SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 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 0-5485
----------
ENVIRODYNE INDUSTRIES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-2677354
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Harger Road, Suite 190, Oak Brook, Illinois 60521
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 571-8800
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
------ -------
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the
registrant has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No
------ ------
As of August 9, 1996, there were 14,479,721 shares outstanding of
the registrant's Common Stock, $.01 par value.
Page 1 of 30 Pages
INDEX TO FINANCIAL STATEMENTS
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated balance sheets at June 27, 1996 (unaudited)
and December 28, 1995 4
Unaudited consolidated statements of operations
for the three months ended June 27, 1996 and
June 29, 1995 and for the six months ended
June 27, 1996 and June 29, 1995 5
Unaudited consolidated statements of cash flows
for the six months ended June 27, 1996
and June 29, 1995 6
Notes to consolidated financial statements 7
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at June 27, 1996 (unaudited)
and December 28, 1995 21
Unaudited consolidated statements of operations for the
three months ended June 27, 1996 and June 29, 1995
and for the six months ended June 27, 1996 and
June 29, 1995 22
Unaudited consolidated statements of cash flows for the
six months ended June 27, 1996 and June 29, 1995 23
Notes to consolidated financial statements 24
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
The financial information included in this quarterly report has been
prepared in conformity with the accounting principles and practices
reflected in the financial statements included in the annual report on
Form 10-K filed with the Securities and Exchange Commission for the year
ended December 28, 1995 (1995 Form 10-K). These quarterly financial
statements should be read in conjunction with the financial statements
and the notes thereto included in the 1995 Form 10-K. The accompanying
financial information, which is unaudited, reflects all adjustments
which are, in the opinion of management, necessary for a fair statement
of the results for the interim periods presented.
The condensed consolidated balance sheet as of December 28, 1995 was
derived from the audited consolidated financial statements in the
Company's annual report of Form 10-K.
Reported interim results of operations are based in part on estimates
which may be subject to year-end adjustments. In addition, these
quarterly results of operations are not necessarily indicative of those
expected for the year.
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 27, December 28,
1996 1995
---------------- ---------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 19,774 $ 30,325
Receivables, net 87,585 89,454
Inventories 104,853 99,474
Other current assets 27,043 21,646
-------- --------
Total current assets 239,255 240,899
Property, plant and equipment,
including those under capital leases 558,097 545,491
Less accumulated depreciation
and amortization 97,099 75,987
-------- --------
Property, plant and equipment, net 460,998 469,504
Deferred financing costs 6,850 8,090
Other assets 42,468 45,589
Excess reorganization value 130,293 135,485
-------- --------
$879,864 $899,567
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current portion
of long-term debt and obligations
under capital leases $ 11,675 $ 12,504
Accounts payable 42,983 39,117
Accrued liabilities 70,992 67,553
-------- --------
Total current liabilities 125,650 119,174
Long-term debt including obligations
under capital leases 522,699 530,181
Accrued employee benefits 56,251 55,626
Deferred and noncurrent income taxes 70,085 77,490
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,479,721 shares issued and
outstanding at June 27, 1996 and
13,579,460 shares at December 28, 1995 145 136
Paid in capital 134,855 134,864
Accumulated (deficit) (35,223) (25,131)
Cumulative foreign currency
translation adjustments 5,402 7,227
-------- --------
Total stockholders' equity 105,179 117,096
-------- --------
$879,864 $899,567
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended June Ended June Ended June Ended June
27, 1996 29, 1995 27, 1996 29, 1995
------------- ------------ ------------ ------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $165,747 $165,184 $325,483 $321,008
COSTS AND EXPENSES
Cost of sales 124,053 123,404 243,762 238,359
Selling, general
and administrative 28,304 27,786 54,946 56,056
Amortization of intangibles
and excess reorganization value 4,115 3,905 8,206 7,815
-------- -------- -------- --------
OPERATING INCOME 9,275 10,089 18,569 18,778
Interest income 381 19 772 83
Interest expense 14,496 13,796 29,372 27,230
Other expense (income), net 225 (548) 3,261 (1,139)
-------- -------- -------- --------
(LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (5,065) (3,140) (13,292) (7,230)
Income tax provision (benefit) (900) 177 (3,200) (18)
-------- -------- -------- --------
(LOSS) BEFORE EXTRAORDINARY ITEM (4,165) (3,317) (10,092) (7,212)
Extraordinary loss, net of tax 4,196 4,196
-------- -------- -------- --------
NET (LOSS) $ (4,165) $ (7,513) $(10,092) $(11,408)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES 14,479,721 13,515,000 14,093,895 13,515,000
PER SHARE AMOUNTS:
(LOSS) BEFORE EXTRAORDINARY ITEM $(.29) $(.25) $(.72) $(.53)
===== ===== ===== =====
NET (LOSS) $(.29) $(.56) $(.72) $(.84)
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
June 27, June 29,
1996 1995
------------ -----------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
(Loss) before extraordinary item $(10,092) $(7,212)
Extraordinary (loss) on debt extinguishment (4,196)
-------- -------
Net (loss) (10,092) (11,408)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization under capital leases 21,861 20,132
Amortization of intangibles and excess
reorganization value 8,206 7,815
Amortization of deferred financing fees and discount 1,156 1,031
Increase (decrease) in deferred and
noncurrent income taxes (5,794) (3,705)
Loss on debt extinguishment 6,778
Foreign currency transaction loss (gain) 5 (2,079)
(Gain) on sales of property, plant and equipment (159) (11)
Changes in operating assets and liabilities:
Accounts receivable 670 (6,130)
Inventories (6,095) (12,851)
Other current assets (5,613) (7,360)
Accounts payable and accrued liabilities 8,316 (3,834)
Other (98) (25)
-------- -------
Total adjustments 22,455 (239)
-------- -------
Net cash provided by (used in) operating
activities 12,363 (11,647)
Cash flows from investing activities:
Capital expenditures (16,568) (13,597)
Proceeds from sale of property, plant and equipment 275 29
-------- -------
Net cash (used in) investing activities (16,293) (13,568)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 1,130 206,053
Deferred financing costs (7,667)
Repayment of revolving loan, long-term borrowings
and capital lease obligations (8,859) (173,494)
-------- -------
Net cash (used in) provided by
financing activities (7,729) 24,892
Effect of currency exchange rate changes on cash 1,108 (675)
-------- -------
Net (decrease) in cash and equivalents (10,551) (998)
Cash and equivalents at beginning of period 30,325 7,289
-------- -------
Cash and equivalents at end of period $ 19,774 $ 6,291
======== =======
- ---------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $34,501 $33,373
Income taxes paid $ 690 $ 3,996
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
June 27, December 28,
1996 1995
----------- ------------
Raw materials $ 17,768 $ 17,150
Work in process 31,567 32,800
Finished products 55,518 49,524
-------- --------
$104,853 $ 99,474
======== ========
Approximately 56% of the inventories at June 27, 1996 were valued at Last-
In, First-Out (LIFO). These LIFO values exceeded current manufacturing cost
by approximately $5.6 million at June 27, 1996.
2. DEBT OBLIGATIONS (dollars in thousands)
On June 20, 1995, Envirodyne Industries, Inc. (Envirodyne or the Company)
completed the sale of $160,000 aggregate principal amount of senior secured
notes pursuant to an indenture dated June 20, 1995 (Indenture) consisting
of (i) $151,500 of 12% Senior Secured Notes due 2000 and (ii) $8,500 of
Floating Rate Senior Secured Notes due 2000 (collectively, the Senior
Secured Notes). Envirodyne used the net proceeds of the offering primarily
to refinance senior bank debt and pay transaction fees and expenses.
Concurrently with the June 20, 1995 financing, Envirodyne entered into a
$20,000 domestic revolving credit facility (Revolving Credit Facility) and
a $28,000 letter of credit facility (Letter of Credit Facility). The Senior
Secured Notes and the obligations under the Revolving Credit Facility and
the Letter of Credit Facility are guaranteed by Envirodyne's significant
domestic subsidiaries and secured by a collateral pool (Collateral Pool)
comprised of: (i) all domestic accounts receivable (including intercompany
receivables) and inventory; (ii) all patents, trademarks and other
intellectual property (subject to non-exclusive licensing agreements);
(iii) substantially all domestic fixed assets (other than assets subject
to a lease agreement with General Electric Capital Corporation); and (iv)
a senior pledge of 100% of the capital stock of Envirodyne's significant
domestic subsidiaries and 65% of the capital stock of Viskase S.A. Such
guarantees and security are shared by the holders of the Senior Secured
Notes and the holders of the obligations under the Revolving Credit
Facility on a pari passu basis pursuant to an intercreditor agreement.
---- -----
Pursuant to such intercreditor agreement, the security interest of the
holders of the obligations under the Letter of Credit Facility has priority
over all other liens on the Collateral Pool.
The Company finances its working capital needs through a combination of
cash generated through operations and borrowings under the Revolving Credit
Facility. The availability of funds under the Revolving Credit Facility is
subject to the Company's compliance with certain covenants (which are
substantially similar to those included in the Indenture), borrowing base
limitations measured by accounts receivable and inventory of the Company
and reserves which may be established at the discretion of the lenders.
Currently, there are no drawings under the Revolving Credit Facility. The
available borrowing capacity under the Revolving Credit Facility was $20
million at June 27, 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
interest rate on the floating rate tranche is approximately 11.6%. The
interest rate on the floating rate tranche is reset semi-annually on June
15 and December 15. Interest on the Senior Secured Notes is payable each
June 15 and December 15.
On June 15, 1999, $80,000 of Senior Secured Notes is subject to a mandatory
redemption. The remaining principal amount outstanding will mature on June
15, 2000.
In the event the Company has Excess Cash Flow (as defined) in excess of
$5,000 in any fiscal year, Envirodyne is required to make an offer to
purchase Senior Secured Notes together with any borrowed money obligations
outstanding under the Revolving Credit Facility, on a pro rata basis, in
an amount equal to the Excess Cash Flow at a purchase price of 100% plus
any accrued interest to the date of purchase. There was no Excess Cash Flow
for fiscal 1995.
The Senior Secured Notes are redeemable, in whole or from time to time in
part, at Envirodyne's option, at the greater of (i) the outstanding
principal amount or (ii) the present value of the expected future cash
flows from the Senior Secured Notes discounted at a rate equal to the
Treasury Note yield corresponding closest to the remaining average life of
the Senior Secured Notes at the time of prepayment plus 100 basis points;
plus accrued interest thereon to the date of purchase.
- ----
Upon the occurrence of a Change of Control (which includes the acquisition
by any person of more than 50% of Envirodyne's Common Stock), each holder
of the Senior Secured Notes has the right to require the Company to
repurchase such holder's Senior Secured Notes at a price equal to the
greater of (i) the outstanding principal amount or (ii) the present value
of the expected cash flows from the Senior Secured Notes discounted at a
rate equal to the Treasury Note yield corresponding closest to the
remaining average life of the Senior Secured Notes at the time of
prepayment plus 100 basis points; plus accrued interest thereon to the date
----
of purchase.
The Indenture contains covenants with respect to Envirodyne and its
subsidiaries limiting (subject to a number of important qualifications),
among other things, (i) the ability to pay dividends or redeem or
repurchase common stock, (ii) the incurrence of indebtedness, (iii) the
creation of liens, (iv) certain affiliate transactions and (v) the ability
to consolidate with or merge into another entity and to dispose of assets.
Borrowings under the Revolving Credit Facility bear interest at a rate per
annum equal to the three month London Interbank Offered Rate (LIBOR) on the
first day of each calendar quarter plus 300 basis points. The Revolving
Credit Facility expires on June 20, 1998.
Envirodyne has entered into interest rate agreements that cap $50 million
of interest rate exposure at an average LIBOR rate of 6.50% until January
1997. These interest rate cap agreements were entered into under terms of
the senior bank financing that was repaid on June 20, 1995. Interest
expense includes $306 of amortization of the interest rate cap premium
during the six-month period ended June 27, 1996. Envirodyne has not
received any payments under the interest rate protection agreements.
The Letter of Credit Facility expires on June 20, 1998. Fees on the
outstanding amount of letters of credit are 2.0% per annum, with an
issuance fee of 0.5% on the face amount of the letter of credit. There is
a commitment fee of 0.5% per annum on the unused portion of the Letter of
Credit Facility.
Had the refinancing taken place at the beginning of 1995, the pro forma
Envirodyne consolidated statement of operations would have been:
(in thousands, except for number of shares and per share amounts)
Pro Forma Six Months
Ended June 29, 1995
---------------------
Net sales $321,008
Cost of sales 238,359
Selling, general and administrative 56,056
Amortization of intangibles and
excess reorganization cost 7,815
--------
Operating income 18,778
Interest income 83
Interest expense 30,066
Other expense (income), net (1,139)
--------
(Loss) before income taxes (10,066)
Income tax (benefit) (1,124)
--------
Net (loss) $ (8,942)
========
Weighted average common shares 13,515,000
Net (loss) per share $(.66)
=====
The pro forma information reflects the change in interest expense and
related tax effect due to the issuance of $160 million principal amount of
Senior Secured Notes and the refinancing of the Company's bank debt.
The $219,262 principal amount of 10-1/4% Notes were issued pursuant to an
Indenture dated as of December 31, 1993 (10-1/4% Note Indenture) between
Envirodyne and Bankers Trust Company, as Trustee. The 10-1/4% Notes are the
unsecured senior obligations of Envirodyne, bear interest at the rate of
10-1/4% per annum, payable on each June 1 and December 1, and mature on
December 1, 2001. The 10-1/4% Notes are redeemable, in whole or from time
to time in part, at the option of Envirodyne, at the percentages of
principal amount specified below plus accrued and unpaid interest to the
redemption date, if the 10-1/4% Notes are redeemed during the twelve-month
period commencing on January 1 of the following years:
Year Percentage
-------- ----------
1996 104%
1997 103%
1998 102%
1999 101%
2000 and thereafter 100%
The 10-1/4% Note Indenture contains covenants with respect to Envirodyne
and its subsidiaries limiting (subject to a number of important
qualifications), among other things, (i) the ability to pay dividends on
or redeem or repurchase capital stock, (ii) the incurrence of indebtedness,
(iii) certain affiliate transactions and (iv) the ability of the Company
to consolidate with or merge with or into another entity or to dispose of
substantially all its assets.
Outstanding short-term and long-term debt consisted of:
June December
27, 1996 28, 1995
---------- ----------
Short-term debt, current maturity
of long-term debt, and
capital lease obligation:
Current maturity of Viskase Capital
Lease Obligation $ 6,633 $ 6,012
Current maturity of
Viskase Limited Term Loan (3.9%) 1,919 2,033
Other 3,123 4,459
------- -------
Total short-term debt $11,675 $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 (3.9%) 5,758 7,115
Other 3,130 2,622
-------- --------
Total long-term debt $522,699 $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 upon the current rates offered to the Company for the
debt of the same remaining maturities. At June 27, 1996 the carrying amount
and estimated fair value of debt obligations (excluding capital lease
obligations) were $390,218 and $366,218, respectively.
3. CONTINGENCIES (dollars in thousands)
Although Envirodyne is not a direct party, litigation is pending from
events arising out of Envirodyne's 1993 bankruptcy case and the 1989
acquisition of Envirodyne by Emerald Acquisition Corporation (Emerald) with
respect to which 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 Rifkin
- ------------------------------------------------------------------------
and Michael Zimmerman, Case No. 93 A 1616, United States Bankruptcy Court
- ---------------------
for the Northern District of Illinois, Eastern Division (Bankruptcy Court),
ARTRA Group Incorporated (ARTRA) alleges breach of fiduciary duty and
tortious inference by the defendants in connection with the negotiation and
consummation of Envirodyne's plan of reorganization (Plan of
Reorganization) in 1993. A motion for summary judgment was granted in favor
of all defendants, which decision has been appealed to the District Court.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc,
- --------------------------------------------------------------------
Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly,
- ---------------------------------------------------------------------
Charles K. Bobrinskoy and Michael Zimmerman, Case No. 93 L 2198, Circuit
- -------------------------------------------
Court of the Eighteenth Judicial Circuit, County of DuPage, State of
Illinois, ARTRA alleges breach of fiduciary duty, fraudulent and negligent
misrepresentation and breach of contract in connection with the 1989
acquisition of Envirodyne by Emerald. The plaintiff seeks damages in the
total amount of $136.2 million plus interest and punitive damages of $408.6
million. All claims against Mr. Kelly and D.P. Kelly & Associates, L.P.
have been dismissed by the Circuit Court and some of those decisions have
been appealed to the Illinois Appellate Court. D.P. Kelly & Associates,
L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkin and Zimmerman have
asserted common law and contractual rights of indemnity against Envirodyne
for attorneys' fees, costs and any ultimate liability relating to the
claims set forth in the complaints. Envirodyne is continuing its evaluation
of the merits of the indemnification claims against Envirodyne and the
underlying claims in the litigation. Upon the undertaking of D.P. Kelly &
Associates, L.P. to repay such funds in the event it is ultimately
determined that there is no right to indemnity, Envirodyne is advancing
funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for the payment of
legal fees in the case pending before the Bankruptcy Court. Although the
Company is not a party to either case, the Company believes that the
plaintiff's claims raise similar factual issues to those raised in the
Envirodyne bankruptcy case which, if adjudicated in a manner similar to
that in the Envirodyne bankruptcy case, would render it difficult for the
plaintiff to establish liability. Accordingly, the Company believes that
the indemnification claims would not have a material adverse effect upon
the business or financial position of the Company, even if the claimants
were ultimately successful in establishing their right to indemnification.
Certain of Envirodyne's stockholders prior to the acquisition of Envirodyne
by Emerald failed to exchange their certificates representing old
Envirodyne common stock for the $40 per share cash merger consideration
specified by the applicable acquisition agreement. In the Envirodyne
bankruptcy case, Envirodyne sought to equitably subordinate the claims of
the holders of untendered shares, so that such holders would not receive
a distribution under the Plan of Reorganization. The Bankruptcy Court
granted Envirodyne's motion for summary judgment and equitably subordinated
the claims of the holders of untendered shares to the claims of other
general unsecured creditors. Certain of the affected holders appealed and
both the U.S. District Court and the U.S. Seventh Circuit Court of Appeals
affirmed the Bankruptcy Court decision. Those holders have petitioned the
Supreme Court of the United States for Writ of Certiorari which is pending.
Envirodyne believes that, even in the event prior decisions are reversed,
the maximum number of shares of common stock that it would be required to
issue to such claimants is approximately 106,000.
In February 1996 Clear Shield National and three other plastic cutlery
manufacturers were named as defendants in three civil actions filed in the
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.
The plaintiffs have filed motions for summary judgment in Clear Shield
National's Bankruptcy proceeding in the U.S. Bankruptcy Court for the
Northern District of Illinois, Eastern Division. Their motions contend that
the Bankruptcy Court's order did not discharge the plaintiffs' claims.
Clear Shield National has filed a cross motion for summary judgment. The
claims pending in the Eastern District of Pennsylvania have been stayed
pending the decision in the Bankruptcy Court on the cross motions for
summary judgment.
The Company and its subsidiaries are involved in various legal proceedings
arising out of its business and other environmental matters, none of which
is expected to have a material adverse effect upon its results of
operations, cash flows or financial position.
4. SUBSIDIARY GUARANTORS
Envirodyne's payment obligations under the Senior Secured Notes are fully
and unconditionally guaranteed on a joint and several basis (collectively,
Subsidiary Guarantees) by Viskase Corporation, Viskase Holding Corporation,
Viskase Sales Corporation, Clear Shield National, Inc., Sandusky Plastics,
Inc. and Sandusky Plastics of Delaware, Inc., each a direct or indirect
wholly-owned subsidiary of Envirodyne and each a "Guarantor." These
subsidiaries represent substantially all of the operations of Envirodyne
conducted in the United States. The remaining subsidiaries of Envirodyne
generally are foreign subsidiaries or otherwise relate to foreign
operations.
The obligations of each Guarantor under its Subsidiary Guarantee are the
senior obligation of such Guarantor, and are collateralized, subject to
certain permitted liens, by substantially all of the domestic assets of the
Guarantor and, in the case of Viskase Holding Corporation, by a pledge of
65% of the capital stock of Viskase S.A. The Subsidiary Guarantees and
security are shared with the lenders under the Revolving Credit Agreement
on a pari passu basis and are subject to the priority interest of the
---- -----
holders of obligations under the Letter of Credit Facility, each pursuant
to an intercreditor agreement.
The following consolidating condensed financial data illustrate the
composition of the combined Guarantors. No single Guarantor has any
significant legal restrictions on the ability of investors or creditors to
obtain access to its assets in the event of default on the Subsidiary
Guarantee other than its subordination to senior indebtedness described
above. Separate financial statements of the Guarantors are not presented
because management has determined that these would not be material to
investors. Based on the book value and the market value of the pledged
securities of Viskase Corporation, Viskase Sales Corporation, Clear Shield
National, Inc., Sandusky Plastics, Inc. and Sandusky Plastics of Delaware,
Inc., these Subsidiary Guarantors do not constitute a substantial portion
of the collateral and, therefore, the separate financial statements of
these subsidiaries have not been provided. Separate unaudited interim
financial statements of Viskase Holding Corporation are being filed within
this quarterly report.
Investments in subsidiaries are accounted for by the parent and Subsidiary
Guarantors on the equity method for purposes of the supplemental
consolidating presentation. Earnings of subsidiaries are therefore
reflected in the parent's and Subsidiary Guarantors' investment accounts
and earnings. The principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
JUNE 27, 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 $ 11,421 $ (210) $ 8,563 $ 19,774
Receivables and advances, net 75,105 70,913 50,360 $(108,793) 87,585
Inventories 68,424 38,000 (1,571) 104,853
Other current assets 302 17,854 8,887 27,043
-------- -------- -------- --------- --------
Total current assets 86,828 156,981 105,810 (110,364) 239,255
Property, plant and equipment including
those under capital leases 133 409,568 148,396 558,097
Less accumulated depreciation
and amortization 76 71,536 25,487 97,099
-------- -------- -------- --------- --------
Property, plant and equipment, net 57 338,032 122,909 460,998
Deferred financing costs 5,998 852 6,850
Other assets 40,957 1,511 42,468
Investment in subsidiaries 67,323 117,811 (185,134)
Excess reorganization value 91,336 38,957 130,293
-------- -------- -------- --------- --------
$160,206 $745,117 $270,039 $(295,498) $879,864
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital leases $ 7,181 $ 4,494 $ 11,675
Accounts payable and advances $ 15 103,169 48,592 $(108,793) 42,983
Accrued liabilities 7,709 36,185 27,098 70,992
-------- -------- -------- --------- --------
Total current liabilities 7,724 146,535 80,184 (108,793) 125,650
Long-term debt including obligation
under capital leases 379,262 137,334 6,103 522,699
Accrued employee benefits 51,954 4,297 56,251
Deferred and noncurrent income taxes 33,189 12,951 23,945 70,085
Intercompany loans (365,148) 340,000 25,149 (1)
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,479,721 shares issued and
outstanding 145 3 32,738 (32,741) 145
Paid in capital 134,855 87,899 87,871 (175,770) 134,855
Accumulated earnings (deficit) (35,223) (36,913) 4,398 32,515 (35,223)
Cumulative foreign currency
translation adjustments 5,402 5,354 5,354 (10,708) 5,402
-------- -------- -------- --------- --------
Total stockholders' equity 105,179 56,343 130,361 (186,704) 105,179
-------- -------- -------- --------- --------
$160,206 $745,117 $270,039 $(295,498) $879,864
======== ======== ======== ========= ========
<FN>
(1) Elimination of intercompany receivables, payables and investment accounts.
/TABLE
<PAGE>
<PAGE>
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 leases 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 leases $ 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 leases 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
======== ======== ======== ========= ========
<FN>
(1) Elimination of intercompany receivables, payables and investment accounts.
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 27, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $210,412 $133,210 $(18,139) $325,483
COSTS AND EXPENSES
Cost of sales 160,915 101,529 (18,682) 243,762
Selling, general and administrative $ 2,813 30,966 21,167 54,946
Amortization of intangibles and
excess reorganization value 6,457 1,749 8,206
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (2,813) 12,074 8,765 543 18,569
Interest income 403 369 772
Interest expense 21,771 6,506 1,095 29,372
Intercompany interest expense (income) (20,659) 18,701 1,958
Management fees (income) (3,189) 2,437 752
Other expense (income), net 2,083 (21) 1,199 3,261
Equity loss (income) in subsidiary 8,618 (2,064) (6,554)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (11,034) (13,485) 4,130 7,097 (13,292)
Income tax provision (benefit) (942) (4,324) 2,066 (3,200)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(10,092) $ (9,161) $ 2,064 $ 7,097 $(10,092)
======== ======== ======== ========= ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED JUNE 27, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $107,931 $ 66,998 $(9,182) $165,747
COSTS AND EXPENSES
Cost of sales 82,048 51,071 (9,066) 124,053
Selling, general and administrative $ 1,267 16,045 10,992 28,304
Amortization of intangibles and
excess reorganization value 3,229 886 4,115
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,267) 6,609 4,049 (116) 9,275
Interest income 187 194 381
Interest expense 10,831 3,163 502 14,496
Intercompany interest expense (income) (10,146) 9,322 824
Management fees (income) (1,598) 1,219 379
Other expense (income), net (127) (194) 546 225
Equity loss (income) in subsidiary 4,140 (900) (3,240)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,180) (6,001) 1,992 3,124 (5,065)
Income tax provision (benefit) (15) (1,977) 1,092 (900)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(4,165) $(4,024) $ 900 $ 3,124 $ (4,165)
======== ======== ======== ========= ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR SIX MONTHS ENDED JUNE 27, 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 $(24,670) $ 19,190 $ 17,843 $ 12,363
Cash flows from investing activities:
Capital expenditures (3) (14,836) (1,729) (16,568)
Proceeds from sales of property,
plant and equipment 136 40 99 275
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities 133 (14,796) (1,630) (16,293)
Cash flows from financing activities:
Proceeds from revolving loan and
long-term borrowings 1,130 1,130
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,220) (2,639) (8,859)
Increase (decrease) in Envirodyne loan 17,945 (17,945)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 17,945 (5,090) (20,584) (7,729)
Effect of currency exchange rate changes on cash 1,108 1,108
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents (6,592) (696) (3,263) (10,551)
Cash and equivalents at beginning of period 18,013 486 11,826 30,325
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 11,421 $ (210) $8,563 $19,774
======== ======== ======== ========= ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 29, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $211,180 $129,214 $(19,386) $321,008
COSTS AND EXPENSES
Cost of sales 154,687 102,946 (19,274) 238,359
Selling, general and administrative $ 3,125 33,391 19,540 56,056
Amortization of intangibles and
excess reorganization value 6,133 1,682 7,815
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (3,125) 16,969 5,046 (112) 18,778
Interest income 4 38 41 83
Interest expense 18,232 7,033 1,965 27,230
Intercompany interest expense (income) (18,441) 17,000 1,441
Management fees (income) (3,700) 3,219 481
Other expense (income), net (2,714) 9 1,566 (1,139)
Equity Loss (income) in subsidiary 10,072 2,369 (12,441)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (6,570) (12,623) (366) 12,329 (7,230)
Income tax provision (benefit) 1,332 (2,663) 1,313 (18)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (7,902) (9,960) (1,679) 12,329 (7,212)
Extraordinary loss, net of tax 3,506 690 4,196
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(11,408) $ (9,960) $ (2,369) $ 12,329 $(11,408)
======== ======== ======== ========= ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED JUNE 29, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $108,891 $66,694 $(10,401) $165,184
COSTS AND EXPENSES
Cost of sales 79,618 54,043 (10,257) 123,404
Selling, general and administrative $ 1,552 16,037 10,197 27,786
Amortization of intangibles and
excess reorganization value 3,067 838 3,905
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,552) 10,169 1,616 (144) 10,089
Interest income 4 13 2 19
Interest expense 9,148 3,541 1,107 13,796
Intercompany interest expense (income) (9,089) 8,498 591
Management fees (income) (1,850) 1,661 189
Other expense (income), net (562) 52 (38) (548)
Equity loss (income) in subsidiary 4,532 1,613 (6,145)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (3,727) (5,183) (231) 6,001 (3,140)
Income tax provision (benefit) 280 (795) 692 177
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (4,007) (4,388) (923) 6,001 (3,317)
Extraordinary loss, net of tax 3,506 690 4,196
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(7,513) $(4,388) $(1,613) $6,001 $(7,513)
======== ======== ======== ========= ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR SIX MONTHS ENDED JUNE 29, 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 $ 867 $(11,421) $ (1,093) $(11,647)
Cash flows from investing activities:
Capital expenditures (33) (10,289) (3,275) (13,597)
Proceeds from sale of property, plant and
equipment 29 29
-------- -------- -------- --------- --------
Net cash (used in) investing activities (33) (10,289) (3,246) (13,568)
Cash flows from financing activities:
Proceeds from revolving loan and
long-term borrowings 164,000 42,053 206,053
Deferred financing costs (7,667) (7,667)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (119,275) (5,578) (48,641) (173,494)
Increase (decrease) in Envirodyne loan (35,385) 24,886 10,499
-------- -------- -------- --------- --------
Net cash provided by financing activities 1,673 19,308 3,911 24,892
Effect of currency exchange rate changes
on cash (675) (675)
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents 2,507 (2,402) (1,103) (998)
Cash and equivalents at beginning
of period 555 1,853 4,881 7,289
-------- -------- -------- --------- --------
Cash and equivalents at end
of period $ 3,062 $ (549) $ 3,778 $ 6,291
======== ======== ======== ========= ========
</TABLE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
The financial information included in this quarterly report has been prepared
in conformity with the accounting principles and practices reflected in the
financial statements included in the annual report on Form 10-K filed with
the Securities and Exchange Commission for the year ended December 28, 1995
(1995 Form 10-K). These quarterly financial statements should be read in
conjunction with the financial statements and the notes thereto included in
the 1995 Form 10-K. The accompanying financial information, which is
unaudited, reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented.
The condensed consolidated balance sheet as of December 28, 1995 was derived
from the audited Viskase Holding Corporation's consolidated financial
statements included in Envirodyne Industries, Inc.'s annual report of Form
10-K.
Reported interim results of operations are based in part on estimates which
may be subject to year-end adjustments. In addition, these quarterly results
of operations are not necessarily indicative of those expected for the year.
<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 27, December 28,
1996 1995
------------- ------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 8,563 $ 11,826
Receivables, net 46,467 53,022
Receivables, affiliates 52,715 51,829
Inventories 38,000 38,233
Other current assets 8,887 9,106
-------- --------
Total current assets 154,632 164,016
Property, plant and equipment 148,396 150,417
Less accumulated depreciation 25,487 20,217
-------- --------
Property, plant and equipment, net 122,909 130,200
Deferred financing costs 852 1,042
Other assets 1,511 1,869
Excess reorganization value 38,957 40,517
-------- --------
$318,861 $337,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 4,494 $ 6,097
Accounts payable 16,481 13,720
Accounts payable and advances, affiliates 48,623 54,152
Accrued liabilities 27,099 21,942
-------- --------
Total current liabilities 96,697 95,911
Long-term debt 6,103 7,721
Accrued employee benefits 4,297 4,281
Deferred and noncurrent income taxes 23,945 25,895
Intercompany loans 63,159 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 15,843 12,100
Cumulative foreign currency
translation adjustments 5,354 7,179
-------- --------
Total stockholders' equity 124,660 122,742
-------- --------
$318,861 $337,644
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended June Ended June Ended June Ended June
27, 1996 29, 1995 27, 1996 29, 1995
------------- ------------- ----------- --------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $66,998 $66,694 $133,210 $129,214
COSTS AND EXPENSES
Cost of sales 51,071 54,043 101,529 102,946
Selling, general
and administrative 9,482 8,423 18,394 17,269
Amortization of intangibles
and excess reorganization value 886 838 1,749 1,682
------- ------- -------- --------
OPERATING INCOME 5,559 3,390 11,538 7,317
Interest income 194 2 369 41
Interest expense 502 1,107 1,095 1,965
Intercompany interest expense 824 591 1,958 1,429
Management fees 379 189 752 481
Other expense (income), net 546 (38) 1,199 1,261
------- ------- -------- --------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 3,502 1,543 6,903 2,222
Income tax provision (benefit) 1,688 1,409 3,160 2,257
------- ------- -------- --------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 1,814 134 3,743 (35)
Extraordinary loss, net of tax 690 690
------- ------- -------- --------
NET INCOME (LOSS) $ 1,814 $ (556) $ 3,743 $ (725)
======= ======= ======= =======
WEIGHTED AVERAGE COMMON SHARES 100 100 100 100
PER SHARE AMOUNTS:
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM $18,140 $1,340 $37,430 $(350)
======= ====== ======= =====
NET INCOME (LOSS) $18,140 $(5,560) $37,430 $(7,250)
======= ======= ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 27, June 29,
1996 1995
---------- -----------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Income (loss) before extraordinary item $ 3,743 $ (35)
Extraordinary loss on debt extinguishment 690
-------- -------
Net income (loss) 3,743 (725)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 5,879 5,761
Amortization of intangibles and excess
reorganization value 1,749 1,682
Amortization of deferred financing fees and discount 113 94
Increase (decrease) in deferred and
noncurrent income taxes (507) (89)
Loss on debt extinguishment 1,030
(Gain) on sales of property, plant and equipment (55) (11)
Changes in operating assets and liabilities:
Accounts receivable 5,258 (3,138)
Accounts receivable, affiliates (2,692) (2,002)
Inventories (785) (8,241)
Other current assets (102) (700)
Accounts payable and accrued liabilities 8,996 (605)
Accounts payable and advances, affiliates (3,751) 4,531
Other (3)
-------- -------
Total adjustments 14,100 (1,688)
-------- -------
Net cash provided by (used in) operating
activities 17,843 (2,413)
Cash flows from investing activities:
Capital expenditures (1,729) (3,275)
Proceeds from sale of property, plant and equipment 99 29
-------- -------
Net cash (used in) investing activities (1,630) (3,246)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 42,053
Repayment of revolving loan and long-term borrowings (2,639) (48,641)
Increase (decrease) in Envirodyne loan (17,945) 10,499
-------- -------
Net cash provided by (used in) financing activities (20,584) 3,911
Effect of currency exchange rate changes on cash 1,108 (675)
-------- -------
Net (decrease) in cash and equivalents (3,263) (2,423)
Cash and equivalents at beginning of period 11,826 6,201
-------- -------
Cash and equivalents at end of period $ 8,563 $ 3,778
======== ========
- ----------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $ 398 $ 987
Income taxes paid $ 389 $3,536
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
June 27, December 28,
1996 1995
---------- ------------
Raw materials $ 4,457 $ 5,299
Work in process 12,850 13,342
Finished products 20,693 19,592
------- -------
$38,000 $38,233
======= =======
2. CONTINGENCIES (dollars in thousands)
Viskase Holding Corporation and its subsidiaries are involved in
various legal proceedings arising out of its business and other
environmental matters, none of which is expected to have a material
adverse effect upon its results of operations, cash flows or
financial position.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
(dollars in thousands)
----------------------
The accompanying management's discussion and analysis of financial
condition and results of operations should be read in conjunction
with the following table:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
June 27, June 29,
1996 1995
---------- ----------
(in thousands)
<S> <C> <C>
Net sales:
Food packaging products $144,615 $144,261
Disposable foodservice supplies 21,132 20,923
-------- --------
$165,747 $165,184
======== ========
Operating income:
Food packaging products $ 8,341 $ 9,958
Disposable foodservice supplies 2,198 1,683
Other and eliminations (1,264) (1,552)
------ -------
$9,275 $10,089
====== =======
Depreciation and amortization under capital lease
and amortization of intangible expense:
Food packaging products $13,764 $12,897
Disposable foodservice supplies 1,226 1,133
Other 12 21
------- -------
$15,002 $14,051
======= =======
Capital expenditures:
Food packaging products $9,156 $5,278
Disposable foodservice supplies 869 655
Other 33
------- ------
$10,025 $5,966
======= ======
/TABLE
<PAGE>
Results of Operations
- ---------------------
The Company's net sales for the first six months and second quarter
of 1996 were $325.5 million and $165.7 million, respectively, which
represented slight increases of 1.4% and 0.3%, respectively, over
comparable periods of 1995. Second quarter net sales at Viskase
increased by 0.3% over the prior year. The benefits of a stronger
presence in the Latin American and Asian Pacific markets were
offset by lower pricing due to competitive pressures in both the
domestic and European markets. Second quarter net sales at Sandusky
were flat compared to the prior year. Sales to dairy customers were
lower than expected following a general softness in dairy product
sales in the U.S. Second quarter net sales at Clear Shield
increased 1.0% from the prior year primarily due to volume
increases from new business. These increases more than offset
volume loss from softness in the quick serve restaurant market
segment.
Operating income for the first six months and second quarter of
1996 was $18.6 million and $9.3 million, respectively, representing
decreases of 1.1% and 8.1%, respectively, from the comparable
periods of 1995. The decrease in operating income resulted
primarily from declines in gross margins caused by continued price
competition in the U.S. and Europe, particularly within the casing
product lines. Lower selling, general and administrative expenses,
principally research and development, had some offsetting effects.
Additionally, lower volumes at Sandusky negatively impacted gross
margins.
The British beef industry continues to be affected by concerns over
bovine spongiform encephalopathy (BSE), or mad cow disease. While
certain of our film product lines in Europe are sold to customers
in affected industries, management believes that Viskase's results
will not be significantly impacted.
Net interest expense for the six month period totaled $28.6 million
representing an increase of $1.5 million from the first six months
of 1995. The increase is the result of borrowings at higher
interest rates, which more than offset the effect of lower
borrowing levels.
Other income (expense) totaled $(3.3) million and $1.1 million for
the first six months of 1996 and 1995, respectively. The 1996
expense included a $(2.0) million charge for the termination of the
management agreement with D.P. Kelly & Associates, L.P. The
remaining expense in 1996 and income in 1995 consisted principally
of foreign currency transaction gains and losses.
The Company has entered into forward foreign exchange contracts to
hedge certain foreign currency transactions on a continuing basis
for periods consistent with its committed foreign exchange
exposures. The effect of this practice is to minimize the effect of
foreign exchange rate movements on the Company's operating results.
The Company's hedging activities do not subject the Company to
additional exchange risk because gains and losses on these
contracts offset losses and gains on the transactions being hedged.
The cash flows from forward contracts are classified consistent
with the cash flows from the transactions or events being hedged.
The tax benefit for the first six months resulted from the benefit
of U.S. losses partially offset by the provision related to income
from foreign subsidiaries. Due to the permanent differences in the
U.S. resulting from non-deductible amortization and foreign losses
for which no tax benefit is provided, a benefit of $3.2 million was
provided on a loss before income taxes of $13.3 million. The U.S.
tax benefit is recorded as a reduction of the deferred tax
liability and does not result in a refund of income taxes.
Liquidity and Capital Resources
- -------------------------------
Cash and equivalents decreased by $10.6 million during the six
months ended June 27, 1996. Cash flows used by investing activities
of $16.3 million and for financing activities of $7.7 million
exceed cash flows provided by operating activities of $12.4
million. Cash flows used in investing activity consist principally
of capital expenditures for property, plant and equipment. Cash
flows used for financing activities were principally attributable
to the principal repayment under the General Electric Capital
Corporation Lease and reduction of foreign borrowing. Cash flows
used in operating activities were principally attributable to the
Company's loss from operations offset by the effect of depreciation
and amortization.
On June 20, 1995, Envirodyne Industries, Inc. (Envirodyne or the
Company) completed the sale of $160 million aggregate principal
amount of senior secured notes pursuant to an indenture dated June
20, 1995 (Indenture) consisting of (i) $151.5 million of 12% Senior
Secured Notes due 2000 and (ii) $8.5 million of Floating Rate
Senior Secured Notes due 2000 (collectively, the Senior Secured
Notes). Envirodyne used the net proceeds of the offering primarily
to refinance senior bank debt and pay transaction fees and
expenses. Concurrently with the June 20, 1995 financing, Envirodyne
entered into a $20 million domestic revolving credit facility
(Revolving Credit Facility) and a $28 million letter of credit
facility (Letter of Credit Facility). The Senior Secured Notes and
the obligations under the Revolving Credit Facility and the Letter
of Credit Facility are guaranteed by Envirodyne's significant
domestic subsidiaries and secured by a collateral pool (Collateral
Pool) comprised of: (i) all domestic accounts receivable (including
intercompany receivables) and inventory; (ii) all patents,
trademarks and other intellectual property (subject to non-
exclusive licensing agreements); (iii) substantially all domestic
fixed assets (other than assets subject to a lease agreement with
General Electric Capital Corporation); and (iv) a senior pledge of
100% of the capital stock of Envirodyne's significant domestic
subsidiaries and 65% of the capital stock of Viskase S.A. Such
guarantees and security are shared by the holders of the Senior
Secured Notes and the holders of the obligations under the
Revolving Credit Facility on a pari passu basis pursuant to an
---- -----
intercreditor agreement. Pursuant to such intercreditor agreement,
the security interest of the holders of the obligations under the
Letter of Credit Facility has priority over all other liens on the
Collateral Pool.
The Company finances its working capital needs through a
combination of cash generated through operations and borrowings
under the Revolving Credit Facility. The availability of funds
under the Revolving Credit Facility is subject to the Company's
compliance with certain covenants (which are substantially similar
to those included in the Indenture), to borrowing base limitations
measured by accounts receivable and inventory of the Company and to
reserves which may be established in the discretion of the lenders.
Currently, there are no drawings under the Revolving Credit
Facility. The available borrowing capacity under the Revolving
Credit Facility was $20 million at June 27, 1996. There are no
significant restrictions on the Company's ability to transfer funds
among its operations under the terms of its principal debt
agreements.
The Company anticipates that its operating cash flow will be
sufficient to meet its operating expenses and to service its
interest payments on the Senior Secured Notes, the 10.25% Notes and
its other outstanding indebtedness. The Company will be required to
satisfy its $80 million mandatory redemption obligation with
respect to the Senior Secured Notes in 1999 and to pay the
remaining principal amount of the Senior Secured Notes in 2000.
Additionally, the Company's 10.25% Notes, of which $219.3 million
principal amount is outstanding, will mature in December 2001. The
Company expects that in order to make these payments it will be
required to pursue one or more alternative strategies, such as
refinancing its indebtedness, selling additional equity capital,
reducing or delaying capital expenditures, or selling assets. There
can be no assurance that any of these strategies could be effected
on satisfactory terms, if at all.
Capital expenditures for the first six months of 1996 and 1995
totaled $16.6 million and $13.6 million, respectively. Capital
expenditures for 1996 are expected to be approximately $34 million
and $31 million in future years.
The Company has entered into interest rate agreements that cap $50
million of interest rate exposures at an average LIBOR rate of
6.50% until January 1997. These interest rate cap agreements were
entered into under terms of the senior bank financing that was
repaid on June 20, 1995. Interest expense includes $306 of
amortization of interest rate cap premium during the three-month
period ended June 27, 1996. The Company has not received any
payments under the interest rate protection agreements.
The Company has spent approximately $11 million to $17 million
annually on research and development programs, including product
and process development, and on new technology development during
each of the past three years, and the 1996 research and development
and product introduction expenses are expected to be approximately
$10 million. Among the projects included in the current research
and development efforts is the application of certain patents and
technology licensed by Viskase to the manufacture of cellulosic
casings. The commercialization of these applications and the
related fixed asset expense associated with such commercialization
may require substantial financial commitments in future periods.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
For a description of pending litigation and other contingencies,
see Part 1, Note 3, Contingencies.
Item 2 - Changes in Securities
---------------------
No reportable events occurred during the quarter ended June 27,
1996.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its Annual Meeting of Stockholders (the "Meeting")
on May 15, 1996. The business conducted at the Meeting included (i)
the election of directors, (ii) the ratification of an amendment to
the Company's 1993 Stock Option Plan, (iii) the ratification of the
Company's Non-Employee Directors' Compensation Plan, and (iv) the
ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ended
December 26, 1996. The results were as follows:
<PAGE>
<TABLE>
<CAPTION>
Election of Directors For Against
- --------------------- ---------- ---------
<S> <C> <C>
Robert N. Dangremond 11,045,347 1,807,256
Avram A. Glazer 11,071,192 1,781,411
Malcolm I. Glazer 11,072,403 1,780,200
F. Edward Gustafson 12,770,959 81,644
Michael E. Heisley 12,689,748 162,855
Gregory R. Page 11,051,853 1,800,750
Mark D. Senkpiel 11,045,853 1,806,750
</TABLE>
<TABLE>
<CAPTION>
Ratification of Amendment to
1993 Stock Option Plan For Against Abstaining
- ---------------------------- ---------- ------- ----------
<S> <C> <C> <C>
10,876,840 224,558 24,508
</TABLE>
<TABLE>
<CAPTION>
Ratification of Non-Employee
Directors' Compensation Plan For Against Abstaining
- ---------------------------- ---------- ------- ----------
<S> <C> <C> <C>
10,896,598 437,021 19,949
</TABLE>
<TABLE>
<CAPTION>
Ratification of Appointment
of Coopers & Lybrand For Against Abstaining
- --------------------------- ---------- ------- ----------
<S> <C> <C> <C>
12,831,823 11,789 8,991
</TABLE>
<PAGE>
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
On June 27, 1996, the Company filed a Form 8-K to disclose
that the Board of Directors of the Company had adopted a
stockholder rights plan featuring the issuance of common
stock purchase rights to the Company's common stockholders
of record as of June 26, 1996.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ENVIRODYNE INDUSTRIES, INC.
----------------------------
Registrant
By: /s/
-------------------------
Gordon S. Donovan
Vice President and Treasurer
(Duly authorized officer
and principal financial
officer of the registrant)
Date: August 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-26-1996
<PERIOD-END> JUN-27-1996
<CASH> 19,774
<SECURITIES> 0
<RECEIVABLES> 90,358
<ALLOWANCES> (2,773)
<INVENTORY> 104,853
<CURRENT-ASSETS> 239,255
<PP&E> 558,097
<DEPRECIATION> 97,099
<TOTAL-ASSETS> 879,864
<CURRENT-LIABILITIES> 125,650
<BONDS> 522,699
<COMMON> 145
0
0
<OTHER-SE> 99,632
<TOTAL-LIABILITY-AND-EQUITY> 879,864
<SALES> 325,483
<TOTAL-REVENUES> 325,483
<CGS> 243,762
<TOTAL-COSTS> 243,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 865
<INTEREST-EXPENSE> 29,372
<INCOME-PRETAX> (13,292)
<INCOME-TAX> (3,200)
<INCOME-CONTINUING> (10,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,092)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.72)
</TABLE>
