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 March 27, 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 60521
- ------------------------------------------------ ----------
(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 May 9, 1997, there were 14,564,233 shares outstanding of the
registrant's Common Stock, $.01 par value.
Page 1 of Pages<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at March 27, 1997 (unaudited)
and December 26, 1996 4
Unaudited consolidated statements of operations
for the three months ended March 27, 1997
and March 28, 1996 5
Unaudited consolidated statements of cash flows
for the three months ended March 27, 1997
and March 28, 1996 6
Notes to consolidated financial statements 7
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at March 27, 1997 (unaudited)
and December 26, 1996 17
Unaudited consolidated statements of operations for
the three months ended March 27, 1997
and March 28, 1996 18
Unaudited consolidated statements of cash flows
for the three months ended March 27, 1997
and March 28, 1996 19
Notes to consolidated financial statements 20
<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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 27, December 26,
1997 1996
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 28,800 $ 41,794
Receivables, net 75,465 79,174
Inventories 97,910 95,012
Other current assets 32,560 22,141
-------- --------
Total current assets 234,735 238,121
Property, plant and equipment,
including those under capital
leases 565,749 578,704
Less accumulated depreciation
and amortization 120,035 116,896
-------- --------
Property, plant and
equipment, net 445,714 461,808
Deferred financing costs 5,537 5,902
Other assets 41,446 42,809
Excess reorganization value 122,490 125,107
-------- --------
$849,922 $873,747
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including
current portion of long-term
debt and obligations
under capital leases $ 13,293 $ 11,291
Accounts payable 35,065 37,015
Accrued liabilities 84,280 82,109
-------- --------
Total current liabilities 132,638 130,415
Long-term debt including
obligations
under capital leases 510,995 521,179
Accrued employee benefits 53,038 53,697
Deferred and noncurrent
income taxes 57,779 64,811
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,552,233 shares issued and
outstanding at March 27, 1997
and 14,545,107 shares at
December 26, 1996 146 145
Paid in capital 135,148 135,100
Accumulated (deficit) (41,366) (38,813)
Cumulative foreign currency
translation adjustments 1,626 7,305
Unearned restricted stock
issued for future service (82) (92)
-------- --------
Total stockholders' equity 95,472 103,645
-------- --------
$849,922 $873,747
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
--------------------------
March March
27, 1997 28, 1996
---------- ---------
(in thousands, except for
number of shares and
per share amounts)
NET SALES $154,539 $159,736
COSTS AND EXPENSES
Cost of sales 115,998 119,709
Selling, general
and administrative 27,075 26,642
Amortization of intangibles
and excess reorganization value 4,052 4,091
-------- --------
OPERATING INCOME 7,414 9,294
Interest income 504 391
Interest expense 14,259 14,876
Other expense (income), net (388) 3,036
-------- --------
(LOSS) BEFORE INCOME TAXES (5,953) (8,227)
Income tax (benefit) (3,400) (2,300)
-------- --------
NET (LOSS) $ (2,553) $ (5,927)
======== ========
WEIGHTED AVERAGE
COMMON SHARES 14,547,378 13,737,748
NET (LOSS) PER SHARE $(.18) $(.43)
===== =====
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 27, March 28,
1997 1996
---------- ---------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (2,553) $ (5,927)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization under capital lease 11,228 10,974
Amortization of intangibles and excess
reorganization value 4,052 4,091
Amortization of deferred financing fees and discount 379 579
(Decrease) in deferred and
noncurrent income taxes (5,270) (3,866)
Foreign currency transaction loss (gain) 1,357 47
(Gain) on disposition of assets (1,075) (2)
Changes in operating assets and liabilities:
Accounts receivable 1,665 2,307
Inventories (7,091) (6,212)
Other current assets (10,811) (10,558)
Accounts payable and accrued liabilities 3,097 14,243
Other (1,949) 191
------- -------
Total adjustments (4,418) 11,794
------- -------
Net cash provided by (used in) operating activities (6,971) 5,867
Cash flows from investing activities:
Capital expenditures (10,399) (6,543)
Proceeds from disposition of assets 11,827 49
------- -------
Net cash provided by (used in) investing activities 1,428 (6,494)
Cash flows from financing activities:
Issuance of common stock 59
Deferred financing costs (72)
Repayment of revolving loan, long-term borrowings
and capital lease obligation (6,785) (7,202)
------- -------
Net cash (used in) financing activities (6,798) (7,202)
Effect of currency exchange rate changes on cash (653) 506
------- -------
Net (decrease) in cash and equivalents (12,994) (7,323)
Cash and equivalents at beginning of period 41,794 30,325
------- -------
Cash and equivalents at end of period $28,800 $23,002
======= =======
- -----------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $12,684 $13,379
Income taxes paid $ 319 $ 453
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
March December
27, 1997 26, 1996
---------- ----------
Raw materials $ 16,636 $ 14,960
Work in process 29,524 29,057
Finished products 51,750 50,995
-------- --------
$ 97,910 $ 95,012
======== ========
Approximately 59% of the inventories at March 27, 1997 were valued
at Last-In, First-Out (LIFO). These LIFO values exceeded current
manufacturing cost by approximately $5 million at March 27, 1997.
2. DEBT OBLIGATIONS (dollars in thousands)
Outstanding short-term and long-term debt consisted of:
March December
27, 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%) 1,731 1,876
Other 1,887 2,782
------- -------
Total short-term debt $13,293 $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%) 4,330 4,690
Other 2,530 2,678
-------- --------
Total long-term debt $510,995 $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 was infringing on various Viskase
patents relating to multi-layer barrier plastic films used for
fresh red meat, processed meat and poultry product applications.
On November 8, 1996, after a three week trial, a jury found that
ANC had willfully infringed Viskase's patents and awarded
Viskase $102.4 million in compensatory damages. On December 5,
1996, ANC posted a supersedeas bond in the amount of $108
million and the Court entered an order staying Viskase's
enforcement of the judgment. The Court also entered an order
permanently enjoining ANC from making or selling infringing
products after December 23, 1996.
The judgment is not final and the parties are presently engaged
in the post-judgment motion phase of the case. ANC has filed
motions to reduce the damage award by at least $75 million or
alternatively, grant ANC a new trial. Viskase is seeking a
determination that the case be deemed "exceptional" and that the
award be increased by approximately $46 million which includes
compensatory damages for ANC's infringement during the period of
October 1, 1996 through December 23, 1996 and additional damages
for prejudgment interest, attorneys' fees and related expenses.
Due to ANC's willful infringement of the patents, Viskase has
asked the court to treble the compensatory award. These motions
are all pending before the Court and rulings are expected in the
second quarter 1997. Meanwhile post-judgment interest is
accruing on the $102.4 million award from November 8, 1996 at an
annual rate of 5.49%. The Company expects ANC to vigorously
contest the award and to appeal any final judgment. The award
and any pending claims for additional damages have not been
recorded in the Company's financial statements.
Litigation is pending with respect to events arising out of the
Envirodyne bankruptcy case and the 1989 acquisition of
Envirodyne by Emerald Acquisition Corporation (Emerald) with
respect to which, although Envirodyne is not presently a party
to such litigation, certain defendants have asserted indemnity
rights against Envirodyne.
In ARTRA Group Incorporated v. Salomon Brothers Holding Company
------------------------------------------------------------
Inc, Salomon Brothers Inc, D.P. Kelly & Associates, L.P.,
- -------------------------------------------------------
Donald P. Kelly, Charles K. Bobrinskoy, James L. Massey,
- -------------------------------------------------------
William Rifkind and Michael Zimmerman, Case No. 93 A 1616,
- -------------------------------------
United States Bankruptcy Court for the Northern District of
Illinois, Eastern Division, ARTRA Group Incorporated (ARTRA)
alleges breach of fiduciary duty and tortious inference in
connection with the negotiation and consummation of the Plan of
Reorganization (ARTRA I). In ARTRA Group Incorporated v. Salomon
------- -----------------------------------
Brothers Holding Company Inc, Salomon Brothers Inc, D.P. Kelly
- --------------------------------------------------------------
& Associates, L.P., Donald P. Kelly, Charles K. Bobrinskoy and
- --------------------------------------------------------------
Michael Zimmerman, Case No. 93 L 2198, Circuit Court of the
- -----------------
Eighteenth Judicial Circuit, DuPage County, Illinois, ARTRA
alleges breach of fiduciary duty, fraudulent and negligent
misrepresentation and breach of contract in connection with the
1989 acquisition of Envirodyne by Emerald (ARTRA II). The
--------
plaintiff seeks damages in the total amount of $136.2 million
plus interest and punitive damages of $408.6 million. D.P. Kelly
& Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey,
Rifkind and Zimmerman have asserted common law and contractual
rights of indemnity against Envirodyne for attorneys' fees,
costs and any ultimate liability relating to the claims set
forth in the complaints. Upon a motion of the defendants, the
Bankruptcy Court dismissed ARTRA's claims in ARTRA I. ARTRA
-------
appealed to the U.S. District Court and on October 31, 1996, the
U.S. District Court affirmed the Bankruptcy Court's decision.
ARTRA has appealed to the U.S. Court of Appeals for the Seventh
Circuit. All briefs have been filed and the parties are awaiting
oral argument.
Envirodyne is continuing its evaluation of the merits of the
indemnification claims against Envirodyne and the underlying
claims in the litigation. Upon the undertaking of D.P. Kelly &
Associates, L.P. to repay such funds in the event it is
ultimately determined that there is no right to indemnity,
Envirodyne is advancing funds to D.P. Kelly & Associates, L.P.
and Mr. Kelly for the payment of legal fees in ARTRA I. Although
-------
the Company is not a party to either case, the Company believes
that the plaintiff's claims raise similar factual issues to
those raised in the Envirodyne bankruptcy case which, if
adjudicated in a manner similar to that in the Envirodyne bank-
ruptcy case, would render it difficult for the plaintiff to
establish liability or prove damages. Accordingly, the Company
believes that the indemnification claims would not have a material
adverse effect upon the business or financial position of the
Company, even if the claimants were successful in establishing
their right to indemnification.
Since early 1993, the Antitrust Division of the United States
Department of Justice has been investigating the disposable
plastic cutlery industry. This investigation has resulted in the
indictment and conviction of certain companies and individuals
in the industry. Some indictments and criminal trials are
pending. Although the United States Department of Justice has
advised a former officer and an existing employee of Clear
Shield National that they are targets of the investigation,
neither person has been indicted. Clear Shield National is
cooperating fully with the investigation.
In February 1996 Clear Shield National and three other plastic
cutlery manufacturers were named as defendants in the following
three civil complaints: Eisenberg Brothers, Inc., on behalf of
--------------------------------------
itself and all others similarly situated, v. Amcel Corp., Clear
- ---------------------------------------------------------------
Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark
- ------------------------------------------------------------
Holdings, Inc. t/a Winkler Products, Civil Action No. 96-728,
- -----------------------------------
United States District Court for the Eastern District of
Pennsylvania; St. Cloud Restaurant Supply Company v. Amcel
--------------------------------------------
Corp., Clear Shield National, Inc., Dispoz-O Plastics Corp. and
- ---------------------------------------------------------------
Benchmark Holdings, Inc. t/a Winkler Products, Case No. 96C
- ---------------------------------------------
0777, United States District Court for the Northern District of
Illinois, Eastern Division; and Servall Products, Inc., on
--------------------------
behalf of itself and all others similarly situated, v. Amcel
- ------------------------------------------------------------
Corporation, Clear Shield National, Inc., Dispoz-O Plastics
- -----------------------------------------------------------
Corporation and Benchmark Holdings, Inc. t/a Winkler Products,
- -------------------------------------------------------------
Civil Action No. 96-1116, United States District Court for the
Eastern District of Pennsylvania. Each of the complaints
alleges, among other things, that from October 1990 through
April 1992 the defendants unlawfully conspired to fix the prices
at which plastic cutlery would be sold. The Company has informed
the plaintiffs that such claims as they relate to Clear Shield
were discharged by the order of the Bankruptcy Court and Plan of
Reorganization and that the plaintiffs are permanently enjoined
from pursuing legal action to collect discharged claims.
On February 27, 1996, the plaintiff in the St. Cloud case
---------
voluntarily dismissed the action without prejudice and refiled
its action in the United States District Court for the Eastern
District of Pennsylvania but did not name Clear Shield National
as a defendant. On March 14, 1996, Eisenberg Brothers Inc.,
St. Cloud and Servall filed a motion in Clear Shield National's
Bankruptcy proceeding in the United States Bankruptcy Court for
the Northern District of Illinois, Eastern Division contending
that the Bankruptcy Court's order did not discharge the
plaintiff's claim. On March 19, 1997, the Bankruptcy Court
denied their motion and granted the Company's cross motion for
summary judgement. Eisenberg Brothers, Inc. has appealed the
Bankruptcy Court's decision to the U.S. District Court.
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 its business and other environmental
matters, none of which is expected to have a material adverse
effect upon its results of operations, cash flows or financial
position.
4. 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.
5. SUBSIDIARY GUARANTORS
Envirodyne's payment obligations under the Senior Secured Notes
are fully and unconditionally guaranteed on a joint and several
basis (collectively, Subsidiary Guarantees) by Viskase
Corporation, Viskase Holding Corporation, Viskase Sales
Corporation, Clear Shield National, Inc., Sandusky Plastics,
Inc. and Sandusky Plastics of Delaware, Inc., each a direct or
indirect wholly-owned subsidiary of Envirodyne and each a
"Guarantor." These subsidiaries represent substantially all of
the operations of Envirodyne conducted in the United States. The
remaining subsidiaries of Envirodyne generally are foreign
subsidiaries or otherwise relate to foreign operations.
The obligations of each Guarantor under its Subsidiary Guarantee
are the senior obligation of such Guarantor, and are
collateralized, subject to certain permitted liens, by
substantially all of the domestic assets of the Guarantor and,
in the case of Viskase Holding Corporation, by a pledge of 65%
of the capital stock of Viskase S.A. The Subsidiary Guarantees
and security are shared with the lenders under the Revolving
Credit Agreement on a pari passu basis and are subject to the
priority interest of the holders of obligations under the Letter
of Credit Facility, each pursuant to an intercreditor agreement.
The following consolidating condensed financial data illustrate
the composition of the combined Guarantors. No single Guarantor
has any significant legal restrictions on the ability of
investors or creditors to obtain access to its assets in the
event of default on the Subsidiary Guarantee other than its
subordination to senior indebtedness described above. Separate
financial statements of the Guarantors are not presented because
management has determined that these would not be material to
investors. Based on the book value and the market value of the
pledged securities of Viskase Corporation, Viskase Sales
Corporation, Clear Shield National, Inc., Sandusky Plastics,
Inc. and Sandusky Plastics of Delaware, Inc., these Subsidiary
Guarantors do not constitute a substantial portion of the
collateral and, therefore, the separate financial statements of
these subsidiaries have not been provided. Separate unaudited
interim financial statements of Viskase Holding Corporation are
being filed within this quarterly report.
Investments in subsidiaries are accounted for by the parent and
Subsidiary Guarantors on the equity method for purposes of the
supplemental consolidating presentation. Earnings of
subsidiaries are therefore reflected in the parent's and
Subsidiary Guarantors' investment accounts and earnings. The
principal elimination entries eliminate investments in
subsidiaries and intercompany balances and transactions.
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
MARCH 27, 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 $ 13,070 $ (14) $ 15,744 $28,800
Receivables and advances, net 77,813 53,179 44,840 $ (100,367) 75,465
Inventories 64,590 34,679 (1,359) 97,910
Other current assets 434 22,696 9,430 32,560
-------- -------- -------- --------- --------
Total current assets 91,317 140,451 104,693 (101,726) 234,735
Property, plant and equipment including
those under capital lease 143 428,928 136,678 565,749
Less accumulated depreciation
and amortization 102 95,089 24,844 120,035
-------- -------- -------- --------- --------
Property, plant and equipment, net 41 333,839 111,834 445,714
Deferred financing costs 4,791 746 5,537
Other assets 39,492 1,954 41,446
Investment in subsidiaries 57,363 119,449 (176,812)
Excess reorganization value 85,939 36,551 122,490
-------- -------- -------- --------- --------
$153,512 $719,170 $255,778 $(278,538) $849,922
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 10,223 $3,070 $ 13,293
Accounts payable and advances $ 35 102,340 33,057 $ (100,367) 35,065
Accrued liabilities 16,468 37,611 30,201 84,280
-------- -------- -------- --------- --------
Total current liabilities 16,503 150,174 66,328 (100,367) 132,638
Long-term debt including obligation
under capital lease 379,262 127,250 4,483 510,995
Accrued employee benefits 48,842 4,196 53,038
Deferred and noncurrent income taxes 28,228 6,739 22,812 57,779
Intercompany loans (365,953) 340,000 25,953
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,552,233 shares issued and
outstanding 146 3 32,738 (32,741) 146
Paid in capital 135,148 87,899 87,871 (175,770) 135,148
Accumulated earnings (deficit) (41,366) (43,310) 9,824 33,486 (41,366)
Cumulative foreign currency
translation adjustments 1,626 1,573 1,573 (3,146) 1,626
Unearned restricted stock issued
for future services (82) (82)
-------- -------- -------- --------- --------
Total stockholders' equity 95,472 46,165 132,006 (178,171) 95,472
-------- -------- -------- --------- --------
$153,512 $719,170 $255,778 $(278,538) $849,922
======== ======== ======== ========= ========
<FN>
(1) Elimination of intercompany receivables, payables and investment accounts.
/TABLE
<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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 27, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $101,378 $64,227 $(11,066) $154,539
COSTS AND EXPENSES
Cost of sales 78,568 48,383 (10,953) 115,998
Selling, general and administrative $1,097 14,553 11,425 27,075
Amortization of intangibles and
excess reorganization value 3,267 785 4,052
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,097) 4,990 3,634 (113) 7,414
Interest income 383 121 504
Interest expense 11,027 2,846 386 14,259
Intercompany interest expense (income) (10,106) 9,351 755
Management fees (income) (1,170) 876 294
Other expense (income), net 1,481 (927) (942) (388)
Equity loss (income) in subsidiary 1,373 (1,952) 579
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (3,319) (5,204) 3,262 (692) (5,953)
Income tax provision (benefit) (766) (3,944) 1,310 (3,400)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(2,553) $(1,260) $1,952 $ (692) $ (2,553)
======== ======== ======== ========= ========
</TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THREE MONTHS ENDED MARCH 27, 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 $(7,705) $14,377 $(13,643) $(6,971)
Cash flows from investing activities:
Capital expenditures (10) (8,562) (1,827) (10,399)
Proceeds from disposition of assets 1,105 10,722 11,827
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities (10) (7,457) 8,895 1,428
Cash flows from financing activities:
Issuance of common stock 59 59
Deferred financing costs (26) (46) (72)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,772) (13) (6,785)
Increase (decrease) in Envirodyne loan (5,033) 5,033
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities (5,000) (6,772) 4,974 (6,798)
Effect of currency exchange rate
changes on cash (653) (653)
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents (12,715) 148 (427) (12,994)
Cash and equivalents at beginning of period 25,785 (162) 16,171 41,794
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 13,070 $ (14) $15,744 $28,800
======== ======== ======== ========= ========
/TABLE
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED MARCH 28, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $102,481 $66,212 $ (8,957) $159,736
COSTS AND EXPENSES
Cost of sales 78,867 50,458 (9,616) 119,709
Selling, general and administrative $1,546 14,921 10,175 26,642
Amortization of intangibles and
excess reorganization value 3,228 863 4,091
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,546) 5,465 4,716 659 9,294
Interest income 216 175 391
Interest expense 10,940 3,343 593 14,876
Intercompany interest expense (income) (10,513) 9,379 1,134
Management fees (income) (1,591) 1,218 373
Other expense (income), net 2,210 173 653 3,036
Equity Loss (income) in subsidiary 4,478 (1,164) (3,314)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (6,854) (7,484) 2,138 3,973 (8,227)
Income tax provision (benefit) (927) (2,347) 974 (2,300)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(5,927) $ (5,137) $ 1,164 $ 3,973 $(5,927)
======== ======== ======== ========= ========
</TABLE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR THREE MONTHS ENDED MARCH 28, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (11,061) $ 9,527 $7,401 $ 5,867
Cash flows from investing activities:
Capital expenditures (3) (5,919) (621) (6,543)
Proceeds from disposition of assets 35 14 49
-------- -------- -------- --------- --------
Net cash (used in) investing activities (3) (5,884) (607) (6,494)
Cash flows from financing activities:
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,052) (1,150) (7,202)
Increase (decrease) in Envirodyne loan 9,540 (9,540)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 9,540 (6,052) (10,690) (7,202)
Effect of currency exchange rate changes
on cash 506 506
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents (1,524) (2,409) (3,390) (7,323)
Cash and equivalents at beginning
of period 18,013 486 11,826 30,325
-------- -------- -------- --------- --------
Cash and equivalents at end
of period $16,489 $ (1,923) $ 8,436 $23,002
======== ======== ======== ========= ========
/TABLE
<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>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 27, December 26,
1997 1996
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 15,744 $ 16,171
Receivables, net 41,796 43,634
Receivables, affiliates 46,674 51,269
Inventories 34,679 36,509
Other current assets 9,430 10,224
-------- --------
Total current assets 148,323 157,807
Property, plant and equipment 136,678 158,175
Less accumulated depreciation 24,844 30,086
-------- --------
Property, plant and equipment, net 111,834 128,089
Deferred financing costs 746 758
Other assets 1,954 2,025
Excess reorganization value 36,551 37,405
-------- --------
$299,408 $326,084
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 3,070 $ 4,109
Accounts payable 11,280 13,736
Accounts payable and
advances, affiliates 29,316 51,891
Accrued liabilities 30,201 31,677
-------- --------
Total current liabilities 73,867 101,413
Long-term debt 4,483 4,854
Accrued employee benefits 4,196 4,331
Deferred and noncurrent income taxes 22,812 24,899
Intercompany loans 63,963 58,691
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value,
1,000 shares authorized;
100 shares issued and outstanding
Paid in capital 103,463 103,463
Retained earnings 25,051 21,152
Cumulative foreign currency
translation adjustments 1,573 7,281
-------- --------
Total stockholders' equity 130,087 131,896
-------- --------
$299,408 $326,084
======== ========
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
----------------------
March 27, March 28,
1997 1996
--------- ---------
(in thousands, except
for number of shares
and per share amounts)
NET SALES $64,227 $66,212
COSTS AND EXPENSES
Cost of sales 48,383 50,458
Selling, general
and administrative 9,863 8,912
Amortization of intangibles
and excess reorganization value 785 863
------- -------
OPERATING INCOME 5,196 5,979
Interest income 121 175
Interest expense 386 593
Intercompany interest expense 755 1,134
Management fees 294 373
Other expense (income), net (1,942) 653
------- -------
INCOME BEFORE INCOME TAXES 5,824 3,401
Income tax provision 1,925 1,472
------- -------
NET INCOME $ 3,899 $ 1,929
======= =======
WEIGHTED AVERAGE
COMMON SHARES 100 100
NET INCOME PER SHARE $38,990 $19,290
======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
March 27, March 28,
1997 1996
----------- ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,899 $ 1,929
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,847 2,982
Amortization of intangibles and excess
reorganization value 785 863
Amortization of deferred financing fees and discount 57
(Decrease) in deferred and
noncurrent income taxes (418) (536)
(Gain) on disposition of assets (1,000) (14)
Changes in operating assets and liabilities:
Accounts receivable (206) 2,872
Accounts receivable, affiliates 1,684 97
Inventories (2,363) (338)
Other current assets 535 591
Accounts payable and accrued liabilities (5,937) 2,865
Accounts payable, affiliates (14,469) (3,964)
Other (3)
-------- -------
Total adjustments (18,542) 5,472
-------- -------
Net cash provided by (used in) operating activities (14,643) 7,401
Cash flows from investing activities:
Capital expenditures (1,827) (621)
Proceeds from disposition of assets 11,722 14
-------- -------
Net cash provided by (used in) investing activities 9,895 (607)
Cash flows from financing activities:
Deferred financing costs (46)
Repayment of revolving loan and long-term borrowings (13) (1,150)
Increase (decrease) in Envirodyne loan and advances 5,033 (9,540)
-------- -------
Net cash provided by (used in) financing activities 4,974 (10,690)
Effect of currency exchange rate changes on cash (653) 506
-------- -------
Net (decrease) in cash and equivalents (427) (3,390)
Cash and equivalents at beginning of period 16,171 11,826
-------- -------
Cash and equivalents at end of period $15,744 $ 8,436
======= =======
- -----------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $ 49 $138
Income taxes paid $153 $250
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
March 27, December 26,
1997 1996
--------- -----------
Raw materials $ 4,363 3,728
Work in process 10,551 11,395
Finished products 19,765 21,386
------- -------
$34,679 $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 was
infringing on various Viskase patents relating to multi-layer barrier
plastic films used for fresh red meat, processed meat and poultry
product applications. On November 8, 1996, after a three week trial, a
jury found that ANC had willfully infringed Viskase's patents and
awarded Viskase $102.4 million in compensatory damages. On December 5,
1996, ANC posted a supersedeas bond in the amount of $108 million and
the Court entered an order staying Viskase's enforcement of the
judgment. The Court also entered an order permanently enjoining ANC from
making or selling infringing products after December 23, 1996.
The judgment is not final and the parties are presently engaged in the
post-judgment motion phase of the case. ANC has filed motions to reduce
the damage award by at least $75 million or alternatively, grant ANC a
new trial. Viskase is seeking a determination that the case be deemed
"exceptional" and that the award be increased by approximately $46
million which includes compensatory damages for ANC's infringement
during the period of October 1, 1996 through December 23, 1996 and
additional damages for prejudgment interest, attorneys' fees and related
expenses. Due to ANC's willful infringement of the patents, Viskase has
asked the court to treble the compensatory award. These motions are all
pending before the Court and rulings are expected in the second quarter
1997. Meanwhile post-judgment interest is accruing on the $102.4 million
award from November 8, 1996 at an annual rate of 5.49%. The Company
expects ANC to aggressively contest the award and to appeal any final
judgment. The award and any pending claims for additional damages have
not been recorded in the Company's financial statements.
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 its business and other environmental matters,
none of which is expected to have a material adverse effect upon its
results of operations, cash flows or financial position.
3. 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.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS (dollars in thousands)
---------------------------------------------------------
The accompanying management's discussion and analysis of financial
condition and results of operations should be read in conjunction with
the following table:
Three Months Ended
----------------------
March 27, March 28,
1997 1996
--------- ---------
(in thousands)
Net sales:
Food packaging products $135,614 $142,220
Disposable foodservice supplies 18,925 17,678
Other and eliminations (162)
-------- --------
$154,539 $159,736
======== ========
Operating income:
Food packaging products $7,037 $9,252
Disposable foodservice supplies 1,474 1,595
Other and eliminations (1,097) (1,553)
-------- --------
$7,414 $9,294
======== ========
Depreciation and amortization
under capital lease
and amortization of intangible
expense:
Food packaging products $13,987 $13,837
Disposable foodservice supplies 1,286 1,202
Other 7 26
-------- --------
$15,280 $15,065
======== ========
Capital expenditures:
Food packaging products $ 9,632 $ 5,509
Disposable foodservice supplies 757 1,031
Other 10 3
-------- --------
$10,399 $ 6,543
======== ========
Results of Operations
- ---------------------
The Company's net sales for the first three months of 1997 were $154.5
million, which represented a decrease of 3.3% over the first three
months of 1996. Net sales at Viskase decreased by 3.6% over the prior
year. The benefits of a stronger presence in the Latin American markets
were offset by lower pricing due to competitive pressures in both the
domestic and European markets. European sales were also negatively
affected by foreign currency translation due to the strengthening of the
U.S. dollar. First quarter net sales at Clear Shield increased 7.1% from
the prior year primarily due to expansion into the West Coast markets.
First quarter net sales at Sandusky decreased by 17.4% from the prior
year due partially to the company's previously announced closing of its
injection molding operation.
Operating income for the first three months of 1997 was $7.4 million,
representing a decrease of 20.2% from the first three months 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.
On November 8, 1996, a jury awarded $102.4 million in damages to Viskase
Corporation in its patent infringement lawsuit against ANC. Viskase
brought suit against ANC with respect to its infringement of various
Viskase patents relating to multilayer barrier plastic films used for
fresh red meat, processed meat and poultry product applications. The
jury found that ANC had willfully infringed Viskase's patents.
Envirodyne expects ANC to appeal the award. This award has not been
recorded in the Company's financial statements. (See Part 1, Note 3,
Contingencies in Notes to Consolidated Financial Statements for
Envirodyne Industries, Inc. and Subsidiaries.)
The British beef industry continues to be affected by concerns over
bovine spongiform encephalopathy (BSE), or mad cow disease. While
certain of our product lines in Europe are sold to customers in affected
industries, Viskase's results have not been significantly impacted, nor
does management expect any significant impact in the future.
Net interest expense for the three-month period totaled $13.8 million
representing a decrease of $.7 million from the first three 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 $.4 million and $(3.0) million for
the first three months of 1997 and 1996, respectively. In January of
1997, the sale of the oriented polystyrene business resulted in a $1.0
million gain. The gain was offset by foreign exchange gains and losses.
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. The effect of
this practice is to minimize the effect of foreign exchange rate
movements on the Company's operating results. The Company's hedging
activities do not subject the Company to additional exchange risk
because gains and losses on these contracts offset losses and gains on
the transactions being hedged. The cash flows from forward contracts are
classified consistent with the cash flows from the transactions or
events being hedged.
The tax benefit for the first three months resulted from the benefit of
U.S. losses partially offset by the provision related to income from
foreign subsidiaries. Due to the permanent differences in the U.S.
resulting from non-deductible amortization and foreign losses for which
no tax benefit is provided, a benefit of $3.4 million was provided on a
loss before income taxes of $(6.0) 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
- -----
In March 1997 the Company announced that it was exploring the potential
sale of Viskase Corporation's PVC film business. Viskase's plants in
Aurora, Ohio, and Sedgefield, England, would be affected by a sale. Net
sales of PVC films in 1996 totaled approximately $54 million.
In 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.
Liquidity and Capital Resources
- -------------------------------
Cash and equivalents decreased by $13.0 million during the three months
ended March 27, 1997. Cash flows used in operating activities of $7.0
million and used in financing activities of $6.8 million exceeded the
funds provided by investing activities of $1.4 million. Cash flows used
in 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 provided by
investing activity consist principally of the proceeds, net of capital
expenditures for property, plant and equipment, from sales 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. The availability of funds under the Revolving Credit
Facility is subject to the Company's compliance with certain covenants
(which are substantially similar to those included in the Indenture), to
borrowing base limitations measured by accounts receivable and inventory
of the Company and to reserves which may be established in the
discretion of the lenders. Currently, there are no drawings under the
$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 including
covenants that require the maintenance of minimum level of tangible net
worth, maximum ratios of debt and senior debt to total capitalization,
and a minimum fixed charge coverage. The Company is currently in
compliance with its debt covenants. In the event that the Company is
unable to maintain compliance with the covenants, it will be necessary
to obtain a waiver or an amendment of such covenants from such lenders.
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 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 three months of 1997 and 1996 totaled
$10.4 million and $6.5 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 be approximately $8
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.
<PAGE>
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 March 27, 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
27 Financial Data Schedules.
(b) Reports on Form 8-K
On March 20, 1997, the Company filed a Form 8-K reporting that the
Board of Directors amended the Amended and Restated By-Laws of the
Company to provide for advance written notice by any stockholder
intending to nominate any person for election as director or to bring
any other business before an annual meeting of stockholders.
<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: May 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1997
<PERIOD-END> MAR-27-1997
<CASH> 28,800,000
<SECURITIES> 0
<RECEIVABLES> 77,596,000
<ALLOWANCES> (2,131,000)
<INVENTORY> 97,910,000
<CURRENT-ASSETS> 234,735,000
<PP&E> 565,749,000
<DEPRECIATION> 120,035,000
<TOTAL-ASSETS> 849,922,000
<CURRENT-LIABILITIES> 132,638,000
<BONDS> 510,995,000
0
0
<COMMON> 146,000
<OTHER-SE> 93,700,000
<TOTAL-LIABILITY-AND-EQUITY> 849,922,000
<SALES> 154,539,000
<TOTAL-REVENUES> 154,539,000
<CGS> 115,998,000
<TOTAL-COSTS> 115,998,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 313,000
<INTEREST-EXPENSE> 14,259,000
<INCOME-PRETAX> (5,953,000)
<INCOME-TAX> (3,400,000)
<INCOME-CONTINUING> (2,553,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,553,000)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
