SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 26, 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 August 8, 1997, there were 14,636,741 shares outstanding
of the registrant's Common Stock, $.01 par value.
Page 1 of 31 Pages<PAGE>
INDEX TO FINANCIAL STATEMENTS
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at June 26, 1997 (unaudited)
and December 26, 1996 4
Unaudited consolidated statements of operations
for the three months ended June 26, 1997 and
June 27, 1996 and for the six months
ended June 26, 1997 and June 27, 1996 5
Unaudited consolidated statements of cash flows
for the six months ended June 26, 1997
and June 27, 1996 6
Notes to consolidated financial statements 7
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets at June 26, 1997 (unaudited)
and December 26, 1996 19
Unaudited consolidated statements of operations
for the three months ended June 26, 1997 and
June 27, 1996 and for the six months ended
June 26, 1997 and June 27, 1996 20
Unaudited consolidated statements of cash flows
for the six months ended June 26, 1997
and June 27, 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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 26, December 26,
1997 1996
------------ -----------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 13,859 $ 41,794
Receivables, net 74,542 79,174
Inventories 97,938 95,012
Other current assets 29,681 22,141
-------- --------
Total current assets 216,020 238,121
Property, plant and equipment,
including those under
capital leases 579,746 578,704
Less accumulated depreciation
and amortization 130,233 116,896
-------- --------
Property, plant and equipment, net 449,513 461,808
Deferred financing costs 5,015 5,902
Other assets 40,202 42,809
Excess reorganization value 119,930 125,107
-------- --------
$830,680 $873,747
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligations under capital leases $ 13,456 $ 11,291
Accounts payable 38,949 37,015
Accrued liabilities 68,720 82,109
-------- --------
Total current liabilities 121,125 130,415
Long-term debt including obligations
under capital leases 509,799 521,179
Accrued employee benefits 52,850 53,697
Deferred and noncurrent income taxes 54,022 64,811
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,602,047 shares issued and
outstanding at June 26, 1997
and 14,545,107 shares at
December 26, 1996 146 145
Paid in capital 135,363 135,100
Accumulated (deficit) (45,871) (38,813)
Cumulative foreign currency
translation adjustments 3,317 7,305
Unearned restricted stock issued
for future service (71) (92)
-------- --------
Total stockholders' equity 92,884 103,645
-------- --------
$830,680 $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 Six Months Six Months
Ended June Ended June Ended June Ended June
26, 1997 27, 1996 26, 1997 27, 1996
------------- ------------- ------------- -------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $156,529 $165,747 $ 311,068 $325,483
COSTS AND EXPENSES
Cost of sales 117,729 124,053 233,727 243,762
Selling, general
and administrative 27,125 28,304 54,200 54,946
Amortization of intangibles
and excess reorganization value 4,046 4,115 8,098 8,206
-------- -------- -------- --------
OPERATING INCOME 7,629 9,275 15,043 18,569
Interest income 254 381 758 772
Interest expense 14,149 14,496 28,408 29,372
Other expense (income), net 1,839 225 1,451 3,261
-------- -------- -------- --------
(LOSS) BEFORE INCOME TAXES (8,105) (5,065) (14,058) (13,292)
Income tax (benefit) (3,600) (900) (7,000) (3,200)
-------- -------- -------- --------
NET (LOSS) $ (4,505) $ (4,165) $(7,058) $(10,092)
======== ======== ======= ========
WEIGHTED AVERAGE
COMMON SHARES 14,570,519 14,479,721 14,558,950 14,093,895
PER SHARE AMOUNTS:
NET (LOSS) $(.31) $(.29) $(.48) $(.72)
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------
June 26, June 27,
1997 1996
------------- ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(7,058) $(10,092)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation and amortization under capital leases 21,879 21,861
Amortization of intangibles and excess
reorganization value 8,098 8,206
Amortization of deferred financing fees and discount 863 1,156
(Decrease) in deferred and
noncurrent income taxes (8,471) (5,794)
Foreign currency transaction loss 701 5
(Gain) on disposition of assets (1,080) (159)
Changes in operating assets and liabilities:
Accounts receivable 1,949 670
Inventories (7,629) (6,095)
Other current assets (8,060) (5,613)
Accounts payable and accrued liabilities (7,343) 8,316
Other (237) (98)
------- -------
Total adjustments 670 22,455
------- -------
Net cash provided by (used in) operating
activities (6,388) 12,363
Cash flows from investing activities:
Capital expenditures (25,003) (16,568)
Proceeds from disposition of assets 11,895 275
------- -------
Net cash (used in) investing activities (13,108) (16,293)
Cash flows from financing activities:
Issuance of common stock 285
Proceeds from revolving loan and long-term borrowings 1,130
Deferred financing costs (47)
Repayment of revolving loan, long-term borrowings
and capital lease obligations (7,933) (8,859)
------- -------
Net cash (used in) financing activities (7,695) (7,729)
Effect of currency exchange rate changes on cash (744) 1,108
------- -------
Net (decrease) in cash and equivalents (27,935) (10,551)
Cash and equivalents at beginning of period 41,794 30,325
------- -------
Cash and equivalents at end of period $13,859 $ 19,774
======= ========
- -----------------------------------------------------------------------------------------------
Supplemental cash flow information:
Interest paid $33,581 $34,501
Income taxes paid $ 3,907 $ 690
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
June December
26, 1997 26, 1996
---------- ----------
Raw materials $ 16,393 $ 14,960
Work in process 31,649 29,057
Finished products 49,896 50,995
-------- --------
$ 97,938 $ 95,012
======== ========
Approximately 59% of the inventories at June 26, 1997 were valued
at Last-In, First-Out (LIFO). These LIFO values exceeded current
manufacturing cost by approximately $ 5.4 million at June 26, 1997.
2. DEBT OBLIGATIONS (dollars in thousands)
Outstanding short-term and long-term debt consisted of:
June December
26, 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%) 1,688 1,876
Other 2,093 2,782
------- -------
Total short-term debt $13,456 $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%) 3,375 4,690
Other 2,289 2,678
-------- --------
Total long-term debt $509,799 $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 third
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%. If the Court does not grant a new trial, 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 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 (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, 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 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. 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 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 bankruptcy case, would render it difficult for the
plaintiff to establish liability or prove damages. Accordingly, the
Company believes that the indemnification claims would not have a
material adverse effect upon the business or financial position of
the Company, even if the claimants were successful in establishing
their right to indemnification.
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 and
conviction of certain companies and individuals in the industry.
Although the United States Department of Justice had advised a
former officer and an existing employee of Clear Shield National
that they were targets of the investigation, neither person nor
Clear Shield National were indicted.
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 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. The appeal has been fully briefed and the
parties are awaiting the U.S. District Court's decision.
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. SUBSEQUENT EVENTS
On August 11, 1997, the Company received an offer from Heico
Holdings, Inc., a Delaware corporation, associated with Michael E.
Heisley, a director of Envirodyne, to acquire Envirodyne in the
form of a statutory merger pursuant to which holders of the
Company's common stock would receive $8.50 per share in cash plus
additional cash consideration based on the final amount of any
damages awarded in the patent infringement lawsuit against American
National Can Company.
The offer is the second offer by a company affiliated with Mr.
Heisley. On June 11, 1997, the Company received an offer from HK
Acquisitions Corporation, another company affiliated with Mr.
Heisley, to acquire Envirodyne for $8.50 per share in cash. On June
23, 1997, an independent committee of the Board of Directors
determined that the offer from HK Acquisitions Corporation was
unacceptable and not in the best interests of stockholders.
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>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS
JUNE 26, 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 $ 11,008 $ (1,306) $ 4,157 $ 13,859
Receivables and advances, net 69,156 50,167 44,114 $ (88,895) 74,542
Inventories 63,631 35,678 (1,371) 97,938
Other current assets 910 18,429 10,342 29,681
-------- -------- -------- --------- --------
Total current assets 81,074 130,921 94,291 (90,266) 216,020
Property, plant and equipment including
those under capital lease 144 438,899 140,703 579,746
Less accumulated depreciation
and amortization 109 103,215 26,909 130,233
-------- -------- -------- --------- --------
Property, plant and equipment, net 35 335,684 113,794 449,513
Deferred financing costs 4,428 587 5,015
Other assets 38,129 2,073 40,202
Investment in subsidiaries 54,536 119,861 (174,397)
Excess reorganization value 84,235 35,695 119,930
-------- -------- -------- --------- --------
$140,073 $708,830 $246,440 $(264,663) $830,680
======== ======== ======== ========= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt and
obligation under capital lease $ 10,224 $ 3,232 $ 13,456
Accounts payable and advances $ 35 98,165 29,644 $ (88,895) 38,949
Accrued liabilities 5,844 37,815 25,061 68,720
-------- -------- -------- --------- --------
Total current liabilities 5,879 146,204 57,937 (88,895) 121,125
Long-term debt including obligation
under capital lease 379,262 127,110 3,427 509,799
Accrued employee benefits 48,669 4,181 52,850
Deferred and noncurrent income taxes 28,184 3,497 22,341 54,022
Intercompany loans (366,136) 340,000 26,136
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
none outstanding
Common stock, $.01 par value;
14,602,047 shares issued and
outstanding 146 3 32,738 (32,741) 146
Paid in capital 135,363 87,899 87,871 (175,770) 135,363
Accumulated earnings (deficit) (45,871) (47,809) 8,552 39,257 (45,871)
Cumulative foreign currency
translation adjustments 3,317 3,257 3,257 (6,514) 3,317
Unearned restricted stock issued
for future services (71) (71)
-------- -------- -------- --------- --------
Total stockholders' equity 92,884 43,350 132,418 (175,768) 92,884
-------- -------- -------- --------- --------
$140,073 $708,830 $246,440 $(264,663) $830,680
======== ======== ======== ========= ========
<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 SIX MONTHS ENDED JUNE 26, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $207,467 $124,806 $(21,205) $311,068
COSTS AND EXPENSES
Cost of sales 159,657 95,149 (21,079) 233,727
Selling, general and administrative $2,415 29,449 22,336 54,200
Amortization of intangibles and
excess reorganization value 6,533 1,565 8,098
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (2,415) 11,828 5,756 (126) 15,043
Interest income 491 267 758
Interest expense 21,713 5,889 806 28,408
Intercompany interest expense (income) (20,235) 18,700 1,535
Management fees (income) (2,343) 1,761 582
Other expense (income), net 863 (919) 1,507 1,451
Equity loss (income) in subsidiary 5,885 (680) (5,205)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (7,807) (12,923) 1,593 5,079 (14,058)
Income tax provision (benefit) (749) (7,164) 913 (7,000)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(7,058) $(5,759) $ 680 $5,079 $(7,058)
======== ======== ======== ========= ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED JUNE 26, 1997
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $106,089 $60,579 $(10,139) $156,529
COSTS AND EXPENSES
Cost of sales 81,089 46,766 (10,126) 117,729
Selling, general and administrative $1,318 14,896 10,911 27,125
Amortization of intangibles and
excess reorganization value 3,266 780 4,046
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,318) 6,838 2,122 (13) 7,629
Interest income 108 146 254
Interest expense 10,686 3,043 420 14,149
Intercompany interest expense (income) (10,129) 9,349 780
Management fees (income) (1,173) 885 288
Other expense (income), net (618) 8 2,449 1,839
Equity loss (income) in subsidiary 4,512 1,272 (5,784)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,488) (7,719) (1,669) 5,771 (8,105)
Income tax provision (benefit) 17 (3,220) (397) (3,600)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(4,505) $(4,499) $(1,272) $ 5,771 $ (4,505)
======== ======== ======== ========= ========
/TABLE
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR SIX MONTHS ENDED JUNE 26, 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 $(9,915) $23,205 $(19,678) $(6,388)
Cash flows from investing activities:
Capital expenditures (11) (18,611) (6,381) (25,003)
Proceeds from sales of property,
plant and equipment 1,173 10,722 11,895
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities (11) (17,438) 4,341 (13,108)
Cash flows from financing activities:
Issuance of common stock 285 285
Deferred financing costs (44) (3) (47)
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,911) (1,022) (7,933)
Increase (decrease) in Envirodyne loan (5,092) 5,092
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities (4,851) (6,911) 4,067 (7,695)
Effect of currency exchange rate changes on cash (744) (744)
-------- -------- -------- --------- --------
Net (decrease) in cash and equivalents (14,777) (1,144) (12,014) (27,935)
Cash and equivalents at beginning of period 25,785 (162) 16,171 41,794
-------- -------- -------- --------- --------
Cash and equivalents at end of period $11,008 $(1,306) $ 4,157 $13,859
======== ======== ======== ========= ========
</TABLE>
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR SIX MONTHS ENDED JUNE 27, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $210,412 $133,210 $(18,139) $325,483
COSTS AND EXPENSES
Cost of sales 160,915 101,529 (18,682) 243,762
Selling, general and administrative $ 2,813 30,966 21,167 54,946
Amortization of intangibles and
excess reorganization value 6,457 1,749 8,206
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (2,813) 12,074 8,765 543 18,569
Interest income 403 369 772
Interest expense 21,771 6,506 1,095 29,372
Intercompany interest expense (income) (20,659) 18,701 1,958
Management fees (income) (3,189) 2,437 752
Other expense (income), net 2,083 (21) 1,199 3,261
Equity loss (income) in subsidiary 8,618 (2,064) (6,554)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (11,034) (13,485) 4,130 7,097 (13,292)
Income tax provision (benefit) (942) (4,324) 2,066 (3,200)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(10,092) $ (9,161) $ 2,064 $ 7,097 $(10,092)
======== ======== ======== ========= ========
</TABLE>
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED JUNE 27, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
NET SALES $107,931 $ 66,998 $(9,182) $165,747
COSTS AND EXPENSES
Cost of sales 82,048 51,071 (9,066) 124,053
Selling, general and administrative $ 1,267 16,045 10,992 28,304
Amortization of intangibles and
excess reorganization value 3,229 886 4,115
-------- -------- -------- --------- --------
OPERATING INCOME (LOSS) (1,267) 6,609 4,049 (116) 9,275
Interest income 187 194 381
Interest expense 10,831 3,163 502 14,496
Intercompany interest expense (income) (10,146) 9,322 824
Management fees (income) (1,598) 1,219 379
Other expense (income), net (127) (194) 546 225
Equity loss (income) in subsidiary 4,140 (900) (3,240)
-------- -------- -------- --------- --------
INCOME (LOSS) BEFORE INCOME TAXES (4,180) (6,001) 1,992 3,124 (5,065)
Income tax provision (benefit) (15) (1,977) 1,092 (900)
-------- -------- -------- --------- --------
NET INCOME (LOSS) $(4,165) $(4,024) $ 900 $ 3,124 $ (4,165)
======== ======== ======== ========= ========
/TABLE
<PAGE>
<PAGE>
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATING CASH FLOWS
FOR SIX MONTHS ENDED JUNE 27, 1996
<TABLE>
<CAPTION>
Guarantor Nonguarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
-------- ------------ ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $(24,670) $ 19,190 $ 17,843 $ 12,363
Cash flows from investing activities:
Capital expenditures (3) (14,836) (1,729) (16,568)
Proceeds from sales of property,
plant and equipment 136 40 99 275
-------- -------- -------- --------- --------
Net cash provided by (used in)
investing activities 133 (14,796) (1,630) (16,293)
Cash flows from financing activities:
Proceeds from revolving loan and
long-term borrowings 1,130 1,130
Repayment of revolving loan, long-term
borrowings and capital lease obligations (6,220) (2,639) (8,859)
Increase (decrease) in Envirodyne loan 17,945 (17,945)
-------- -------- -------- --------- --------
Net cash provided by (used in)
financing activities 17,945 (5,090) (20,584) (7,729)
Effect of currency exchange rate changes on cash 1,108 1,108
-------- -------- -------- --------- --------
Net increase (decrease) in cash
and equivalents (6,592) (696) (3,263) (10,551)
Cash and equivalents at beginning of period 18,013 486 11,826 30,325
-------- -------- -------- --------- --------
Cash and equivalents at end of period $ 11,421 $ (210) $8,563 $19,774
======== ======== ======== ========= ========
</TABLE>
<PAGE>
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
June 26, December 26,
1997 1996
----------- ------------
(in thousands)
ASSETS
Current assets:
Cash and equivalents $ 4,157 $ 16,171
Receivables, net 41,119 43,634
Receivables, affiliates 50,016 51,269
Inventories 35,679 36,509
Other current assets 10,342 10,224
-------- --------
Total current assets 141,313 157,807
Property, plant and equipment 140,703 158,175
Less accumulated depreciation 26,909 30,086
-------- --------
Property, plant and equipment, net 113,794 128,089
Deferred financing costs 587 758
Other assets 2,073 2,025
Excess reorganization value 35,695 37,405
-------- --------
$293,462 $326,084
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Short-term debt including current
portion of long-term debt $ 3,232 $ 4,109
Accounts payable 11,227 13,736
Accounts payable and
advances, affiliates 28,944 51,891
Accrued liabilities 25,061 31,677
-------- --------
Total current liabilities 68,464 101,413
Long-term debt 3,427 4,854
Accrued employee benefits 4,181 4,331
Deferred and noncurrent income taxes 22,341 24,899
Intercompany loans 64,146 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 24,183 21,152
Cumulative foreign currency
translation adjustments 3,257 7,281
-------- --------
Total stockholders' equity 130,903 131,896
-------- --------
$293,462 $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 Six Months Six Months
Ended June Ended June Ended June Ended June
26, 1997 27, 1996 26, 1997 27, 1996
------------- ------------- ------------- -------------
(in thousands, except for number of shares and per share amounts)
<S> <C> <C> <C> <C>
NET SALES $60,579 $66,998 $124,806 $133,210
COSTS AND EXPENSES
Cost of sales 46,766 51,071 95,149 101,529
Selling, general
and administrative 9,600 9,482 19,463 18,394
Amortization of intangibles
and excess reorganization value 780 886 1,565 1,749
-------- -------- -------- --------
OPERATING INCOME 3,433 5,559 8,629 11,538
Interest income 146 194 267 369
Interest expense 420 502 806 1,095
Intercompany interest expense 780 824 1,535 1,958
Management fees 288 379 582 752
Other expense (income), net 2,449 546 507 1,199
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (358) 3,502 5,466 6,903
Income tax provision 510 1,688 2,435 3,160
-------- -------- -------- --------
NET INCOME (LOSS) $(868) $ 1,814 $ 3,031 $ 3,743
======== ======== ======= ========
WEIGHTED AVERAGE
COMMON SHARES 100 100 100 100
PER SHARE AMOUNTS:
NET INCOME (LOSS) $(8,680) $18,140 $30,310 $37,430
======== ======== ======= ========
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
-----------------------------------
June 26, June 27,
1997 1996
------------- ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $3,031 $ 3,743
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 5,325 5,879
Amortization of intangibles and excess
reorganization value 1,565 1,749
Amortization of deferred financing fees and discount 103 113
(Decrease) in deferred and
noncurrent income taxes (395) (507)
(Gain) on sales of property, plant and equipment (1,000) (55)
Changes in operating assets and liabilities:
Accounts receivable 168 5,258
Accounts receivable, affiliates (893) (2,692)
Inventories (3,872) (785)
Other current assets (506) (102)
Accounts payable and accrued liabilities (5,477) 8,996
Accounts payable and advances, affiliates (18,727) (3,751)
Other (3)
------- -------
Total adjustments (23,709) 14,100
------- -------
Net cash provided by (used in) operating
activities (20,678) 17,843
Cash flows from investing activities:
Capital expenditures (6,381) (1,729)
Proceeds from sale of property, plant and equipment 11,722 99
------- -------
Net cash provided by (used in) investing activities 5,341 (1,630)
Cash flows from financing activities:
Deferred financing costs (3)
Repayment of revolving loan and long-term borrowings (1,022) (2,639)
Increase (decrease) in Envirodyne loan 5,092 (17,945)
------- -------
Net cash provided by (used in) financing activities 4,067 (20,584)
Effect of currency exchange rate changes on cash (744) 1,108
------- -------
Net (decrease) in cash and equivalents (12,014) (3,263)
Cash and equivalents at beginning of period 16,171 11,826
------- -------
Cash and equivalents at end of period $ 4,157 $ 8,563
======= ========
Supplemental cash flow information:
Interest paid $ 97 $ 398
Income taxes paid $ 3,653 $ 389
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
VISKASE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES (dollars in thousands)
Inventories consisted of:
June 26, December 26,
1997 1996
---------- -------------
Raw materials $ 4,422 $ 3,728
Work in process 10,629 11,395
Finished products 20,628 21,386
------- -------
$35,679 $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 third
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%. If the Court does not grant a new trial, 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 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.
<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
-----------------------------
June 26, June 27,
1997 1996
----------- -----------
(in thousands)
Net sales:
Food packaging products $133,074 $144,615
Disposable foodservice supplies 23,455 21,132
-------- --------
$156,529 $165,747
======== ========
Operating income:
Food packaging products $ 6,993 $ 8,341
Disposable foodservice supplies 1,926 2,198
Other and eliminations (1,290) (1,264)
------- -------
$ 7,629 $ 9,275
======= =======
Depreciation and amortization
under capital lease and
amortization of
intangible expense:
Food packaging products $13,385 $13,764
Disposable foodservice supplies 1,305 1,226
Other 7 12
------- -------
$14,697 $15,002
======= =======
Capital expenditures:
Food packaging products $11,563 $ 9,156
Disposable foodservice supplies 3,040 869
Other 1
------- -------
$14,604 $10,025
======= =======
Results of Operations
- ---------------------
The Company's net sales for the first six months and second quarter
of 1997 were $311.1 million and $156.5 million, respectively, which
represented decreases of 4.4% and 5.6%, respectively, from
comparable periods of 1996. Second quarter net sales at Viskase
decreased by 7.5% from 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.
Second quarter net sales at Clear Shield increased 11.0% from the
prior year due to volume expansion in the western region markets
partially offset by lower pricing due to competitive pressures.
Second quarter net sales at Sandusky decreased by 15.2% from the
prior year due partially to the company's previously announced
closing of its injection molding operations.
Operating income for the first six months and second quarter of
1997 was $15.0 million and $7.6 million, respectively, representing
decreases of 19.0% and 17.7%, respectively, from the 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. Lower selling, general and administrative expenses
had some offsetting effects. 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 six-month period totaled $27.7 million
representing a decrease of $1.0 million from the first six 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 $(1.5) million and $(3.3)
million for the first six months of 1997 and 1996, respectively.
The 1997 expense consists principally of foreign exchange losses
offset by a $1.0 million gain recorded on the January 1997 sale of
the oriented polystyrene business. The gain is offset by foreign
exchange 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. 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 six months resulted from the benefit
of U.S. losses partially offset by the provision related to income
from foreign subsidiaries. Due to the permanent differences in the
U.S. resulting from non-deductible amortization and foreign losses
for which no tax benefit is provided, a benefit of $7.0 million was
provided on a loss before income taxes of $14.1 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 July 1997, the Company committed to a plan to restructure its
operations. This action is directly related to lowering the
Company's fixed costs. Management estimates that a before-tax
charge of $3.0 million will be recorded to operations in the third
quarter of 1997 to cover the costs of restructuring.
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 by October 1997.
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 $27.9 million during the six
months ended June 26, 1997. Cash flows used in operating
activities, used by investing activities and used in financing
activities were $6.4 million, $13.1 million and $7.7 million,
respectively. 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 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 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
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. As
described in more detail below, the Company solicited and has
received the required consents from the holders of Senior Secured
Notes for certain amendments to, and waivers under, the 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 Indenture, Revolving Credit Facility
and Letter of Credit Facility.
The Company determined that, as of June 26, 1997, its Consolidated
Debt was approximately 85.37% of Consolidated Total Capitalization.
Under the terms of the Indenture, as well as the Revolving Credit
Facility and Letter of Credit Facility, the Company covenanted that
it would not permit its Consolidated Debt to be more than 85% of
Consolidated Total Capitalization. As described above, the Company
has received required consents and waivers from holders of Senior
Secured Notes, the 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 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 six months of 1997 and 1996
totaled $25.0 million and $16.6 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 June 26,
1997.
Item 3 - Defaults Upon Senior Securities
-------------------------------
None.
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company held its Annual Meeting of Stockholders (the "Meeting")
on May 16, 1997. The following business was conducted at the
Meeting; (i) the election of five (5) directors; (ii) the
ratification of the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for the fiscal year ended
December 25, 1997; and (iii) the approval of a stockholder proposal
to recommend to the Board of Directors that it redeem or otherwise
terminate the Stockholder Rights Plan, and not adopt any other
stockholder rights plan without a binding vote by stockholders. The
results were as follows:
Election of Directors For Withheld
- --------------------- ------------ -----------
Robert N. Dangremond 8,012,654 4,114
Avram A. Glazer 49,555 1,771
Malcolm I. Glazer 49,555 1,771
F. Edward Gustafson 8,012,654 4,114
Michael E. Heisley 8,013,853 2,915
Robert V. Leffler, Jr. 49,555 1,771
Gregory R. Page 8,013,854 2,914
Mark D. Senkpiel 8,012,653 4,115
Ratification of Appointment
of Coopers & Lybrand For Against Abstaining
- --------------------------- --------- --------- ----------
8,051,904 9,290 6,900
Approval of Stockholder
Proposal For Against Abstaining
- ----------------------- -------- --------- ----------
66,990 7,998,109 2,995
There were no broker non-votes.
Item 5 - Other Information
-----------------
None.
Item 6 - Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.9 Envirodyne Industries, Inc. Corporate Office Management
Incentive Plan for Fiscal Year 1997.
10.21 Envirodyne Industries, Inc. Corporate Office Severance Pay
Policy.
27 Financial Data Schedules.
(b) Reports on Form 8-K
(1) On May 9, 1997, the Company filed a Form 8-K to report
that on May 9, 1997 the Company announced that its wholly
owned subsidiary, Viskase Corporation, has successfully
developed a new process for the manufacture of
its cellulose casings.
(2) On May 16, 1997, the Company filed a Form 8-K to report
that on May 14, 1997 (i) the Company announced that it had
received a proposal from Zapata Corporation to acquire all
of the then outstanding shares of Envirodyne common stock
not owned by Zapata Corporation in a negotiated merger
transaction, and (ii) the Board of Directors of the
Company had amended the Amended and Restated By-Laws of
the Company (a) to provide that the Board will consist of
five directors, (b) to establish a standing committee of
"Independent Directors" to review, evaluate and make
recommendations to the Board with respect to a transaction
between the Company and an "Interested Person," and (c) to
require an 80% approval of the Board to enter into a
transaction between the Company and an "Interested Person"
or to amend, modify or repeal the Amended and Restated
By-Laws.
(3) On May 21, 1997, the Company filed a Form 8-K to report
that on May 21, 1997, the Company announced the final
results of the Annual Meeting of Stockholders held on May
16, 1997. The Company announced that the stockholders had
overwhelmingly elected the five directors nominees
proposed by the Company and rejected a proposal by Zapata
Corporation to eliminate the stockholder rights plan.*
(4) On June 13, 1997, the Company filed a Form 8-K to report
that on June 12, 1997, the Company announced that it had
received an offer from HK Acquisitions Corporation, formed
by Michael E. Heisley, a director, and Donald P. Kelly,
the former chairman, president and chief executive officer
of the Company, to purchase all of the outstanding shares
of common stock of the Company in a negotiated merger
transaction.
(5) On June 20, 1997, the Company filed a Form 8-K to report
that on June 18, 1997 the Company announced that the offer
from HK Acquisitions Corporation, which was due to expire
at the close of business on June 18, 1997, was extended to
the close of business on June 23, 1997.
(6) On June 24, 1997, the Company filed a Form 8-K to report
that on June 23, 1997 the Company announced that the
independent committee of the Board of Directors responded
to an offer from HK Acquisitions Corporation and that the
independent committee determined that the offer was
unacceptable and not in the best interests of
stockholders.
* On June 4, 1997, the Company filed an amended Form 8-K as
it had inadvertently reported the Date of Event as May 21,
1997, and attached a press release dated May 21, 1997 for
the original Form 8-K. The Company issued the press
release on May 20, 1997 and therefore the Date of Event
and the press release attached to the Form 8-K should have
both been dated May 20, 1997.
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: August 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-25-1997
<PERIOD-END> JUN-26-1997
<CASH> 13,859,000
<SECURITIES> 0
<RECEIVABLES> 76,193,000
<ALLOWANCES> (1,651,000)
<INVENTORY> 97,938,000
<CURRENT-ASSETS> 216,020,000
<PP&E> 579,746,000
<DEPRECIATION> 130,233,000
<TOTAL-ASSETS> 830,680,000
<CURRENT-LIABILITIES> 121,125,000
<BONDS> 509,799,000
0
0
<COMMON> 146
<OTHER-SE> 89,421,000
<TOTAL-LIABILITY-AND-EQUITY> 830,680,000
<SALES> 311,068,000
<TOTAL-REVENUES> 311,068,000
<CGS> 233,727,000
<TOTAL-COSTS> 233,727,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31,000
<INTEREST-EXPENSE> 28,408,000
<INCOME-PRETAX> (14,058,000)
<INCOME-TAX> (7,000,000)
<INCOME-CONTINUING> (7,058,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,058,000)
<EPS-PRIMARY> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
EXHIBIT 10.9
ENVIRODYNE INDUSTRIES, INC.
CORPORATE OFFICE
MANAGEMENT INCENTIVE PLAN
Fiscal Year 1997
I. Purpose
-------
The Envirodyne Industries, Inc. Management Incentive Plan
(MIP) has been established for Fiscal Year 1997 for those
covered employees defined under Section III below.
The purpose of this Management Incentive Plan is to provide
additional compensation to participants for their contribution
to the achievement of the objectives of the Company including:
- Assisting in attracting and retaining highly qualified
key employees.
- Encouraging and stimulating superior performance by such
personnel.
II. Definitions
-----------
A. Base Salary equals the salary earnings for the portion
-----------
of the Fiscal Year during which the participant was an
active employee in the particular level of management
for which the computation is being made. Salary
earnings do not include Plan awards, long-term incentive
awards, imputed income from such programs as executive
life insurance or non-recurring earnings such as moving
expenses and is based on salary earnings before
reductions for such items as contributions under Section
401-(K) of the Internal Revenue Code of 1986 as amended.
B. Company means Envirodyne Industries, Inc., its
-------
successors and assigns.
C. Fiscal Year means the Company's Fiscal Year beginning
-----------
January 1 and ending the last day of December.
D. Plan means the Envirodyne Industries, Inc. Management
----
Incentive Plan as from time to time amended.
E. Chairman of the Board and Chief Executive Officer means
-------------------------------------------------
the Chairman of the Board and Chief Executive Officer of
Envirodyne Industries, Inc.
F. Financial Targets are the financial goal(s) appropriate
-----------------
to the company for the Fiscal Year. These goals are
identified in Exhibit B and are specifically identified
by participant in Exhibit C.
G. Discretionary Goals refer to the personal goals and
-------------------
objectives set by each participant and his/her
supervisor at the beginning of each Fiscal Year against
which performance is measured.
III. EMPLOYEES COVERED BY THIS PLAN
------------------------------
The Plan is applicable to those management employees and
other key personnel in the management levels specified in the
attached Exhibit C.
IV. FINANCIAL AWARD
---------------
A participant in the Plan shall be entitled to a Financial
Award computed in accordance with the following formula:
Base Financial Bonus Financial
Salary x Performance x Percent = Performance
Incentive Allocated Award
Earned To Financial
Targets
Where:
- "Base Salary" is as defined in Section II A.
- "Financial Performance Incentive Earned" is determined by
the relationship of actual achievement to targeted goals
and can range from target to maximum, with full attain-
ment of the financial goals equating to the target for
each measure as set forth in the business plan. The
target/maximum range for each participant is a function
of management level slotting (See Exhibit C). The
relationship of actual achievement to the performance
range will be determined by using straight-line
interpolation for achievement between the target and the
maximum of the payout range as applicable (see Exhibit
B). Actual performance below target will result in no
award being paid on that particular financial measure.
- "Bonus Percent Allocated To Financial Targets" shall
range from 0% to 100%.
If a participant was in more than one management level during
a Fiscal Year, a separate computation shall be made for each
level applicable to the participant during such Fiscal Year;
the sum of the separate computations shall be the
participant's Financial Performance Award.
V. Personal Performance Award
--------------------------
Goals for each participant are to be developed jointly by the
participant and his/her supervisor at the beginning of a
Fiscal Year. It is anticipated that both quantifiable and
non-quantifiable goals will be developed in the process.
Each goal should be weighted from 0% to 100%, with the sum of
the weights equal to 100%.
A participant in the Plan shall be entitled to a Personal
Performance Award computed in accordance with the following
formula:
Base Personal Bonus Personal
Salary x Performance x Percent = Performance
Incentive Allocated Award
Earned To Personal
Objectives
Where:
- "Base Salary" is as defined in Section II A.
- "Percent of Personal Objectives Achieved" ranges from 0%
to 100% and is determined by the agreed upon performance
of the individual against pre-established individual
goals.
- "Percent of Bonus Allocated to Personal Objectives" shall
range from 0% to 100%.
It is intended that the participant and his/her supervisor
will agree on meaningful individual goals. The following is
a partial list of the type of goals or objectives that may be
developed:
- Achievement of income goals
- Development of subordinates
- Successful development of new accounts/products
- Improvement in product merchandising programs
- Attainment of self-development objectives
- Control or reduction of operating expenses
At the end of a Fiscal Year, each participant will review
and evaluate his/her accomplishment of personal goals and
objectives. The participant and his/her supervisor will
then review the preliminary rating. Thereafter, the
supervisor will assign a Personal Performance %, from 0% to
100%, reflecting the participant's achievement of his/her
goals during such Fiscal Year. The Personal Performance %
recommendation of the supervisor shall be reviewed by the
President of the Company, who shall recommend an
appropriate Personal Performance % to the Chairman of the
Board and Chief Executive Officer who shall approve the
final Personal Performance % for each participant.
VI. Performance Measures, Targets and Payout Ranges
-----------------------------------------------
The financial performance measures, targets and payout
ranges used for incentive purposes shall be established by
the Company based on the annual business plan. Those
measures, targets and payout ranges, as appropriate, shall
be approved by the Chairman of the Board and Chief
Executive Officer. The performance measures, targets and
payout ranges are defined in Exhibit B.
VII. Participant Bonus Composition
-----------------------------
The composition of each participant's bonus shall be
determined by the President of the Company or his
designee(s). The composition may have a Discretionary
portion and a Financial portion. The composition of the
bonuses are established in Exhibit C.
VIII. Computation and Disbursement of Funds
-------------------------------------
As soon as possible after the close of the Fiscal Year, the
President of the Company will recommend a final personal
goal achievement percentage and incentive award payment to
the Chairman of the Board and Chief Executive Officer.
Once approved, payment of the awards shall be made within
sixty (60) days after the end of the Fiscal Year.
If the participant dies before receiving his/her award, the
amount due will be paid to the designated beneficiaries on
file with the Company and, in the absence of such
designation, to the participant's estate. All payment
awards shall be reduced by amounts required to be withheld
for taxes at the time payments are made.
IX. Changes to Target
-----------------
The President of the Company may recommend to the Chairman
of the Board and Chief Executive Officer, at any time prior
to the final determination of awards, changes to the
performance measures, targets, and payout ranges used for
incentive purposes. If, in the judgment of the Chairman of
the Board and Chief Executive Officer, such change(s)
is/are desirable in the interests of equitable treatment of
the participants and the Company as a result of
extraordinary or non-recurring events, changes in
applicable accounting rules or principles, changes in the
Company's methods of accounting, changes in applicable law,
changes due to consolidation, acquisitions, or
reorganization, the Chairman of the Board and Chief
Executive Officer shall authorize and approve such
change(s) for immediate incorporation into the Plan.
Further, should actual performance on any one or all of the
financial measure(s) be less than or greater than target by
twenty-five percent (25%) or more, the award actually
earned under that measure(s) will be at the sole discretion
of the Chairman of the Board and Chief Executive Officer
subject to approval by the Compensation Committee of the
Board.
X. Partial Awards
--------------
A participant shall be entitled to payment of a partial
Financial Award and a partial Personal Objectives Award,
computed in accordance with Sections IV and V, and based on
Base Salary in a Fiscal Year, if prior to the end of such
Fiscal Year, a participant:
- Dies,
- Retires (is eligible to immediately receive retirement
benefits under a Company sponsored retirement plan),
- Becomes permanently disabled,
- Transfers to a position with a salary grade not
eligible for participation in the Plan,
- Enters military service,
- Takes an approved leave of absence,
- Is appointed or elected to public office,
- Is terminated due to position elimination,
provided that the participant was an active employee for a
minimum of 30 consecutive calendar days during such Fiscal
Year. Such partial awards shall be paid when payments of
non-deferred awards for such Fiscal Year are made.
Participants hired during the course of a Fiscal Year and
who are employed through the end of such Fiscal Year shall
be eligible for an award based on their Base Salary during
such Fiscal Year, provided that such employees begin active
service prior to February 1 of such Fiscal Year.
XI. Forfeiture of Bonus
-------------------
Except as provided in Section X, no participant who ceases
to be an employee of the Company prior to the end of a
Fiscal Year shall be entitled to any amounts under this
Plan for such Fiscal Year unless the Chairman of the Board
and Chief Executive Officer, in consultation with the Vice
President, Human Resources, decides otherwise.
Participants who cease to be an employee of the Company
between the end of a Fiscal Year and the payment date of
awards for such Fiscal Year shall be entitled to awards
earned during such Fiscal Year.
XII. Administration
--------------
This Plan shall be administered by the Vice President, Human
Resources of Envirodyne Industries, Inc., subject to the
control and supervision of the Chairman of the Board and
Chief Executive Officer and the Compensation Committee of the
Board of Directors of Envirodyne Industries.
Any changes to the context of the Plan, the performance
ranges, Plan adjustments and actual payouts will be reviewed
with and approved by the Compensation Committee of the Board
of Directors.
In the event of a claim or dispute brought forth by a
participant, the decision of the Chairman of the Board and
Chief Executive Officer as to the facts in the case and the
meaning and intent of any provision of the Plan, or its
application, shall be final and conclusive.
XIII. No Employment Contract; Future Plans
------------------------------------
Participation in this Plan shall not confer upon any
participant any right to continue in the employ of the
Company nor interfere in any way with the right of the
Company to terminate any participant's employment at any
time. The company is under no obligation to continue the
Plan in future Fiscal Years.
XIV. Amendment or Termination
------------------------
The Company may at any time, or from time to time, (a) amend,
alter or modify the provisions of this Plan, (b) terminate
this Plan, or (c) terminate the participation of an employee
or group of employees in this Plan; provided, however, that
in the event of the termination of this Plan or a termination
of participation, the Company shall provide the partial
awards to the affected participant(s) for the portion of the
Fiscal Year during which such employee(s) were participants
in this Plan, in a manner in which the Company, in its sole
judgment, determines to be equitable to such participants and
the Company.
XV. General Provisions
------------------
(a) No right under the Plan shall be assignable, either
voluntarily or involuntarily by way of encumbrance, pledge,
attachment, level or charge of any nature (except as may be
required by state or federal law).
(b) Nothing in the Plan shall require the Company to
segregate or set aside any funds or other property for the
purpose of paying any portion of an award. No participant,
beneficiary or other person shall have any right, title or
interest in any amount awarded under the Plan prior to the
close of the Fiscal Year, or in any property of the Company
or its subsidiaries.
_____________________ ____________________________
Final Approval Date Chairman of the Board
and Chief Executive Officer
____________________________
Vice President
Human Resources
EXHIBIT 10.21
ENVIRODYNE INDUSTRIES, INC.
CORPORATE OFFICE
SEVERANCE PAY POLICY
Envirodyne Industries, Inc. (the "Company") hereby adopts the
Envirodyne Industries, Inc. Severance Pay Policy (this "Policy") for its
eligible employees at its Corporate Office effective as of May 15, 1996 and
thereafter until otherwise amended or terminated by the Company; provided,
--------
however, that in the event a Change of Control (as hereinafter defined) or
- -------
the elimination or consolidation of all or part of this office occurs
during the term of this Policy, the term of this Policy shall be deemed to
be extended to and including the anniversary date twenty-four (24) months
following the effective date of such Change of Control or office
consolidation or elimination. With respect to "Employees" as defined in
Section A, this Policy shall replace and supersede any and all other
policies, plans or programs of the Company regarding severance benefits.
A. Covered Employees
-----------------
All permanent, full-time salaried executive and administrative
personnel employed by the Company at its Corporate Office (Employees)
are covered by this Policy.
B. Eligibility
-----------
An Employee shall be eligible for the severance pay set forth in
this Policy in the event of any actions/decisions deemed to eliminate
or consolidate all or part of this office including, but not limited
to, a Change of Control or office consolidation or elimination and:
(1) any involuntary separation of employment from the Company for any
reason other than death, disability or willful misconduct on the
part of the Employee;
(2) any voluntary separation of employment from the Company following
a reduction in the Employee's base compensation and/or incentive
bonus opportunity from that in effect on the day immediately
before the effective date of the Change of Control or office
consolidation or elimination; or
(3) any voluntary separation of employment from the Company following
a reduction in the Employee's principal responsibilities from
those in effect on the day immediately before the effective date
of the Change of Control or office consolidation or elimination.
C. Amount of Severance Pay
-----------------------
An Employee eligible for severance pay under Section B shall
receive the following:
(1) Cash Payment
(a) Employees in VP; I-P and I of the Approved Company
--------------------------------------------------
Management Incentive Plan
-------------------------
An amount equivalent to twenty-four (24) months' salary (at
the highest annual rate in effect during the three-year
period prior to termination), plus a target bonus under the
Management Incentive Plan (MIP) in effect at the time of
termination.
(b) Other Approved Company Management Plan Participants
An amount equivalent to twelve (12) months' salary (at the
highest annual rate in effect during the three-year period
prior to termination), plus a target bonus under the
Management Incentive Plan (MIP) in effect at the time of
termination.
(c) All Other Employees
-------------------
An amount equivalent to six (6) months salary (at the
highest annual rate in effect during the three year period
prior to termination), plus "notice pay" equivalent to one
(1) month's pay.
(d) Form of Payment
---------------
Employees shall elect to receive their cash severance
payment in a single lump sum or in semi-monthly installment
payments, consistent with paragraphs (a), (b) and (c) above
and the Company's established payroll procedures for the
duration of the severance period. All cash severance
payments will be net of all applicable federal and state
withholding taxes. An Employee receiving installment
payments may at any time elect to suspend such future
payments and receive any remaining installments in a lump
sum.
(2) Group Insurance
---------------
Medical, life and dental insurance benefits, if any, in effect
at the time of termination shall be extended to the earlier of
when the Employee is covered by another employer's plan or:
(a) for any Employee electing cash severance payment in a single
lump sum, six (6) months after termination.
(b) for any Employee electing cash severance payment in
installment payments, the end of the month in which the
severance installment payments expire.
(c) All other insurance coverage (LTD; AD/D; travel/ accident)
will cease effectiveness as of the conclusion of the severed
employee's last day of active employment.
(3) Envirodyne Retirement Savings Plan
----------------------------------
Participation in the Envirodyne Retirement Income Plan will cease
as of the employee's last day of active employment. Company
contributions to the Plan on behalf of such employee will also
cease of the employee's last day of active employment. The act
of severance as defined in this Policy will, however, cause an
acceleration of the vesting provision of the Plan such that the
terminated employee will be one hundred percent (100%) vested in
the company's contributions on his/her behalf as of the last day
of the employee's active employment with the Company.
(4) Vacation
--------
Employees shall receive cash payment for earned but not taken
vacation in addition to severance pay. Payments for earned but
not taken vacation shall be made at the time of termination.
(5) Executive Automobiles
---------------------
For those participants, the act of severance as defined in this
policy shall result in the acceleration of the monthly automobile
allowance remaining under each executive's lease arrangement in
place at the time of separation. The executive, however, will
become responsible for all expenses associated with the operation
of the car, i.e., insurance, maintenance and repair, registration
fees, etc. This payment will be made to the executive at the
time of separation and will be grossed up for income tax purposes
at the executive's rate of tax withholding, both federal and
state.
(6) Outplacement
------------
At the discretion of the Company, outplacement services may be
provided for Employees in the manner determined by the Company.
No payment shall be made to an Employee in lieu of outplacement
services.
D. Severance Policy Integration
----------------------------
Notwithstanding any provision of this Policy to the contrary, the
severance pay under this Policy shall be reduced by the severance
benefits then payable to an Employee under any other agreement,
understanding, plan, policy, program or arrangement of the Company or
a subsidiary of the Company.
E. Other Company Payments
----------------------
In addition to any severance benefits payable to an Employee
under this Policy, such Employee shall be entitled to receive all
benefits payable under any other plan or agreement of the Company
unrelated to severance benefits.
F. Change of Control Definition
----------------------------
A "Change of Control" for purposes of this Policy shall mean the
occurrence of either of the following events: (i) any person (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act")) is or becomes a "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire whether such
right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the Common Stock of the
Company or (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new or replacement
directors whose election by such Board or whose nomination for
election by the shareholders of the Company was approved by a vote of
a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of
the Company then in office.
G. General Release
---------------
Notwithstanding Section B or any other provision of this Policy
to the contrary, in order to receive any severance pay under this
Policy, an Employee must sign a statement, in such form as determined
by the Company, which releases the Company and its subsidiaries,
shareholders, directors, officers, employees, successors and assigns
from any existing and future claims except as such claims of any
nature relate directly to the payment of any benefits due under this
Policy or any other severance benefit.
H. No Alienation of Severance Benefits
-----------------------------------
No interest of an Employee or his spouse or any other beneficiary
under this Policy, or any right to receive any payments or
distribution hereunder, shall be subject in any manner to sale,
transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind, nor may such interest or right
to receive a payment or distribution be taken voluntarily or
involuntarily, for the satisfaction of the obligations or debts of,
or other claims against, an Employee or his spouse or other
beneficiary, including claims for alimony, support, separate
maintenance, and claims of bankruptcy proceedings.
I. Administration
--------------
The President of the Company and the Vice President, Human
Resources of Envirodyne Industries, Inc. be responsible for
interpreting and assuring the effective administration of this Policy.
All exceptions to or interpretations of this Policy must be approved
in advance.
J. Duration of Policy
------------------
This Policy shall become effective as of May 15, 1996, and shall
remain in effect until this Policy is otherwise amended or terminated
by the Company; provided, however, that in the event a Change of
Control or the elimination or consolidation of all or part of this
office occurs during the term of this Policy, the term of this Policy
shall be deemed to be extended to and including the anniversary date
twenty-four (24) months following the effective date of such Change
of Control or office consolidation or elimination.
IN WITNESS WHEREOF, Envirodyne Industries, Inc. has caused this
instrument to be executed by its duly authorized officer on May 15, 1996.
ENVIRODYNE INDUSTRIES, INC.
By: __________________________
F. Edward Gustafson
Chief Executive Officer
Envirodyne Industries, Inc.
