general
unsecured claims of Envirodyne is 14,479,721.
Under the 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.
5. 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
unaudited interim financial statements of Viskase Holding Corporation are being
filed within this quarterly report.
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.
F-66
<PAGE> 68
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
MARCH 28, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations (1) Total
-------- ------------ ------------ ---------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 16,489 $ (1,923) $ 8,436 $ 23,002
Receivables and advances, net 73,219 67,508 52,060 $ (106,439) 86,348
Inventories 68,570 38,124 (1,455) 105,239
Other current assets 510 22,090 9,473 32,073
-------- -------- -------- --------- --------
Total current assets 90,218 156,245 108,093 (107,894) 246,662
Property, plant and equipment including
those under capital lease 265 400,668 148,705 549,638
Less accumulated depreciation
and amortization 176 63,569 22,859 86,604
-------- -------- -------- --------- --------
Property, plant and equipment, net 89 337,099 125,846 463,034
Deferred financing costs 6,497 951 7,448
Other assets 42,672 1,655 44,327
Investment in subsidiaries 71,972 117,371 (189,343)
Excess reorganization value 93,152 39,737 132,889
-------- -------- -------- --------- --------
$168,776 $746,539 $276,282 $(297,237) $894,360
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 7,051 $ 4,963 $ 12,014
Accounts payable and advances $ 15 99,213 48,640 $ (106,439) 41,429
Accrued liabilities 19,868 36,273 22,710 78,851
-------- -------- -------- --------- --------
Total current liabilities 19,883 142,537 76,313 (106,439) 132,294
Long-term debt including obligation
under capital lease 379,262 136,462 7,389 523,113
Accrued employee benefits 51,649 4,295 55,944
Deferred and noncurrent income taxes 33,330 15,015 24,811 73,156
Intercompany loans (373,552) 340,000 33,504 48
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,479,721 shares issued and
outstanding 145 3 32,738 (32,741) 145
Paid in capital 134,855 87,899 87,871 (175,770) 134,855
Accumulated earnings (deficit) (31,058) (32,889) 3,498 29,391 (31,058)
Cumulative foreign currency
translation adjustments 5,911 5,863 5,863 (11,726) 5,911
-------- -------- -------- --------- --------
Total stockholders' equity 109,853 60,876 129,970 (190,846) 109,853
-------- -------- -------- --------- --------
$168,776 $746,539 $276,282 $(297,237) $894,360
======== ======== ======== ========= ========
</TABLE>
(1) Elimination of intercompany receivables, payables and investment accounts.
F-67
<PAGE> 69
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 28, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations (1) Total
-------- ------------ ------------ ---------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
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 77,766 117,578 (195,344)
Excess reorganization value 94,968 40,517 135,485
-------- -------- -------- --------- --------
$155,576 $742,122 $289,875 $(288,006) $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 87,899 87,871 (175,770) 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 67,329 130,122 (197,451) 117,096
-------- -------- -------- --------- --------
$155,576 $742,122 $289,875 $(288,006) $899,567
======== ======== ======== ========= ========
</TABLE>
(1) Elimination of intercompany receivables, payables and investment accounts.
F-68
<PAGE> 70
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 28, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $102,481 $66,212 $ (8,957) $159,736
COSTS AND EXPENSES
Cost of sales 78,867 50,458 (9,616) 119,709
Selling, general and administrative $1,546 14,921 10,175 26,642
Amortization of intangibles and
excess reorganization value 3,228 863 4,091
-------- -------- ------- -------- --------
OPERATING INCOME (LOSS) (1,546) 5,465 4,716 659 9,294
Interest income 216 175 391
Interest expense 10,940 3,343 593 14,876
Intercompany interest expense (income) (10,513) 9,379 1,134
Management fees (income) (1,591) 1,218 373
Other expense (income), net 2,210 173 653 3,036
Equity Loss (income) in subsidiary 4,478 (1,164) (3,314)
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (6,854) (7,484) 2,138 3,973 (8,227)
Income tax provision (benefit) (927) (2,347) 974 (2,300)
------- -------- -------- -------- --------
NET INCOME (LOSS) $(5,927) $ (5,137) $ 1,164 $ 3,973 $(5,927)
======= ======== ======= ======== =======
</TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THREE MONTHS ENDED MARCH 28, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $(11,061) $ 9,527 $7,401 $ 5,867
Cash flows from investing activities:
Capital expenditures (3) (5,919) (621) (6,543)
Proceeds from sale of property, plant and
equipment 35 14 49
-------- -------- ------- -------- -------
Net cash (used in) investing activities (3) (5,884) (607) (6,494)
Cash flows from financing activities:
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,052) (1,150) (7,202)
Increase (decrease) in Envirodyne loan 9,540 (9,540)
-------- -------- -------- -------- -------
Net cash provided by (used in) financing
activities 9,540 (6,052) (10,690) (7,202)
Effect of currency exchange rate changes
on cash 506 506
-------- -------- -------- -------- -------
Net increase (decrease) in cash
and equivalents (1,524) (2,409) (3,390) (7,323)
Cash and equivalents at beginning
of period 18,013 486 11,826 30,325
-------- -------- ------- -------- -------
Cash and equivalents at end
of period $16,489 $ (1,923) $ 8,436 $23,002
======= ======== ======= ======== =======
</TABLE>
F-69
<PAGE> 71
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 30, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $102,289 $ 62,520 $ (8,985) $155,824
COSTS AND EXPENSES
Cost of sales 75,069 48,903 (9,017) 114,955
Selling, general and administrative $1,573 17,354 9,343 28,270
Amortization of intangibles and
excess reorganization value 3,066 844 3,910
------- -------- -------- -------- --------
OPERATING INCOME (LOSS) (1,573) 6,800 3,430 32 8,689
Interest income 55 9 64
Interest expense 9,084 3,522 828 13,434
Intercompany interest expense (income) (9,352) 8,502 850
Management fees (income) (1,850) 1,558 292
Other expense (income), net (2,152) (43) 1,604 (591)
Equity loss (income) in subsidiary 5,540 756 (6,296)
------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (2,843) (7,440) (135) 6,328 (4,090)
Income tax provision 1,052 (1,868) 621 (195)
------- -------- -------- -------- --------
NET INCOME (LOSS) $(3,895) $ (5,572) $ (756) $ 6,328 $ (3,895)
======= ======== ======== ======== ========
</TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THREE MONTHS ENDED MARCH 30, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities $(23,043) $12,237 $(3,730) $(14,536)
Cash flows from investing activities:
Capital expenditures (5,826) (1,805) (7,631)
------- -------- -------- -------- --------
Net cash (used in) investing activities (5,826) (1,805) (7,631)
Cash flows from financing activities:
Proceeds from revolving loan and
long term borrowings 13,900 28,349 42,249
Deferred financing costs (464) (464)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (2,837) (5,450) (11,686) (19,973)
Increase (decrease) in Envirodyne loan 14,705 (14,705)
------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities 25,304 (5,450) 1,958 21,812
Effect of currency exchange rate
changes on cash 275 275
------- -------- -------- -------- --------
Net increase (decrease) in cash
and equivalents 2,261 961 (3,302) (80)
Cash and equivalents at beginning of period 555 1,853 4,881 7,289
------- -------- -------- -------- --------
Cash and equivalents at end of period $ 2,816 $ 2,814 $ 1,579 $ 7,209
======= ======== ======== ======== ========
</TABLE>
F-70
<PAGE> 72
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
The financial information included in this quarterly report has been prepared
in conformity with the accounting principles and practices reflected in the
financial statements included in the annual report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December 28, 1995 (1995
Form 10-K). These quarterly financial statements should be read in conjunction
with the financial statements and the notes thereto included in the 1995 Form
10-K. The accompanying financial information, which is unaudited, reflects all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented.
The condensed consolidated balance sheet as of December 28, 1995 was derived
from the audited Viskase Holding Corporation's consolidated financial
statements included in Envirodyne Industries, Inc.'s annual report of Form
10-K.
Reported interim results of operations are based in part on estimates which may
be subject to year-end adjustments. In addition, these quarterly results of
operations are not necessarily indicative of those expected for the year.
F-71
<PAGE> 73
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
---------------- ---------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 8,436 $ 11,826
Receivables, net 49,351 53,022
Receivables, affiliates 51,328 51,829
Inventories 38,124 38,233
Other current assets 9,473 9,106
-------- -------
Total current assets 156,712 164,016
Property, plant and equipment 148,705 150,417
Less accumulated depreciation 22,859 20,217
---------- --------
Property, plant and equipment, net 125,846 130,200
Deferred financing costs 951 1,042
Other assets 1,655 1,869
Excess reorganization value 39,737 40,517
-------- --------
$324,901 $337,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 4,963 $ 6,097
Accounts payable 15,819 13,720
Accounts payable and advances, affiliates 50,044 54,152
Accrued liabilities 22,711 21,942
--------- ----------
Total current liabilities 93,537 95,911
Long-term debt 7,389 7,721
Accrued employee benefits 4,295 4,281
Deferred and noncurrent income taxes 24,811 25,895
Intercompany loans 71,514 81,094
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 14,029 12,100
Cumulative foreign currency
translation adjustments 5,863 7,179
--------- ----------
Total stockholders' equity 123,355 122,742
-------- --------
$324,901 $337,644
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-72
<PAGE> 74
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 28, March 30,
1996 1995
--------- ---------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C>
NET SALES $66,212 $62,520
COSTS AND EXPENSES
Cost of sales 50,458 48,903
Selling, general
and administrative 8,912 8,846
Amortization of intangibles
and excess reorganization value 863 844
------- -------
OPERATING INCOME 5,979 3,927
Interest income 175 39
Interest expense 593 858
Intercompany interest expense 1,134 838
Management fees 373 292
Other expense, net 653 1,299
------- -------
INCOME BEFORE INCOME TAXES 3,401 679
Income tax provision 1,472 848
------- -------
NET INCOME (LOSS) $ 1,929 $ (169)
======= =======
WEIGHTED AVERAGE
COMMON SHARES 100 100
PER SHARE AMOUNTS:
NET INCOME (LOSS) $19,290 $(1,690)
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-73
<PAGE> 75
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 28, March 30,
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,929 $ (169)
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 2,982 2,808
Amortization of intangibles and excess
reorganization value 863 844
Amortization of deferred financing fees and discount 57 54
Increase (decrease) in deferred and
noncurrent income taxes (536) (91)
(Gain) on sales of property, plant and equipment (14)
Changes in operating assets and liabilities:
Accounts receivable 2,872 (88)
Accounts receivable, affiliates 97 (2,325)
Inventories (338) (6,652)
Other current assets 591 1,276
Accounts payable and accrued liabilities 2,865 (1,321)
Accounts payable and advances, affiliates (3,964) 1,225
Other (3) (689)
-------- --------
Total adjustments 5,472 (4,959)
-------- --------
Net cash provided by (used in) operating activities 7,401 (5,128)
Cash flows from investing activities:
Capital expenditures (621) (1,805)
Proceeds from sale of property, plant and equipment 14
-------- --------
Net cash (used in) investing activities (607) (1,805)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 28,349
Repayment of revolving loan and long-term borrowings (1,150) (11,686)
Increase (decrease) in Envirodyne loan (9,540) (14,627)
-------- --------
Net cash provided by (used in) financing activities (10,690) 2,036
Effect of currency exchange rate changes on cash 506 275
-------- --------
Net (decrease) in cash and equivalents (3,390) (4,622)
Cash and equivalents at beginning of period 11,826 6,201
-------- --------
Cash and equivalents at end of period $ 8,436 $ 1,579
======== ========
- ----------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $138 $ 250
Income taxes paid $250 $ 685
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-74
<PAGE> 76
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
<TABLE>
<CAPTION>
March 28, December 28,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials $ 4,653 $ 5,299
Work in process 13,045 13,342
Finished products 20,426 19,592
-------- -------
$38,124 $38,233
======= =======
</TABLE>
2. CONTINGENCIES (dollars in thousands)
Viskase Holding Corporation 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.
F-75
