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 September 26, 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 November 8, 1996, there were 14,545,107 shares
outstanding of the registrant's Common Stock, $.01 par value.
Page 1 of 26 Pages
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Consolidated balance sheets at September 26, 1996
(unaudited) and December 28, 1995 4
Unaudited consolidated statements of operations
for the three months ended September 26, 1996
and September 28, 1995 and for the nine months ended
September 26, 1996 and September 28, 1995 5
Unaudited consolidated statements of cash flows
for the nine months ended September 26, 1996 and
September 28, 1995 6
Notes to consolidated financial statements 7
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at September 26, 1996
(unaudited) and December 28, 1995 18
Unaudited consolidated statements of operations
for the three months ended September 26, 1996
and September 28, 1995 and for the nine months
ended September 26, 1996 and September 28, 1995 19
Unaudited consolidated statements of cash flows
for the nine months ended September 26, 1996
and September 28, 1995 20
Notes to consolidated financial statements 21
<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 on 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
September 26, December 28,
1996 1995
------------- ------------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 39,195 $ 30,325
Receivables, net 80,968 89,454
Inventories 100,737 99,474
Other current assets 26,973 21,646
--------- ---------
Total current assets 247,873 240,899
Property, plant and equipment,
including those under capital
leases 562,711 545,491
Less accumulated depreciation
and amortization 107,398 75,987
--------- ---------
Property, plant and equipment, net 455,313 469,504
Deferred financing costs 6,392 8,090
Other assets 41,708 45,589
Excess reorganization value 127,700 135,485
--------- ---------
$ 878,986 $ 899,567
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligations under capital
leases $ 9,807 $ 12,504
Accounts payable 32,814 39,117
Accrued liabilities 89,716 67,553
--------- ---------
Total current liabilities 132,337 119,174
Long-term debt including obligations
under capital leases 522,550 530,181
Accrued employee benefits 56,610 55,626
Deferred and noncurrent income taxes 65,944 77,490
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,514,721 shares issued and
outstanding at September 26, 1996
and 13,579,460 shares at
December 28, 1995 145 136
Paid in capital 134,977 134,864
Accumulated (deficit) (39,147) (25,131)
Cumulative foreign currency
translation adjustments 5,672 7,227
Unearned restricted stock issued
for future services (102)
--------- ---------
Total stockholders' equity 101,545 117,096
--------- ---------
$ 878,986 $ 899,567
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
26, 1996 28, 1995 26, 1996 28, 1995
--------------- --------------- --------------- ---------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $163,825 $166,688 $489,308 $487,696
COSTS AND EXPENSES
Cost of sales 122,763 125,876 366,525 364,235
Selling, general
and administrative 28,134 28,252 83,080 84,308
Amortization of intangibles
and excess reorganization
value 4,220 3,907 12,426 11,722
-------- -------- -------- --------
OPERATING INCOME 8,708 8,653 27,277 27,431
Interest income 414 43 1,186 126
Interest expense 14,582 14,866 43,954 42,096
Other (income) expense, net 1,064 1,305 4,325 166
-------- -------- -------- --------
(LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (6,524) (7,475) (19,816) (14,705)
Income tax (benefit) (2,600) (3,000) (5,800) (3,018)
-------- -------- -------- --------
(LOSS) BEFORE EXTRAORDINARY
ITEM (3,924) (4,475) (14,016) (11,687)
Extraordinary (loss),
net of tax (4,196)
-------- -------- -------- --------
NET (LOSS) $ (3,924) $ (4,475) $(14,016) $(15,883)
======== ======== ======== ========
WEIGHTED AVERAGE
COMMON SHARES 14,514,721 13,515,000 14,255,987 13,515,000
PER SHARE AMOUNTS:
(LOSS) BEFORE
EXTRAORDINARY ITEM $(.27) $ (.33) $(.98) $ (.86)
===== ======= ===== ======
NET (LOSS) $(.27) $ (.33) $(.98) $(1.18)
===== ======= ===== ======
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
-------------------------------
September 26, September 28,
1996 1995
------------- -------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
(Loss) before extraordinary item $(14,016) $(11,687)
Extraordinary (loss) on debt extinguishment (4,196)
-------- --------
Net (loss) (14,016) (15,883)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization under capital lease 32,329 29,756
Amortization of intangibles and excess
reorganization value 12,426 11,722
Amortization of deferred financing fees and discount 1,742 1,604
Increase (decrease) in deferred and
noncurrent income taxes (10,157) (7,773)
Loss on debt extinguishment 6,778
Foreign currency transaction (gain) (111) (935)
(Gain) on sales of property, plant and equipment (200) (3)
Changes in operating assets and liabilities:
Accounts receivable 7,440 (10,369)
Inventories (1,839) (3,632)
Other current assets (5,509) (2,959)
Accounts payable and accrued liabilities 16,704 9,555
Other 1,054 (582)
-------- --------
Total adjustments 53,879 33,162
-------- --------
Net cash provided by operating activities 39,863 17,279
Cash flows from investing activities:
Capital expenditures (22,832) (24,208)
Proceeds from sale of property, plant and equipment 2,129 47
-------- --------
Net cash (used in) investing activities (20,703) (24,161)
Cash flows from financing activities:
Issuance of common stock 20
Proceeds from revolving loan and long-term borrowings 1,130 206,053
Deferred financing costs (91) (7,701)
Repayment of revolving loan, long-term borrowings
and capital lease obligation (10,909) (179,419)
-------- --------
Net cash provided by (used in) financing activities (9,850) 18,933
Effect of currency exchange rate changes on cash (440) 24
-------- --------
Net increase in cash and equivalents 8,870 12,075
Cash and equivalents at beginning of period 30,325 7,289
-------- --------
Cash and equivalents at end of period $39,195 $ 19,364
======= ========
- ---------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $34,639 $33,974
Income taxes paid $ 1,090 $ 4,537
<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:
September 26, December 28,
1996 1995
------------ ------------
Raw materials $ 16,800 $ 17,150
Work in process 29,800 32,800
Finished products 54,137 49,524
-------- --------
$100,737 $ 99,474
======== ========
Approximately 58% of the inventories at September 26, 1996 were valued
at Last-In, First-Out (LIFO). These LIFO values exceeded current
manufacturing cost by approximately $5.1 million at September 26,
1996.
<PAGE>
<PAGE>
2. DEBT OBLIGATIONS (dollars in thousands)
<TABLE>
Outstanding short-term and long-term debt consisted of:
<CAPTION>
September December
26, 1996 28, 1995
---------- ----------
<S> <C> <C>
Short-term debt, current maturity of long-term
debt, and capital lease obligation:
Current maturity of Viskase Capital Lease Obligation $ 6,633 $ 6,012
Current maturity of Viskase Limited Term Loan (3.9%) 1,928 2,033
Other 1,246 4,459
------- -------
Total short-term debt $ 9,807 $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%) 5,782 7,115
Other 2,957 2,622
-------- --------
Total long-term debt $522,550 $530,181
======== ========
</TABLE>
<PAGE>
<PAGE>
3. EXECUTIVE STOCK COMPENSATION PLAN (dollars in thousands)
In March 1996 the Board approved a stock compensation plan as part of
the employment agreement between the Company and its chief executive
officer. Pursuant to the employment agreement, the Company issued
35,000 shares of common stock. These shares carry voting and dividend
rights; however, sale of the shares is restricted prior to vesting.
Subject to continued employment, vesting occurs three years from the
March 27, 1996 date of the employment agreement. The shares issued
under the plan have been recorded at their fair market value on date
of grant with a corresponding charge to stockholders' equity for the
unearned portion of the award. The grant date is the date the
employment agreement was consummated between the parties.
The unearned portion is being amortized as compensation expense on a
straight-line basis over the related vesting period. Compensation
expense for the first nine months of 1996 totaled $20.
4. CONTINGENCIES
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 was affirmed by the District
Court. The summary judgment may be subject to further appeal. 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.
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 before the
judge who presided over the bankruptcy case, seeking a ruling 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 against Clear Shield National 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.
5. SUBSEQUENT EVENT
On November 8, 1996, a jury awarded $102.4 million in damages in
Viskase Corporation's (Viskase) patent infringement lawsuit against
American National Can Co. Viskase brought suit against American
National Can Co. for infringing on various Viskase patents relating
to multilayer barrier plastic films used for fresh red meat, processed
meat and poultry product applications. The jury found that American
National Can Co. had willfully infringed on Viskase's patents.
Envirodyne expects American National Can Co. to appeal the award. This
award has not been recorded in the Company's financial statements.
Viskase will petition the court to declare the case exceptional and
increase the damages up to threefold and to award attorneys' fees. The
Company will also seek prejudgment interest from December 1989. In
addition, Viskase will seek to enjoin American National Can Co. from
further violation of Viskase's patent rights.
6. 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
SEPTEMBER 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 $ 31,898 $ (869) $ 8,166 $ 39,195
Receivables and advances, net 70,561 66,295 51,472 $ (107,360) 80,968
Inventories 67,490 34,663 (1,416) 100,737
Other current assets 362 17,378 9,233 26,973
-------- -------- -------- --------- --------
Total current assets 102,821 150,294 103,534 (108,776) 247,873
Property, plant and equipment including
those under capital leases 134 412,313 150,264 562,711
Less accumulated depreciation
and amortization 88 79,422 27,888 107,398
-------- -------- -------- --------- --------
Property, plant and equipment, net 46 332,891 122,376 455,313
Deferred financing costs 5,567 825 6,392
Other assets 40,301 1,407 41,708
Investment in subsidiaries 63,783 119,482 (183,265)
Excess reorganization value 89,518 38,182 127,700
-------- -------- -------- --------- --------
$172,217 $732,486 $266,324 $(292,041) $878,986
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital leases $ 7,183 $ 2,624 $ 9,807
Accounts payable and advances $ 15 94,119 46,040 $ (107,360) 32,814
Accrued liabilities 17,964 40,137 31,615 89,716
-------- -------- -------- --------- --------
Total current liabilities 17,979 141,439 80,279 (107,360) 132,337
Long-term debt including obligation
under capital leases 379,262 137,198 6,090 522,550
Accrued employee benefits 52,258 4,352 56,610
Deferred and noncurrent income taxes 33,073 8,943 23,928 65,944
Intercompany loans (359,642) 340,000 19,641 1
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,514,721 shares issued and
outstanding 145 3 32,738 (32,741) 145
Paid in capital 134,977 87,899 87,871 (175,770) 134,977
Accumulated earnings (deficit) (39,147) (40,878) 5,801 35,077 (39,147)
Cumulative foreign currency
translation adjustments 5,672 5,624 5,624 (11,248) 5,672
Unearned restricted stock issued
for future services (102) (102)
-------- -------- -------- --------- --------
Total stockholders' equity 101,545 52,648 132,034 (184,682) 101,545
-------- -------- -------- --------- --------
$172,217 $732,486 $266,324 $(292,041) $878,986
======== ======== ======== ========= ========
<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 NINE MONTHS ENDED SEPTEMBER 26, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $314,794 $203,838 $(29,324) $489,308
COSTS AND EXPENSES
Cost of sales 241,813 154,734 (30,022) 366,525
Selling, general and administrative $4,021 46,626 32,433 83,080
Amortization of intangibles and
excess reorganization value 9,804 2,622 12,426
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (4,021) 16,551 14,049 698 27,277
Interest income 649 537 1,186
Interest expense 32,605 9,730 1,619 43,954
Intercompany interest expense (income) (30,676) 28,056 2,620
Management fees (income) (4,656) 3,647 1,009
Other expense (income), net 1,958 (9) 2,376 4,325
Equity loss (income) in subsidiary 12,428 (3,467) (8,961)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (15,031) (21,406) 6,962 9,659 (19,816)
Income tax provision (benefit) (1,015) (8,280) 3,495 (5,800)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(14,016) $ (13,126) $3,467 $ 9,659 $(14,016)
======== ========= ====== ======== ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 26, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $104,382 $70,628 $(11,185) $163,825
COSTS AND EXPENSES
Cost of sales 80,898 53,205 (11,340) 122,763
Selling, general and administrative $1,208 15,660 11,266 28,134
Amortization of intangibles and
excess reorganization value 3,347 873 4,220
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,208) 4,477 5,284 155 8,708
Interest income 246 168 414
Interest expense 10,834 3,224 524 14,582
Intercompany interest expense (income) (10,017) 9,355 662
Management fees (income) (1,467) 1,210 257
Other expense (income), net (125) 12 1,177 1,064
Equity loss (income) in subsidiary 3,810 (1,403) (2,407)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (3,997) (7,921) 2,832 2,562 (6,524)
Income tax provision (benefit) (73) (3,956) 1,429 (2,600)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(3,924) $(3,965) $1,403 $ 2,562 $ (3,924)
======== ========= ====== ======== ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 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 $(9,626) $21,453 $28,036 $39,863
Cash flows from investing activities:
Capital expenditures (4) (19,346) (3,482) (22,832)
Proceeds from sales of property,
plant and equipment 136 1,762 231 2,129
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities 132 (17,584) (3,251) (20,703)
Cash flows from financing activities:
Issuance of common stock 20 20
Proceeds from revolving loan and
long-term borrowings 1,130 1,130
Deferred financing costs (91) (91)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,354) (4,555) (10,909)
Increase (decrease) in Envirodyne loan 23,450 (23,450)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 23,379 (5,224) (28,005) (9,850)
Effect of currency exchange rate
changes on cash (440) (440)
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents 13,885 (1,355) (3,660) 8,870
Cash and equivalents at beginning of period 18,013 486 11,826 30,325
-------- ------- ------- --------- --------
Cash and equivalents at end of period $ 31,898 $ (869) $ 8,166 $39,195
======== ======= ======= ======== =======
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 28, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $317,424 $196,627 $(26,355) $487,696
COSTS AND EXPENSES
Cost of sales 236,071 154,523 (26,359) 364,235
Selling, general and administrative $4,734 49,977 29,597 84,308
Amortization of intangibles and
excess reorganization value 9,199 2,523 11,722
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS) (4,734) 22,177 9,984 4 27,431
Interest income 34 42 50 126
Interest expense 29,159 10,412 2,525 42,096
Intercompany interest expense (income) (28,417) 25,500 2,917
Management fees (income) (5,550) 4,820 730
Other expense (income), net (1,607) 129 1,644 166
Equity Loss (income) in subsidiary 13,423 455 (13,878)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (11,708) (19,097) 2,218 13,882 (14,705)
Income tax provision (benefit) 669 (5,670) 1,983 (3,018)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (12,377) (13,427) 235 13,882 (11,687)
Extraordinary (loss), net of tax (3,506) (690) (4,196)
-------- -------- -------- -------- --------
NET INCOME (LOSS) $(15,883) $ (13,427) $ (455) $ 13,882 $(15,883)
======== ========= ====== ======== ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 28, 1995
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $106,244 $67,413 $(6,969) $166,688
COSTS AND EXPENSES
Cost of sales 81,384 51,577 (7,085) 125,876
Selling, general and administrative $ 1,609 16,586 10,057 28,252
Amortization of intangibles and
excess reorganization value 3,066 841 3,907
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS) (1,609) 5,208 4,938 116 8,653
Interest income 30 4 9 43
Interest expense 10,927 3,379 560 14,866
Intercompany interest expense (income) (9,976) 8,500 1,476
Management fees (income) (1,850) 1,601 249
Other expense (income), net 1,107 120 78 1,305
Equity loss (income) in subsidiary 3,351 (1,914) (1,437)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (5,138) (6,474) 2,584 1,553 (7,475)
Income tax provision (benefit) (663) (3,007) 670 (3,000)
-------- -------- -------- -------- --------
NET INCOME (LOSS) $(4,475) $(3,467) $ 1,914 $1,553 $(4,475)
======== ========= ====== ======== ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 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 $ (13,300) $ 23,209 $7,370 $ 17,279
Cash flows from investing activities:
Capital expenditures (34) (18,936) (5,238) (24,208)
Proceeds from sale of property, plant and
equipment 47 47
-------- -------- -------- -------- --------
Net cash (used in) investing activities (34) (18,936) (5,191) (24,161)
Cash flows from financing activities:
Proceeds from revolving loan and
long term borrowings 164,000 42,053 206,053
Deferred financing costs (7,667) (34) (7,701)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (123,275) (7,682) (48,462) (179,419)
Increase (decrease) in Envirodyne loan (8,751) 8,751
-------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities 24,307 (7,682) 2,308 18,933
Effect of currency exchange rate changes
on cash 24 24
-------- -------- -------- -------- --------
Net increase (decrease) in cash
and equivalents 10,973 (3,409) 4,511 12,075
Cash and equivalents at beginning
of period 555 1,853 4,881 7,289
-------- -------- -------- -------- --------
Cash and equivalents at end
of period $11,528 $ (1,556) $9,392 $19,364
======== ========= ====== ======== ========
/TABLE
<PAGE>
<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 on 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
September 26, December 28,
1996 1995
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 8,166 $ 11,826
Receivables, net 45,909 53,022
Receivables, affiliates 54,385 51,829
Inventories 34,663 38,233
Other current assets 9,233 9,106
-------- --------
Total current assets 152,356 164,016
Property, plant and equipment 150,264 150,417
Less accumulated depreciation 27,888 20,217
-------- --------
Property, plant and
equipment, net 122,376 130,200
Deferred financing costs 825 1,042
Other assets 1,407 1,869
Excess reorganization value 38,182 40,517
-------- --------
$315,146 $337,644
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 2,624 $ 6,097
Accounts payable 12,631 13,720
Accounts payable and
advances, affiliates 49,014 54,152
Accrued liabilities 31,616 21,942
-------- --------
Total current liabilities 95,885 95,911
Long-term debt 6,090 7,721
Accrued employee benefits 4,352 4,281
Deferred and noncurrent
income taxes 23,928 25,895
Intercompany loans 57,651 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 18,153 12,100
Cumulative foreign currency
translation adjustments 5,624 7,179
-------- --------
Total stockholders' equity 127,240 122,742
-------- --------
$315,146 $337,644
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
26, 1996 28, 1995 26, 1996 28, 1995
--------------- --------------- --------------- ---------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $70,628 $67,413 $203,838 $196,627
COSTS AND EXPENSES
Cost of sales 53,205 51,577 154,734 154,523
Selling, general
and administrative 9,767 9,933 28,161 27,202
Amortization of intangibles
and excess reorganization value 873 841 2,622 2,523
------- ------- -------- --------
OPERATING INCOME 6,783 5,062 18,321 12,379
Interest income 168 9 537 50
Interest expense 524 560 1,619 2,525
Intercompany interest expense 662 1,476 2,620 2,905
Management fees 257 249 1,009 730
Other (income) expense, net 1,177 78 2,376 1,339
------- ------- -------- --------
INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 4,331 2,708 11,234 4,930
Income tax provision 2,021 1,611 5,181 3,868
------- ------- -------- --------
INCOME BEFORE
EXTRAORDINARY ITEM 2,310 1,097 6,053 1,062
Extraordinary (loss), net of tax (690)
------- ------- -------- --------
NET INCOME $ 2,310 $ 1,097 $ 6,053 $ 372
======= ======= ======== ========
WEIGHTED AVERAGE
COMMON SHARES 100 100 100 100
PER SHARE AMOUNTS:
INCOME BEFORE
EXTRAORDINARY ITEM $23,100 $10,970 $ 60,530 $ 10,620
======= ======= ======== ========
NET INCOME $23,100 $10,970 $ 60,530 $ 3,720
======= ======= ======== ========
<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>
Nine Months Ended
---------------------------------
September 26, September 28,
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Income before extraordinary item $6,053 $ 1,062
Extraordinary (loss) on debt extinguishment (690)
------ -------
Net income 6,053 372
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 8,334 8,164
Amortization of intangibles and excess
reorganization value 2,622 2,523
Amortization of deferred financing fees
and discount 170 94
Increase (decrease) in deferred and
noncurrent income taxes (578) (210)
Loss on debt extinguishment 1,030
(Gain) on sales of property, plant and equipment (6) (3)
Changes in operating assets and liabilities:
Accounts receivable 6,469 (7,661)
Accounts receivable, affiliates (4,351) (2,918)
Inventories 2,010 (1,965)
Other current assets (430) (309)
Accounts payable and accrued liabilities 9,474 (2,859)
Accounts payable and advances, affiliates (1,731) 10,052
Other (260)
-------- --------
Total adjustments 21,983 5,678
-------- --------
Net cash provided by operating activities 28,036 6,050
Cash flows from investing activities:
Capital expenditures (3,482) (5,238)
Proceeds from sale of property, plant and equipment 231 47
-------- --------
Net cash (used in) investing activities (3,251) (5,191)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 42,053
Deferred financing costs (34)
Repayment of revolving loan and long-term borrowings (4,555) (48,462)
Increase (decrease) in Envirodyne loan (23,450) 8,751
-------- --------
Net cash provided by (used in)
financing activities (28,005) 2,308
Effect of currency exchange rate changes on cash (440) 24
-------- --------
Net increase (decrease) in cash and equivalents (3,660) 3,191
Cash and equivalents at beginning of period 11,826 6,201
-------- --------
Cash and equivalents at end of period $ 8,166 $ 9,392
======== ========
- --------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $520 $1,517
Income taxes paid $710 $3,999
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
September 26, December 28,
1996 1995
------------ ------------
Raw materials $ 3,811 $ 5,299
Work in process 11,704 13,342
Finished products 19,148 19,592
------- -------
$34,663 $38,233
======= =======
2. CONTINGENCIES (dollars in thousands)
The Company and its subsidiaries are involved in various legal
proceedings arising out of its business and other environmental
matters, none of which is expected to have a material adverse
effect upon its results of operations, cash flows or financial
position.
3. SUBSEQUENT EVENT
On November 8, 1996, a jury awarded $102.4 million in damages in
Viskase Corporation's (Viskase) patent infringement lawsuit against
American National Can Co. Viskase brought suit against American
National Can Co. for infringing on various Viskase patents relating
to multilayer barrier plastic films used for fresh red meat,
processed meat and poultry product applications. The jury found
that American National Can Co. had willfully infringed on Viskase's
patents. Envirodyne expects American National Can Co. to appeal the
award. This award has not been recorded in the Company's financial
statements.
Viskase will petition the court to declare the case exceptional and
increase the damages up to threefold and to award attorneys' fees.
The Company will also seek prejudgment interest from December 1989.
In addition, Viskase will seek to enjoin American National Can Co.
from further violation of Viskase's patent rights.
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:
Three Months Ended
---------------------------
September 26, September 28,
1996 1995
------------ ------------
(in thousands)
Net sales:
Food packaging products $142,944 $146,874
Disposable foodservice supplies 20,881 19,814
-------- --------
$163,825 $166,688
======== ========
Operating income:
Food packaging products $8,027 $9,596
Disposable foodservice supplies 1,880 666
Other and eliminations (1,199) (1,609)
------ ------
$8,708 $8,653
====== ======
Depreciation and amortization
under capital lease and amortization
of intangible expense:
Food packaging products $13,426 $12,355
Disposable foodservice supplies 1,250 1,157
Other 12 19
------- -------
$14,688 $13,531
======= =======
Capital expenditures:
Food packaging products $ 5,730 $ 9,530
Disposable foodservice supplies 533 1,080
Other 1 1
------- -------
$ 6,264 $10,611
======= =======
Results of Operations
- ---------------------
The Company's net sales for the first nine months and third quarter
of 1996 were $489.3 million and $163.8 million, respectively, which
represented a slight increase of 0.3% and decrease of 1.7%,
respectively, over comparable periods of 1995. Third quarter net
sales at Viskase decreased by 3.2% 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 as well as
lower casing volumes in the U.S. Third quarter net sales at
Sandusky increased by 6.3% from the prior year. Sales to dairy
customers were lower than expected following a general softness in
dairy product sales in the U.S. Third quarter net sales at Clear
Shield increased 5.4% 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 nine months and third quarter of
1996 was $27.3 million and $8.7 million, respectively, representing
a decrease of 0.6% and an increase of 0.6%, 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. Additionally, lower volumes at
Sandusky negatively impacted gross margins.
On November 8, 1996, a jury awarded $102.4 million in damages in
Viskase Corporation's (Viskase) patent infringement lawsuit against
American National Can Co. Viskase brought suit against American
National Can Co. for infringing on various Viskase patents relating
to multilayer barrier plastic films used for fresh red meat,
processed meat and poultry product applications. The jury found
that American National Can Co. had willfully infringed on Viskase's
patents. Envirodyne expects American National Can Co. to appeal the
award. This award has not been recorded in the Company's financial
statements.
Viskase will petition the court to declare the case exceptional and
increase the damages up to threefold and to award attorneys' fees.
The Company will also seek prejudgment interest from December 1989.
In addition, Viskase will seek to enjoin American National Can Co.
from further violation of Viskase's patent rights.
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 nine-month period totaled $42.8
million representing an increase of $0.8 million from the first
nine 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 $(4.3) million and $(0.2) million
for the first nine 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 nine 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 $5.8 million was
provided on a loss before income taxes of $(19.8) 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 increased by $8.9 million during the nine
months ended September 26, 1996. Cash flows provided by operating
activities of $39.9 million exceeded the cash flows used by
investing activities of $20.7 million and for financing activities
of $9.9 million. Cash flows provided by operating activities were
principally attributable to the Company's loss from operations
offset by the effect of depreciation and amortization and funds
generated through the improved management of working capital. 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.
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 September 26, 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 nine months of 1996 and 1995
totaled $22.8 million and $24.2 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 $459 of
amortization of interest rate cap premium during the nine-month
period ended September 26, 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.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
For a description of pending litigation and other contingencies,
see Part 1, Note 4, Contingencies.
Item 2 - Changes in Securities
---------------------
No reportable events occurred during the quarter ended September
26, 1996.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-26-1996
<PERIOD-END> SEP-26-1996
<CASH> 39,195,000
<SECURITIES> 0
<RECEIVABLES> 83,660,000
<ALLOWANCES> (2,692,000)
<INVENTORY> 100,737,000
<CURRENT-ASSETS> 247,873,000
<PP&E> 562,711,000
<DEPRECIATION> 107,398,000
<TOTAL-ASSETS> 878,986,000
<CURRENT-LIABILITIES> 132,337,000
<BONDS> 522,550,000
<COMMON> 145,000
0
0
<OTHER-SE> 95,728,000
<TOTAL-LIABILITY-AND-EQUITY> 878,986,000
<SALES> 489,308,000
<TOTAL-REVENUES> 489,308,000
<CGS> 366,525,000
<TOTAL-COSTS> 366,525,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 985,000
<INTEREST-EXPENSE> 43,954,000
<INCOME-PRETAX> (19,816,000)
<INCOME-TAX> (5,800,000)
<INCOME-CONTINUING> (14,016,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,016,000)
<EPS-PRIMARY> (0.98)
<EPS-DILUTED> (0.98)
</TABLE>
