<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER: 1-4219
ZAPATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE C-74-1339132
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 940-6100
--------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- --------------------------
<S> <C>
Common Stock, $0.25 par value . . . . . . . . . . . . . . . . . . . . . . . . . New York Stock Exchange
10 1/4% Subordinated Debentures due 1997 . . . . . . . . . . . . . . . . . . . New York Stock Exchange
10 7/8% Subordinated Debentures due 2001 . . . . . . . . . . . . . . . . . . . New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
$2 Noncumulative Convertible Preference Stock, $1 par value.
On December 26, 1996, there were outstanding 29,548,707 shares of the
Company's Common Stock, $0.25 par value. The aggregate market value of the
Company's voting stock held by nonaffiliates of the Company is $66,781,269,
based on the closing price in consolidated trading on December 26, 1996, for
the Company's Common Stock and the value of the number of shares of Common
Stock into which the Company's $2 Noncumulative Convertible Preference Stock
was convertible on such date.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K/A. [X]
------
Documents incorporated by reference: None.
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<PAGE> 2
Zapata Corporation hereby amends Item 14 of its annual report on Form 10-K
for the fiscal year ended September 30, 1996. Item 14, as so amended, is as
follows. The financial statements of Envirodyne Industries, Inc. and
subsidiaries, as referenced in Item 14, are also filed herewith.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) LIST OF DOCUMENTS FILED.
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(1)(A) Consolidated financial statements, Zapata Corporation and subsidiary companies--
Report of Coopers & Lybrand L.L.P., independent public accountants . . . . . . . . . . . . . 22
Consolidated balance sheet--September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . 23
Consolidated statement of operations for the years ended September 30,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated statement of cash flows for the years ended September 30,
1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated statement of stockholders' equity for the years ended
September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . 27
(B) Consolidated financial statements, Envirodyne Industries, Inc. and subsidiary companies--
Report of Coopers & Lybrand L.L.P., independent public accountants . . . . . . . . . . . . . F-1
Consolidated balance sheets--December 26, 1996 and December 28, 1995 . . . . . . . . . . . F-2
Consolidated statements of operations for December 29, 1995 to
December 26, 1996; December 30, 1994 to December 28, 1995; and
January 1 to December 29, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated statements of stockholders' equity (deficit) December 29, 1995 to
December 26, 1996; December 30, 1994 to December 28, 1995; and
January 1 to December 29, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated statements of cash flows December 29, 1995 to
December 26, 1996; December 30, 1994 to December 28, 1995; and
January 1 to December 29, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . F-6
(2) Supplemental Schedule:
Report of Coopers & Lybrand L.L.P., independent public accountants . . . . . . . . . . . . . 67
I--Zapata Corporation (parent company financial statements) as of and
for the years ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
All schedules, except those listed above, have been omitted since the
information required to be submitted has been included in the financial
statements or notes or has been omitted as not applicable or not required.
Page numbers that are referenced above, except for the "F" pages, refer to
the page numbers contained in the Company's Form 10-K for the fiscal year
ended September 30, 1996.
(3) Exhibits
The exhibits indicated by an asterisk (*) are incorporated by reference.
2
<PAGE> 3
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
3(a)* -- Restated Certificate of Incorporation of Zapata filed with
Secretary of State of Delaware May 3, 1994 (Exhibit 3(a) to
Current Report on Form 8-K dated April 27, 1994 (File No.
1-4219)).
3(b)* -- Certificate of Designation, Preferences and Rights of $1
Preference Stock (Exhibit 3(c) to Zapata's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1993 (File
No. 1-4219)).
3(c)* -- Certificate of Designation, Preferences and Rights of $100
Preference Stock (Exhibit 3(d) to Zapata's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1993 (File
No. 1-4219)).
3(d)*++ -- By-laws of Zapata, as amended effective November 11, 1996.
Certain instruments respecting long-term debt of Zapata and its
subsidiaries have been omitted pursuant to Regulation S-K, Item 601. Zapata
hereby agrees to furnish a copy of any such instrument to the Commission upon
request.
10(a)*+ -- Zapata 1990 Stock Option Plan (Exhibit 10(b) to Zapata's
Annual Report on Form 10-K for the fiscal year ended September
30, 1990 (File No. 1-4219)).
10(b)*+ -- First Amendment to Zapata 1990 Stock Option Plan (Exhibit
10(c) to Zapata's Registration Statement on Form S-1
(Registration No. 33-40286)).
10(c)*+ -- Zapata Special Incentive Plan, as amended and restated
effective February 6, 1992 (Exhibit 10(a) to Zapata's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1992 (File No. 1-4219)).
10(d)*+ -- Zapata 1981 Stock Incentive Plan, as amended and restated
effective February 12, 1986 (Exhibit 19(a) to Zapata's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1986 (File No. 1-4219)).
10(e)*+ -- Zapata Supplemental Pension Plan effective as of April 1, 1992
(Exhibit 10(b) to Zapata's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1992 (File No. 1-4219)).
10(f)*+ -- Zapata Annual Incentive Plan effective January 1, 1991
(Exhibit 10(h) to Zapata's Registration Statement on Form S-1
(Registration No. 33-40286)).
10(g)*+ -- Cimarron Gas Companies, Inc. Incentive Appreciation Plan,
effective as of September 30, 1992 (Exhibit 2(c) to Zapata's
Current Report on Form 8-K dated November 24, 1992 (File No.
1-4219)).
10(h)*+ -- Noncompetition Agreement dated as of November 9, 1993 by and
among Zapata and Peter M. Holt and Benjamin D. Holt, Jr.
(Exhibit 10(q) to Zapata's Annual Report on form 10-K for the
fiscal year ended September 30, 1994 (File No. 1-4219)).
10(i)*+ -- Termination Agreement between Cimarron Gas Companies, Inc. and
James C. Jewett dated as of January 24, 1994 (Exhibit 10(a) to
Zapata's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 1993 (File No. 1-4219)).
10(j)*+ -- Consulting Agreement dated as of July 1, 1994 between Zapata
Corporation and Thomas H. Bowersox (Exhibit 10(w) to Zapata's
Annual Report on Form 10-K for the fiscal year ended September
30, 1994 (File No. 1-4219)).
10(k)*+ -- Consulting Agreement between Ronald C. Lassiter and Zapata
dated as of July 15, 1994 (Exhibit 10(a) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 1994
(File No. 1-4219)).
3
<PAGE> 4
10(l)*+ -- Employment Agreement between Lamar C. McIntyre and Zapata
dated as of October 1, 1994 (Exhibit 10(v) to Zapata's Annual
Report on Form 10-K for the fiscal year ended September 30,
1994 (File No. 1-4219)).
10(m)*+ -- Purchase Agreement dated as of April 10, 1995 by and between
Norex America, Inc. and Zapata relating to 2,250,000 shares of
Zapata Common Stock (Exhibit 10(c) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1995 (File No. 1-4219)).
10(n)*+ -- Assignment and Assumption of Consulting Agreement effective as
of July 1, 1995 by and between Zapata and Zapata Protein, Inc.
(Exhibit 10(b) to Zapata's Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1995 (File No. 1-4219)).
10(o)* -- Stock Purchase Agreement dated as of August 7, 1995 between
Zapata Corporation and Malcolm I. Glazer (Exhibit 10(o) to
Zapata's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 (File No. 1-4219)).
10(p)*+ -- Mutual Release Agreement dated as of December 1, 1995 by and
among Zapata Corporation, Cimarron Gas Holding Company, Robert
W. Jackson and the Robert W. Jackson Trust.
10(q)* -- Purchase and Sale Agreement dated March 26, 1996 by and among
Cimarron Gas Holding Company, Conoco Inc. and Enogex Products
Corporation (Exhibit 2.1 to Zapata's Current Report on Form
8-K dated April 9, 1996 (File No. 1-4219)).
10(r)* -- Amendment and Clarification of Purchase and Sale Agreement,
Waiver and Closing Agreement dated April 9, 1996 (Exhibit 2.2
to Zapata's Current Report on Form 8-K dated April 9, 1996
(File No. 1-4219)).
10(s)* -- Agreement and Plan of Merger dated as of June 4, 1996 among
Zapata, Zapata Acquisition Corp. and Houlihan's (Exhibit 2.1
to Zapata's Registration Statement on Form S-4 (Reg. No. 333-
06729)).
10(t)* -- Standstill Agreement dated April 30, 1996 between Zapata and
Malcolm I. Glazer (Exhibit 10.18 to Zapata's Registration
Statement on Form S-4 (Reg. No. 333-06729)).
10(u)* -- Irrevocable proxy dated June 4, 1996 granted by Malcolm I.
Glazer to members of a Special Committee of the Board of
Directors of Zapata (Exhibit 10.19 to Zapata's Registration
Statement on Form S-4 (Reg. No. 333-06729)).
10(v)* -- Supplemental Agreement dated June 4, 1996 between Malcolm I.
Glazer and Zapata (Exhibit 10.20 to Zapata's Registration
Statement on Form S-4 (Reg. No. 333-06729)).
10(w)* -- 1996 Long-Term Incentive Plan of Zapata (Exhibit 10.21 to
Zapata's Registration Statement on Form S-4 (Reg. No.
333-06729)).
10(x)*+ -- Employment Agreement between Joseph L. von Rosenberg III and
Zapata effective as of June 1, 1996.
10(y) -- Indemnification Agreement between Zapata and certain directors
and officers accompanied by Schedule pursuant to Rule 12b-31.
21*++ -- Subsidiaries of the Registrant.
23(a)*++ -- Consent of Huddleston & Co., Inc.
23(b)*++ -- Consent of Coopers & Lybrand L.L.P.
23(c) -- Consent of Coopers & Lybrand L.L.P. with respect to the
consolidated financial statements of Envirodyne Industries,
Inc.
24*++ -- Powers of attorney.
27*++ -- Financial Data Schedule.
- ----------------------------------
4
<PAGE> 5
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to the requirements of Item 14(c) of Form
10-K.
++ Exhibits filed with the Company's Form 10-K for fiscal year ended
September 30, 1996.
(b) REPORTS ON FORM 8-K.
Current Report on Form 8-K dated September 8, 1996 announcing (1) that
W. George Loar, a director of the Company, died on September 8, 1996; and (2)
that on September 24, 1996, the Delaware Court of Chancery issued an opinion,
in connection with a lawsuit brought by a stockholder, holding that Zapata's
proposed acquisition of Houlihan's Restaurant Group, Inc. was subject to a
supermajority voting requirement in Zapata's certificate of incorporation.
(c) FINANCIAL STATEMENT SCHEDULES.
Filed herewith as financial statement schedules are (i) Schedule I
supporting Zapata's consolidated financial statements listed under paragraph
(a) of this Item and the Independent Accountants' Report with respect thereto,
and (ii) separate financial statements of Envirodyne Industries, Inc. and the
report of Independent Accounts with respect thereto.
5
<PAGE> 6
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
ZAPATA CORPORATION
By: /s/ Joseph L. von Rosenberg III
--------------------------------
Joseph L. von Rosenberg III
Executive Vice President, General
Counsel and Corporate Secretary
April 17, 1997
6
<PAGE> 7
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.
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 26, 1996 and
December 28, 1995, and the consolidated results of their operations and
their cash flows for the period December 29, 1995 to December 26, 1996,
December 30, 1994 to December 28, 1995 and January 1 to December 29,
1994, 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 20, 1997
F-1
<PAGE> 8
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 26, December 28,
1996 1995
-------------- ---------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 41,794 $ 30,325
Receivables, net 79,174 89,454
Inventories 95,012 99,474
Other current assets 22,141 21,646
-------- --------
Total current assets 238,121 240,899
Property, plant and equipment,
including those under capital leases 578,704 545,491
Less accumulated depreciation
and amortization 116,896 75,987
-------- --------
Property, plant and equipment, net 461,808 469,504
Deferred financing costs 5,902 8,090
Other assets 42,809 45,589
Excess reorganization value 125,107 135,485
-------- --------
$873,747 $899,567
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current portion
of long-term debt and obligations
under capital leases $ 11,291 $ 12,504
Accounts payable 37,015 39,117
Accrued liabilities 82,109 67,553
-------- --------
Total current liabilities 130,415 119,174
Long-term debt including obligations
under capital leases 521,179 530,181
Accrued employee benefits 53,697 55,626
Deferred and noncurrent income taxes 64,811 77,490
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,545,107 shares issued and
outstanding at December 26, 1996 and
13,579,460 shares at December 28, 1995 145 136
Paid in capital 135,100 134,864
Accumulated (deficit) (38,813) (25,131)
Cumulative foreign currency
translation adjustments 7,305 7,227
Unearned restricted stock issued
for future service (92)
-------- --------
Total stockholders' equity 103,645 117,096
-------- --------
$873,747 $899,567
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 9
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
52 weeks 52 weeks 52 weeks
December 29, December 30, January 1,
1995 to 1994, to to
December 26, December 28, December 29,
1996 1995 1994
-------------- -------------- -------------
(in thousands, except for number of shares
and per share amounts)
<S> <C> <C> <C>
NET SALES $651,356 $650,212 $599,029
Patent infringement settlement income 9,457
COSTS AND EXPENSES
Cost of sales 488,244 485,048 435,760
Selling, general and administrative 107,088 111,230 108,437
Amortization of intangibles and
excess reorganization value 16,334 15,799 15,612
-------- -------- --------
OPERATING INCOME 39,690 38,135 48,677
Interest income 1,568 670 307
Interest expense 58,565 57,336 49,514
Other expense (income), net 3,075 1,710 (1,668)
Minority interest in loss of subsidiary 50
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (20,382) (20,241) 1,188
Income tax provision (benefit) (6,700) (2,918) 4,800
-------- -------- --------
(LOSS) BEFORE EXTRAORDINARY ITEM (13,682) (17,323) (3,612)
Extraordinary (loss), net of tax (4,196)
-------- -------- --------
NET (LOSS) $(13,682) $(21,519) $ (3,612)
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES 14,325,595 13,516,771 13,500,703
========== ========== ==========
PER SHARE AMOUNTS:
(LOSS) BEFORE EXTRAORDINARY ITEM $(.96) $(1.28) $(.27)
===== ====== =====
NET (LOSS) $(.96) $(1.59) $(.27)
===== ====== =====
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 10
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Cumulative Unearned
Foreign Restricted Total
Currency Stock Stockholders'
Common Paid in Accumulated Translation Issued For Equity
Stock Capital (Deficit) Adjustments Future Service (Deficit)
------ -------- ----------- ------------- -------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
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
Net (loss) (13,682) (13,682)
Issuance of Common Stock 9 236 $(92) 153
Translation Adjustment 78 78
---- -------- -------- ------ ---- --------
Balance December 26, 1996 $145 $135,100 $(38,813) $7,305 $(92) $103,645
==== ======== ======== ====== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 11
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
52 weeks 52 weeks 52 weeks
December 29, December 30, January 1,
1995 to 1994, to to
December 26, December 28, December 29,
1996 1995 1994
-------------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
(Loss) before extraordinary item $(13,682) $(17,323) $ (3,612)
Extraordinary (loss) (4,196)
-------- -------- --------
Net (loss) (13,682) (21,519) (3,612)
Adjustments to reconcile net (loss) to net cash
provided by operating activities:
Depreciation and amortization under
capital leases 42,086 40,262 35,775
Amortization of intangibles and
excess reorganization value 16,334 15,799 15,612
Amortization of deferred financing fees
and discount 2,272 2,196 1,569
Decrease in deferred and noncurrent income taxes (11,065) (6,450) (52)
Loss on debt extinguishment 6,778
Foreign currency transaction gain (810) (1,233) (3,465)
Loss (gain) on sales of property,
plant and equipment 165 73 (9)
Changes in operating assets and liabilities:
Accounts receivable 10,180 (839) (11,257)
Inventories 4,383 12,741 (10,548)
Other current assets (788) (1,837) (1,607)
Accounts payable and accrued liabilities 12,463 (1,670) 3,774
Other (5,214) (5,334) (2,894)
-------- -------- --------
Total adjustments 70,006 60,486 26,898
-------- -------- --------
Total net cash provided by operating activities 56,324 38,967 23,286
Cash flows from investing activities:
Capital expenditures (37,073) (34,465) (32,566)
Proceeds from sale of property, plant and equipment 2,356 86 359
Purchase of minority interest in subsidiary (4,200)
-------- -------- --------
Net cash (used in) investing activities (34,717) (34,379) (36,407)
Cash flows from financing activities:
Issuance of common stock 153
Proceeds from revolving loan
and long-term borrowings 2,186 207,922 37,668
Deferred financing costs (142) (7,887) (1,608)
Repayment of revolving loan, long-term borrowings
and capital lease obligations (11,705) (181,375) (22,617)
-------- -------- --------
Net cash provided by (used in)
financing activities (9,508) 18,660 13,443
Effect of currency exchange rate changes on cash (630) (212) (776)
-------- -------- --------
Net increase (decrease) in cash and equivalents 11,469 23,036 (454)
Cash and equivalents at beginning of period 30,325 7,289 7,743
-------- -------- --------
Cash and equivalents at end of period $41,794 $30,325 $ 7,289
- ------------------------------------------------------------------------------------------------------------------------
Supplemental cash flow information and noncash
investing and financing activities:
Interest paid $55,798 $55,030 $ 43,484
Income taxes paid $ 1,647 $ 4,895 $ 5,058
Capital lease obligations (machinery and equipment) $ 2,186 $ 2,081
Issuance of common stock for directors' compensation
and employee stock grant $ 153
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 12
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 United States 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 United States 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.
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 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 58% 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 fluc-
tuations, 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.
F-6
<PAGE> 13
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
teams 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, Australia and Argentina.
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
Latin America, Viskase operates service centers in Monterrey, Mexico,
and within the Guarulhos, Brazil, plant. In Europe, Viskase operates
casings service centers in Milan, Italy, Pulheim, Germany, and Moscow,
Russia. Viskase also operates a service center through a joint venture
in Brisbane, Australia. These service centers provide finishing,
inventory and delivery services to Viskase customers.
Sandusky's and Clear Shield's sales are predominantly in the United
States.
Competition
Viskase is one of the world's leading producers of cellulosic casings
and a major producer of films. From time to time, Viskase experiences
reduced market share or reduced profits due to price competition;
however, management believes that such market conditions will not result
in any long-term material loss of business.
The dairy and delicatessen containers industry is highly fragmented.
Sandusky competes in the manufacture and sale of dairy and delicatessen
containers with several domestic manufacturers of thermoformed and
injection molded plastic containers. Major competitive factors in the
dairy and delicatessen container business are price, quality and
customer service. Major competitive factors in the specialized
thermoformed container business are price and technical and customer
service capabilities.
Clear Shield's primary competitors include several major corporations,
some of which are larger and better capitalized than Clear Shield and,
in some cases, offer a wider product line than Clear Shield. Clear
Shield's competitors periodically engage in aggressive price discounting
to gain business. Clear Shield management believes, however, that such
market conditions will not result in any long-term material loss of
business for Clear Shield, although its profit margins may be affected
from time to time.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of presentation
Effective in 1990 Envirodyne adopted a 52/53 week fiscal year ending on
the last Thursday of December. The 1993 financial statements include
December 31, 1993 in order to present the effect of the consummation of
the Plan of Reorganization.
F-7
<PAGE> 14
(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 1996 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 $26,338 and
$24,536 of short-term investments at December 26, 1996 and December 28,
1995, 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. Property and equipment additions include acquisition of
property and equipment and costs incurred for computer software
purchased for internal use including related external direct costs of
materials and services and payroll costs for employees who are directly
associated with the project. 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.
(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.
F-8
<PAGE> 15
(I) Excess reorganization value, net
Excess reorganization value is amortized on the straight-line method
over 15 years. Accumulated amortization of excess reorganization value
totaled $31 million and $20 million at December 26, 1996, and December
28, 1995, respectively.
The Company continues to evaluate the recoverability of excess
reorganization value based on operating performance and undiscounted
cash flows of the operating business units. Impairment will be
recognized when the expected undiscounted future operating cash flows
derived from such intangible is less than its carrying value. If
impairment is identified, valuation techniques deemed appropriate under
the particular circumstances will be used to determine the intangible's
fair value. The loss will be measured based on the excess of carrying
value over the determined fair value. The review for impairment is
performed at least on a quarterly basis.
(J) Pensions
The North American operations of Viskase and the Company's operations in
Europe have defined benefit retirement plans covering substantially all
salaried and full time hourly employees. Pension cost is computed using
the projected unit credit method.
The Company's funding policy is consistent with funding requirements of
the applicable federal and foreign laws and regulations.
(K) Postretirement benefits other than pensions
The North American operations of Viskase have postretirement health care
and life insurance benefits. Effective January 1, 1993, postretirement
benefits other than pensions are accounted for in accordance with the
provisions of Statement of Financial Accounting Standards (SFAS) No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
(L) Postemployment benefits
Effective December 31, 1993 and in conjunction with the Fresh Start
Reporting, the Company adopted SFAS No. 112 "Employers Accounting for
Postemployment Benefits." The impact of adopting SFAS No. 112 was not
material.
(M) Income taxes
Income taxes are accounted for in accordance with SFAS No. 109. Tax
provisions and benefits are recorded at statutory rates for taxable
items included in the consolidated statements of operations regardless
of the period for which such items are reported for tax purposes.
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of assets and liabilities for
which income tax benefits will be realized in future years.
(N) Net income (loss) per share
Net income (loss) per share of common stock is based upon the weighted
average number of shares of common stock outstanding during the year. No
effect has been given to options outstanding under the Company's stock
option plans and warrants issued pursuant to the Plan of Reorganization
as their effect is anti-dilutive.
(O) Revenue recognition
Sales to customers are recorded at the time of shipment net of discounts
and allowances.
F-9
<PAGE> 16
(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. The Company has not
adopted fair value accounting, and, accordingly, no compensation cost
has been recognized for employee stock-based compensation. The Company
has complied with the disclosure requirements of SFAS 123 (refer to Note
16).
4. RECEIVABLES (dollars in thousands)
Receivables consisted primarily of trade accounts receivable and were
net of allowances for doubtful accounts of $2,051 and $3,224 at
December 26, 1996, and at December 28, 1995, respectively.
Envirodyne has a broad base of customers, with no single customer
accounting for more than 5% of sales.
5. INVENTORIES (dollars in thousands)
Inventories consisted of:
December 26, December 28,
1996 1995
----------- -----------
Raw materials $14,960 $17,150
Work in process 29,057 32,800
Finished products 50,995 49,524
------- -------
$95,012 $99,474
======= =======
Approximately 55% and 54% of the Company's inventories at December 26,
1996, and December 28, 1995, respectively, were valued at LIFO. These
LIFO values exceeded current manufacturing cost by approximately $4,000
at both December 26, 1996, and December 28, 1995. Inventories were net
of reserves for obsolete and slow moving inventory of $4,397 and $3,818
at December 26, 1996, and December 28, 1995, 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.
F-10
<PAGE> 17
6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands)
December 26, December 28,
1996 1995
----------- -------------
Property, plant and equipment:
Land and improvements $ 15,644 $ 16,369
Buildings and improvements 84,778 81,767
Machinery and equipment 312,185 292,176
Construction in progress 25,889 15,938
Capital leases:
Machinery and equipment 140,208 139,241
-------- --------
$578,704 $545,491
======== ========
Maintenance and repairs charged to costs and expenses for 1996, 1995,
and 1994 aggregated $34,887, $33,227 and $33,045, respectively.
Depreciation is computed on the straight-line method over the estimated
useful lives of the assets ranging from 3 to 32 years.
7. OTHER ASSETS (dollars in thousands)
Other assets were comprised of:
December 26, December 28,
1996 1995
----------- -----------
Patents $50,000 $50,000
Less accumulated amortization 15,000 10,000
-------- --------
Patents, net 35,000 40,000
Other 7,809 5,589
-------- --------
$42,809 $45,589
======== ========
Patents are amortized on the straight-line method over an estimated
average useful life of ten years.
8. ACCRUED LIABILITIES (dollars in thousands)
Accrued liabilities were comprised of:
December 26, December 28,
1996 1995
----------- -----------
Compensation and employee benefits $38,122 $31,997
Taxes 11,103 6,535
Accrued volume and sales discounts 14,959 13,218
Other 17,925 15,803
-------- --------
$82,109 $67,553
======== ========
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
F-11
<PAGE> 18
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 Europe Limited. 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 26, 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 income taxes of
$2,582, was included in the Company's Statement of Operations for the
quarter ended June 29, 1995.
The $151,500 tranche of Senior Secured Notes bears interest at a rate of
12% per annum and the $8,500 tranche bears interest at a rate equal to
the six month London Interbank Offered Rate (LIBOR) plus 575 basis
points. The current interest rate on the floating rate tranche is
approximately 11.4%. The interest rate on the floating rate tranche is
reset semi-annually on June 15 and December 15. Interest on the Senior
Secured Notes is payable each June 15 and December 15.
On June 15, 1999, $80,000 of the aggregate principal amount of the
Senior Secured Notes is subject to a mandatory redemption. The remaining
principal amount outstanding will mature on June 15, 2000.
In the event the Company has Excess Cash Flow (as defined) in excess of
$5,000 in any fiscal year, beginning with fiscal 1995, Envirodyne will
be required to make an offer to purchase Senior Secured Notes together
with any borrowed money obligations outstanding under the Revolving
Credit Facility, on a pro rata basis, in an amount equal to the Excess
Cash Flow at a purchase price of 100% plus any accrued interest to the
date of purchase. There was no Excess Cash Flow for fiscal 1996.
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
F-12
<PAGE> 19
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.
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.
The $219,262 principal amount of 10-1/4% Notes were issued pursuant to
an Indenture dated as of December 31, 1993 (10-1/4% Note Indenture)
between Envirodyne and Bankers Trust Company, as Trustee. The 10-1/4%
Notes are the unsecured senior obligations of Envirodyne, bear interest
at the rate of 10-1/4% per annum, payable on each June 1 and December 1,
and mature on December 1, 2001. The 10-1/4% Notes are redeemable, in
whole or from time to time in part, at the option of Envirodyne, at the
percentages of principal amount specified below plus accrued and unpaid
interest to the redemption date, if the 10-1/4% Notes are redeemed
during the twelve-month period commencing on January 1 of the following
years:
Year Percentage
1997 103%
1998 102%
1999 101%
2000 and thereafter 100%
The 10-1/4% Note Indenture contains covenants with respect to Envirodyne
and its subsidiaries limiting (subject to a number of important
qualifications), among other things, (i) the ability to pay dividends on
or redeem or repurchase capital stock, (ii) the incurrence of
indebtedness, (iii) certain affiliate transactions and (iv) the ability
of the Company to consolidate with or merge with or into another entity
or to dispose of substantially all its assets.
F-13
<PAGE> 20
Outstanding short-term and long-term debt consisted of:
December December
26, 1996 28, 1995
-------- --------
Short-term debt, current maturity of
long-term debt and
capital lease obligations:
Current maturity of Viskase
Capital Lease Obligation $ 6,633 $ 6,012
Current maturity of Viskase
Limited Term Loan (4.7%) 1,876 2,033
Other 2,782 4,459
------- -------
Total short-term debt $11,291 $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%) 4,690 7,115
Other 2,678 2,622
-------- --------
Total long-term debt $521,179 $530,181
======== ========
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 26, 1996, the
carrying amount and estimated fair value of debt obligations (excluding
capital lease obligations) were $387,539 and $390,265, respectively.
The average interest rate on short-term borrowing during 1996 was 9.7%.
On December 28, 1990, Viskase and GECC entered into a sale and leaseback
transaction. The sale and leaseback of assets included the production
and finishing equipment at Viskase's four domestic casing production and
finishing facilities. The facilities are located in Chicago, Illinois;
Loudon, Tennessee; Osceola, Arkansas and Kentland, Indiana. Viskase, as
the Lessee under the relevant agreements, will continue to operate all
of the facilities. Sales proceeds on the sale-leaseback transaction were
$171.5 million; proceeds were used to repay approximately $154 million
of bank debt and a $15 million convertible note outstanding at the time.
The lease has been accounted for as a capital lease.
The principal terms of the sale and leaseback transaction include: (a) a
15-year basic lease term (plus selected renewals at Viskase's option);
(b) annual rent payments in advance beginning in February 1991; and
(c) a fixed price purchase option at the end of the basic 15-year term
and fair market purchase options at the end of the basic term and each
renewal term. Further, the Lease Documents contain covenants requiring
maintenance by the Company of certain financial ratios and restricting
the Company's ability to pay dividends, make payments to affiliates,
make investments and incur indebtedness.
Annual rental payments under the Lease will be approximately
$19.2 million through 1997, $21.4 million in 1998 and $23.5 million
through the end of the basic 15-year term. Viskase is required to
provide credit support consisting of a standby letter of credit in an
amount up to one year's rent through at least 1997. This credit support
can be reduced up to $4 million currently if the Company achieves and
maintains certain financial ratios. As of December 26, 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
F-14
<PAGE> 21
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, 1997.
Principal payments under the capital lease obligations for the years
ended 1997 through 2001 range from approximately $7 million to
$16 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 26, 1996:
Year ending December
1997 $ 19,775
1998 21,812
1999 23,948
2000 23,948
2001 23,948
Thereafter 94,522
========
Net minimum lease payments 207,953
Less: Amount representing interest (63,022)
========
$144,931
========
Aggregate maturities of remaining long-term debt for each of the next
five fiscal years are:
Total
---------
1997 $ 10,492
1998 12,214
1999 95,479
2000 95,756
2001 235,551
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 26, 1996, are:
1997 $2,248
1998 1,338
1999 641
2000 141
2001 69
Total thereafter -
------
Total minimum lease payments $4,437
======
Total rent expense during 1996, 1995 and 1994 amounted to $5,026,
$6,749, and $5,982, respectively.
11. RETIREMENT PLANS
The Company and its subsidiaries have defined contribution and defined
benefit plans varying by country and subsidiary.
F-15
<PAGE> 22
At December 26, 1996, the North American operations of Viskase
maintained several non-contributory defined benefit retirement plans.
The Viskase plans cover substantially all salaried and full-time hourly
employees, and benefits are based on final average compensation and
years of credited service. The Company's policy is to fund the minimum
actuarially computed annual contribution required under the Employee
Retirement Income Security Act of 1974 (ERISA).
As of the Viskase acquisition date, the former owner assumed the
liability for the accumulated benefit obligation under its plans. The
effect of expected future compensation increases on benefits accrued is
recorded as a liability on the Company's consolidated balance sheet.
PENSIONS -- NORTH AMERICA (dollars in thousands):
Net pension cost for the Viskase North American plans consisted of:
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
Service cost -- benefits earned
during the year $ 3,301 $ 3,238 $ 3,662
Interest cost on projected
benefit obligation 5,121 4,794 4,249
Actual (gain) loss on plan assets (4,712) (7,012) 874
Net amortization and deferral 1,061 4,086 (3,696)
------- ------- -------
Net pension cost $ 4,771 $ 5,106 $ 5,089
====== ====== =======
F-16
<PAGE> 23
The amounts included in the consolidated balance sheet for the North
American plans of Viskase were:
December 26, December 28,
1996 1995
----------- -----------
Actuarial present value of
benefit obligation:
Vested benefits $48,058 $45,208
Nonvested benefits 4,112 4,435
------- -------
Accumulated benefit obligation 52,170 49,643
Effect of projected future
compensation increases 22,840 16,566
------- -------
Projected benefit obligation 75,010 66,209
Plan assets at fair value,
primarily listed stocks and
investment grade corporate bonds 51,896 43,190
------- -------
Amount underfunded 23,114 23,019
Unrecognized gain 5,975 7,578
Unrecognized prior service costs 55 63
------- -------
Accrued liability included in
consolidated balance sheet $29,144 $30,660
======= =======
Assumed discount rate 7.5% 7.5%
Assumed long-term compensation factor 5.0% 4.5%
Assumed long-term return on plan assets 8.5% 8.5%
SAVINGS PLANS (dollars in thousands):
The Company also has defined contribution savings and similar plans,
which vary by subsidiary, and, accordingly, are available to
substantially all full-time United States 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 $2,207, $2,134,
and $2,109 in 1996, 1995, and 1994, 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 1996, 1995
and 1994 was $1,972, $1,383 and $1,043, 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 $2,204; conversely,
plan assets exceeded the vested benefits in certain other plans by
approximately $2,569.
OTHER POSTRETIREMENT BENEFITS (dollars in thousands):
The Company provides postretirement health care and life insurance
benefits to Viskase's North American employees. The Company does
not fund postretirement health care and life benefits in advance,
and has the right to modify these plans in the future.
Effective January 1, 1993, the company adopted the provisions of
SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS No. 106 requires that the expected cost
of these benefits must be charged to expense during the years that
the employee renders service. In connection with the 1989
acquisition of the Company, an accrual of $15,000 had been recorded
for the estimated postretirement benefits liability at the
acquisition date. On January 1, 1993, an additional liability and
transition obligation was recorded on a prospective basis for
$6,500. The transaction obligation was to be amortized over
20 years. Subsequently, Fresh Start Reporting resulted in the
write-off of the transition obligation and statement of the
liability for postretirement health care and life insurance
F-17
<PAGE> 24
benefits at fair value. Net periodic postretirement benefit cost
for 1996 and 1995 includes the following components:
<TABLE>
<CAPTION>
Medical Life Total
----------------- ------------------ -------------------
1996 1995 1996 1995 1996 1995
-------- -------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic postretirement
benefit cost:
Service cost -- benefits earned during
the current year $515 $ 413 $ 163 $ 162 $ 678 $ 575
Interest cost -- on accumulated post-
retirement benefit obligation 1,404 1,182 499 472 1,903 1,654
Amortization of unrecognized
net loss or (net gain) 15 (71) (10) (16) 5 (87)
Amortization of prior service cost (credit) 73 (2) 5 (1) 78 (3)
------ ------- ------- ------ ------ -------
Net periodic benefit cost $2,007 $ 1,522 $ 657 $ 617 $2,664 $ 2,139
====== ======= ======= ====== ====== =======
Accumulated postretirement benefit obligations:
Retirees $ 9,565 $ 6,937 $ 3,402 $2,745 $12,967 $ 9,682
Fully eligible active participants 2,043 2,309 2,173 2,409 4,216 4,718
Other active participants 8,422 7,411 1,712 1,624 10,134 9,035
------- ------- ------- ------ ------- -------
Total 20,030 16,657 7,287 6,778 27,317 23,435
Unrecognized gains or (losses) (322) 1,616 702 622 380 2,238
Unrecognized prior service costs (616) (109) (45) (661) (109)
------- ------- ------- ------ ------- -------
Accrued postretirement benefit cost $19,092 $18,164 $ 7,944 $7,400 $27,036 $25,564
======= ======= ======= ====== ======= =======
</TABLE>
Assumed discount rate 7.50%
Assumed medical trend rate 10.50% in 1996 decreasing to 6.50% in 2004
Assumed long-term
compensation factor 4.50%
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 26, 1996 and December 28, 1995 by
$322 and $178, respectively, and the service and interest cost
components for 1996 and 1995 by a total of $69 and $16,
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. Based on past experience and current conditions, the Company
does not expect a protracted work stoppage to occur stemming from union
activities; 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 employees are represented by unions.
Certain of the hourly production personnel at Sandusky's Ohio
thermoforming and injection molding facilities are members of a union.
As of December 26, 1996, approximately 1,425 of the Company's employees
are covered by collective bargaining agreements that will expire within
one year.
F-18
<PAGE> 25
12. INCOME TAXES (dollars in thousands)
The provision (benefit) for income taxes consisted of:
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
Current:
Federal $ 200
Foreign $ 4,365 $ 950 4,652
State and local
------- ------ ------
$ 4,365 $ 950 4,852
------- ------ ------
Deferred:
Federal (9,911) (7,219) (194)
Foreign 393 2,098 128
State and local (1,547) (1,329) 14
------- ------- ------
(11,065) (6,450) (52)
------- ------- ------
$(6,700) $(5,500) $4,800
======= ======= ======
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.
A reconciliation from the statutory federal tax rate to the consolidated
effective tax rate follows:
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
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 (4.9) (3.2) .8
Net effect of taxes
relating to foreign
operations 6.3 .8 140.3
Intangibles amortization 12.5 9.4 214.1
Other (11.8) 7.6 13.8
----- ----- -----
Consolidated effective
tax rate (32.9)% (20.4)% 404.0%
===== ===== =====
Temporary differences and carryforwards which give rise to a significant
portion of deferred tax assets and liabilities for 1996 are as follows:
F-19
<PAGE> 26
<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 $286,750 $109,383
Inventory basis differences 30,096 11,775
Intangible basis differences 34,916 13,617
Lease transaction $141,182 $55,061
Pension and healthcare 55,235 21,593
Employee benefits accruals 15,119 5,896
Valuation allowances 3,721 1,451
Other accruals and reserves 2,569 921
Foreign exchange and other 38,354 14,958
-------- -------- ------- --------
$217,826 $390,116 $84,922 $149,733
======== ======== ======= ========
</TABLE>
At December 26, 1996, the Company had $16,393 of undistributed earnings
of foreign subsidiaries considered permanently invested for which
deferred taxes have not been provided.
At December 26, 1996, the Company had federal income tax net operating
loss carryforwards of approximately $88 million, which have been
substantially offset by a valuation allowance. 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 (losses) after extraordinary loss and before income taxes were
approximately $(30,323), $(30,138) and $(7,705) in 1996, 1995 and 1994,
respectively. Foreign earnings or (losses) before income taxes were
approximately $9,942, $3,118 and $8,893 in 1996, 1995 and 1994,
respectively.
The Company joins in filing a United States consolidated federal income
tax return including all of its domestic subsidiaries.
13. COMMITMENTS
As of December 26, 1996, the Company had capital expediture commitments
outstanding of approximately $2.5 million.
14. CONTINGENCIES (dollars in thousands)
In late 1993, Viskase commenced a legal action against American National
Can Company (ANC) in Federal District Court for the Northern District of
Illinois, Eastern Division, 93C7651. Viskase claimed that ANC was
infringing on various Viskase patents relating to multi-layer barrier
plastic films used for fresh red meat, processed meat and poultry
product applications. On November 8, 1996, after a three week trial, a
jury found that ANC had willfully infringed Viskase's patents and
awarded Viskase $102.4 million in compensatory damages. On December 5,
1996, ANC posted a supersedeas bond in the amount of $108 million and
F-20
<PAGE> 27
the Court entered an order staying Viskase's enforcement of the
judgment. The Court also entered an order permanently enjoining ANC from
making or selling infringing products after December 23, 1996.
The judgment is not final and the parties are presently engaged in the
post-judgment motion phase of the case. ANC has filed motions to reduce
the damage award by at least $75 million or alternatively, grant ANC a
new trial. Viskase is seeking a determination that the case be deemed
"exceptional" and that the award be increased by approximately $46
million which includes compensatory damages for ANC's infringement
during the period of October 1, 1996 through December 23, 1996 and
additional damages for prejudgment interest, attorneys' fees and related
expenses. Due to ANC's willful infringement of the patents, Viskase has
asked the court to treble the compensatory award. These motions are all
pending before the Court and rulings are expected in the second quarter
1997. Meanwhile post-judgment interest is accruing on the $102.4 million
award from November 8, 1996 at an annual rate of 5.49%. The Company
expects ANC to vigorously contest the award and to appeal any final
judgment. The award and any pending claims for additional damages have
not been recorded in the Company's financial statements.
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 is pending with respect to events arising out of the
Envirodyne bankruptcy case and the 1989 acquisition of Envirodyne by
Emerald Acquisition Corporation (Emerald) with respect to which,
although Envirodyne is not presently a party to such litigation, certain
defendants have asserted indemnity rights against Envirodyne.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc,
----------------------------------------------------------------
Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly,
- ---------------------------------------------------------------------
Charles K. Bobrinskoy, James L. Massey, William Rifkind and Michael
- - - -------------------------------------------------------------------
Zimmerman, Case No. 93 A 1616, United States Bankruptcy Court for the
- ----------
Northern District of Illinois, Eastern Division, ARTRA Group
Incorporated (ARTRA) alleges breach of fiduciary duty and tortious
inference in connection with the negotiation and consummation of the
Plan of Reorganization (ARTRA I). In ARTRA Group Incorporated v. Salomon
------- -----------------------------------
Brothers Holding Company Inc, Salomon Brothers Inc, D.P. Kelly &
- ----------------------------------------------------------------
Associates, L.P., Donald P. Kelly, Charles K. Bobrinskoy and Michael
- --------------------------------------------------------------------
Zimmerman, Case No. 93 L 2198, Circuit Court of the Eighteenth Judicial
- ----------
Circuit, DuPage County, Illinois, ARTRA alleges breach of fiduciary
duty, fraudulent and negligent misrepresentation and breach of contract
in connection with the 1989 acquisition of Envirodyne by Emerald (ARTRA
-----
II). 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 a motion of the
defendants, the Bankruptcy Court dismissed ARTRA's claims in ARTRA I.
-------
ARTRA appealed to the U.S. District Court and on October 31, 1996, the
U.S. District Court affirmed the Bankruptcy Court's decision. ARTRA has
appealed to the U.S. Court of Appeals for the Seventh Circuit. All
briefs have been filed and the parties are awaiting oral argument.
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 ARTRA I.
-------
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
F-21
<PAGE> 28
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 or prove damages. Accordingly, the
Company believes that the indemnification claims would not have a material
adverse effect upon the business or financial position of the Company, even
if the claimants were successful in establishing their right to
indemnification.
Since early 1993, the Antitrust Division of the United States Department
of Justice has been investigating the disposable plastic cutlery industry.
This investigation has resulted in the indictment and conviction of certain
companies and individuals in the industry. Some indictments and criminal
trials are pending. Although the United States Department of Justice has
advised a former officer and an existing employee of Clear Shield National
that they are targets of the investigation, neither person has been
indicted. 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
United States 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., St. Cloud and Servall filed a motion in
Clear Shield National's Bankruptcy proceeding in the United States
Bankruptcy Court for the Northern District of Illinois, Eastern Division
contending that the Bankruptcy Court's order did not discharge the
plaintiff's claim. On March 19, 1997, the Bankruptcy Court denied their
motion and granted the Company's cross motion for summary judgment. The
time period for appeal by Eisenberg Brothers, Inc. et al. has not
passed.
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. 14,545,107
shares of common stock were issued and outstanding as of December 26,
1996. In accordance with the Plan of Reorganization, a total of 900,261,
64,460 and 15,000 additional shares of common stock were issued to the
general unsecured creditors of Envirodyne during 1996, 1995 and 1994,
respectively.
F-22
<PAGE> 29
Envirodyne issued 1,500,000 warrants pursuant to the Plan of
Reorganization, exercisable at any time until December 31, 1998. Each
warrant was initially exercisable for one share of common stock at an
initial exercise price of $17.25 per share. The exercise price and the
number of shares of common stock for which a warrant is exercisable were
adjusted as a result of the issuance of certain shares of Envirodyne
after the consummation of the Plan of Reorganization, including the
issuance of shares in settlement of the SMD lawsuit discussed in Note
14. Under terms of the warrant agreement, the exercise price has been
adjusted from $17.25 to $16.08 per share and the number of common shares
for which each warrant is exercisable has been adjusted from 1.000 share
to 1.073 shares.
On June 26, 1996, the Board of Directors adopted a Shareholder Rights
Plan (Plan). Under the Plan, the Board declared a dividend of one Common
Stock Purchase Right (Right) for each outstanding common share of the
Company. Rights were issued to the shareholders of record on June 26,
1996. The Rights are attached to and automatically trade with the
outstanding shares of the Company's common stock.
The Rights will only become exercisable ten days after a public
announcement that a person or group has acquired or obtained the right
to acquire 41% or more of the Company's Common Stock or ten business
days after a person or group commences a tender or offer that would
result in such person or group owning 41% or more of the outstanding
shares (even if no purchases actually occur).
When the Rights first become exercisable, each Right will entitle the
holder thereof to buy from the Company one share of Common Stock for
$20.00, subject to adjustment. If any person acquires 41% or more of the
Company's Common Stock, other than pursuant to a tender or exchange
offer for all outstanding shares of the Company approved by a majority
of the independent directors not affiliated with a 40%-or-more
stockholder, after receiving advice from one or more investment banking
firms, each Right not owned by a 41%-or-more stockholder would become
exercisable for shares of the Company having a market value of two times
the exercise price of the Right. If the Company is involved in a merger
or other business combination, or sells 50% or more of its assets or
earning power to another person, at any time after the Rights become
exercisable, the Rights will entitle the holder thereof to buy shares of
common stock of the acquiring company having a market value of twice the
exercise price of each Right.
Rights may be redeemed at a price of $0.001 per Right at any time prior
to their expiration on June 26, 2006.
16. STOCK-BASED COMPENSATION (dollars in thousands)
The Company maintains several stock option plans and agreements. The
plans provide for the granting of incentive and nonqualified stock
options to employees, officers, and directors. Stock options have been
granted at prices at or above the fair market value on the date of
grant. Options generally vest in three equal installments beginning one
year from the grant date and expire ten years from the grant date. Non-
employee director options, however, vest on the date of grant. The
options are subject to acceleration upon the occurrence of certain
events, such acceleration event occurred in both November 1994 and
August 1995.
The Company accounts for these plans under Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations. Accordingly, compensation expense is
recognized using the intrinsic value-based method for options granted
under the plans. The Company has adopted only the disclosure provisions
required by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (SFAS 123).
F-23
<PAGE> 30
A summary of the Company's stock option activity during the fiscal
years ended as of December 26, 1996, December 28, 1995 and December
29, 1994 is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------- ----------------------- ---------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
-------- -------------- -------- -------------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 424,230 $5.06 388,920 $5.06
Granted 536,500 4.26 97,200 5.02 402,020 $5.06
Exercised
Forfeited (61,900) 4.79 (61,890) 5.06 (13,100) 5.06
------- ------- -------
Outstanding at
year end 898,830 4.60 424,230 5.06 388,920 5.06
======= ======= =======
Options exercisable
at year end 392,730 5.04 424,230 5.04 388,920 5.06
======= ======= =======
</TABLE>
There were 651,170 shares of common stock reserved for future stock
option grants at December 26, 1996.
As of December 26, 1996, total stock options outstanding have a
weighted-average remaining contractual life of 9.86 years. The
exercise price of options outstanding as of December 26, 1996
ranged from $3.50 to $5.06. The weighted average grant date fair
value of options granted during fiscals 1996 and 1995 was $2.202
and $1.812, respectively.
As option prices per share have not been below the underlying stock
price on the grant dates, no compensation expense associated with
these plans has been recognized to date in accordance with APB 25.
Had the Company elected to apply the provisions of SFAS 123 regarding
recognition of compensation expense to the extent of the calculated fair
value of compensatory options, reported net income and earnings per
share would have been reduced to the following amounts (only options
granted in 1995 and 1996 are included in the calculation of pro forma
net income and earnings per share):
1996 1995
-------- --------
(Loss) before extraordinary item $(13,682) $(17,323)
Pro forma (loss) before extraordinary item (13,826) (17,356)
Net (loss) $(13,682) $(21,519)
Pro forma net (loss) (13,826) (21,552)
PER SHARE AMOUNTS:
(Loss) before extraordinary item $(.96) $(1.28)
Pro forma (loss) before extraordinary item (.97) (1.28)
Net (loss) $(.96) $(1.59)
Pro forma net (loss) (.97) (1.59)
The effects of applying SFAS 123 in the above pro forma disclosure are
not likely to be representative of the effects disclosed in future years
as SFAS 123 does not apply to grants prior to 1995.
F-24
<PAGE> 31
The fair value of each option granted during 1996 and 1995 is estimated
on the date of grant using the Black-Scholes option pricing model with
the following assumptions: (1) expected volatility of 40.04% for both
years, (2) risk-free interest rate equaling the 5-year treasury yield on
the grant date, which ranged from 6.11% to 6.52% in 1996 and 5.97% to
7.06% in 1995, and (3) expected life of 5 years in both years. The
Company has never declared dividends, nor does it currently expect to
declare dividends in the foreseeable future.
Pursuant to the employment agreement between the Company and its chief
executive officer, the Company issued 35,000 shares of common stock to
its chief executive officer. These shares carry voting and dividend
rights; however sale of the shares is restricted prior to vesting.
Subject to continued employment, vesting occurs on March 27, 1999. The
shares issued under the employment agreement have been recorded at fair
market value on the date of grant with a corresponding charge to
stockholders' equity for the unearned portion of the award. The fair
market value per share was $3.50. The unearned portion is being
amortized as compensation expense on a straight-line basis over the
related vesting period. Compensation expense related to the plan totaled
$31 during fiscal 1996.
The Company also has a stock compensation plan for the non-employee
directors of the Company that was approved during fiscal 1996. These
directors may elect to receive directors fees in the form of common
stock of the Company based upon the average market price of the
Company's common stock on the grant date. During fiscal 1996 30,386
shares of common stock were issued under this plan at $4.03 per share.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS (dollars in thousands)
The following table presents the carrying value and estimated fair value
as of December 26, 1996 of the Company's financial instruments. (Refer
to Notes 3 and 9.)
Carrying Estimated
Value Fair Value
-------- ----------
Assets:
Cash and equivalents $ 41,794 $ 41,794
Foreign currency contracts 12,995 12,337
Liabilities:
Long-term debt
(excluding capital leases) 387,539 390,265
18. PATENT LITIGATION SETTLEMENT (dollars in thousands)
In 1989 certain competitors of Viskase filed a declaratory action
challenging the validity and enforceability of a Viskase patent relating
to casings used in the manufacture of food products. In May 1994, the
trial court upheld the validity and enforceability of the Viskase patent
and found infringement of the patent. Before the trial on damages was
conducted, Viskase entered into agreements to settle the claims and
grant licenses to the competitors. Under the terms of these agreements
Viskase received $9,457 for past infringement and advance royalties and
established royalty rates for future patent use.
19. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands)
Research and development costs are expensed as incurred and totaled
$6,841, $11,034 and $16,852 for 1996, 1995, and 1994, respectively.
F-25
<PAGE> 32
20. RELATED PARTY TRANSACTIONS (dollars in thousands)
In March 1996, the Company terminated its management agreement with D.P.
Kelly and Associates, L.P. (DPK). Upon termination of the agreement, the
Company was required to pay the amount of $2,000 to DPK pursuant to
provisions in the agreement. In addition to the above amount, the
Company paid management fees to DPK during 1996 totaling $193. During
each of 1995 and 1994, the Company paid DPK $770 for management
services.
During fiscal 1996, 1995 and 1994, the Company made payments of
approximately $18, $156, and $560, respectively, to an affiliate of DPK
for the use of a jet aircraft on an as-needed basis.
During fiscal 1996, 1995, and 1994, the Company purchased product and
services from affiliates of DPK in the amounts of approximately $904,
$1,537, and $1,367, respectively. During fiscal 1996, 1995, and 1994,
the Company sublet office space from DPK for which it paid approximately
$139, $151, and $151, respectively, in rent. During fiscal 1996 and
1995, the Company reimbursed a non-affiliated medical plan in the
aggregate amount of $41 and $79 for medical claims of Messrs. Kelly,
Gustafson and Corcoran.
During fiscal years 1994 through 1996, the Company advanced funds to and
made payments on behalf of DPK and Donald P. Kelly totaling
approximately $171 for legal fees related to the litigation involving
ARTRA Group Incorporated (refer to Note 14).
During fiscal 1996, the Company sold two autos to an affiliate of DPK.
The total sum received was $135 and was based on the fair market value
of the autos. A gain on the sale of $117 was recognized by the Company.
During fiscal years 1996, 1995 and 1994, Viskase Corporation, a wholly
owned subsidiary of the Company, had sales of $19,795, $18,035 and
$14,779, respectively, to Cargill, Inc. and its affiliates. Such sales
were made in the ordinary course. During 1996 Cargill Financial Services
Corporation had beneficial ownership of approximately 9.4% of the
Company's outstanding Common Stock, and Gregory R. Page, President of
the Red Meat Group of Excel Corp., a subsidiary of Cargill, Inc., is a
director of the Company.
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 1996, 1995, and 1994 includes
net foreign exchange transaction gains (losses) of approximately $687,
$(61), and $2,707, respectively.
F-26
<PAGE> 33
Business Segment Information
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
Net sales:
Food packaging products $572,653 $574,266 $530,179
Disposable foodservice
supplies 78,865 76,138 68,996
Other and eliminations (162) (192) (146)
-------- -------- --------
$651,356 $650,212 $599,029
======== ======== ========
Earnings before
income taxes:
Operating income:
Food packaging products $37,310 $39,183 $ 48,145
Disposable foodservice
supplies 7,342 4,959 6,514
Unallocated expenses, net
-- primarily corporate (4,962) (6,007) (5,982)
-------- -------- --------
39,690 38,135 48,677
Interest expense, net 56,997 56,666 49,207
Other expense (income), net 3,075 1,710 (1,668)
Minority interest in loss
of subsidiary 50
-------- -------- --------
$(20,382) $(20,241) $ 1,188
======== ======== ========
Identifiable assets:
Food packaging products $762,233 $796,655 $814,731
Disposable foodservice
supplies 69,725 69,812 71,530
Corporate and other,
primarily
cash equivalents 41,789 33,100 10,375
-------- -------- --------
$873,747 $899,567 $896,636
======== ======== ========
Depreciation and
amortization
under capital lease and
amortization of
intangibles expense:
Food packaging products $53,413 $51,404 $ 47,207
Disposable foodservice
supplies 4,949 4,581 4,125
Corporate and other 58 76 55
-------- -------- --------
$58,420 $56,061 $ 51,387
======== ======== ========
Capital expenditures:
Food packaging products $32,934 $30,744 $ 28,534
Disposable foodservice
supplies 4,135 3,687 4,012
Corporate and other 4 34 20
-------- -------- --------
$37,073 $34,465 $ 32,566
======== ======== ========
F-27
<PAGE> 34
Geographic Area Information
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
Net sales:
North America $423,092 $417,408 $407,761
South America 40,498 31,381 22,507
Europe 201,926 213,618 184,395
Other and eliminations (14,160) (12,195) (15,634)
-------- -------- --------
$651,356 $650,212 $599,029
======== ======== ========
Operating profit:
North America $22,425 $22,504 $ 29,520
South America 1,883 524 (1,396)
Europe 15,445 15,373 20,553
Other and eliminations (63) (266)
-------- -------- --------
$39,690 $38,135 $ 48,677
======== ======== ========
Identifiable assets:
North America $633,201 $645,504 $639,831
South America 33,007 31,873 27,527
Europe 205,446 219,802 229,278
Other and eliminations 2,093 2,388
-------- -------- --------
$873,747 $899,567 $896,636
======== ======== ========
United States export sales:
(reported in North America
sales above)
Asia $28,300 $22,509 $10,362
South and Central America 17,056 18,691 18,656
South Africa 9,484
Other International 259 219 147
-------- -------- --------
$45,615 $41,419 $38,649
======== ======== ========
The total assets and net assets of foreign businesses were approximately
$273,895 and $116,503 at December 26, 1996.
22. QUARTERLY DATA (unaudited)
Quarterly financial information for 1996 and 1995 is as follows (in
thousands, except for per share amounts):
First Second Third Fourth
Fiscal 1996 Quarter Quarter Quarter Quarter Annual
- ---------------- -------- -------- -------- -------- --------
Net Sales $159,736 $165,747 $163,825 $162,048 $651,356
Operating Income 9,294 9,275 8,708 12,413 39,690
Net income (loss) (5,927) (4,165) (3,924) 334 (13,682)
Net income (loss)
per share (.43) (.29) (.27) .02 (.96)
F-28
<PAGE> 35
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 1996
do not equal the total for the year because of rounding and 1996 stock
issuances, as shown on the Consolidated Statement of Stockholders'
Equity.
First Second Third Fourth
Fiscal 1995 Quarter Quarter Quarter Quarter Annual
- -------------------- -------- -------- -------- -------- --------
Net Sales $155,824 $165,184 $166,688 $162,516 $650,212
Operating Income 8,689 10,089 8,653 10,704 38,135
Net (loss) (3,895) (7,513) (4,475) (5,636) (21,519)
Net (loss) per share (.29) (.56) (.33) (.42) (1.59)
The second quarter net (loss) includes an extraordinary loss of $(4.2)
million on debt extinguishment.
Net income (loss) per share amounts are computed independently for each
of the quarters presented using weighted average shares outstanding
during each quarter. The sum of the quarterly per share amounts in 1995
do not equal the total for the year because of rounding and 1995 stock
issuances, as shown on the Consolidated Statement of Stockholders'
Equity.
23. SUBSEQUENT EVENTS (dollars in thousands)
In March 1997 the Company announced that it was exploring the potential
sale of Viskase Corporation's PVC film business. Viskase's plants in
Aurora, Ohio, and Sedgefield, England, would be affected by a sale. Net
sales of PVC films in 1996 totaled approximately $54 million.
In March 1997 Viskase Corporation received a subpoena from the Antitrust
Division of the United States Department of Justice relating to a grand
jury investigation of the sausage casings industry. Viskase Corporation
is cooperating fully with the investigation.
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 Europe Limited. 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.
F-29
<PAGE> 36
The following consolidating condensed financial data illustrate the
composition of the combined Guarantors. No single Guarantor has any
significant legal restrictions on the ability of investors or creditors
to obtain access to its assets in the event of default on the Subsidiary
Guarantee other than its subordination to senior indebtedness described
above. Separate financial statements of the Guarantors are not presented
because management has determined that these would not be material to
investors. Based on the book value and the market value of the pledged
securities of Viskase Corporation, Viskase Sales Corporation, Clear
Shield National, Inc., Sandusky Plastics, Inc. and Sandusky Plastics of
Delaware, Inc., these Subsidiary Guarantors do not constitute a
substantial portion of the collateral and, therefore, the separate
financial statements of these subsidiaries have not been provided.
Separate audited financial statements of Viskase Holding Corporation are
being filed within.
Investments in subsidiaries are accounted for by the parent and
Subsidiary Guarantors on the equity method for purposes of the
supplemental consolidating presentation. Earnings of subsidiaries are
therefore reflected in the parent's and Subsidiary Guarantors'
investment accounts and earnings. The principal elimination entries
eliminate investments in subsidiaries and intercompany balances and
transactions.
F-30
<PAGE> 37
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 26, 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 $ 25,785 $ (162) $ 16,171 $ 41,794
Receivables and advances, net 61,960 70,258 46,032 $ (99,076) 79,174
Inventories 59,730 36,509 (1,227) 95,012
Other current assets 187 11,730 10,224 22,141
-------- -------- -------- --------- --------
Total current assets 87,932 141,556 108,936 (100,303) 238,121
Property, plant and equipment including
those under capital lease 133 420,396 158,175 578,704
Less accumulated depreciation
and amortization 95 86,715 30,086 116,896
-------- -------- -------- --------- --------
Property, plant and equipment, net 38 333,681 128,089 461,808
Deferred financing costs 5,144 758 5,902
Other assets 40,784 2,025 42,809
Investment in subsidiaries 64,433 123,236 (187,669)
Excess reorganization value 87,702 37,405 125,107
-------- -------- -------- --------- --------
$157,547 $726,959 $277,213 $(287,972) $873,747
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 7,182 $ 4,109 $ 11,291
Accounts payable and advances $ 35 85,156 50,900 $ (99,076) 37,015
Accrued liabilities 6,197 44,235 31,677 82,109
-------- -------- -------- --------- --------
Total current liabilities 6,232 136,573 86,686 (99,076) 130,415
Long-term debt including obligation
under capital lease 379,262 137,063 4,854 521,179
Accrued employee benefits 49,366 4,331 53,697
Deferred and noncurrent income taxes 29,088 10,824 24,899 64,811
Intercompany loans (360,680) 340,000 20,681 (1)
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,545,107 shares issued and
outstanding 145 3 32,738 (32,741) 145
Paid in capital 135,100 87,899 87,871 (175,770) 135,100
Accumulated earnings (deficit) (38,813) (42,050) 7,872 34,178 (38,813)
Cumulative foreign currency
translation adjustments 7,305 7,281 7,281 (14,562) 7,305
Unearned restricted stock issued
for future services (92) (92)
-------- -------- -------- --------- --------
Total stockholders' equity 103,645 53,133 135,762 (188,895) 103,645
-------- -------- -------- --------- --------
$157,547 $726,959 $277,213 $(287,972) $873,747
======== ======== ======== ========= ========
</TABLE>
(1) Elimination of intercompany receivables, payables and investment accounts.
F-31
<PAGE> 38
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-32
<PAGE> 39
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 26, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
--------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $418,732 $273,435 $(40,811) $651,356
COSTS AND EXPENSES
Cost of sales 322,422 207,520 (41,698) 488,244
Selling, general and administrative $4,973 57,927 44,188 107,088
Amortization of intangibles and
excess reorganization value 12,947 3,387 16,334
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (4,973) 25,436 18,340 887 39,690
Interest income 1,061 507 1,568
Interest expense 43,504 12,813 2,248 58,565
Intercompany interest expense (income) (40,596) 37,394 3,202
Management fees (income) (7,226) 5,704 1,522
Other expense (income), net 850 646 1,579 3,075
Equity loss (income) in subsidiary 13,411 (5,538) (7,873)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (13,855) (25,583) 10,296 8,760 (20,382)
Income tax provision (benefit) (173) (11,285) 4,758 (6,700)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(13,682) $(14,298) $ 5,538 $ 8,760 $(13,682)
======== ======== ======== ========= ========
</TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 26, 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 $(14,896) $ 30,440 $ 40,780 $ 56,324
Cash flows from investing activities:
Capital expenditures (4) (27,496) (9,573) (37,073)
Proceeds from sales of property,
plant and equipment 136 1,767 453 2,356
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities 132 (25,729) (9,120) (34,717)
Cash flows from financing activities:
Issuance of common stock 153 153
Proceeds from revolving loan and
long term borrowings 1,130 1,056 2,186
Deferred financing costs (142) (142)
Repayment of revolving loan,
long-term borrowings and
capital lease obligations (6,489) (5,216) (11,705)
Increase (decrease) in
Envirodyne loan and advances 22,525 (22,525)
-------- -------- -------- --------- --------
Net cash provided by
(used in) financing activities 22,536 (5,359) (26,685) (9,508)
Effect of currency exchange rate
changes on cash (630) (630)
-------- -------- -------- --------- --------
Net increase (decrease)
in cash and equivalents 7,772 (648) 4,345 11,469
Cash and equivalents
at beginning of period 18,013 486 11,826 30,325
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 25,785 $ (162) $ 16,171 $ 41,794
======== ======== ======== ========= ========
</TABLE>
F-33
<PAGE> 40
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 28, 1995
<TABLE>
<CAPTION>
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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 28, 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 $(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 and advances (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-34
<PAGE> 41
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 1994
<TABLE>
<CAPTION>
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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THE YEAR ENDED DECEMBER 29, 1994
<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 $ (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 and advances (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> 42
Financial statement schedules required by Regulation S-X
- - - --------------------------------------------------------
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements:
- - - ---------------------------------
Report of independent accountants F-37
Consolidated balance sheets, December 26, 1996 and
December 28, 1995 F-38
Consolidated statements of operations, for December 29, 1995
to December 26, 1996; December 30, 1994 to
December 28, 1995;
and January 1 to December 29, 1994 F-39
Consolidated statements of stockholders' equity (deficit),
for December 29, 1995 to December 26, 1996;
December 30, 1994 to December 28, 1995; and
January 1 to December 29, 1994 F-40
Consolidated statements of cash flows, for December 29, 1995
to December 26, 1996; December 30, 1994 to
December 28, 1995; and January 1 to December 29, 1994 F-41
Notes to consolidated financial statements F-42
F-36
<PAGE> 43
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.
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 26, 1996 and December 28, 1995, and the consolidated
results of their operations and their cash flows for the period
December 29, 1995 to December 26, 1996, December 30, 1994 to
December 28, 1995 and January 1 to December 29, 1994, 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 20, 1997
F-37
<PAGE> 44
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 26, December 28,
1996 1995
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 16,171 $ 11,826
Receivables, net 43,634 53,022
Receivables, affiliates 51,269 51,829
Inventories 36,509 38,233
Other current assets 10,224 9,106
-------- --------
Total current assets 157,807 164,016
Property, plant and equipment 158,175 150,417
Less accumulated depreciation 30,086 20,217
-------- --------
Property, plant and
equipment, net 128,089 130,200
Deferred financing costs 758 1,042
Other assets 2,025 1,869
Excess reorganization value 37,405 40,517
-------- --------
$326,084 $337,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 4,109 $ 6,097
Accounts payable 13,736 13,720
Accounts payable and
advances, affiliates 51,891 54,152
Accrued liabilities 31,677 21,942
-------- --------
Total current liabilities 101,413 95,911
Long-term debt 4,854 7,721
Accrued employee benefits 4,331 4,281
Deferred and noncurrent income taxes 24,899 25,895
Intercompany loans 58,691 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 21,152 12,100
Cumulative foreign currency
translation adjustments 7,281 7,179
-------- --------
Total stockholders' equity 131,896 122,742
-------- --------
$326,084 $337,644
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
F-38
<PAGE> 45
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
52 weeks 52 weeks 52 weeks
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
(in thousands, except for number of shares
and per share amounts)
<S> <C> <C> <C>
NET SALES $273,435 $267,212 $220,787
Patent infringement settlement income 9,457
COSTS AND EXPENSES
Cost of sales 207,520 207,232 168,891
Selling, general and administrative 38,386 36,288 27,654
Amortization of intangibles and
excess reorganization value 3,387 3,333 3,346
-------- -------- --------
OPERATING INCOME 24,142 20,359 30,353
Interest income 507 455 248
Interest expense 2,248 3,353 3,453
Intercompany interest expense 3,202 4,199 3,861
Management fees 1,522 1,709 856
Other expense (income), net 1,579 3,754 2,518
Minority interest in
loss of subsidiary 50
-------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 16,098 7,799 19,963
Income tax provision 7,046 4,947 10,025
-------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 9,052 2,852 9,938
Extraordinary loss, net of tax 690
-------- -------- --------
NET INCOME $ 9,052 $ 2,162 $ 9,938
======== ======== ========
WEIGHTED AVERAGE COMMON SHARES 100 100 100
=== === ===
PER SHARE AMOUNTS:
NET INCOME $ 90,520 $ 21,620 $ 99,380
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-39
<PAGE> 46
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, 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
Net income 9,052 9,052
Translation adjustments 102 102
-------- ------- ------ --------
Balance December 26, 1996 $103,463 $21,152 $7,281 $131,896
======== ======= ====== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-40
<PAGE> 47
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
------------ ----------- -----------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Income before extraordinary item $ 9,052 $ 2,852 $ 9,938
Extraordinary loss 690
------- ------- -------
Net income 9,052 2,162 9,938
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 10,687 11,202 9,018
Amortization of intangibles and excess reorganization value 3,387 3,333 3,346
Amortization of deferred financing fees and discount 227 208 210
Increase in deferred and noncurrent income taxes 393 2,098 128
Loss on debt extinguishment 1,030
Foreign currency transaction loss 159
Loss (gain) on sales of property, plant and equipment (39) 30 32
Changes in operating assets and liabilities:
Accounts receivable 11,078 (4,441) (9,076)
Accounts receivable, affiliates (1,802) (2,847) (18,214)
Inventories (743) 7,224 (8,895)
Other current assets (1,787) (2,144) (1,462)
Accounts payable and accrued liabilities 9,681 (6,926) 8,314
Accounts payable, affiliates 860 8,383 21,739
Other (214) (790) 288
------- ------- -------
Total adjustments 31,728 16,519 5,428
------- ------- -------
Net cash provided by operating activities 40,780 18,681 15,366
Cash flows from investing activities:
Capital expenditures (9,573) (6,589) (10,880)
Proceeds from sale of property, plant and equipment 453 47 120
Purchase of minority interest in subsidiary (4,200)
------- ------- -------
Net cash (used in) investing activities (9,120) (6,542) (14,960)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 1,056 42,216 10,068
Deferred financing costs (1,166)
Repayment of revolving loan and long-term borrowings (5,216) (50,588) (9,112)
Increase (decrease) in Envirodyne loan and advances (22,525) 3,236 (555)
------- ------- -------
Net cash provided by (used in) financing activities (26,685) (6,302) 401
Effect of currency exchange rate changes on cash (630) (212) (776)
------- ------- -------
Net increase in cash and equivalents 4,345 5,625 31
Cash and equivalents at beginning of period 11,826 6,201 6,170
------- ------- -------
Cash and equivalents at end of period $16,171 $ 11,826 $ 6,201
======= ======== ========
- ----------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $791 $1,919 $ 1,808
Income taxes paid $1,209 $4,255 $ 3,548
</TABLE>
Supplemental schedule of noncash investing and financing activities:
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.
Fiscal 1996
- -----------
Viskase Corporation transferred equipment totaling $441
thousand to Viskase de Mexico S.A. de C.V.
The accompanying notes are an integral part of the
consolidated financial statements.
F-41
<PAGE> 48
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 Argentina S.A. Viskase Holding Corporation Argentina
Viskase Australia Limited Viskase Holding Corporation Australia
Viskase Brasil Embalagens Ltda. Viskase Holding Corporation Brazil
Viskase Europe Limited Viskase Holding Corporation United Kingdom
Viskase de Mexico S.A. de C.V. Viskase Holding Corporation Mexico
Viskase S.A. Viskase Europe Limited 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 United States 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 United States 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.
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
F-42
<PAGE> 49
casings used in preparing and packaging processed meat products and
is a major producer of heat shrinkable plastic bags and specialty
films for packaging and preserving fresh and processed meat
products, poultry and cheeses. The Company is also a leading
international manufacturer of plasticized polyvinyl chloride (PVC)
films, primarily for use in packaging food items.
International Operations
Viskase Holding Corporation's subsidiaries have seven manufacturing
facilities located outside the continental United States, in
Beauvais, France; Thaon, France; Lindsay, Ontario, Canada;
Sedgefield, England (Great Britain); Swansea, Wales (Great
Britain); Guarulhos, Brazil and Nuevo Laredo, Mexico.
International sales and operations may be subject to various risks
including, but not limited to, possible unfavorable exchange rate
fluctuations, political instability, governmental regulations
(including import and export controls), restrictions on currency
repatriation, embargoes, labor relations laws and the possibility
of governmental expropriation. Viskase Holding Corporation's
foreign operations generally are subject to taxes on the
repatriation of funds.
International operations in certain parts of the world may be
subject to international balance of payments difficulties which may
raise the possibility of delay or loss in the collection of
accounts receivable from sales to customers in those countries.
Viskase Holding Corporation believes that its subsidiaries' allow-
ance for doubtful accounts makes adequate provision for the
collectibility of its receivables. Management believes that growth
potential exists for many of Viskase's products outside the United
States and that Viskase is well positioned to participate in these
markets.
Sales and Distribution
Viskase Holding Corporation's subsidiaries' principal markets are
in Europe, Latin America, North America and Asia Pacific.
The United Kingdom operation sells its PVC films directly and
through distributors, primarily to the retail grocery and
foodservice industries in Europe.
In Europe, Viskase Holding Corporation's subsidiaries operate
casings service centers in Milan, Italy, Pulheim, Germany, and
Moscow, Russia. The Company also operates a service center in
Brisbane, Australia. These service centers provide finishing,
inventory and delivery services to customers. The subsidiaries also
use outside distributors to market their products to customers in
Europe, Africa, Asia and Latin America.
Competition
From time to time, Viskase Holding Corporation's subsidiaries
experience reduced market share or reduced profits due to price
competition; however, management believes that such market
conditions will not result in any long-term material loss of
business.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Basis of presentation
Effective in 1990 Envirodyne Industries, Inc. adopted a 52/53 week
fiscal year ending on the last Thursday of December. Viskase
Holding Corporation's 1993 financial statements include
December 31, 1993 in order to present the effect of the
consummation of the Plan of Reorganization.
F-43
<PAGE> 50
(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 1996 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 $4,074 and $8,074 of short-term investments at December 26,
1996 and December 28, 1995, respectively.
(E) Inventories
Inventories, primarily foreign, are valued at the lower of
first-in, first-out (FIFO) cost or market.
(F) Property, plant and equipment
Property, plant and equipment are carried at cost less accumulated
depreciation. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets ranging from 3 to 32
years. Upon retirement or other disposition, cost and related
accumulated depreciation are removed from the accounts, and any
gain or loss is included in results of operations. Effective
December 31, 1993 and in conjunction with the Fresh Start
Reporting, property, plant and equipment was reported at the
estimated fair value.
(G) Deferred financing costs
Deferred financing costs are amortized on a straight-line basis
over the expected term of the related debt agreement. Amortization
of deferred financing costs is classified as interest expense.
(H) Excess reorganization value and excess investment over net
assets acquired, net
Excess reorganization value is amortized on the straight-line
method over 15 years.
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.
F-44
<PAGE> 51
(I) Pensions
The Company's operations in Europe have defined benefit retirement
plans covering substantially all salaried and full time hourly
employees. Pension cost is computed using the projected unit credit
method.
The Company's funding policy is consistent with funding
requirements of the applicable foreign laws and regulations.
(J) Postemployment benefits
Effective December 31, 1993 and in conjunction with the Fresh Start
Reporting, the Company adopted SFAS No. 112 "Employers Accounting
for Postemployment Benefits." The impact of adopting SFAS No. 112
was not material.
(K) Income taxes
Income taxes are accounted for in accordance with SFAS No. 109. Tax
provisions and benefits are recorded at statutory rates for taxable
items included in the consolidated statements of operations
regardless of the period for which such items are reported for tax
purposes. Deferred income taxes are recognized for temporary
differences between financial statement and income tax bases of
assets and liabilities for which income tax benefits will be
realized in future years.
(L) Net income (loss) per share
Net income (loss) per share of common stock is based upon the
weighted average number of shares of common stock outstanding
during the year.
(M) Revenue recognition
Sales to customers are recorded at the time of shipment net of
discounts and allowances.
(N) Foreign currency contracts
The Company maintains a hedging program to partially hedge its
forecasted foreign currency revenue cash flows. The hedging program
principally addresses revenue cash flows within its European
operations. The foreign exchange contracts are denominated
predominantly in the major European currencies and have varying
maturities up to eighteen months. The effect of this practice is to
minimize the effect of foreign exchange rate movements on the
Company's operating results. The Company's hedging activities do
not subject the Company to additional exchange rate risk because
gains and losses on these contracts offset losses and gains on the
transactions being hedged. The cash flows from forward contracts
accounted for as hedges of identifiable transactions or events are
classified consistent with the cash flows from the transactions or
events being hedged.
4. RECEIVABLES (dollars in thousands)
Receivables consisted primarily of trade accounts receivable and
were net of allowances for doubtful accounts of $1,404 and $2,256
at December 26, 1996, and at December 28, 1995, respectively.
F-45
<PAGE> 52
5. INVENTORIES (dollars in thousands)
Inventories consisted of:
December 26, December 28,
1996 1995
----------- -----------
Raw materials $ 3,728 $ 5,299
Work in process 11,395 13,342
Finished products 21,386 19,592
------- -------
$36,509 $38,233
======= =======
Inventories were net of reserves for obsolete and slow moving
inventory of $1,283 and $1,331 at December 26, 1996 and
December 28, 1995, respectively.
6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands)
December 26, December 28,
1996 1995
----------- -----------
Property, plant and equipment:
Land and improvements $ 5,394 $ 5,319
Buildings and improvements 30,349 30,236
Machinery and equipment 117,312 114,212
Construction in progress 4,916 283
Capital Leases:
Machinery and equipment 204 367
-------- --------
$158,175 $150,417
======== ========
Maintenance and repairs charged to costs and expenses for 1996,
1995, and 1994 aggregated $8,374, $10,288 and $10,748,
respectively. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets ranging from 3 to
32 years.
7. ACCRUED LIABILITIES (dollars in thousands)
Accrued liabilities were comprised of:
December 26, December 28,
1996 1995
----------- -----------
Compensation and employee benefits $10,287 $ 9,446
Taxes 6,073 1,585
Accrued volume and sales discounts 5,101 5,320
Inventory received not billed 2,805 1,205
Other 7,411 4,386
------- -------
$31,677 $21,942
======= =======
8. DEBT OBLIGATIONS (dollars in thousands)
As described in Note 1, Chapter ll Reorganization Proceedings,
Envirodyne and certain of its domestic Subsidiaries (including
Viskase Holding Corporation) emerged from Chapter 11 on December
31, 1993.
On June 20, 1995, Envirodyne completed the sale of $160,000
aggregate principal amount of senior secured notes to certain
institutional investors in a private placement. The senior secured
F-46
<PAGE> 53
notes were issued pursuant to an indenture dated June 20, 1995
(Indenture) and consist of (i) $151,500 of 12% Senior Secured Notes
due 2000 and (ii) $8,500 of Floating Rate Senior Secured Notes due
2000 (collectively, the Senior Secured Notes). Envirodyne used the
net proceeds of the offering primarily to (i) repay the Company's
$86,125 domestic term loan, (ii) repay the $68,316 of obligations
under the Company's domestic and foreign revolving loans and (iii)
pay transaction fees and expenses. Concurrently with the June 20,
1995 placement, Envirodyne entered into a new $20,000 domestic
revolving credit facility (Revolving Credit Facility) and a new
$28,000 letter of credit facility (Letter of Credit Facility). The
Senior Secured Notes and the obligations under the Revolving Credit
Facility and the Letter of Credit Facility are guaranteed by
Envirodyne's significant domestic subsidiaries and secured by a
collateral pool (Collateral Pool) comprised of: (i) all domestic
accounts receivable (including intercompany receivables) and
inventory; (ii) all patents, trademarks and other intellectual
property (subject to non-exclusive licensing agreements); (iii)
substantially all domestic fixed assets (other than assets subject
to a lease agreement with General Electric Capital Corporation);
and (iv) a senior pledge of 100% of the capital stock of
Envirodyne's significant domestic subsidiaries and 65% of the
capital stock of Viskase S.A. Such guarantees and security are
shared by the holders of the Senior Secured Notes and the holders
of the obligations under the Revolving Credit Facility on a pari
passu basis pursuant to an intercreditor agreement. Pursuant to such
intercreditor agreement, the security interest of the holders of the
obligations under the Letter of Credit Facility has priority over all
other liens on the Collateral Pool.
The Company finances its working capital needs through a
combination of cash generated through operations and borrowings
local unsecured credit facilities and intercompany loans.
The Company recognized an extraordinary loss of $1,030 representing
the write-off of deferred financing fees related to the June 20,
1995 debt refinancing. The extraordinary loss, net of applicable
income taxes of $340, was included in the Company's Statement of
Operations for the quarter ended June 29, 1995.
The Viskase Limited term facility is with a foreign financial
institution. The term facility, which is collateralized by
substantially all of the assets of Viskase Limited, bears a
variable interest rate and is payable in 16 equal semiannual
installments that began in December 1992.
Outstanding short-term and long-term debt consisted of:
December 26, December 28,
1996 1995
----------- -----------
Short-term debt and current
maturity of long-term debt:
Current maturity of Viskase
Limited Term Loan (4.7%) $1,876 $2,033
Other 2,233 4,064
------ ------
Total short-term debt $4,109 $6,097
====== ======
Long-term debt:
Viskase Limited
Term Loan (4.7%) $4,690 $7,115
Other 164 606
------ ------
Total long-term debt $4,854 $7,721
====== ======
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. The fair values of debt obligations
approximated their carrying values.
F-47
<PAGE> 54
Aggregate maturities of remaining long-term debt for each of the
next five fiscal years are:
Total
------
1997 $3,211
1998 1,981
1999 1,875
2000 939
2001 -
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 26, 1996, are:
1997 $ 745
1998 247
1999 129
2000 6
2001 3
Total thereafter
------
Total minimum lease payments $1,130
======
Total rent expense during 1996, 1995 and 1994 amounted to $2,905,
$3,750, and $2,350, respectively.
10. RETIREMENT PLANS (dollars in thousands)
The Company maintains various pension and statutory separation pay
plans for its European employees. The expense for these plans in
1996, 1995 and 1994 was $1,972, $1,383, and $1,043, 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
$2,204; conversely, plan assets exceeded the vested benefits in
certain other plans by approximately $2,569.
The Company's postretirement benefits are not material.
11. CONTINGENCIES (dollars in thousands)
In late 1993, Viskase commenced a legal action against American
National Can Company (ANC) in Federal District Court for the
Northern District of Illinois, Eastern Division, 93C7651. Viskase
claimed that ANC was infringing on various Viskase patents relating
to multi-layer barrier plastic films used for fresh red meat,
processed meat and poultry product applications. On November 8,
1996, after a three week trial, a jury found that ANC had willfully
infringed Viskase's patents and awarded Viskase $102.4 million in
compensatory damages. On December 5, 1996, ANC posted a supersedeas
bond in the amount of $108 million and the Court entered an order
staying Viskase's enforcement of the judgment. The Court also
entered an order permanently enjoining ANC from making or selling
infringing products after December 23, 1996.
The judgment is not final and the parties are presently engaged in
the post-judgment motion phase of the case. ANC has filed motions
to reduce the damage award by at least $75 million or
alternatively, grant ANC a new trial. Viskase is seeking a
determination that the case be deemed "exceptional" and that the
F-48
<PAGE> 55
award be increased by approximately $46 million which includes
compensatory damages for ANC's infringement during the period of
October 1, 1996 through December 23, 1996 and additional damages
for prejudgment interest, attorneys' fees and related expenses. Due
to ANC's willful infringement of the patents, Viskase has asked the
court to treble the compensatory award. These motions are all
pending before the Court and rulings are expected in the second
quarter 1997. Meanwhile post-judgment interest is accruing on the
$102.4 million award from November 8, 1996 at an annual rate of
5.49%. The Company expects ANC to aggressively contest the award
and to appeal any final judgment. The award and any pending claims
for additional damages have not been recorded in the Company's
financial statements.
The Company and its subsidiaries are involved in various legal
proceedings arising out of its business and other environmental
matters, none of which is expected to have a material adverse
effect upon its results of operations, cash flows or financial
position.
12. INCOME TAXES (dollars in thousands)
The provision (benefit) for income taxes consisted of:
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
Current:
Federal $1,909 $1,316 $4,479
Foreign 4,365 950 4,652
State and local 379 243 766
------ ------ ------
6,653 2,509 9,897
------ ------ ------
Deferred:
Federal
Foreign 393 2,098 128
State and local
------- ------- -------
393 2,098 128
------- ------- -------
$ 7,046 $ 4,607 $10,025
======= ======= =======
A reconciliation from the statutory federal tax rate to the
consolidated effective tax rate follows:
December 29, December 30, January 1,
1995 to 1994 to to
December 26, December 28, December 29,
1996 1995 1994
----------- ----------- -----------
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 1.5 2.3 2.5
Net effect of taxes
relating to
foreign operations 7.9 30.4 11.1
Other (.6) .4 1.6
---- ---- ----
Consolidated effective
tax rate 43.8% 68.1% 50.2%
==== ==== ====
F-49
<PAGE> 56
Temporary differences and carryforwards which give rise to a
significant portion of deferred tax assets and liabilities for 1996
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 $70,911 $25,206
Pension and healthcare 1,684 605
Other accruals, reserves, and other $6,457 3,813 $2,363 1,451
------ ------- ------ -------
$6,457 $76,408 $2,363 $27,262
====== ======= ====== =======
</TABLE>
At December 26, 1996, the Company had $16,393 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 $6,156, $3,937 and $12,634
in 1996, 1995 and 1994, respectively. Foreign earnings or (losses)
before income taxes were approximately $9,942, $2,832 and $7,329 in
1996, 1995 and 1994, respectively.
13. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands)
Research and development costs are expensed as incurred and totaled
$1,282, $1,106, and $1,562, for 1996, 1995, and 1994, respectively.
14. RELATED PARTY TRANSACTIONS (dollars in thousands)
Intercompany loans and advances:
- - - -------------------------------
<TABLE>
<CAPTION>
December 26, December 28,
1996 1995
----------- -----------
<S> <C> <C>
Viskase S.A. 12% promissory note due to Envirodyne $ 7,000 $25,142
Viskase Limited 12% promissory note due to Envirodyne 13,681
Viskase S.A. promissory note due to Envirodyne 17,440
Accrued interest on Viskase S.A. promissory note 83
Viskase United Kingdom Limited promissory note
due to Envirodyne, including accrued interest 419
Advances:
Viskase Corporation to Viskase Holding Corporation 38,010 38,010
------- -------
$58,691 $81,094
======= =======
</TABLE>
The 12% promissory notes due to Envirodyne are payable on demand.
Interest is payable semiannually on June 30 and December 31.
The Viskase S.A. promissory note due to Envirodyne was payable on
demand and bore interest at a rate of 10.00%. The note was repaid
in fiscal 1996.
The $2.5 million Viskase United Kingdom Limited promissory note due
to Envirodyne was payable on demand and bore interest at a rate of
8.00%. The balance of the note was repaid in fiscal 1996.
The Viskase Corporation advance to Viskase Holding Corporation is
payable on demand.
F-50
<PAGE> 57
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 1996, 1995 and 1994, the Company was charged $999, $1,022 and
$756, respectively, by Viskase Corporation for management services.
In 1996, 1995 and 1994, the Company was charged $520, $687 and
$100, respectively, by Envirodyne for management services.
During 1996, 1995 and 1994, the Company purchased semi-finished and
finished inventory from Viskase Sales Corporation in the amount of
$32,489, $26,953 and $23,114, respectively. In addition, during
1996, 1995 and 1994, the Company had sales of inventory to Viskase
Sales Corporation in the amount of $7,842, $7,329 and $5,632,
respectively.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying value and estimated fair
value as of December 26, 1996 of the Company's financial
instruments. (Refer to Notes 3 and 8.)
Carrying Estimated
Value Fair Value
-------- -----------
Assets:
Cash and equivalents $16,171 $16,171
Foreign currency contracts 12,995 12,337
Liabilities:
Long-term debt 7,742 7,742
16. PATENT LITIGATION SETTLEMENT (dollars in thousands)
In 1989 certain competitors of Viskase filed a declaratory action
challenging the validity and enforceability of a Viskase patent
relating to casings used in the manufacture of food products. In
May 1994, the trial court upheld the validity and enforceability of
the Viskase patent and found infringement of the patent. Before the
trial on damages was conducted, Viskase entered into agreements to
settle the claims and grant licenses to the competitors. Under the
terms of these agreements Viskase received $9,457 for past
infringement and advance royalties and established royalty rates
for future patent use.
17. SUBSEQUENT EVENTS (dollars in thousands)
In March 1997 the Company announced that it was exploring the
potential sale of Viskase Corporation's PVC film business.
Viskase's plants in Aurora, Ohio, and Sedgefield, England, would be
affected by a sale. Net sales of PVC films in 1996 totaled
approximately $54 million.
In March 1997, Viskase Corporation received a subpoena from the
Antitrust Division of the United States Department of Justice
relating to a grand jury investigation of the sausage casings
industry. Viskase Corporation has cooperated fully with the
investigation.
F-51
<PAGE> 58
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II
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>
1996 for the year ended
December 26
Allowance for
doubtful accounts $3,224 $ 659 $(2,293) $ 469 $ (8) $2,051
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
1996 for the year ended
December 26
Reserve for obsolete and
slow moving inventory 3,818 1,805 (1,210) (16) 4,397
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
</TABLE>
(1) Foreign currency translation.
F-52
<PAGE> 59
The exhibits indicated by an asterisk (*) are incorporated by reference.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<S> <C>
3(a)* -- Restated Certificate of Incorporation of Zapata filed with Secretary of State of Delaware
May 3, 1994 (Exhibit 3(a) to Current Report on Form 8-K dated April 27, 1994 (File No.
1-4219)).
3(b)* -- Certificate of Designation, Preferences and Rights of $1 Preference Stock (Exhibit 3(c) to
Zapata's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1993 (File No.
1-4219)).
3(c)* -- Certificate of Designation, Preferences and Rights of $100 Preference Stock (Exhibit 3(d) to
Zapata's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1993 (File No.
1-4219)).
3(d)*++ -- By-laws of Zapata, as amended effective November 11, 1996.
10(a)*+ -- Zapata 1990 Stock Option Plan (Exhibit 10(b) to Zapata's Annual Report on Form 10-K for the
fiscal year ended September 30, 1990 (File No. 1-4219)).
10(b)*+ -- First Amendment to Zapata 1990 Stock Option Plan (Exhibit 10(c) to Zapata's Registration
Statement on Form S-1 (Registration No. 33-40286)).
10(c)*+ -- Zapata Special Incentive Plan, as amended and restated effective February 6, 1992 (Exhibit
10(a) to Zapata's Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File
No. 1-4219)).
10(d)*+ -- Zapata 1981 Stock Incentive Plan, as amended and restated effective February 12, 1986
(Exhibit 19(a) to Zapata's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1986 (File No. 1-4219)).
10(e)*+ -- Zapata Supplemental Pension Plan effective as of April 1, 1992 (Exhibit 10(b) to Zapata's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 1-4219)).
10(f)*+ -- Zapata Annual Incentive Plan effective January 1, 1991 (Exhibit 10(h) to Zapata's
Registration Statement on Form S-1 (Registration No. 33-40286)).
10(g)*+ -- Cimarron Gas Companies, Inc. Incentive Appreciation Plan, effective as of September 30, 1992
(Exhibit 2(c) to Zapata's Current Report on Form 8-K dated November 24, 1992 (File No.
1-4219)).
10(h)*+ -- Noncompetition Agreement dated as of November 9, 1993 by and among Zapata and Peter M. Holt
and Benjamin D. Holt, Jr. (Exhibit 10(q) to Zapata's Annual Report on form 10-K for the
fiscal year ended September 30, 1994 (File No. 1-4219)).
10(i)*+ -- Termination Agreement between Cimarron Gas Companies, Inc. and James C. Jewett dated as of
January 24, 1994 (Exhibit 10(a) to Zapata's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1993 (File No. 1-4219)).
10(j)*+ -- Consulting Agreement dated as of July 1, 1994 between Zapata Corporation and Thomas H.
Bowersox (Exhibit 10(w) to Zapata's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (File No. 1-4219)).
10(k)*+ -- Consulting Agreement between Ronald C. Lassiter and Zapata dated as of July 15, 1994
(Exhibit 10(a) to Zapata's Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 1994 (File No. 1-4219)).
</TABLE>
<PAGE> 60
<TABLE>
<S> <C>
10(l)*+ -- Employment Agreement between Lamar C. McIntyre and Zapata dated as of October 1, 1994
(Exhibit 10(v) to Zapata's Annual Report on Form 10-K for the fiscal year ended September
30, 1994 (File No. 1-4219)).
10(m)*+ -- Purchase Agreement dated as of April 10, 1995 by and between Norex America, Inc. and Zapata
relating to 2,250,000 shares of Zapata Common Stock (Exhibit 10(c) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1995 (File No. 1-4219)).
10(n)*+ -- Assignment and Assumption of Consulting Agreement effective as of July 1, 1995 by and
between Zapata and Zapata Protein, Inc. (Exhibit 10(b) to Zapata's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1995 (File No. 1-4219)).
10(o)* -- Stock Purchase Agreement dated as of August 7, 1995 between Zapata Corporation and Malcolm
I. Glazer (Exhibit 10(o) to Zapata's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995 (File No. 1-4219)).
10(p)*+ -- Mutual Release Agreement dated as of December 1, 1995 by and among Zapata Corporation,
Cimarron Gas Holding Company, Robert W. Jackson and the Robert W. Jackson Trust.
10(q)* -- Purchase and Sale Agreement dated March 26, 1996 by and among Cimarron Gas Holding Company,
Conoco Inc. and Enogex Products Corporation (Exhibit 2.1 to Zapata's Current Report on Form
8-K dated April 9, 1996 (File No. 1-4219)).
10(r)* -- Amendment and Clarification of Purchase and Sale Agreement, Waiver and Closing Agreement
dated April 9, 1996 (Exhibit 2.2 to Zapata's Current Report on Form 8-K dated April 9, 1996
(File No. 1-4219)).
10(s)* -- Agreement and Plan of Merger dated as of June 4, 1996 among Zapata, Zapata Acquisition Corp.
and Houlihan's (Exhibit 2.1 to Zapata's Registration Statement on Form S-4 (Reg. No. 333-
06729)).
10(t)* -- Standstill Agreement dated April 30, 1996 between Zapata and Malcolm I. Glazer (Exhibit
10.18 to Zapata's Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(u)* -- Irrevocable proxy dated June 4, 1996 granted by Malcolm I. Glazer to members of a Special
Committee of the Board of Directors of Zapata (Exhibit 10.19 to Zapata's Registration
Statement on Form S-4 (Reg. No. 333-06729)).
10(v)* -- Supplemental Agreement dated June 4, 1996 between Malcolm I. Glazer and Zapata (Exhibit
10.20 to Zapata's Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(w)* -- 1996 Long-Term Incentive Plan of Zapata (Exhibit 10.21 to Zapata's Registration Statement on
Form S-4 (Reg. No. 333-06729)).
10(x)*+ -- Employment Agreement between Joseph L. von Rosenberg III and Zapata effective as of June 1,
1996..
10(y) -- Indemnification Agreement between Zapata and certain directors and officers accompanied by
Schedule pursuant to Rule 12b-31.
21*++ -- Subsidiaries of the Registrant.
23(a)*++ -- Consent of Huddleston & Co., Inc.
23(b)*++ -- Consent of Coopers & Lybrand L.L.P.
23(c) -- Consent of Coopers & Lybrand L.L.P. with respect to the consolidated financial statements of
Envirodyne Industries, Inc.
24*++ -- Powers of attorney.
27*++ -- Financial Data Schedule.
</TABLE>
- ------------------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
++ Exhibits filed with the Company's Form 10-K for fiscal year ended
September 30, 1996.
<PAGE> 1
EXHIBIT 10 (y)
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this 9th day of November, 1995
("Agreement"), by and between Zapata Corporation, a Delaware corporation
("Company"), and Joseph L. von Rosenberg III ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of
their service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and the
uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
applicable law so that they will serve or continue to serve the Company free
from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional services for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants contained
herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to serve as director
and/or officer of the Company. Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have
no obligation under this Agreement to continue Indemnitee in such position.
Section 2. Indemnification - General. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in
this Agreement and (b) to the fullest extent permitted by applicable law in
effect on the date hereof and as amended from time to time. The rights of
Indemnitee provided under the preceding sentence shall include, but shall not
be limited to, the rights set forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by or in the Right of the
Company. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 3 if, by reason of his Corporate Status (as
hereinafter defined), he is, or is threatened to be made, a party to any
threatened, pending, or completed Proceeding (as hereinafter defined), other
than a Proceeding by or in the right
<PAGE> 2
EXHIBIT 10(y)
of the Company. Pursuant to this Section 3, Indemnitee shall be indemnified
against all Expenses, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company. Indemnitee shall be
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company; provided, however, that, if applicable law
so provides, no indemnification against such Expenses shall be made in respect
of any claim, issue or matter in such Proceeding as to which Indemnitee shall
have been adjudged to be liable to the Company unless and to the extent that
the Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that such
indemnification may be made.
Section 5. Indemnification for Expenses of a Party who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, to the
extent that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or
more but less than all claims, issues or matters in such Proceeding, the
Company shall indemnify Indemnitee against all Expenses actually and reasonably
incurred by him or on his behalf in connection with each successfully resolved
claim, issue or matter. For purposes of this Section and without limitation,
the termination of any claim, issue or matter in such a Proceeding by
dismissal, with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
Section 6. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
Section 7. Advancement of Expenses. The Company shall advance all reasonable
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within ten (10) days after the receipt by the Company of a statement
or statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any
2
<PAGE> 3
EXHIBIT 10(y)
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses.
Section 8. Procedure for Determination of Entitlement to Indemnification.
a. To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including
therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent Indemnitee is entitled
to indemnification. The Secretary of the Company shall,
promptly upon receipt of such a request for indemnification,
advise the Board of Directors in writing that Indemnitee has
requested indemnification.
b. Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a
determination, if required by applicable law, with respect to
Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change in Control (as hereinafter defined)
shall have occurred, by Independent Counsel (as hereinafter
defined) in a written opinion to the Board of Directors, a
copy of which shall be delivered to Indemnitee; or (ii) if a
Change of Control shall not have occurred, (A) by the Board of
Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined); or (B) if a
quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, such
quorum of Disinterested Directors so directs, by Independent
Counsel in a written opinion to the Board of Directors, a copy
of which shall be delivered to Indemnitee; or (C) if so
directed by the Board of Directors, by the stockholders of the
Company; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be
made within ten (10) days after such determination.
Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such
person, persons, or entity upon reasonable advance request any
documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys'
fees and disbursements) incurred by Indemnitee in so
cooperating with the person, persons or entity making such
determination shall be borne by the Company (irrespective of
the determination as to Indemnitee's entitlement to
indemnification) and the Company hereby indemnifies and agrees
to hold Indemnitee harmless therefrom.
c. In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant
to Section 8(b) hereof, the Independent Counsel shall be
selected as provided in this Section 8(c). If a Change of
Control shall not have occurred, the Independent Counsel shall
be selected by the Board of Directors, and
3
<PAGE> 4
EXHIBIT 10(y)
the Company shall give written notice to Indemnitee advising
him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent
Counsel shall be selected by Indemnitee (unless Indemnitee
shall request that such selection be made by the Board of
Directors, in which event the preceding sentence shall apply),
and Indemnitee shall give written notice to the Company
advising it of the identity of the Independent Counsel so
selected. In either event, Indemnitee or the Company, as the
case may be, may, within ten (10) days after such written
notice of selection shall have been given, deliver to the
Company or to Indemnitee, as the case may be, a written
objection to such selection; provided, however, that such
objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirements
of "Independent Counsel" as defined in Section 17 of this
Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such
written objection is so made and substantiated, the
Independent Counsel so selected may not serve as Independent
Counsel unless and until such objection is withdrawn or a
court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of
a written request for indemnification pursuant to Section 8(a)
hereof, no Independent Counsel shall have been selected and
not objected to, either the Company or Indemnitee may petition
the Court of Chancery of the State of Delaware or other court
of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the
other's selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person selected by the
Court or by such other person as the Court shall designate,
and the person with respect to whom all objections are so
resolved or the person so appointed shall act as Independent
Counsel under Section 8(b) hereof. The Company shall pay any
and all reasonable fees and expenses of Independent Counsel
incurred by such Independent Counsel in connection with acting
pursuant to Section 8(b) hereof, and the Company shall pay all
reasonable fees and expenses incident to the procedures of
this Section 8(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration
pursuant to Section 10(a)(iii) of this Agreement, Independent
Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
Section 9. Presumptions and Effect of Certain Proceedings.
a. If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification
hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to
indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with
Section 8(a) of this Agreement, and the Company shall have the
4
<PAGE> 5
EXHIBIT 10(y)
burden of proof to overcome that presumption in connection
with the making by any person, persons or entity of any
determination contrary to that presumption.
b. The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not
(except as otherwise expressly provided in this Agreement) of
itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal Proceeding, that
Indemnitee had reasonable cause to believe that his conduct
was unlawful.
Section 10. Remedies of Indemnitee.
a. In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of
Expenses is not timely made pursuant to Section 7 of this
Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 8(b)
of this Agreement within ninety (90) days after receipt by the
Company of the request for indemnification, (iv) payment of
indemnification is not made pursuant to Section 5 or 6 of this
Agreement within ten (10) days after receipt by the Company of
a written request therefor, or (v) payment of indemnification
is not made within ten ( 10) days after a determination has
been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to such
indemnification or advancement of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an
adjudication or an award in arbitration within 180 days
following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a);
provided, however, that the foregoing clause shall not apply
in respect of a proceeding brought by Indemnitee to enforce
his rights under Section 5 of this Agreement.
b. In the event that a determination shall have been made
pursuant to Section 8(b) of this Agreement that Indemnitee is
not entitled to indemnification, any judicial proceeding or
arbitration commenced pursuant to this Section 10 shall be
conducted in all respects as a de novo trial, or arbitration,
on the merits and Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change of Control shall
have occurred, in any judicial proceeding or arbitration
commenced pursuant to this Section 10 the Company shall have
the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may
be.
5
<PAGE> 6
EXHIBIT 10(y)
c. If a determination shall have been made pursuant to Section
8(b) of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such
determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a
misstatement by Indemnitee of a material fact, or an omission
of a material fact necessary to make Indemnitee's statement
not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law.
d. In the event that Indemnitee, pursuant to this Section 10,
seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of,
this Agreement, Indemnitee shall be entitled to recover from
the Company, and shall be indemnified by the Company against,
any and all expenses (of the types described in the definition
of Expenses in Section 17 of this Agreement) actually and
reasonably incurred by him in such judicial adjudication or
arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the
expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately
prorated.
Section 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
a. The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the Certificate of
Incorporation, the By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or of any
provision hereof shall limit or restrict any right of
Indemnitee under this Agreement in respect of any action taken
or omitted by such Indemnitee in his Corporate Status prior to
such amendment, alteration or repeal.
b. To the extent that the Company maintains an insurance policy
or policies providing liability insurance for directors and/or
officers of the Company or of any other corporation,
partnership, joint venture, trust, employee benefit plan or
other enterprise which such person serves at the request of
the Company, Indemnitee shall be covered by such policy or
policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director and/or
officer under such policy or policies.
c. In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of
the rights of recovery of Indemnitee, who shall execute all
papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary
to enable the Company to bring suit to enforce such rights.
6
<PAGE> 7
EXHIBIT 10(y)
d. The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually
received such payment under any insurance policy, contract,
agreement or otherwise.
Section 12. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee, or agent of the
Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which Indemnitee served at the
request of the Company; or (b) the final termination of any Proceeding then
pending in respect of which Indemnitee is granted rights of indemnification or
advancement of expenses hereunder and of any proceeding commenced by Indemnitee
pursuant to Section 10 of this Agreement relating thereto. This Agreement shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of Indemnitee and his heirs, executors and administrators.
Section 13. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and (b) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
Section 14. Except to Right of Indemnification or Advancement of Expenses.
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement
with respect to any Proceeding brought by Indemnitee, or any claim therein
prior to a Change in Control, unless the bringing of such Proceeding or making
of such claim shall have been approved by the Board of Directors.
Section 15. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 16. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or the affect the construction thereof.
Section 17. Definitions. For purposes of this Agreement:
7
<PAGE> 8
EXHIBIT 10(y)
a. "Change of Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A (or in response to any similar item on
any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the Company
is then subject to such reporting requirement; provided,
however, that, without limitation, such a Change in Control
shall be deemed to have occurred if after the Effective Date
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding
securities without the prior approval of at least two-thirds
of the members of the Board of Directors in office immediately
prior to such person attaining such percentage interest; (ii)
there occurs a proxy contest, or the Company is a party to a
merger, consolidation, sale of assets, plan of liquidation or
other reorganization not approved by at least two-thirds of
the members of the Board of Directors then in office, as a
consequence of which members of the Board of Directors in
office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive
years, other than as a result of an event described in clause
(a)(ii) of this Section 17, individuals who at the beginning
of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination
for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the
Board of Directors.
b. "Corporate Status" describes the status of a person who is or
was a director and/or officer of the Company or of any other
corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person is or was
serving at the request of the Company.
c. "Disinterested Director" means a director of the Company who
is not and was not a party to the Proceeding in respect of
which indemnification is sought by Indemnitee.
d. "Effective Date" means November 9, 1995.
e. "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts,
witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a Proceeding.
8
<PAGE> 9
EXHIBIT 10(y)
f. "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and
neither presently is, nor in the past five years has been,
retained to represent: (i) the Company or Indemnitee in any
matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under
the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine
Indemnitee's rights under this Agreement.
g. "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative
hearing or any other proceeding, whether civil, criminal,
administrative or investigative, except one (i) initiated by
an Indemnitee pursuant to Section 10 of this Agreement to
enforce his rights under this Agreement or (ii) pending on or
before the Effective Date, provided, however, that Proceeding
shall include the lawsuit styled Elly Harwin v. Malcolm I.
Glazer, Avram A. Glazer, Peter M. Holt, Ronald C. Lassiter,
Robert V. Leffler, Jr., W. George Loar and Zapata Corporation;
Civil Action No. 14473; In the Court of Chancery of the State
of Delaware in and for New Castle County.
Section 18. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
Section 20. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
a. If to Indemnitee to:
Joseph L. von Rosenberg III
Zapata Corporation
1717 St. James Place
Suite 550
P.O. Box 4240
Houston, Texas 77210-4240
9
<PAGE> 10
EXHIBIT 10(y)
b. If to the Company, to:
Zapata Corporation
1717 St. James Place
Suite 550
P.O. Box 4240
Houston, Texas 77210-4240
Attention: General Counsel
or to such other address as may have been furnished to Indemnitee by the
Company or to the Company by Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
Section 22. Miscellaneous. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
ZAPATA CORPORATION
(the "COMPANY")
By:
------------------------------
Robert A. Gardiner
Vice President and Controller
ATTEST:
By:
--------------------------
Kenneth W. Robichau
"INDEMNITEE"
-----------------------------------
Joseph L. von Rosenberg III
10
<PAGE> 11
SCHEDULE PURSUANT TO RULE 12b-31
The following directors and officers of Zapata are parties to indemnification
agreements with Zapata in substantially the form filed as Exhibit 10(y).
<TABLE>
<CAPTION>
Name Date of Agreement
---- -----------------
<S> <C>
Avram A. Glazer November 9, 1995
Malcolm I. Glazer November 9, 1995
R. C. Lassiter November 9, 1995
Robert V. Leffler, Jr. November 9, 1995
W. George Loar November 9, 1995
Sharon M. Brunner November 9, 1995
Robert A. Gardiner November 9, 1995
Lamar C. McIntyre November 9, 1995
Kenneth W. Robichau November 9, 1995
Joseph L. von Rosenberg III November 9, 1995
</TABLE>
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements of Zapata Corporation of Form S-3 (File 33-68034) and on Form S-8s
(File Nos. 33-19085 and 33-45251) of our reports, dated March 20, 1997, on our
audits of (a) the consolidated financial statements and financial statement
schedules of Envirodyne Industries, Inc. and subsidiaries as of December 26,
1996 and December 28, 1995 and for the period December 29, 1995 to December 26,
1996, December 30, 1994 to December 28, 1995, and January 1 to December 29,
1994 and (b) the consolidated financial statements and financial statement
schedules of Viskase Holding Corporation and subsidiaries as of December 26,
1996 and December 28, 1995 and for the period December 29, 1995 to December 26,
1996, December 30, 1994 to December 28, 1995 and January 1 to December 29,
1994, which reports are included in this Form 10-K/A.
Coopers & Lybrand L.L.P.
Chicago, Illinois
April 17, 1997
