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 25, 1997
-------------------
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 60523
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (630) 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 7, 1997, there were 14,693,143 shares
outstanding of the registrant's Common Stock, $.01 par value.
Page 1 of 29 Pages
<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at September 25, 1997 (unaudited)
and December 26, 1996 4
Unaudited consolidated statements of operations for the
three months ended September 25, 1997 and
September 26, 1996 and for the nine months ended
September 25, 1997 and September 26, 1996 5
Unaudited consolidated statements of cash flows
for the nine months ended September 25, 1997
and September 26, 1996 6
Notes to consolidated financial statements 7
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at September 25, 1997 (unaudited)
and December 26, 1996 19
Unaudited consolidated statements of operations
for the three months ended September 25, 1997
and September 26, 1996 and for the nine months
ended September 25, 1997 and September 26, 1996 20
Unaudited consolidated statements of cash flows
for the nine months ended September 25, 1997
and September 26, 1996 21
Notes to consolidated financial statements 22
<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 26, 1996
(1996 Form 10-K). These quarterly financial statements should
be read in conjunction with the financial statements and the
notes thereto included in the 1996 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 26,
1996 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 25, December 26,
1997 1996
-------------- ------------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 16,772 $ 41,794
Receivables, net 77,351 79,174
Inventories 99,005 95,012
Other current assets 27,285 22,141
-------- --------
Total current assets 220,413 238,121
Property, plant and equipment,
including those under
capital leases 585,877 578,704
Less accumulated depreciation
and amortization 138,896 116,896
-------- --------
Property, plant
and equipment, net 446,981 461,808
Deferred financing costs 5,045 5,902
Other assets 39,465 42,809
Excess reorganization value 117,499 125,107
-------- --------
$829,403 $873,747
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including
current portion of
ong-term debt and
obligations
under capital leases $ 13,688 $ 11,291
Accounts payable 36,466 37,015
Accrued liabilities 83,724 82,109
-------- --------
Total current liabilities 133,878 130,415
Long-term debt including
obligations
under capital leases 509,579 521,179
Accrued employee benefits 52,813 53,697
Deferred and noncurrent
income taxes 44,493 64,811
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,693,143 shares issued
and outstanding at
September 25, 1997 and
14,545,107 shares at
December 26, 1996 147 145
Paid in capital 135,880 135,100
Accumulated (deficit) (49,624) (38,813)
Cumulative foreign currency
translation adjustments 2,298 7,305
Unearned restricted stock
issued for future service (61) (92)
-------- --------
Total stockholders' equity 88,640 103,645
-------- --------
$829,403 $873,747
======== ========
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
25, 1997 26, 1996 25, 1997 26, 1996
--------------- -------------- -------------- ----------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $155,004 $163,825 $466,072 $489,308
COSTS AND EXPENSES
Cost of sales 116,334 122,763 350,061 366,525
Selling, general
and administrative 28,534 28,134 82,734 83,080
Amortization of intangibles
and excess reorganization value 3,966 4,220 12,064 12,426
Restructuring charges 3,500 3,500
-------- -------- -------- --------
OPERATING INCOME 2,670 8,708 17,713 27,277
Interest income 97 414 855 1,186
Interest expense 13,927 14,582 42,335 43,954
Other (income) expense, net 363 1,064 1,814 4,325
-------- -------- -------- --------
(LOSS) BEFORE INCOME TAXES (11,523) (6,524) (25,581) (19,816)
Income tax (benefit) (7,770) (2,600) (14,770) (5,800)
-------- -------- -------- --------
NET (LOSS) $ (3,753) $ (3,924) $(10,811) $(14,016)
======== ======== ======== ========
WEIGHTED AVERAGE
COMMON SHARES 14,645,809 14,514,721 14,587,810 14,255,987
PER SHARE AMOUNTS:
NET (LOSS) $(.26) $(.27) $(.74) $(.98)
===== ===== ===== =====
<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>
Nine Months Ended
---------------------------------
September 25, September 26,
1997 1996
------------- -------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(10,811) $(14,016)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization under capital lease 32,024 32,329
Amortization of intangibles and excess
reorganization value 12,064 12,426
Amortization of deferred financing fees and discount 1,298 1,742
(Decrease) in deferred and noncurrent income taxes (17,392) (10,157)
Foreign currency transaction loss (gain) 1,231 (111)
Net (gain) on disposition of assets (928) (200)
Changes in operating assets and liabilities:
Accounts receivable (1,614) 7,440
Inventories (9,171) (1,839)
Other current assets (5,833) (5,509)
Accounts payable and accrued liabilities 6,116 16,704
Other 601 1,054
------- --------
Total adjustments 18,396 53,879
------- --------
Net cash provided by operating activities 7,585 39,863
Cash flows from investing activities:
Capital expenditures (36,036) (22,832)
Proceeds from disposition of assets 11,873 2,129
-------- --------
Net cash (used in) investing activities (24,163) (20,703)
Cash flows from financing activities:
Issuance of common stock 813 20
Proceeds from revolving loan and long-term borrowings 314 1,130
Deferred financing costs (522) (91)
Repayment of revolving loan, long-term borrowings
and capital lease obligation (8,043) (10,909)
------- -------
Net cash (used in) financing activities (7,438) (9,850)
Effect of currency exchange rate changes on cash (1,006) (440)
------- -------
Net increase (decrease) in cash and equivalents (25,022) 8,870
Cash and equivalents at beginning of period 41,794 30,325
------- -------
Cash and equivalents at end of period $16,772 $39,195
- ---------------------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $33,706 $34,639
Income taxes paid $ 3,908 $ 1,090
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
September December
25, 1997 26, 1996
--------- --------
Raw materials $ 17,543 $ 14,960
Work in process 30,525 29,057
Finished products 50,937 50,995
-------- --------
$ 99,005 $ 95,012
======== ========
Approximately 62% of the inventories at September 25, 1997 were valued
at Last-In, First-Out (LIFO). These LIFO values exceeded current
manufacturing cost by approximately $6 million at September 25, 1997.
2. DEBT OBLIGATIONS (dollars in thousands)
Outstanding short-term and long-term debt consisted of:
September December
25, 1997 26, 1996
--------- --------
Short-term debt, current maturity
of long-term
debt, and capital lease obligation:
Current maturity of Viskase Capital
Lease Obligation $ 9,675 $ 6,633
Current maturity of Viskase
Limited Term Loan (3.9%) 1,648 1,876
Other 2,365 2,782
------- -------
Total short-term debt $13,688 $11,291
======= =======
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 124,873 134,549
Viskase Limited Term Loan (3.9%) 3,296 4,690
Other 2,148 2,678
-------- --------
Total long-term debt $509,579 $521,179
======== ========
3. CONTINGENCIES
In late 1993, Viskase commenced a legal action against American
National Can Company (ANC) in Federal District Court for the Northern
District of Illinois, Eastern Division, 93C7651. Viskase claimed that
ANC's use of two different very low density polyethylene plastic
resins in the manufacture of ANC's multi-layer barrier shrink film
products was infringing various Viskase patents relating to multi-
layer barrier plastic films used for fresh red meat, processed meat
and poultry product applications. In November 1996, after a three-week
trial, a jury found that ANC had willfully infringed Viskase's patents
and awarded Viskase $102.4 million in compensatory damages. The Court
also entered an order permanently enjoining ANC from making or selling
infringing products after December 23, 1996.
On September 29, 1997, the Court set aside the jury verdict in part
and ordered a retrial on certain issues. The Court upheld the jury
finding on the validity of all of Viskase's patents and the jury
finding that ANC had wilfully infringed Viskase's patents by ANC's use
of Dow Chemical Company's "Attane" brand polyethylene plastic resin
in ANC's products. However, the Court ordered a new trial on the issue
of whether ANC's use of Dow Chemical Company's "Affinity" brand
polyethylene plastic resin infringed Viskase's patents and whether
such conduct was wilful. Because the jury rendered one general damage
verdict, the Court ordered a retrial of all damage issues. By
operation of the Court's order, the injunction in respect of ANC's
future use of the "Affinity" brand resin was removed. No new trial
date has been set. The Company expects ANC to vigorously contest this
matter and to appeal any final judgment. No part of the pending claims
have been recorded in the Company's financial statements.
Litigation is pending with respect to events arising out of the
Envirodyne bankruptcy case and the 1989 acquisition of Envirodyne by
Emerald Acquisition Corporation (Emerald) with respect to which,
although Envirodyne is not presently a party to such litigation,
certain defendants have asserted indemnity rights against Envirodyne.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc,
-----------------------------------------------------------------
Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly,
- --------------------------------------------------------------------
Charles K. Bobrinskoy, James L. Massey, William Rifkin and Michael
- ------------------------------------------------------------------
Zimmerman, Case No. 93 A 1616, United States Bankruptcy Court for the
- ---------
Northern District of Illinois, Eastern Division, ARTRA Group
Incorporated (ARTRA) alleges breach of fiduciary duty and tortious
inference in connection with the negotiation and consummation of the
Plan of Reorganization. The plaintiff seeks damages in the total
amount of $136.2 million plus interest and punitive damages of $408.6
million. D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy,
Massey, 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. Upon a motion of the defendants, the Bankruptcy Court
dismissed ARTRA's claims. ARTRA appealed to the U.S. District Court
and on October 31, 1996, the U.S. District Court affirmed the
Bankruptcy Court's decision. ARTRA has appealed to the U.S. Court of
Appeals for the Seventh Circuit. The appeal has been fully briefed and
oral arguments heard in May 1997. The parties are awaiting the U.S.
Court of Appeals decision.
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.
Although the Company is not a party to the 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 or prove damages.
Accordingly, the Company believes that the indemnification claims will
not have a material adverse effect upon the business or financial
position of the Company, even if the claimants were successful in
establishing their right to indemnification.
In 1993, the Antitrust Division of the United States Department of
Justice began an investigation of the disposable plastic cutlery
industry. This investigation has resulted in the indictment, trial and
conviction of certain companies and individuals in the industry, but
did not include Clear Shield National or any of its present or former
employees. In February 1996 Clear Shield National and three other
plastic cutlery manufacturers were named as defendants in the
following three civil complaints: Eisenberg Brothers, Inc., on behalf
-----------------------------------
of itself and all others similarly situated, v. Amcel Corp., Clear
- ------------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark Holdings,
- ---------------------------------------------------------------------
Inc. t/a Winkler Products, Civil Action No. 96-728, United States
- -------------------------
District Court for the Eastern District of Pennsylvania; St. Cloud
---------
Restaurant Supply Company v. Amcel Corp., Clear Shield National, Inc.,
- ---------------------------------------------------------------------
Dispoz-O Plastics Corp. and Benchmark Holdings, Inc. t/a Winkler
- ----------------------------------------------------------------
Products, Case No. 96C 0777, United States District Court for the
- --------
Northern District of Illinois, Eastern Division; and Servall Products,
----------------
Inc., on behalf of itself and all others similarly situated, v. Amcel
- ---------------------------------------------------------------------
Corporation, Clear Shield National, Inc., Dispoz-O Plastics
- -----------------------------------------------------------
Corporation and Benchmark Holdings, Inc. t/a Winkler Products, Civil
- -------------------------------------------------------------
Action No. 96-1116, United States District Court for the Eastern
District of Pennsylvania. Each of the complaints alleges, among other
things, that from October 1990 through April 1992 the defendants
unlawfully conspired to fix the prices at which plastic cutlery would
be sold. The Company informed the plaintiffs that such claims as they
relate to Clear Shield were discharged by the order of the Bankruptcy
Court and Plan of Reorganization and that the plaintiffs are
permanently enjoined from pursuing legal action to collect discharged
claims.
On February 27, 1996, the plaintiff in the St. Cloud case voluntarily
---------
dismissed the action without prejudice and refiled its action in the
United States District Court for the Eastern District of Pennsylvania
but did not name Clear Shield National as a defendant. On March 14,
1996, Eisenberg Brothers Inc., St. Cloud and Servall filed a motion
in Clear Shield National's bankruptcy proceeding in the United States
Bankruptcy Court for the Northern District of Illinois, Eastern
Division, contending that the Bankruptcy Court's order did not
discharge the plaintiffs' claims. On March 19, 1997, the Bankruptcy
Court denied their motion and granted the Company's cross motion for
summary judgement. Eisenberg Brothers, Inc. has appealed the
Bankruptcy Court's decision to the U.S. District Court. On October 24,
1997, the District Court upheld the Bankruptcy Court's decision. The
plaintiff's period for appeal is running.
In March 1997 Viskase Corporation received a subpoena from the
Antitrust Division of the United States Department of Justice relating
to a grand jury investigation of the sausage casings industry. Viskase
Corporation is cooperating fully with the investigation.
The Company and its subsidiaries are involved in various legal
proceedings arising out of their business and other environmental
matters, none of which is expected to have a material adverse effect
upon results of operations, cash flows or financial position.
4. ACCOUNTING STANDARDS
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128),
which will be effective for interim and annual financial statements
issued for periods ending after December 15, 1997. SFAS No. 128
simplifies the previous standards for computing earnings per share,
replacing the presentation of primary earnings per share with a
presentation of basic earnings per share. It also requires dual
presentation of basic and diluted earnings per share on the face of
the income statement for all entities with complex capital structures,
which applies to the Company. Management believes that adoption of
SFAS No. 128 will not have a material effect on the Company's earnings
per share amounts.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 129, "Disclosure of Information About Capital
Structure" (SFAS No. 129), which will be effective for interim and
annual financial statements issued for periods ending after December
15, 1997. SFAS No. 129 requires that companies include additional
detail in disclosures about capital structure related to rights and
privileges associated with outstanding security issues. Management
believes that adoption of SFAS No. 129 will not have a material effect
on the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), which will be effective for interim and annual financial
statements issued for periods ending after December 15, 1997. SFAS No.
130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. Management believes that adoption of SFAS No. 130 will not
have a material effect on the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), which will be
effective for interim and annual financial statements issued for
periods ending after December 15, 1997. SFAS No. 131 specifies revised
guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed. Management
believes that adoption of SFAS No. 131 will not have a material effect
on the Company.
5. RESTRUCTURING CHARGES (dollars in thousands)
During the third quarter, the Company's Viskase subsidiary committed
to a plan of restructuring whereby it will adjust its operations from
a segregated regional focus to a more congruent global focus. These
actions are directly related to lowering Viskase's fixed costs.
Restructuring actions identified resulted in charges to continuing
operations of $3.5 million before tax and included costs associated
with voluntary and involuntary severance expense and the consolidation
of a finishing plant. In the third quarter, $.7 million was charged
against the reserve.
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 25, 1997
<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 $ 9,711 $ (1,335) $ 8,396 $ 16,772
Receivables and advances, net 79,584 53,194 49,041 $ (104,468) 77,351
Inventories 67,188 33,119 (1,302) 99,005
Other current assets 925 16,042 10,318 27,285
-------- -------- -------- --------- --------
Total current assets 90,220 135,089 100,874 (105,770) 220,413
Property, plant and equipment including
those under capital lease 144 446,518 139,215 585,877
Less accumulated depreciation
and amortization 115 111,134 27,647 138,896
-------- -------- -------- --------- --------
Property, plant and equipment, net 29 335,384 111,568 446,981
Deferred financing costs 4,519 526 5,045
Other assets 37,603 1,862 39,465
Investment in subsidiaries 50,534 120,570 (171,104)
Excess reorganization value 82,587 34,912 117,499
-------- -------- -------- --------- --------
$145,302 $711,233 $249,742 $(276,874) $829,403
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 10,227 $ 3,461 $ 13,688
Accounts payable and advances $ 35 107,064 33,835 $(104,468) 36,466
Accrued liabilities 16,113 44,081 23,530 83,724
-------- -------- -------- --------- --------
Total current liabilities 16,148 161,372 60,826 (104,468) 133,878
Long-term debt including obligation
under capital lease 379,262 126,970 3,347 509,579
Accrued employee benefits 48,666 4,147 52,813
Deferred and noncurrent income taxes 27,653 (5,077) 21,917 44,493
Intercompany loans (366,401) 340,022 26,379
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,693,143 shares issued and
outstanding 147 3 32,738 (32,741) 147
Paid in capital 135,880 87,899 87,871 (175,770) 135,880
Accumulated earnings (deficit) (49,624) (50,860) 10,279 40,581 (49,624)
Cumulative foreign currency
translation adjustments 2,298 2,238 2,238 (4,476) 2,298
Unearned restricted stock issued
for future services (61) (61)
-------- -------- -------- --------- --------
Total stockholders' equity 88,640 39,280 133,126 (172,406) 88,640
-------- -------- -------- --------- --------
$145,302 $711,233 $249,742 $(276,874) $829,403
======== ======== ======== ========= ========
<FN>
(1) Elimination of intercompany receivables, payables and investment accounts.
</TABLE>
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
DECEMBER 26, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations (1) Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 25,785 $ (162) $ 16,171 $41,794
Receivables and advances, net 61,960 70,258 46,032 $ (99,076) 79,174
Inventories 59,730 36,509 (1,227) 95,012
Other current assets 187 11,730 10,224 22,141
-------- -------- -------- --------- --------
Total current assets 87,932 141,556 108,936 (100,303) 238,121
Property, plant and equipment including
those under capital lease 133 420,396 158,175 578,704
Less accumulated depreciation
and amortization 95 86,715 30,086 116,896
-------- -------- -------- --------- --------
Property, plant and equipment, net 38 333,681 128,089 461,808
Deferred financing costs 5,144 758 5,902
Other assets 40,784 2,025 42,809
Investment in subsidiaries 64,433 123,236 (187,669)
Excess reorganization value 87,702 37,405 125,107
-------- -------- -------- --------- --------
$157,547 $726,959 $277,213 $(287,972) $873,747
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 7,182 $4,109 $ 11,291
Accounts payable and advances $ 35 85,156 50,900 $ (99,076) 37,015
Accrued liabilities 6,197 44,235 31,677 82,109
-------- -------- -------- --------- --------
Total current liabilities 6,232 136,573 86,686 (99,076) 130,415
Long-term debt including obligation
under capital lease 379,262 137,063 4,854 521,179
Accrued employee benefits 49,366 4,331 53,697
Deferred and noncurrent income taxes 29,088 10,824 24,899 64,811
Intercompany loans (360,680) 340,000 20,681 (1)
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,545,107 shares issued and
outstanding 145 3 32,738 (32,741) 145
Paid in capital 135,100 87,899 87,871 (175,770) 135,100
Accumulated earnings (deficit) (38,813) (42,050) 7,872 34,178 (38,813)
Cumulative foreign currency
translation adjustments 7,305 7,281 7,281 (14,562) 7,305
Unearned restricted stock issued
for future services (92) (92)
-------- -------- -------- --------- --------
Total stockholders' equity 103,645 53,133 135,762 (188,895) 103,645
-------- -------- -------- --------- --------
$157,547 $726,959 $277,213 $(287,972) $873,747
======== ======== ======== ========= ========
<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 25, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $312,332 $184,711 $(30,971) $466,072
COSTS AND EXPENSES
Cost of sales 240,661 140,313 (30,913) 350,061
Selling, general and administrative $3,735 45,707 33,292 82,734
Amortization of intangibles and
excess reorganization value 9,666 2,398 12,064
Restructuring charges 3,500 3,500
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (3,735) 12,798 8,708 (58) 17,713
Interest income 584 271 855
Interest expense 32,410 8,767 1,158 42,335
Intercompany interest expense (income) (30,380) 28,135 2,245
Management fees (income) (3,393) 2,615 778
Other expense (income), net 1,392 179 243 1,814
Equity loss (income) in subsidiary 8,868 (2,407) (6,461)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (12,048) (24,491) 4,555 6,403 (25,581)
Income tax provision (benefit) (1,237) (15,681) 2,148 (14,770)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(10,811) $(8,810) $ 2,407 $6,403 $(10,811)
======== ======= ======== ========= ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 25, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $104,865 $59,905 $(9,766) $155,004
COSTS AND EXPENSES
Cost of sales 81,004 45,164 (9,834) 116,334
Selling, general and administrative $1,320 16,258 10,956 28,534
Amortization of intangibles and
excess reorganization value 3,133 833 3,966
Restructuring charges 3,500 3,500
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,320) 970 2,952 68 2,670
Interest income 93 4 97
Interest expense 10,697 2,878 352 13,927
Intercompany interest expense (income) (10,145) 9,435 710
Management fees (income) (1,050) 854 196
Other expense (income), net 529 1,098 (1,264) 363
Equity loss (income) in subsidiary 2,983 (1,727) (1,256)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,241) (11,568) 2,962 1,324 (11,523)
Income tax provision (benefit) (488) (8,517) 1,235 (7,770)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(3,753) $(3,051) $ 1,727 $ 1,324 $ (3,753)
======= ======= ======== ======= ========
</TABLE>
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 25, 1997
<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 $(10,997) $31,008 $(12,426) $ 7,585
Cash flows from investing activities:
Capital expenditures (11) (26,285) (9,740) (36,036)
Proceeds from disposition of assets 1,151 10,722 11,873
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities (11) (25,134) 982 (24,163)
Cash flows from financing activities:
Issuance of common stock 813 813
Proceeds from revolving loan and
long-term borrowings 314 314
Deferred financing costs (522) (522)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (7,047) (996) (8,043)
Increase (decrease) in Envirodyne loan (5,357) 5,357
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities (5,066) (7,047) 4,675 (7,438)
Effect of currency exchange rate changes on cash (1,006) (1,006)
-------- -------- -------- --------- --------
Net (decrease) in cash and equivalents (16,074) (1,173) (7,775) (25,022)
Cash and equivalents at beginning of period 25,785 (162) 16,171 41,794
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 9,711 $(1,335) $ 8,396 $16,772
======= ======= ======= ========= =======
/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 disposition of assets 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>
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 26, 1996 (1996 Form 10-K).
These quarterly financial statements should be read in conjunction
with the financial statements and the notes thereto included in the
1996 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 26, 1996
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 25, December 26,
1997 1996
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 8,396 $ 16,171
Receivables, net 43,392 43,634
Receivables, affiliates 53,069 51,269
Inventories 33,119 36,509
Other current assets 10,318 10,224
-------- --------
Total current assets 148,294 157,807
Property, plant and equipment 139,215 158,175
Less accumulated depreciation 27,647 30,086
-------- --------
Property, plant and
equipment, net 111,568 128,089
Deferred financing costs 526 758
Other assets 1,862 2,025
Excess reorganization value 34,912 37,405
-------- --------
$297,162 $326,084
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 3,461 $ 4,109
Accounts payable 11,753 13,736
Accounts payable and
advances, affiliates 32,160 51,891
Accrued liabilities 23,530 31,677
-------- --------
Total current liabilities 70,904 101,413
Long-term debt 3,347 4,854
Accrued employee benefits 4,147 4,331
Deferred and noncurrent
income taxes 21,917 24,899
Intercompany loans 64,389 58,691
Commitments and contingencies
Stockholder's 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 26,757 21,152
Cumulative foreign currency
translation adjustments 2,238 7,281
-------- --------
Total stockholders' equity 132,458 131,896
-------- --------
$297,162 $326,084
======== ========
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
25, 1997 26, 1996 25, 1997 26, 1996
--------------- --------------- --------------- ---------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $59,905 $70,628 $184,711 $203,838
COSTS AND EXPENSES
Cost of sales 45,164 53,205 140,313 154,734
Selling, general
and administrative 9,554 9,767 29,017 28,161
Amortization of intangibles
and excess reorganization value 833 873 2,398 2,622
------- ------- -------- --------
OPERATING INCOME 4,354 6,783 12,983 18,321
Interest income 4 168 271 537
Interest expense 352 524 1,158 1,619
Intercompany interest expense 710 662 2,245 2,620
Management fees 196 257 778 1,009
Other (income) expense, net (1,264) 1,177 (757) 2,376
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 4,364 4,331 9,830 11,234
Income tax provision 1,790 2,021 4,225 5,181
------- ------- -------- --------
NET INCOME $ 2,574 $ 2,310 $5,605 $6,053
======= ======== ====== ======
WEIGHTED AVERAGE
COMMON SHARES 100 100 100 100
PER SHARE AMOUNTS:
NET INCOME $25,740 $23,100 $56,050 $60,530
======= ======= ======= =======
<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 25, September 26,
1997 1996
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,605 $ 6,053
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 7,488 8,334
Amortization of intangibles and excess
reorganization value 2,398 2,622
Amortization of deferred financing fees and discount 152 170
(Decrease) in deferred and noncurrent income taxes (254) (578)
(Gain) on disposition of assets (878) (6)
Changes in operating assets and liabilities:
Accounts receivable (3,195) 6,469
Accounts receivable, affiliates (5,741) (4,351)
Inventories (492) 2,010
Other current assets (691) (430)
Accounts payable and accrued liabilities (285) 9,474
Accounts payable and advances, affiliates (17,134) (1,731)
Other (399)
------- --------
Total adjustments (19,031) 21,983
------- --------
Net cash provided by (used in) operating activities (13,426) 28,036
Cash flows from investing activities:
Capital expenditures (9,740) (3,482)
Proceeds from disposition of assets 11,722 231
------- --------
Net cash provided by (used in) investing activities 1,982 (3,251)
Cash flows from financing activities:
Proceeds from revolving loan and long-term borrowings 314
Repayment of revolving loan and long-term borrowings (996) (4,555)
Increase (decrease) in Envirodyne loan 5,357 (23,450)
------- --------
Net cash provided by (used in) financing activities 4,675 (28,005)
Effect of currency exchange rate changes on cash (1,006) (440)
------- --------
Net (decrease) in cash and equivalents (7,775) (3,660)
Cash and equivalents at beginning of period 16,171 11,826
------- --------
Cash and equivalents at end of period $ 8,396 $ 8,166
======= ========
- ----------------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $186 $520
Income taxes paid $3,579 $710
<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 25, December 26,
1997 1996
------------ -------------
Raw materials $ 4,365 $ 3,728
Work in process 8,893 11,395
Finished products 19,861 21,386
------- -------
$33,119 $36,509
======= =======
2. CONTINGENCIES
In late 1993, Viskase commenced a legal action against American
National Can Company (ANC) in Federal District Court for the Northern
District of Illinois, Eastern Division, 93C7651. Viskase claimed that
ANC's use of two different very low density polyethylene plastic
resins in the manufacture of ANC's multi-layer barrier shrink film
products was infringing various Viskase patents relating to multi-
layer barrier plastic films used for fresh red meat, processed meat
and poultry product applications. In November 1996, after a three-week
trial, a jury found that ANC had willfully infringed Viskase's patents
and awarded Viskase $102.4 million in compensatory damages. The Court
also entered an order permanently enjoining ANC from making or selling
infringing products after December 23, 1996.
On September 29, 1997, the Court set aside the jury verdict in part
and ordered a retrial on certain issues. The Court upheld the jury
finding on the validity of all of Viskase's patents and the jury
finding that ANC had wilfully infringed Viskase's patents by ANC's use
of Dow Chemical Company's "Attane" brand polyethylene plastic resin
in ANC's products. However, the Court ordered a new trial on the issue
of whether ANC's use of Dow Chemical Company's "Affinity" brand
polyethylene plastic resin infringed Viskase's patents and whether
such conduct was wilful. Because the jury rendered one general damage
verdict, the Court ordered a retrial of all damage issues. By
operation of the Court's order, the injunction in respect of ANC's
future use of the "Affinity" brand resin was removed. No new trial
date has been set. The Company expects ANC to vigorously contest this
matter and to appeal any final judgment. No part of the pending claims
have been recorded in the Company's financial statements.
In March 1997 Viskase Corporation received a subpoena from the
Antitrust Division of the United States Department of Justice relating
to a grand jury investigation of the sausage casings industry. Viskase
Corporation is cooperating fully with the investigation.
The Company and its subsidiaries are involved in various legal
proceedings arising out of their business and other environmental
matters, none of which is expected to have a material adverse effect
upon results of operations, cash flows or financial position.
3. ACCOUNTING STANDARDS
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128),
which will be effective for interim and annual financial statements
issued for periods ending after December 15, 1997. SFAS No. 128
simplifies the previous standards for computing earnings per share,
replacing the presentation of primary earnings per share with a
presentation of basic earnings per share. It also requires dual
presentation of basic and diluted earnings per share on the face of
the income statement for all entities with complex capital structures,
which applies to the Company. Management believes that adoption of
SFAS No. 128 will not have a material effect on the Company's earnings
per share amounts.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 129, "Disclosure of Information About Capital
Structure" (SFAS No. 129), which will be effective for interim and
annual financial statements issued for periods ending after December
15, 1997. SFAS No. 129 requires that companies include additional
detail in disclosures about capital structure related to rights and
privileges associated with outstanding security issues. Management
believes that adoption of SFAS No. 129 will not have a material effect
on the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), which will be effective for interim and annual financial
statements issued for periods ending after December 15, 1997. SFAS No.
130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. Management believes that adoption of SFAS No. 130 will not
have a material effect on the Company.
The Company will implement the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131), which will be
effective for interim and annual financial statements issued for
periods ending after December 15, 1997. SFAS No. 131 specifies revised
guidelines for determining an entity's operating segments and the type
and level of financial information to be disclosed. Management
believes that adoption of SFAS No. 131 will not have a material effect
on the Company.
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 September
25, 1997 26, 1996
---------- ----------
(in thousands)
Net sales:
Food packaging products $132,282 $142,944
Disposable foodservice supplies 22,722 20,881
-------- --------
$155,004 $163,825
======== ========
Operating income:
Food packaging products $1,925 $8,027
Disposable foodservice supplies 2,065 1,880
Other and eliminations (1,320) (1,199)
------- -------
$2,670 $8,708
======= =======
Depreciation and amortization
under capital lease
and amortization of
intangible expense:
Food packaging products $12,770 $13,426
Disposable foodservice supplies 1,335 1,250
Other 6 12
------- -------
$14,111 $14,688
======= =======
Capital expenditures:
Food packaging products $ 8,711 $ 5,730
Disposable foodservice supplies 2,322 533
Other 1
------- -------
$11,033 $ 6,264
======= =======
Results of Operations
- ---------------------
The Company's net sales for the first nine months and third quarter
of 1997 were $466.1 million and $155.0 million, respectively, which
represented decreases of 4.7% and 5.4%, respectively, from comparable
periods of 1996. Third quarter net sales at Viskase decreased by 5.9%
from the prior year. The benefits of a stronger presence in the Latin
American markets were offset by lower pricing on small diameter
cellulosic casings. European sales were also negatively affected by
foreign currency translation due to the strengthening of the U.S.
dollar. Third quarter net sales at Clear Shield increased 8.8% from
the prior year due to volume expansion in the western region markets
partially offset by lower pricing due to competitive pressures. Third
quarter net sales at Sandusky decreased by 29.1%. Thermoform sales
increased 9.8% for the quarter. This increase was offset by the
absence of injection molding sales due to the previously announced
closing of its injection molding operations.
Operating income for the first nine months and third quarter of 1997
was $17.7 million and $2.7 million. The Company's 1997 third quarter
operating results included a $3.5 million restructuring charge (see
Note 5). Operating income for the first nine months and third quarter
of 1997, excluding the effect of the restructuring charge, decreased
22.2% and 29.1%, respectively, from comparable periods of 1996. 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 affected 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 affected.
Net interest expense for the nine-month period totaled $41.5 million
representing a decrease of $1.3 million from the first nine months of
1996. The decrease is a result of the combination of lower borrowing
levels, a reduction in amortization of deferred financing fees and the
effects of translation.
Other income (expense) approximated $(1.8) million and $(4.3) million
for the first nine months of 1997 and 1996, respectively. The 1997
expense consists principally of foreign exchange losses. The $1.0
million gain recorded on the January 1997 sale of the oriented
polystyrene business is offset by a $(1.0) million reserve on the loss
of the sale of the Puerto Rico facility. The 1996 expense included a
$(2.0) million charge for the termination of the Management Agreement
with D.P. Kelly & Associates, L.P.
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. This
practice minimizes 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. The Company's effective tax rate reflects
the permanent differences in the U.S. resulting from non-deductible
amortization, foreign losses for which no tax benefit is provided, and
the reduction of a prior year valuation allowance. The reduction in
the valuation allowance in the third quarter has affected the rate in
the third quarter. A benefit of $14.8 million was provided on a loss
before income taxes of $25.6 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.
Other
- -----
The Company entered into a contract to sell its Barceloneta, Puerto
Rico facility. The transaction was completed in the fourth quarter at
a loss of approximately $1.0 million; this loss was recognized in the
third quarter.
In September 1997, the Company announced that it has retained
Donaldson, Lufkin and Jenrette Securities Corporation to assist the
Board of Directors in evaluating the Company's strategic alternatives.
In March 1997, the Company announced that it was exploring the
potential sale of Viskase Corporation's PVC film business and on July
11, 1997, the Company announced that Viskase Corporation had entered
into a non-binding letter of intent with LINPAC Plastics Limited for
the purchase of such PVC film business. Viskase's plants in Aurora,
Ohio, and Sedgefield, England, would be affected by a sale. The
purchase is subject to a number of contingencies and is expected to
be consummated during the fourth quarter.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings
per Share" (SFAS No. 128). This statement will be adopted by the
Company, as required, for periods ending after December 15, 1997.
Implementation of this statement is not expected to have a material
impact on the earnings-per-share data presented by the Company.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information About Capital Structure." This statement will be adopted
by the Company, as required, for periods ending after December 15,
1997. Implementation of this statement is not expected to have a
material impact on the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." This statement will be adopted by the Company, as required,
for periods ending after December 15, 1997. Implementation of this
statement is not expected to have a material impact on the Company.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement
will be adopted by the Company, as required, for periods ending after
December 15, 1997. Implementation of this statement is not expected
to have a material impact on the Company.
Liquidity and Capital Resources
- -------------------------------
Cash and equivalents decreased by $25.0 million during the nine months
ended September 25, 1997. Cash flows used in investing activities of
$24.2 million and used in financing activities of $7.4 million
exceeded funds provided by operations of $7.6 million. Cash flows
provided by operating activities were principally attributable to the
Company's loss from operations and the Company's seasonal increase in
working capital offset by the effect of depreciation and amortization.
Cash flows used for financing activities were principally attributable
to the principal repayment under the GECC Lease. Cash flows used in
investing activities consist principally of capital expenditures for
property, plant and equipment net of the proceeds from the sale of
certain assets principally related to the Company's former oriented
polystyrene business.
The Company finances its working capital needs through a combination
of cash generated through operations and borrowings under the
Revolving Credit Facility and proceeds available from asset sales. The
availability of funds under the Revolving Credit Facility is subject
to the Company's compliance with certain covenants (which are substan-
tially 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 $20 million
Revolving Credit Facility.
The Company's Senior Secured Notes, Revolving Credit Facility and
Letter of Credit Facility contain a number of financial covenants
that, among other things, require the maintenance of a minimum level
of tangible net worth, maximum ratios of debt and senior debt to total
capitalization, and a minimum fixed charge coverage. The Company
solicited and received the required consents from the holders of
Senior Secured Notes for certain amendments to certain financial
covenants, and waivers under, the Senior Secured Notes Indenture. In
addition, the Company has amended, and received substantially similar
waivers under, the Revolving Credit Facility and Letter of Credit
Facility. The Company is currently in compliance with the amended
covenants under the Senior Secured Notes Indenture, Revolving Credit
Facility and Letter of Credit Facility.
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, asset sales, and
borrowings under the Revolving Credit Facility 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 1997 and 1996
totaled $36.0 million and $22.8 million, respectively. Capital
expenditures for 1997 are expected to be approximately $45 million.
The Company spent approximately $7 million in 1996 on research and
development programs, including product and process development, and
on new technology development. The 1997 and future research and
development and product introduction expenses are expected to
approximate $8 million to $9 million annually. Among the projects
included in the current research and development efforts is the
application of certain patents and technology licensed by Viskase to
a new process for the manufacture of cellulosic casings. The first
production unit is currently under construction and is expected to
begin full production in late 1998. The commercialization of these
applications and the related capital expenditures associated with such
commercialization will require substantial financial commitments in
future periods.
The Company and its subsidiaries are taking actions to provide that
their computer systems are capable of processing for the periods of
the year 2000 and beyond. The costs associated with this are not
expected to significantly affect operating cash flow.
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings
-----------------
For a description of pending litigation and other contingencies, see
Part 1, Note 3, Contingencies in Notes to Consolidated Financial
Statements for Envirodyne Industries, Inc. and Subsidiaries.
Item 2 - Changes in Securities
---------------------
No reportable events occurred during the quarter ended September 25,
1997.
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
10.22 Second Amendment to/Consent and Waiver under Revolving Credit
Agreement, dated as of August 4, 1997, between Envirodyne
Industries, Inc. and the Prudential Insurance Company of
America.
10.23 Second Supplemental Indenture, dated as of September 2, 1997,
between Envirodyne Industries, Inc. and Fleet National Bank
(formerly Shawmut Bank of Connecticut, National Association),
as Trustee.
10.24 Amendment No. 2 to Credit Agreement, dated as of August 5,
1997, between Envirodyne Industries, Inc. and BT Commercial
Corporation, individually and as agent.
(b) Reports on Form 8-K
None.
<PAGE>
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, Chief Financial
Officer and Treasurer
(Duly authorized officer
and principal financial
officer of the registrant)
Date: November 10, 1997
EXHIBIT 10.22
August 4, 1997
The Prudential Insurance Company of America
c/o Prudential Capital Group
Two Prudential Plaza, Suite 5600
Chicago, Illinois 60601
Re: Second Amendment to/Consent and Waiver under Revolving
Credit Agreement
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement
("Agreement"), dated as of June 20, 1995 and amended as of
October 13, 1995, between Envirodyne Industries, Inc.
("Envirodyne") and The Prudential Insurance Company of America
("Prudential"). Unless otherwise defined herein, terms used
herein which are defined in the Agreement shall have the meanings
as given in the Agreement.
Envirodyne has requested that Prudential amend the Agreement
and Prudential has agreed to make the amendments specified
herein. In addition, Envirodyne has requested that Prudential
waive any prior default by Envirodyne of Paragraph 4A(a),
Paragraph 4A(b) or Paragraph 4C(a) of the Agreement, if any.
Envirodyne and Prudential therefore agree as follows:
1. Paragraphs 4A(a)(iii),(iv) and (v) of the Agreement is
hereby amended by deleting such paragraphs in their entirety and
substituting in lieu thereof the following:
(iii) During each "Clause (iii) Test Period"
(as defined below) occurring during the period
commencing on December 27, 1996 and ending on
December 25, 1997, to be less than an amount (the
"Clause (iii) Amount") equal to (1) the greater of
(X) the Clause (ii) Amount at December 26, 1996,
and (Y) negative $47,000,000, plus (2) 50% of
----
Consolidated Net Income for such Clause (iii) Test
Period (or zero in the case of a deficit), plus
----
(3) the amount of any net gain realized by the
Company or any of its Subsidiaries on the exchange,
redemption, purchase or other acquisition of any of
its debt securities (including, without limitation,
the 10.25% Notes) during such Clause (iii) Test
Period; where "Clause (iii) Test Period" means, at
any time, the period (taken as a one accounting
period) commencing on December 27, 1996 and ending
on the then most recently ended fiscal quarter of
the Company;
(iv) During each "Clause (iv) Test Period" (as
defined below) occurring during the period
commencing on December 26, 1997 and ending on
December 31, 1998, to be less than an amount (the
"Clause (iv) Amount") equal to (1) the greater of
(X) the Clause (iii) Amount at December 25, 1997,
and (Y) negative $47,000,000, plus (2) 50% of
----
Consolidated Net Income for such Clause (iv) Test
Period (or zero in the case of a deficit), plus
----
(3) the amount of any net gain realized by the
Company or any of its Subsidiaries on the exchange,
redemption, purchase or other acquisition of any of
its debt securities (including, without limitation,
the 10.25% Notes) during such Clause (iv) Test
Period; where "Clause (iv) Test Period" means, at
any time, the period (taken as one accounting
period) commencing on December 26, 1997 and ending
on the then most recently ended fiscal quarter of
the Company; and
(v) During each "Clause (v) Test Period" (as
defined below) occurring after January 1, 1999 and
thereafter, to be less than an amount equal to (1)
the greater of (X) the Clause (iv) Amount at
December 31, 1998, and (Y) negative $47,000,000,
plus (2) the greater of (X) 50% of Consolidated Net
----
Income for such Clause (v) Test Period (or zero in
the case of a deficit), and (Y) $1,250,000
multiplied by the number of the Company's fiscal
quarters that have ended during such Clause (v)
Test Period, plus (3) the amount of any net gain
----
realized by the Company or any of its Subsidiaries
on the exchange, redemption, purchase or other
acquisition of any of its debt securities
(including, without limitation, the 10.25% Notes)
during such Clause (v) Test Period; where "Clause
(v) Test Period" commencing on January 1, 1999 and
ending on the then most recently ended fiscal
quarter of the Company.
2. Paragraph 4A(b) of the Agreement is hereby amended by
deleting such paragraph in its entirety and substituting in lieu
thereof the following:
(b) Fixed Charge Coverage Ratio. The Company
---------------------------
covenants that it will not cause or permit the ratio of (i)
Consolidated Cash Flow for the twelve month period ending at
the end of any fiscal quarter of the Company to (ii)
Consolidated Fixed Charges for each such twelve month period
to be less than the ratio set forth below for the period set
forth below in which such fiscal quarter ends:
Ratio Period
----- ------
1.45:1 Closing Day through December 28, 1995
1.50:1 December 29, 1995 through
December 31, 1998
1:55:1 January 1, 1999 and thereafter
provided, however, for purposes of determining
-------- -------
Consolidated Cash Flow for the calculation of the
Fixed Charge Coverage Ratio only and notwithstanding
any tax effect of such restructuring charges,
restructuring charges in amounts not to exceed
$3,500,000 and $1,500,000 shall be added back, each on
a one-time basis prior to December 25, 1997 and June
25, 1998, respectively, to the calculation of
Consolidated Net Income to the extent deducted
therefrom. In addition, as a condition to the
Company's request for a drawing under the Agreement,
the Company shall certify through delivery of the
Revolving Loan Request that at the time of the
request, the Fixed Charge Coverage Ratio for the
preceding twelve month period (ending on the month
ending not earlier than thirty-five (35) days prior to
the date of the Revolving Loan Request) of the Company
is at least 1.55:1.
3. Paragraph 4C(a) of the Agreement shall be amended by
deleting the last clause of such paragraph, beginning with
"provided, however" and substituting in lieu thereof the following:
-------- -------
provided, however, that at no time shall (1)
-------- -------
Consolidated Senior Debt be more than 52.5% of
Consolidated Total Capitalization, or (2) Consolidated
Debt be more than 88% of Consolidated Total
Capitalization.
4. Exhibit J to the Agreement is hereby amended by deleting
such Exhibit in its entirety and replacing it with the form of
Exhibit J attached hereto as Exhibit A.
---------
5. Prudential hereby waives any prior default by Envirodyne
of Paragraphs 4A(a), Paragraph 4A(b) or Paragraph 4C(a) of the
Agreement, if any.
The provisions of Paragraphs 4A(a)(iii),(iv) and (v),
Paragraph 4A(b) and Paragraph 4C(a) of the Agreement, as amended
by this letter, shall be deemed effective for all purposes as of
December 27, 1996, provided, however, that this letter shall not
become effective until (a) Envirodyne has entered into amendments
that are substantially identical to the amendments to the
Agreement contained herein with respect to (i) the Indenture,
dated as of June 20, 1995 and amended as of October 13, 1995,
between Envirodyne and Fleet National Bank (formerly Shawmut Bank
Connecticut, National Association) ("Indenture"), as trustee and
(ii) the Credit Agreement ("Credit Agreement"), dated as of June
20, 1995 and amended as of October 13, 1995, among Envirodyne, the
lenders identified therein and BT Commercial Corporation, as Agent
("BT"), and (b) Prudential shall have received from the Required
Holders (as defined in the Indenture) and BT written consents
satisfactory to it of the amendments of the Agreement set forth
herein. Prudential hereby consents to amendments to the Indenture
and Credit Agreement in substantially the respective forms
attached hereto as Exhibit B and Exhibit C.
--------- ---------
Envirodyne represents and warrants as follows: (i) it has all
necessary power and authority to execute and deliver this letter;
(ii) the execution, delivery and performance of this letter have
been duly authorized by it, (iii) this letter and the Agreement,
as amended hereby, constitute the legal, valid and binding
obligations of Envirodyne and are enforceable against Envirodyne
in accordance with their terms; (iv) the approval, execution,
delivery and performance of the terms hereof do not violate any
contractual provision to which it is a party or by which it is or
its properties are bound or any law applicable to it; and (v)
after giving effect to the amendments to the Agreement set forth
herein, no Default or Event of Default has occurred and is
continuing.
Upon the effective date of this letter, each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the
Agreement as amended hereby and each reference to the Agreement in
all other Transaction Documents shall mean and be a reference to
the Agreement, as amended hereby.
This letter shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the
internal law of the State of New York.
Except as specifically amended above, the Agreement, and all
other Transaction Documents, shall remain in full force and effect
and are hereby ratified and confirmed. The execution, delivery
and effectiveness of this letter shall not, except as expressly
provided herein, operate as an amendment to any provision of the
Agreement, a waiver of any right, power or remedy of Prudential,
or constitute a waiver of, or consent to any departure from, any
provision of the Agreement or any other Transaction Document.
This letter may be executed by one or more of the parties to
this letter on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and
the same instrument.
Please acknowledge the foregoing and your agreement thereto
by signing the two copies of this letter agreement where indicated
below and returning one copy to me.
Very truly yours,
ENVIRODYNE INDUSTRIES, INC.
By: _____________________________
Gordon S. Donovan
Vice President, Chief Financial
Officer and Treasurer
Accepted and Agreed to
as of the date written above:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: _____________________________
Title: ____________________________
EXHIBIT 10.23
SECOND SUPPLEMENTAL INDENTURE
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of
September 2, 1997 (this "Supplemental Indenture"), between
ENVIRODYNE INDUSTRIES, INC., a Delaware corporation (the
"Company"), and FLEET NATIONAL BANK (formerly Shawmut Bank of
Connecticut, National Association), as trustee (the "Trustee"),
under the Indenture dated as of June 20, 1995 and amended by the
First Supplemental Indenture, dated as of October, 13, 1995, both
between the Company and the Trustee (the "Indenture").
WHEREAS, the Company has issued, the Trustee has
authenticated and there have been delivered pursuant to the
Indenture $160,000,000 aggregate principal amount of the
Company's First Priority Senior Secured Notes due 2000, all of
which are currently outstanding;
WHEREAS, the Company desires, by this Supplemental
Indenture, to amend the negative covenants contained in Sections
4.01(a)(iii),(iv) and (v), Section 4.01(b) and Section 4.03(a) of
the Indenture (collectively, the "Amendment").
WHEREAS, Section 8.02 of the Indenture provides that
the Company and the Trustee may enter into a supplemental
indenture, with the consent of the holders of not less than a
majority in aggregate principal amount of the then outstanding
Securities (as defined therein), for the purpose of changing any
provisions of the Indenture except as otherwise set forth
therein;
WHEREAS, pursuant to Section 5.05 of the Indenture, the
holders of not less than a majority in aggregate principal of the
then outstanding Securities, as of 5:00 p.m., New York time, on
July 21, 1997, the record date for such purposes, have waived any
prior default by the Company of Sections 4.01(a), 4.01(b) or
4.03(a) of the Indenture, if any.
WHEREAS, the holders of not less than a majority in
principal amount of the Securities outstanding, as of 5:00 p.m,
New York City time, on July 21, 1997, the record date for such
purpose, have consented to the Amendment; and
WHEREAS, the Company is legally empowered and has been
duly authorized by the necessary corporate action to make,
execute and deliver this Supplemental Indenture, and all acts and
things whatsoever necessary to make this Supplemental Indenture,
when executed and delivered by the Company and the Trustee, a
valid, binding and legal instrument have been taken;
NOW, THEREFORE, each party agrees as follows for the
benefit of the other party and for the equal and ratable benefit
of the holders of the Securities:
ARTICLE 1
---------
DEFINITIONS
-----------
All terms used in this Supplemental Indenture which are defined
in the Indenture shall have the meanings assigned to them in the
Indenture.
ARTICLE 2
---------
AMENDMENT OF INDENTURE
----------------------
2.1 Sections 4.01(a)(iii),(iv) and (v) of the Indenture are
hereby amended by deleting such sections in their entirety and
substituting in lieu thereof the following:
(iii) During each "Clause (iii) Test Period" (as
defined below) occurring during the period commencing on
December 27, 1996 and ending on December 25, 1997, to be
less than an amount (the "Clause (iii) Amount") equal to
(1) the greater of (X) the Clause (ii) Amount at December
26, 1996, and (Y) negative $47,000,000, plus (2) 50% of
----
Consolidated Net Income for such Clause (iii) Test Period
(or zero in the case of a deficit), plus (3) the amount
----
of any net gain realized by the Company or any of its
Subsidiaries on the exchange, redemption, purchase or other
acquisition of any of its debt securities (including,
without limitation, the 10.25% Notes) during such Clause
(iii) Test Period; where "Clause (iii) Test Period" means,
at any time, the period (taken as a one accounting period)
commencing on December 27, 1996 and ending on the then most
recently ended fiscal quarter of the Company;
(iv) During each "Clause (iv) Test Period" (as defined
below) occurring during the period commencing on December
26, 1997 and ending on December 31, 1998, to be less than
an amount (the "Clause (iv) Amount") equal to (1) the
greater of (X) the Clause (iii) Amount at December 25,
1997, and (Y) negative $47,000,000, plus (2) 50% of
----
Consolidated Net Income for such Clause (iv) Test Period
(or zero in the case of a deficit), plus (3) the amount of
----
any net gain realized by the Company or any of its
Subsidiaries on the exchange, redemption, purchase or other
acquisition of any of its debt securities (including,
without limitation, the 10.25% Notes) during such Clause
(iv) Test Period; where "Clause (iv) Test Period" means,
at any time, the period (taken as one accounting period)
commencing on December 26, 1997 and ending on the then most
recently ended fiscal quarter of the Company; and
(v) During each "Clause (v) Test Period" (as defined
below) occurring after January 1, 1999 and thereafter, to
be less than an amount equal to (1) the greater of (X) the
Clause (iv) Amount at December 31, 1998, and (Y) negative
$47,000,000, plus (2) the greater of (X) 50% of
----
Consolidated Net Income for such Clause (v) Test Period (or
zero in the case of a deficit), and (Y) $1,250,000
multiplied by the number of the Company's fiscal quarters
that have ended during such Clause (v) Test Period, plus
----
(3) the amount of any net gain realized by the Company or
any of its Subsidiaries on the exchange, redemption,
purchase or other acquisition of any of its debt securities
(including, without limitation, the 10.25% Notes) during
such Clause (v) Test Period; where "Clause (v) Test Period"
commencing on January 1, 1999 and ending on the then most
recently ended fiscal quarter of the Company.
2.2 Section 4.01(b) of the Indenture is amended by deleting
such section in its entirety and substituting in lieu thereof the
following:
(b) Fixed Charge Coverage Ratio. The Company
---------------------------
covenants that it will not cause or permit the ratio of (i)
Consolidated Cash Flow for the twelve month period ending
at the end of any fiscal quarter of the Company to (ii)
Consolidated Fixed Charges for each such twelve month
period to be less than the ratio set forth below for the
period set forth below in which such fiscal quarter ends:
Ratio Period
----- --------
1.45:1 Effective Date through
December 28, 1995
1.50:1 December 29, 1995 through
December 31, 1998
1.55:1 January 1, 1999 and thereafter
provided, however, for purposes of determining Consolidated
-------- -------
Cash Flow for the calculation of the Fixed Charge Coverage
Ratio only and notwithstanding any tax effect of such
restructuring charges, restructuring charges in amounts not
to exceed $3,500,000 and $1,500,000 shall be added back,
each on a one-time basis, prior to December 25, 1997 and
June 25, 1998, respectively, to the calculation of the
Consolidated Net Income to the extent deducted therefrom.
2.3 Section 4.03(a) of the Indenture is hereby amended by
deleting the last clause of such section beginning with "provided,
--------
however" and substituting in lieu thereof the following:
- -------
provided, however, that at no time shall (1) Consolidated
-------- -------
Senior Debt be more than 52.5% of Consolidated Total
Capitalization, or (2) Consolidated Debt be more than 88%
of Consolidated Total Capitalization.
ARTICLE 3
---------
MISCELLANEOUS
--------------
3.1 This Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be
deemed to be an original, and all of such counterparts shall together
constitute one and the same instrument.
3.2 The internal laws of the State of New York shall govern
this Supplemental Indenture without regard to principles of conflicts
of law.
3.3 All provisions of this Supplemental Indenture shall be
deemed to be incorporated in, and made a part of, the Indenture; and
the Indenture, as amended and supplemented by this Supplemental
Indenture, shall be read, taken and construed as one and the same
instrument.
3.4 The provisions of Sections 4.01(a)(iii),(iv) and (v),
Section 4.01(b) and Section 4.03(a), as amended by Article 2 of this
Supplemental Indenture, shall be deemed effective for all purposes as
of December 27, 1996; provided, however, that this Supplemental
-------- -------
Indenture shall not become effective as of such date until the
Company has entered into amendments that are substantially identical
to the Amendment contained herein with respect to (i) the Revolving
Credit Agreement, dated as of June 20, 1995 and amended as of October
13, 1995, between the Company and The Prudential Insurance Company of
America and (ii) the Credit Agreement, dated as of June 20, 1995 and
amended as of October 13, 1995, among the Company, the lenders
identified therein and BT Commercial Corporation, as Agent. The
Company shall provide to the Trustee written notice that it has
entered into such amendments and that this Supplemental Indenture has
become effective.
3.5 The recitals to this Supplemental Indenture shall not be
construed as representations of the Trustee and the Trustee makes no
representation as to the accuracy of such recitals.
3.6 The Trustee enters into this Supplemental Indenture in
its capacity as Trustee under the Indenture and in reliance on an
Opinion of Counsel and Officers' Certificate.
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, all as of the
day and year first above written.
ENVIRODYNE INDUSTRIES, INC.
By:_________________________________
Gordon S. Donovan
Vice President, Chief Financial
Officer and Treasurer
Attest:
______________________
Stephen M. Schuster
Vice President and
Secretary
FLEET NATIONAL BANK
By:_________________________________
Title:______________________________
Attest:
By:_________________________________
Title:_____________________________
EXHIBIT 10.24
AMENDMENT NO. 2
TO
CREDIT AGREEMENT
WITH
ENVIRODYNE INDUSTRIES, INC.
DATED AS OF JUNE 20, 1995
(as amended through October 13, 1995)
THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT ("Amendment") is
dated as of August 5, 1997, by and between ENVIRODYNE INDUSTRIES,
INC., a Delaware corporation ("Borrower"), and BT COMMERCIAL
CORPORATION, a Delaware corporation, individually and as agent (in
such capacity, the "Agent") for the "Lenders" under and as defined
in the Credit Agreement referred to below. Capitalized terms used
herein but not otherwise defined herein shall have the respective
meanings assigned to such terms in the Credit Agreement.
WITNESSETH:
----------
WHEREAS, Borrower, Agent and Lenders have entered into that
certain Credit Agreement, dated as of June 20, 1995 and amended
pursuant to Amendment No. 1 to Credit Agreement dated October 13,
1995. (the "Credit Agreement"), pursuant to which Lenders have agreed
to make certain loans and other financial accommodations to or for
the account of Borrower;
WHEREAS, Borrower has requested that Agent and Lenders (i) amend
the Credit Agreement, (ii) consent to the amendments to the
Prudential Revolving Credit Agreement and the First Priority Notes
Indenture, in substantially the respective forms attached hereto as
Exhibits A and A-1 (collectively, the "Other Amendments") and (iii)
waive any prior default by Borrower of Section 8.1(a), Section 8.1(b)
or Section 8.3(a) of the Credit Agreements, if any; and
WHEREAS, Lenders and Agent have agreed (i) to amend the Credit
Agreement; (ii) to consent to the Other Amendments, in each case on
the terms and subject to the conditions hereinafter set forth; and
(iii) to waive any prior default by Borrower of Section 8.1(a),
Section 8.1(b) or Section 8.3(a) of the Credit Agreement, if any.
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the respective parties hereto hereby agree as
follows:
1. Amendment to Credit Agreement. Effective as of December
-----------------------------
27, 1996, upon satisfaction of the conditions precedent set forth in
Section 4 below, and in reliance upon the representations and
warranties of Borrower set forth herein, the Credit Agreement is
hereby amended as follows:
1.1 Sections 8.1(a)(iii),(iv) and (v) of the Credit
Agreement are hereby amended by deleting such sections in their
entirety and substituting in lieu thereof the following:
(iii) During each "Clause (iii) Test Period" (as
defined below) occurring during the period commencing on
December 27, 1996 and ending on December 25, 1997, to be
less than an amount (the "Clause (iii) Amount") equal to
(1) the greater of (X) the Clause (ii) Amount at December
26, 1996, and (Y) negative $47,000,000, plus (2) 50% of
----
Consolidated Net Income for such Clause (iii) Test Period
(or zero in the case of a deficit), plus (3) the amount
----
of any net gain realized by the Borrower or any of its
Subsidiaries on the exchange, redemption, purchase or
other acquisition of any of its debt securities
(including, without limitation, the 10.25% Notes) during
such Clause (iii) Test Period; where "Clause (iii) Test
Period" means, at any time, the period (taken as a one
accounting period) commencing on December 27, 1996 and
ending on the then most recently ended fiscal quarter of
the Borrower;
(iv) During each "Clause (iv) Test Period" (as defined
below) occurring during the period commencing on December
26, 1997 and ending on December 31, 1998, to be less than an
amount (the "Clause (iv) Amount") equal to (1) the greater
of (X) the Clause (iii) Amount at December 25, 1997, and (Y)
negative $47,000,000, plus (2) 50% of Consolidated Net
----
Income for such Clause (iv) Test Period (or zero in the case
of a deficit), plus (3) the amount of any net gain realized
----
by the Borrower or any of its Subsidiaries on the exchange,
redemption, purchase or other acquisition of any of its debt
securities (including, without limitation, the 10.25% Notes)
during such Clause (iv) Test Period; where "Clause (iv) Test
Period" means, at any time, the period (taken as one
accounting period) commencing on December 26, 1997 and
ending on the then most recently ended fiscal quarter of the
Borrower; and
(v) During each "Clause (v) Test Period" (as defined
below) occurring after January 1, 1999 and thereafter, to be
less than an amount equal to (1) the greater of (X) the
Clause (iv) Amount at December 31, 1998, and (Y) negative
$47,000,000, plus (2) the greater of (X) 50% of Consolidated
----
Net Income for such Clause (v) Test Period (or zero in the
case of a deficit), and (Y) $1,250,000 multiplied by the
number of the Borrower's fiscal quarters that have ended
during such Clause (v) Test Period, plus (3) the amount of
----
any net gain realized by the Borrower or any of its
Subsidiaries on the exchange, redemption, purchase or other
acquisition of any of its debt securities (including,
without limitation, the 10.25% Notes) during such Clause (v)
Test Period; where "Clause (v) Test Period" commencing on
January 1, 1999 and ending on the then most recently ended
fiscal quarter of the Borrower.
1.2 Section 8.1(b) of the Credit Agreement is hereby
amended by deleting such section in its entirety and substituting in
lieu thereof the following:
(b) Fixed Charge Coverage Ratio. The Borrower
---------------------------
covenants that it will not cause or permit the ratio of (i)
Consolidated Cash Flow for the twelve month period ending at
the end of any fiscal quarter of the Borrower to (ii)
Consolidated Fixed Charges for each such twelve month period
to be less than the ratio set forth below for the period set
forth below in which such fiscal quarter ends:
Ratio Period
----- ------
1.45:1 Closing Day through December 28, 1995
1.50:1 December 29, 1995 through December 31, 1998
1:55:1 January 1, 1999 and thereafter
provided, however, for purposes of determining
-------- -------
Consolidated Cash Flow for the calculation of the Fixed
Charge Coverage Ratio only and notwithstanding any tax
effect of such restructuring charges, restructuring
charges in amounts not to exceed $3,500,000 and $1,500,000
shall be added back, each on a one-time basis, prior to
December 25, 1997 and June 25 1998, respectively, to the
calculation of the Consolidated Net Income to the extent
deducted therefrom.
1.3 Section 8.3(a) of the Credit Agreement is hereby amended
by deleting the last clause of such section beginning with
"provided, however" and substituting in lieu thereof the following:
-------- -------
provided, however, that at no time shall (1) Consolidated
-------- -------
Senior Debt be more than 52.5% of Consolidated Total
Capitalization, or (2) Consolidated Debt be more than 88%
of Consolidated Total Capitalization.
2. Waiver. Agent, on behalf of itself individually and the
------
Lenders, as agent, hereby waives any prior default by Borrower of
Section 8.1(a), Section 8.1(b) or Section 8.3(a) of the Credit
Agreement, if any.
3. Consent. Effective as of the date hereof, upon
-------
satisfaction of the conditions precedent set for in Section 4 below,
and in reliance upon the representations and warranties of Borrower
set forth herein, Lenders hereby consent to the execution and
delivery by Borrower of each of the Other Amendments.
4. Conditions Precedent. This Amendment shall become
--------------------
effective as of December 27, 1996, upon satisfaction of each of the
following conditions:
(a) As of the date first above written (after giving
effect to this Amendment) no Default or Event of Default shall
have occurred and be continuing.
(b) Agent shall have received two (2) copies of this
Amendment duly executed by Borrower.
(c) Each of the Other Amendments shall have been executed
and delivered by Borrower and prior to or concurrently with the
effectiveness of this Amendment shall have become effective pursuant
to the respective terms thereof.
5. Representations, Warranties and Covenants.
-----------------------------------------
5.1 Borrower hereby represents and warrants to the Agent and
each of the Lenders that:
(a) this Amendment, and the Credit Agreement, as amended
hereby, constitute legal, valid and binding obligations of
Borrower and are enforceable against Borrower in accordance with
their respective terms;
(b) after giving effect to this Amendment, no Default or Event
of Default has occurred and is continuing; and
(c) the execution and delivery by Borrower of this Amendment does not
require the consent or approval of any Person, except such consents and
approvals as shall have been obtained.
6. Reference to and Effect on the Credit Agreement and
---------------------------------------------------
the Other Credit Documents.
--------------------------
6.1 Upon the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import, and each reference in
each of the other Credit Documents to the "Credit Agreement," shall
in each case mean and be a reference to the Credit Agreement as
amended hereby.
6.2 Except as expressly set forth herein, (i) the
execution and delivery of this Amendment shall in no way affect any
right, power or remedy of Agent or any of the Lenders with respect
to any Event of Default nor constitute a waiver of any provision of
the Credit Agreement or any of the other Credit Documents, and (ii)
all terms and conditions of the Credit Agreement, the other Credit
Documents and all other documents, instruments, amendments and
agreements executed and/or delivered by the Borrower pursuant
thereto or in connection therewith shall remain in full force and
effect and are hereby ratified and confirmed in all respects. The
execution and delivery of this Amendment by Agent and each of the
Lenders shall in no way obligate Agent or any of the Lenders, at any
time hereafter, to consent to any other amendment or modification of
any term or provision of the Credit Agreement or any of the other
Credit Documents, whether of a similar or different nature.
7. Governing Law. The validity, interpretation and
-------------
enforcement of this Amendment and any dispute arising out of or in
connection with this Amendment, whether sounding in contract, tort,
equity or otherwise, shall be governed by the internal laws (as
opposed to the conflicts of laws provisions) and decisions of the
state of Illinois.
8. Headings. Section headings in this Amendment are
--------
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
9. Counterparts. This Amendment may be executed in
------------
any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment
to be duly executed and delivered by their proper and duly
authorized officers as of the date first set forth above.
BORROWER:
ENVIRODYNE INDUSTRIES, INC.
By:_________________________________
Gordon S. Donovan
Vice President, Chief Financial
Officer and Treasurer
AGENT:
BT COMMERCIAL CORPORATION, as Agent
By:_________________________________
Title:______________________________
LENDERS:
BT COMMERCIAL CORPORATION, in its
individual capacity
By:_________________________________
Title:______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-25-1997
<PERIOD-END> SEP-25-1997
<CASH> 16,772,000
<SECURITIES> 0
<RECEIVABLES> 78,883,000
<ALLOWANCES> (1,532,000)
<INVENTORY> 99,005,000
<CURRENT-ASSETS> 220,413,000
<PP&E> 585,877,000
<DEPRECIATION> 138,896,000
<TOTAL-ASSETS> 829,403,000
<CURRENT-LIABILITIES> 133,878,000
<BONDS> 509,579,000
0
0
<COMMON> 147,000
<OTHER-SE> 86,195,000
<TOTAL-LIABILITY-AND-EQUITY> 829,403,000
<SALES> 466,072,000
<TOTAL-REVENUES> 466,072,000
<CGS> 350,061,000
<TOTAL-COSTS> 350,061,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 43,000
<INTEREST-EXPENSE> 42,335,000
<INCOME-PRETAX> (25,581,000)
<INCOME-TAX> (14,770,000)
<INCOME-CONTINUING> (10,811,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,811,000)
<EPS-PRIMARY> (0.74)
<EPS-DILUTED> (0.74)
</TABLE>
