UNITED STATES
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 [NO FEE REQUIRED]
For the quarterly period ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from.....to.....
Commission file number 1-3290
NVF COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 51-0035270
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
1166 Yorklyn Road, Yorklyn, Delaware 19736
(address of principal executive offices)
(Zip Code)
(302) 239-5281
(Registrant's telephone number, including area code)
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 .
There were 93,270,917 shares of common stock $.01 par value
outstanding at October 30, 1995.
NVF COMPANY
FORM 10-Q
Quarter ended September 30, 1995
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Earnings (Loss)
Nine Months Ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 6
Consolidated Statements of Changes in Stockholders'
Equity (Deficit)
Nine Months Ended September 30, 1995 and 1994 8
Notes to Interim Consolidated Financial Statements 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations 29
Part II. Other Information:
Item 1. Legal Proceedings 34
Item 3. Defaults Upon Senior Securities 34
Item 5. Other Information 35
Item 6. Exhibits and Reports on Form 8-K 35
Signatures 36
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
(thousands of dollars)
Unaudited
September 30, December 31,
Assets 1995 1994
Current assets:
Cash and equivalents $ 463 1,274
Receivables, less allowance for doubtful
accounts of $566 and $380 15,071 14,884
Inventories 13,888 14,389
Other current assets 453 471
Total current assets 29,875 31,018
Investment in affiliate 102 342
Properties, at cost 88,010 85,652
Less accumulated depreciation and amortization (69,089) (67,068)
Net properties 18,921 18,584
Other assets 2,386 2,317
$ 51,284 52,261
Liabilities and Stockholders' Deficiency
Current liabilities:
Current portion of long-term debt $ 9,887 9,849
Accounts receivable financing 4,819 3,641
Accounts payable 1,734 1,558
Accrued professional liabilities 7,321 5,214
Accrued interest payable 1,369 1,336
Accrued wages and other employee costs 1,510 1,865
Other current liabilities 433 864
Total current liabilities 27,073 24,327
Other noncurrent liabilities 2,891 2,770
Long-term debt 182 35
Liabilities subject to compromise (A) 88,348 88,349
Stockholders' Equity:
Common stock, $.01 par value; authorized
200,000,000 shares; issued 95,563,461
shares 956 956
Capital in excess of par value 234,943 234,943
Accumulated deficit (294,757) (290,767)
Treasury common stock, 2,292,544 shares
at cost (8,352) (8,352)
Total stockholders' deficiency (67,210) (63,220)
$ 51,284 52,261
See accompanying notes to consolidated financial statements
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
(thousands of dollars)
Unaudited
September 30, December 31,
1995 1994
(A) Liabilities subject to compromise consist
of the following:
Trade and other miscellaneous claims $ 9,079 9,445
Accrued interest 2,076 2,076
Pension obligations 5,699 5,378
Post retirement benefit obligations, net 734 527
Subordinated debentures, 5% 48,046 48,046
Subordinated debentures, 10% 11,375 11,375
Other accrued liabilities 11,308 11,340
Current portion of long-term debt 16 39
Noncurrent portion of long term debt 15 123
$ 88,348 (B) 88,349 (B)
(B) Certain liabilities have been separately classified in the Plans of
Reorganization filed on April 13, 1994 and July 14, 1994.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Earnings (Loss)
(In thousands except per share amounts)
Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Net sales and operating revenues $ 23,537 23,091 74,529 70,780
Cost of goods sold 19,590 18,716 61,968 56,648
Depreciation and amortization 674 719 2,022 2,133
Selling, general and administrative
expenses 3,037 2,703 8,798 8,272
23,301 22,138 72,788 67,053
Income from operations 236 953 1,741 3,727
Other income (expense):
Other income (expense), net 375 36 24 (151)
Debt costs (Contractual interest
$1,251, 1,493, 4,072, 4,538) (121) (608) (682) (1,883)
254 (572) (658) (2,034)
Income from operations
before reorganization items
and provision for taxes on
income 490 381 1,083 1,693
Reorganization items:
Professional fees 1,613 891 5,073 2,951
Loss from operations
before taxes on income (1,123) (510) (3,990) (1,258)
Provision for taxes on income - - - 15
Net Loss (1,123) (510) (3,990) (1,273)
Weighted average number of common
and common equivalent shares
outstanding, in thousands of
shares 93,271 93,271 93,271 93,271
Loss per share $ (0.01) (0.01) (0.04) (0.01)
See accompanying notes to consolidated financial statements.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994
(thousands of dollars)
Unaudited
1995 1994
Cash flows from operations:
Net loss $ (3,990) (1,273)
Adjustments to reconcile loss to net
cash provided by operating activities:
Depreciation and amortization 2,022 2,137
Equity in earnings of affiliates 240 -
Total adjustments 2,262 2,137
(1,728) 864
(Increase) decrease in assets:
Receivables, net (187) (860)
Inventories 501 582
Other current assets 18 (118)
Other assets long-term (69) (121)
Increase (decrease) in liabilities:
Accounts payable (34) 79
Accrued interest payable 33 753
Accrued taxes - 22
Accrued wages and other employee costs (191) 538
Other current liabilities (463) 14
Other noncurrent liabilities 328 107
Total (64) 996
Cash provided from (used in)
operating activities without
reorganization items (1,792) 1,860
Cash flows from reorganization items:
Increase (decrease) in accrued professional
fees rendered in connection with
bankruptcy proceeding 2,107 1,662
Net cash provided from operating
activities 315 3,522
Cash flows from investing activities:
Capital expenditures (2,358) (1,114)
See accompanying notes to consolidated financial statements.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Cash Flows (continued)
Nine Months Ended September 30, 1995 and 1994
(thousands of dollars)
Unaudited
1995 1994
Cash flows from financing activities:
Net Proceeds (repayments) from accounts
receivable financing 1,178 (1,749)
Increase (repayments) of long-term debt 54 29
Net cash provided (used) by financing
activities 1,232 (1,720)
Net increase (decrease) in cash and equivalents (811) 688
Cash and equivalents at beginning of year 1,274 1,979
Cash and equivalents at end of period $ 463 2,667
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest $ 649 1,113
Income taxes $ - -
Supplemental schedule for noncash investing
and financing activities:
Total capital expenditures 2,358 1,114
Amounts representing capital leases (90) (30)
Net cash used for investing activities 2,268 1,084
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Nine Months Ended September 30, 1995 and 1994
(thousands of dollars)
Unaudited
Capital In Treasury
Common Excess Of Accumulated Common
Stock Par Value Deficit Stock
Nine Months ended September 30, 1995
Balance at beginning of period $ 956 234,943 (290,767) (8,352)
Net loss for the period - - (3,990) -
Balance at end of period $ 956 234,943 (294,757) (8,352)
Nine Months ended September 30, 1994
Balance at beginning of period $ 956 234,943 (279,784) (8,352)
Net loss for the period - - (1,273) -
Balance at end of period $ 956 234,943 (281,057) (8,352)
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements
Unaudited
Note 1 - Basis of Presentation
The condensed financial information included herein has been
prepared by the Company, without audit, for filing with the
Securities and Exchange Commission. The interim consolidated
financial statements include the accounts of the NVF Company
("NVF") and its wholly-owned subsidiaries (NVF, together with its
subsidiaries, the "Company,") unless the context otherwise
indicates. NVF statements have been filed in accordance with AICPA
Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code". The subsidiary
companies, Parsons Paper and NVF Canada, are not in bankruptcy thus
there was no change made in the manner they are accounted for.
Stand alone statements for NVF can be found in Note 10. All
significant intercompany accounts and transactions have been
eliminated in consolidation. The interim financial statements
presented reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of the
interim period presented. All adjustments were of a normal
recurring nature with the exception of the reclassification of
liabilities subject to compromise. These interim financial
statements should be read in conjunction with the consolidated
statements and related notes thereto contained in the Form 10-K of
the Company for the year ended December 31, 1994.
On August 27, 1993, three creditors of NVF filed an
involuntary bankruptcy petition against NVF under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the District of Delaware ("Bankruptcy
Court"), Case No. 93-1020. On September 15, 1993, NVF filed its
answer to the involuntary petition, and an order for relief was
entered by the Bankruptcy Court. NVF continues to operate its
business and is in possession of its assets as a debtor in
possession in accordance with the Bankruptcy Code. No trustee or
examiner has been appointed.
On April 13, 1994, the Company filed its Disclosure Statement
and Plan of Reorganization. The hearing on the adequacy of the
Disclosure Statement was set for June 15, 1994. On June 6, 1994,
the Disclosure Statement hearing was continued until June 30, 1994.
The hearing was subsequently taken off calendar. On July 15, 1994,
the Company filed its First Amended Disclosure Statement and First
Amended Plan of Reorganization. A hearing on the adequacy of the
First Amended Disclosure Statement was set for September 13, 1994.
On September 7, 1994, the Company filed its Second Amended
Disclosure Statement and Second Amended Plan of Reorganization. On
September 13, 1994, the hearing on the adequacy of the Second
Amended Disclosure was taken off calendar due to the agreement (the
"Joint Agreement") reached before the Bankruptcy Court between NVF
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements (Continued)
Unaudited
Note 1 - Basis of Presentation (continued)
and the Official Committee of Unsecured Creditors of NVF (the
"Committee") to jointly retain an investment banking firm for the
purpose of marketing and selling or recapitalizing the Company.
The investment banking firm, Alex. Brown & Sons Incorporated
("Alex. Brown"), made procedural recommendations that were agreed
upon by NVF and the Committee and approved by the Bankruptcy Court.
Alex. Brown has implemented those procedures and recommended to NVF
and the Committee what they believe to be the highest and best
offer which will realize the greatest value to the creditors. In
accordance with the procedures approved by the Bankruptcy Court,
Alex. Brown contacted a total of 147 potential purchasers for NVF.
On July 24, 1995 Alex. Brown submitted its recommendation to the
Bankruptcy Court under seal. On August 3, 1995 a hearing was held
in the Bankruptcy Court on an Emergency Motion of First Security
and Investment Corporation ("First Security") and Security
Management Corporation for Examination of Alex. Brown & Sons, Inc.
Pursuant to Federal Rule of Bankruptcy Procedure 2004. As a result
of this hearing, the Court has permitted the mover to review the
findings and conclusions of Alex. Brown's decision. Eventually,
Alex Brown determined that the bid by First Security was the
highest and the best bid. On October 27, 1995, NVF and the
Committee filed their motion with the Bankruptcy Court seeking
approval to enter into and execute a stock purchase agreement with
First Security. A hearing is scheduled in mid November. No later
than thirty days after the Bankruptcy Court approves the motion, an
overbid sale will be conducted. The winning bid is expected to be
incorporated into a plan of reorganization that will be proposed
jointly by NVF and the Committee. The plan will set forth the
distributions and treatment for all creditors of the bankruptcy
estate. Common stockholders of NVF are not expected to receive any
distributions. The Bankruptcy Court has granted NVF an extension
of its exclusivity period to November 14, 1995.
On June 25, 1993 an involuntary bankruptcy petition was filed
against APL Corporation ("APL"), the Company's 68% owned
subsidiary. On July 23, 1993, APL filed a motion in the Bankruptcy
Court for the Southern District of Florida and obtained an order on
July 27, 1993 converting the involuntary petition to a voluntary
case under Chapter 11 of the Bankruptcy Code. On or about February
24, 1995, a Disclosure Statement For Creditors' Committee's Plan of
Reorganization was filed in the APL bankruptcy case. A hearing on
the Disclosure Statement in the APL case was held on April 6, 1995
and the Disclosure Statement was approved on April 15, 1995. The
Plan was confirmed on June 8, 1995. Due to the fact that NVF no
longer has control over APL, statements presented herein have been
restated to reflect APL as a discontinued operation and to reflect
the deconsolidation of APL effective June 30, 1993. The Company
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements (Continued)
Unaudited
Note 1 - Basis of Presentation (continued)
has approximately $2.5 million face value of APL's 10-3/4%
Subordinated Sinking Fund Debentures, all of which have been
reserved for in the accompanying financial statements. However a
settlement of litigation commenced by the Committee (See Note 9)
calls for the holders of 11-3/4% Secured NVF Promissory Notes to
return such notes for the return of the APL 10-3/4% Subordinated
Sinking Fund Debentures. A motion seeking approval is to be heard
by the Bankruptcy Court on November 15, 1995.
As part of a series of transactions on April 23, 1993
Insurance and Risk Management ("IRM") repurchased from DWG
Corporation ("DWG") 25% of the issued and outstanding stock of IRM.
As a result of this purchase, NVF's ownership of IRM increased from
45% to 60% as IRM recorded the purchase of the shares from DWG as
treasury stock thus reducing the outstanding shares. In a related
transaction IRM sold to DWG all of its 2.7% stake in CFC Holdings
for $8.4 million resulting in an approximate $7 million gain on the
sale. The result of this gain was IRM's equity went from negative
to positive, therefore NVF, as a 60% owner, recorded its share of
the equity in IRM, approximately $1.5 million. NVF's equity in IRM
was then reduced by dividends paid by IRM in 1993, 1994 and 1995 of
$1,066,667, $133,333 and $240,000, respectively. IRM, DWG and NVF
were affiliated as a result of common ownership and control by
Victor Posner. As a result of the April 23, 1993 transactions DWG
was no longer affiliated with NVF and IRM.
IRM is now in the process of being liquidated. The decision
to liquidate IRM was due to the fact that IRM's business was almost
entirely conducted with affiliated companies. With DWG, the
largest of such affiliated companies, becoming disaffiliated and
electing not to use IRM for insurance placements and claims
managements, IRM's business would become too small to be useful or
profitable, thus the decision to liquidate. The decision to
liquidate did not have a material impact on the Company's financial
statements. Due to the fact that IRM has not and will not take any
new business after June 30, 1993 and will be liquidated as soon as
is practicable, NVF has elected to continue to account for IRM
under the equity method on a quarter lag basis.
For the nine months ended September 30, 1995 and 1994 NVF had
no income from its equity investment in IRM and NVF has a carrying
value of its investment in IRM at September 30, 1995 and December
31, 1994 of $102,000 and $342,000, respectively. NVF has also
recorded a liquidating dividend of $133,333 in Other Income
(Expense) in the first quarter of 1994. In April 1995 the Company
recorded an additional $240,000 liquidating dividend from IRM.
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements (Continued)
Unaudited
Note 1 - Basis of Presentation (continued)
The financial statements included herein have been prepared
assuming that the Company will continue as a going concern and,
accordingly, they do not include any adjustments relating to the
recoverability and classification of recorded assets amounts nor
the amounts and classification of liabilities that might be
necessary should NVF be unable to continue in existence or be
required to sell its assets. As a result of the uncertainties
described above, reference is made to Note 8 of the Notes to
Interim Consolidated Financial Statements included herein for
information concerning the estimated liquidation value of NVF on a
consolidated basis.
Note 2 - Accounts Receivable
The Company had an accounts receivable financing arrangement
with Schottenstein Stores Corporation covering substantially all of
its accounts receivable. Such arrangement provided for advances to
be made against eligible accounts receivable of up to 75% of the
full net amount of such receivables, with interest on such advances
at the prime rate plus 2%, the payment of a commission of 1% of the
face amount of all accounts for which advances are made and the
payment of an administrative fee of $100,000 per year. On March 8,
1995 the Company petitioned the Bankruptcy Court to change
financing arrangements of its accounts receivable. The CIT
Group/Business Credit, Inc. ("CIT") offered the Company a line of
credit up to the lesser of $8,000,000 or 80% of eligible accounts
receivable at an interest rate of prime (8.75% at September 30,
1995) plus 1/2%, a line of credit fee of 1/2% per annum on the
unused balance and a $3,000 per month Collateral Management fee.
On April 28, 1995 the Bankruptcy Court approved the CIT financing
agreement and on May 1, 1995 the Company began using CIT as its
accounts receivable financier. At September 30, 1995, the Company
had outstanding advances under the CIT arrangement aggregating
approximately $4.8 million.
Note 3 - Inventories
The following is a summary of the major classifications of
inventories:
September 30, December 31,
1995 1994
(thousands of dollars)
Raw materials and supplies $ 4,746 $ 3,984
Work in process 2,963 3,177
Finished goods 6,179 7,228
$ 13,888 $ 14,389
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements (Continued)
Unaudited
Note 4 - Interim Period Income Taxes
No Federal income tax benefits were recorded for NVF and its
subsidiaries in the first nine months of 1995 and 1994 because of
financial reporting limitations on recognizing tax benefits on
losses carried forward to future years.
Note 5 - Transactions with Related Parties
In December 1991, NVF acquired from certain holders of APL's
10-3/4% Subordinated Sinking Fund Debentures due August 1, 1997,
approximately $2.5 million of such debentures. In exchange for
such debentures, NVF issued 11-3/4% secured amortizing promissory
notes due December 26, 2001 that require level monthly payments of
approximately $36,000, the last of which was made in July, 1993.
All payments due since have not been made due to the bankruptcy.
According to the terms of the notes, the notes are in default and
may be called for payment of 100% of principal plus interest
($2,417,000 at December 31, 1994 and September 30, 1995). For the
accrued interest on such acquired APL debentures in the amount of
approximately $248,000 NVF issued secured promissory notes that
were paid on June 26, 1992. All such notes are secured by
mortgages on manufacturing properties of NVF. Due to the APL
bankruptcy, the Company has set up reserves for the entire amount
of the APL Debentures. However a settlement of litigation
commenced by the NVF Creditors' Committee (See Note 9) calls for
the holders of 11-3/4% Secured NVF Promissory Notes to return such
notes for the return of the APL 10-3/4% Subordinated Sinking Fund
Debentures. A motion seeking Court approval of the settlement will
be heard by the Bankruptcy Court on November 15, 1995.
Note 6 - Defaults on Subordinated Debt
NVF did not make sinking fund payments of $4.8 million due on
January 1, 1993 and $43.2 million due January 1, 1994 nor did it
make $1.2 million interest payments due July 1, 1993 and January 1,
1994 on its 5% Subordinated Debentures. According to the terms of
the debentures, the debentures are in default and may be called for
100% of principal plus interest. The aggregate principal amount of
the 5% Subordinated Notes at December 31, 1994 and September 30,
1995 was $48,046,000. The contractual accrued interest payable on
the 5% Subordinated Debentures at December 31, 1994 and September
30, 1995 was $4,804,567 and $6,606,286, respectively. NVF did not
make a sinking fund payment of approximately $285,000 on November
14, 1993 and November 14, 1994 nor did it make interest payments of
$568,757 on November 14, 1993, May 14, 1994, November 14, 1994 and
May 14, 1995 on its 10% Subordinated Debentures. According to the
terms of the debentures, the debentures are in default and may be
called for 100% of principal plus interest. The aggregate
principal amount of the 10% Subordinated Notes at December 31, 1994
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
and September 30, 1995 was $11,375,000. The contractual accrued
interest payable on the 10% Subordinated Debentures at December 31,
1994 and September 30, 1995 was $1,843,068 and $2,696,205,
respectively.
Note 7 - Defaults on Secured Debt
NVF did not make interest payments of approximately $373,000
on November 22, 1993, May 22, 1994, November 22, 1994 and May 22,
1995 on its 10% Secured Notes. According to the terms of the notes
the notes are in default and may be called for 100% of the
principal ($7,461,644) plus interest. The contractual accrued
interest payable on the 10% Secured Notes at December 31, 1994 and
September 30, 1995 was $1,214,219 and $1,773,767, respectively.
NVF also did not make monthly payments of approximately $36,000 on
its 11-3/4% Secured Promissory Notes since July, 1993. (See Note
5). According to the terms of the notes, the notes are in default
and may be called for 100% of principal ($2,305,451) plus interest.
The contractual accrued interest payable on the 11-3/4% Secured
Promissory Notes at December 31, 1994 and September 30, 1995 was
$364,911 and $540,498, respectively.
During the fourth quarter of 1994 the Company became aware
that the collateral securing its 11-3/4% Secured Promissory Notes
and its 10% Secured Notes was insufficient to cover the face value
of the obligations. Per Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code",
the Company ceased accruing interest on these debts as of September
30, 1994. As of September 30, 1995 the Company has accrued
$303,578 and $1,027,703 of interest on the 11-3/4% Secured
Promissory Notes and 10% Secured Notes, respectively, in "Accrued
Interest Payable".
Note 8 - Pro Forma Liquidating Balance Sheet - NVF (Unaudited)
Because of the uncertainties concerning the Company's ability
to continue operations on a going concern basis described elsewhere
herein, set forth below is certain pro forma information concerning
the estimated liquidating value of the Company on a consolidated
basis. Such estimated values are the Company's best estimates of
the recoverability of asset amounts upon a liquidation. No
assurance can be given that actual liquidation values will
approximate those set forth below. Values obtainable upon
liquidation can vary widely depending upon various factors,
including general business and market conditions and the manner and
time of sales. The assumption and methodology in estimating the
liquidating value of NVF assets were as follows:
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 8 - Pro Forma Liquidating Balance Sheet - NVF (Unaudited)
Current assets were made up of accounts receivable and
inventory. Most of the Company's inventory is either in process or
finished goods. If liquidated, the Company would have difficulty
selling the inventory without deep discounts. NVF's product is the
base material in electrical components, etc. A large amount of
NVF's inventory is in the circuit board industry. Customers are
unlikely to purchase this inventory because it is technical in
nature and requires tight compliance to military specifications.
For these reasons, inventory was valued at 40% of book value. The
majority of the receivables will be difficult to collect because of
the simple fact that the Company is in liquidation, customers will
not want to pay or may want to return unused materials, etc.
Management feels that there would be a 75% recovery on its
receivables. Properties were valued at current market values and
do not reflect a true liquidation valuation. Liabilities are
valued dollar for dollar.
September 30, 1995
Historical ProForma
(In thousands)
Assets
Current assets $ 29,875 17,321
Properties, net 18,921 11,832
Other assets 2,488 -
$ 51,284 29,153
Liabilities and Stockholders' Deficiency
Current liabilities 27,073 27,073
Long-term debt and other liabilities 91,421 91,421
Stockholders' deficiency (67,210) (89,341)
$ 51,284 29,153
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings
By virtue of NVF's Bankruptcy discussed elsewhere herein, all
litigation against NVF has been stayed pursuant to 11 USC Section
362 and unless otherwise ordered such proceedings will be resolved
in the context of the bankruptcy case.
On December 1, 1993, in an action brought by the Securities &
Exchange Commission not involving the Company, a judge in the
United States District Court for the Southern District of New York
issued a decision stating that the Court would issue a decree,
among other things, barring Victor Posner and Steven Posner from
serving as officers and directors of any reporting company under
the Securities Exchange Act of 1934, as amended, and ordering that
the stock Victor Posner and Steven Posner own in reporting
companies which they control (as defined in that Act) be placed in
voting trusts. On December 29, 1993 such decree was issued. On
January 4, 1994 Victor Posner resigned his positions as Director,
President and Chief Executive Officer of the Company. The United
States Court of Appeals for the Second Circuit has affirmed the
lower court's judgment and certiori has been denied by the United
States Supreme Court.
On June 8, 1994, Richard L. Beltzhoover, as Trustee of The
Employees' Pension and Investment Plan of Insulation Represen-
tatives, Inc. filed suit against NVF in the Court of Chancery of
the State of Delaware In and For New Castle County. The suit
requested that the Court of Chancery summarily order an annual
meeting of the shareholders of the Debtor. On December 5, 1994 the
Board of Directors of the Company approved a settlement proposal
whereby Beltzhoover withdrew his motions and covenants not to
refile, initiate, commence or resurrect any of the motions at any
time before July 31, 1995. Beltzhoover also agreed not to seek
reimbursement from the Company for any expenses incurred as a
result of his efforts. In turn, the Company elected Richard
Beltzhoover and Kim Del Fabro to its Board of Directors effective
December 5, 1994.
On June 4, 1993 Insurance Company of North America ("INA")
filed suit against the Company claiming INA was indemnified by NVF
on certain self insured workers compensation and mining reclamation
obligations written for Sharon Steel Corporation and its
subsidiaries. By virtue of NVF's bankruptcy action, this suit has
been stayed. INA has filed a proof of claim against the Company in
the amount of approximately $4,500,000 in the Bankruptcy Court
which has been resolved by allowance of INA's unsecured claim in
the amount of $4.385 million. The Company has accrued the entire
amount of the claim under "Liabilities Subject to Compromise".
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
On March 17, 1993, New Castle County filed an action in the
Superior Court of the State of Delaware against the Company
claiming that the Company owed New Castle $1,566,956.81 for sewer
service provided to the Company's Yorklyn, Delaware plant. The
Company is unable to predict the outcome of this litigation at this
time; however, the Company believes that it has certain rights of
setoff arising from the failure of New Castle County to operate and
maintain a sewer line and pump station on the Company's land
pursuant to an earlier agreement.
The Creditor's Committee commenced an adversary action in the
United States District Court for the District of Delaware against
certain present and former directors of the Company (including
Messrs. Victor and Steven Posner), Triarc Companies, Inc. (formerly
known as DWG), RC/Arby's Corporation, American Financial
Corporation, Great American Insurance Company and Mid-Continent
Casualty Company (the "Litigation"). The First Amended Complaint
in the action alleged causes of action based on allegations of
breach of fiduciary duty, waste, fraudulent transfers, preference
payments, and violations of the Racketeer influence and Corrupt
Organizations Act ("RICO"). The District Court subsequently
dismissed the Committee's RICO claims on the grounds that
defendants' alleged acts of mail and wire fraud did not proximately
cause injury to NVF. The District Court also held that Delaware's
three-year limitations period set forth in 10 Del. C. 8016 might
apply to some causes of action and allowed the Committee to file a
second amended complaint to plead facts showing why its claims are
not time-barred. In its second amended complaint, the Committee
named NVF Company as a nominal defendant. The Committee had also
filed a motion seeking leave to file a third amended complaint and
a motion seeking reconsideration of the order dismissing the RICO
claims. Following extensive discovery and pre-trial preparation,
on May 9, 1995, the parties to the litigation reached a settlement
of their disputes before a United States Magistrate. Pursuant to
the settlement, which is subject to approval by the Bankruptcy
Court, the parties have agreed, among other things, to the
following: A) Victor Posner has agreed to pay $20,750,000 to the
NVF estate; B) the Committee has agreed that the claim of the 10%
secured notes will be allowed in the approximate amount of $8.2
million; C) the holders of the 11-3/4% Secured NVF notes have
agreed to return such notes in exchange for the return of
approximately $2,538,000 principal amount of the APL 10-3/4%
Subordinated Sinking Fund Debentures held by NVF; D) DWG will
withdraw its unsecured claims of approximately $210,000; and E) the
parties have agreed to exchange mutual releases. A motion seeking
approval of the settlement has been submitted to the Bankruptcy
Court.
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
The Company and the EPA, subject to obtaining necessary
approvals, had reached agreement in principle with respect to
treatment of environmental claims under the Debtor's plan. Under
this agreement, among other things, environmental obligations would
pass through to NVF after reorganization. In light of the
retention of Alex. Brown for the purpose of selling or
recapitalizing the Company, NVF and the EPA have not taken any
further steps to implement this agreement due to the changed
circumstances surrounding the sale or recapitalization of the
Company.
Tybouts Corner Landfill
In October 1980, the EPA filed suit against New Castle County,
Delaware and others with respect to the disposal of waste at the
Tybouts Corner Landfill which is adjacent to the Army Creek
Landfill described below. The EPA sought injunctive relief and
recovery of its clean up costs. The Company and numerous other
alleged potentially responsible parties ("PRP") were named in the
suit as third party defendants in 1985. A Consent Decree was
approved by the Court resolving the Company's liability.
The Company was also named as a defendant in an action brought
by certain residents in the vicinity of the Tybouts Corner Landfill
arising out of the alleged contamination of the site. In November
1992, the Company entered into a settlement of such action with the
Andrews Generator Settlement Group providing for the payment by the
Company of approximately $122,000 in twelve equal monthly
installments (of which three payments in the aggregate amount of
$30,419.58 remain outstanding). The underlying action has been
dismissed. In the event of nonpayment by the Company, the
settlement with the Andrews Group provides for a lien on the
Company's property in New Castle County as a remedy.
Army Creek Landfill & Delaware Sand and Gravel Landfill
In a November 4, 1993 demand letter sent by the New Castle
County Finance Legal Office to the Company and all other non-
settling potentially responsible parties, New Castle County
demanded $9 million for costs related to the installation and
operation of a water treatment plant and oversight costs
attributable to both the Army Creek Landfill and the Delaware Sand
and Gravel Superfund sites which are located in close proximity to
each other in New Castle County, Delaware. On January 27, 1994,
the New Castle County Finance Legal Office filed an Addendum to
Chapter 11 Proof of Claim of New Castle County, Delaware, against
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
the Company for unliquidated costs attributable to both the Army
Creek Landfill and the Delaware Sand and Gravel Superfund sites as
follows:
1) $3 million pursuant to the terms of a Consent Decree
related to the clean up of both sites, and
2) $6 million (exclusive of interest) in clean up costs at
both sites prior to entry of the Consent Decree.
Following court ordered mediation, the Company settled all of
its liability in the Delaware Sand and Gravel Superfund site for
$300,000. A Consent Decree incorporating the settlement was
approved and signed by the court on June 14, 1995. By paying this
amount, the Company received a complete release from liability
related to this site. Further, the Delaware Sand and Gravel
Consent Decree also released its signatories, including NVF, from
any groundwater remedy costs associated with Army Creek. The
County may or may not have additional liability claims related to
the soil or other remedial activities at the Army Creek Landfill.
However, at present no claim, demand or other notice has been
issued by the County to the Company for any other costs related to
the Army Creek Landfill.
Kennett Square Plant Site and Noznesky Junk Yard
The Company was notified in 1984 by the Pennsylvania
Department of Environmental Resources ("DER") of a discharge
containing PCBs from an outfall from its Kennett Square plant in
Chester County, Pennsylvania to an unnamed tributary of the west
branch of Red Clay Creek. The Company responded with an
investigation and clean up of the potential source. The Company
entered into a consent order and agreement with the EPA with
respect to on-site clean up and the EPA advised the Company that it
has fully complied with the order. The DER subsequently requested
that the Company clean up PCBs in the unnamed tributary. With
respect to alleged off-site contaminations, the EPA issued two
unilateral orders requiring testing and removal by the Company of
certain contaminated soils. The Company filed a final report with
the EPA under the second unilateral order, which expressly
superseded the first order, stating that the Company believed its
terms had been complied with. The Company had remediated the swale
by the removal of tons of soil, testing and developing a solution
to the PCBs in the rail road ditch. The Company also discussed
with the EPA a possible settlement with respect to additional
elevated concentrations of PCBs that were detected in an off-site
drainage ditch. On November 10, 1992, the EPA sent to the Company
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
a unilateral order requiring the prompt development and
implementation of a response action plan for (1) the evacuation and
disposal of PCB contaminated soils, sediments and debris from the
off-site drainage ditch and (2) the "swale/tributary PCB report"
described above. The Company declined to undertake the order for
several reasons including financial and technical ones. Through
September 23, 1994, the EPA reports it has incurred costs of
approximately $2,298,189 in performing part or all of the work.
$1,035,047 of those costs are reported to have been incurred
prepetition with the remainder subsequent to the filing. The EPA
could seek to impose fines of $25,000 per day and/or treble damages
for non-compliance with the order due to the Company's refusal to
perform the work.
The EPA is evaluating possible investigation and cleanup of
the site. In addition the EPA has suggested to the Company that it
reclaim a sedimentation pond. Further, the EPA has advised the
Company that it is reviewing Kennett Square and/or adjacent areas
for possible listing on the National Priorities List ("NPL") as a
Superfund site. The EPA informed the Company that costs related to
Kennett Square could be $10 million dollars or higher if Kennett
Square is named as a Superfund site. The EPA has declined to
provide any additional information other than such evaluation is
ongoing.
In approximately March, 1995, the Company also received notice
of violation letters and/or information requests from governmental
agencies regarding alleged hazardous waste management, air
emission, and wastewater discharge violations. The Company has
retained consultants to advise it about the substance of those
claims and the potential compliance costs, if any.
EPA recently investigated and cleaned up a site known as the
Noznesky Junkyard which is adjacent to the Kennett Square Plant.
EPA incurred costs of approximately $1.8 million in the clean up.
Because EPA has not served demand letters on or proceeded with any
formal action against potentially responsible parties, NVF is
uncertain of its connection to this site.
Lipari Landfill
The three principal defendants/third-party plaintiffs at the
Lipari landfill site, Rohm & Haas, Owens-Illinois, and Manor Health
Care, settled with the United States and the State of New Jersey in
1994 and agreed to pay most of the government's costs and to
perform the remedy at the site. Additionally, numerous potentially
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
responsible parties named as third-party defendants by the
principal defendants settled their liability as well. Ten (10)
third-party defendants remain in the litigation, including the
Company, with the third-party plaintiffs. The third-party
defendants generally are substantial companies. The three third-
party plaintiffs and the ten third-party defendants participated in
court ordered mediation to resolve the matter throughout much of
1994 and 1995. This mediation failed and trial schedule is
expected to be set. The three third-party plaintiffs allege joint
and several liability, and seek approximately $6 to $9 million from
the third-party defendants.
GEMS Landfill
The Company, along with numerous other parties, is a recipient
of a unilateral 106 order directing it to perform certain remedial
actions at the GEMS Landfill site in New Jersey as a result of
alleged waste disposal at such site. The Company has also been
named a defendant in litigation commenced by NJDEP with respect to
the GEMS site and had entered into a partial settlement with
respect to Phase I of the GEMS site remediation, for which it paid
approximately $150,000. Subsequently, New Jersey issued a
directive to existing PRPs including the Company, relating to the
GEMS site Phase II (final) remediation. The Company believes there
may be a reallocation of waste volumes attributable to
participating parties which could affect the Company's share for
both Phase I and Phase II settlement cost. Additionally, a class
action involving 200 to 900 property owners received class
certification and litigation is proceeding against some PRPs at
this site.
Helen Kramer Landfill, Marvin Jones Transfer Station, P.J.P
Landfill
On May 31, 1989, NJDEP issued a directive to 48 potentially
responsible parties, including the Company, requesting
reimbursement for the state's expected share of remedial and
administrative costs at the Helen Kramer Landfill. Thereafter,
both the United States and NJDEP filed separate complaints in
October, 1989, alleging joint and several liability. U.S. v. Helen
Kramer, Civil No. 89-4340(6) filed October 16, 1989; and New Jersey
v. Almo Anti-pollution Services Corp., Civil No. 89-4380(6), filed
October 10, 1989. Those actions were joined by the Court. New
Jersey and the United States seek an alleged $184,373,549.18, plus
interest and costs, against some 48 direct defendants, including
the Company, and approximately 265 third-party defendants. Through
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
court ordered mediation last year, the magistrate attempted to
settle the case for substantially less than the government's
demand. The settlement process failed and the magistrate has
recently ruled that the direct defendants are to proceed in the
litigation as jointly and severally liable, but that the third-
party defendants may be only severally liable.
In May 1990, the NJDEP also issued a multi-site directive and
notice to insurers under the New Jersey Spill Act to numerous
parties with respect to the Helen Kramer Landfill, the so-called
Marvin Jones Transfer Station in Sewell, New Jersey and the P.J.P.
Landfill in Jersey City, New Jersey seeking reimbursement of New
Jersey's expected share of costs to implement remedial actions at
such sites as a result of the generation or transportation of
hazardous substance allegedly disposed of at such sites by the
parties named in such directive, including the Company.
Yorklyn Plant Site and Newark Site
In June 1993, the Company received notification from the State
of Delaware regarding potential liability for zinc contamination of
the Yorklyn plant site on the Red Clay Creek and adjacent area.
The State contends that historical plant operations have
contributed levels of zinc in the stream and sediment. The Company
proposes to enter into a Consent Decree with the state to
investigate the alleged contamination.
The NVF Newark site is located along the banks of the White
Clay Creek in Newark, Delaware. NVF ceased all production
operations at this facility in December 1991. In January 1989 the
Delaware Department of Natural Resources and Environmental Control
("DNREC") conducted a "Preliminary Assessment" of the Newark
facility. This was followed by a June 1989 "Site Inspection" (SI)
conducted by DNREC in conjunction with EPA. EPA scored all data
from the "SI" using the National Hazardous Ranking System model and
concluded that the site scores below the minimum score requiring an
"Extensive Site Inspection". The Newark site status with EPA is
"No Further Action". The DNREC has included this Newark site on
their list of "Potential State Super Fund Sites" (a listing of
sites needing further investigation).
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
Buzby Brothers Landfill
In October 1991, the NJDEP issued a directive to more than one
hundred PRPs, including the Company, notifying them that they are
responsible for cleanup of the Buzby Brothers Landfill in Voorhees,
New Jersey, and ordering the PRPs, including the Company, to
reimburse NJDEP for the estimated costs of the remedial
investigation and feasibility study. The PRPs have discussed
settlement of the directive, and an intra-group allocation has been
proposed pursuant to which the Company paid $10,000 to settle its
liability under the directive for reimbursement of the estimated
costs of such investigation and feasibility study. To date,
approximately $8.5 million has been spent by owner/operators to
remediate the site and there is pending federal and state court
litigation against some of the PRPs, not including the Company, in
which those who incurred costs performing a remedy seek
reimbursement from others. It is possible that such an action
could be pursued against the Company.
Boarhead Farms Site
On June 10, 1988 and May 26, 1993, the EPA sent the Company
requests for information connecting the Company to the Boarhead
Farms Site, Bridgeton Township, Bucks County Pennsylvania. The
Company knows of no information directly linking it to this site
and has provided a response to that effect to the EPA on August 8,
1994.
Spectron Site
The EPA named 400 to 500 potentially responsible parties at
this site, including the Company as a generator. Clean up of this
site has been divided into three operable units, and the Company
previously has settled all claims with respect to two of those
units. On or about October 1, 1995, NVF received an EPA notice
letter indicating the EPA's intention to proceed with a remedial
investigation and feasibility study for the final unit and inviting
the Company's participation. The Company is presently
investigating this development and has no information about the
extent of its additional liability, if any.
McAdoo Associates Site
The Company was named as a PRP at the McAdoo Associates Site
in Pennsylvania and entered into a Consent Decree with 63 other
PRPs on June 3, 1988 to settle its liability at the site. Clean up
costs are estimated at $3.18 million, of which the Company agreed
to pay .59% or $22,484.90.
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
Bolsenski Landfill, Mountaintop Landfill, and Rivere Chemical Site
The Company received PRP Notice letters from the EPA with
respect to each of these three sites as follows:
. Bolsenski Landfill Site, Chester County, PA, Sept. 6, 1989
. Mountaintop Landfill, Lancaster County, PA. March 4, 1988
. Rivere Chemical Site, Bucks County, PA, Sept. 8, 1987 and
April 12, 1988.
The Company responded to these notices denying liability.
Other Sites
The Company may have been, or may in the future be, alleged to
be liable for environmental costs at other sites in various states,
including Pennsylvania, New Jersey, and Delaware. Such potential
liability arises out of the Company's alleged use of waste hauling
entities related to Marvin Jonas, whose waste disposal practices
have caused both governmental and private parties to bring cost
recovery actions against any and all former Jonas customers when
there is an allegation that Jonas disposed of waste at a particular
site.
Summary
The Company's consolidated financial statements at September
30, 1995 and December 31, 1994 included elsewhere herein, include
provisions of approximately $6.8 million for costs in connection
with the environmental matters described above. As detailed below,
it is the Company's current belief that the referenced and known
environmental proceedings will not have a material adverse effect
on its financial position or its results of operations. The
Company believes that the $6.8 million accrual should provide an
adequate amount to resolve these known liabilities. However,
because of the uncertain nature of its environmental liabilities,
particularly those related to the Kennett Square facility and the
Yorklyn Plant, the Company is unable to assure that the outcome of
the environmental matters will not have a material adverse effect
on its financial position or the results of operations.
At the off site areas, the Company belongs to PRP Groups which
typically pay costs and expenses on a basis reflecting each
individual PRP's allocated share. While the Company's allocated
share varies from site to site, at most sites it is approximately
1% or less. To devise an estimated range for accrual purposes, the
NVF COMPANY AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements - (Continued)
Unaudited
Note 9 - Legal Proceedings (continued)
Company assessed its allocated share against the range of total
site costs considered by the PRP Group for each site. Because
literally hundreds of other PRPs exist at these other sites, and
those companies are jointly and severally liable, the Company does
not have the resources or the ability to assess the financial
condition of these other parties. In light of the multiple
parties, the Company does not believe that the financial condition
of other companies will affect its liability.
For Company owned sites, the Company employed ranges of costs
for known problems at Kennett Square and Yorklyn. As discussed
below, those ranges do not include other speculative future
environmental developments which could have a material impact on
the Company. By applying this criterion for off site and owned
sites, the Company estimated its environmental liabilities in the
range of approximately $3 million to approximately $15 million.
Based upon its settlement experience at certain sites and an
internal assessment of the total clean up costs at each site, the
Company determined an accrual amount for the range of potential
environmental costs of $6.8 million. The Company's actual cost for
these liabilities may well be closer to the lower end of the range
due to the fact that the Company is in bankruptcy and due to the
bankruptcy treatment of certain of these claims. The $6.8 million
accrual does not include any offset for potential insurance
recoveries. While the Company is hopeful that it will recover some
funds for environmental expenses, it has not reached any agreements
on its insurance claims. The Company has asserted claims against
its insurers for all off site environmental liabilities and all
environmental liabilities for the Kennett Square facility. In
those actions, the Company seeks recovery of all costs incurred in
connection with those environmental matters.
Finally, future environmental matters could have a material
impact on the Company. Specifically, the United States
Environmental Protection Agency ("EPA") is evaluating the Kennett
Square site and/or surrounding areas for possible listing on the
NPL". However, the EPA has provided no indication of whether it
intends to do so. If the EPA were to list the site and/or
surrounding areas on the NPL and a cleanup were to be required,
such a development could have a material impact on the Company.
Because of the wholly speculative nature of this issue, the Company
has not considered it in the $6.8 million accrual.
Note 10 - NVF Stand Alone Financial Statements - Unaudited
The Company's subsidiaries, Parsons Paper and NVF Canada, are
not part of the bankruptcy thus there was no change in the manner
they are accounted for. The accompanying financial statements have
been prepared in accordance with AICPA Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code".
NVF COMPANY
(Debtor-in-Possession)
Balance Sheet
September 30, 1995
(thousands of dollars)
Unaudited
September 30,
Assets 1995
Current assets:
Cash and equivalents $ 241
Receivables, less allowance for doubtful
accounts of $565 13,957
Intercompany receivables, net 7,404
Inventories 12,347
Other current assets 435
Total current assets 34,384
Investment in affiliate 102
Properties, at cost 87,442
Less accumulated depreciation and amortization (68,552)
Net properties 18,890
Other assets 2,289
$ 55,665
Liabilities and Stockholders' Deficiency
Current liabilities not subject to compromise:
Current portion of long-term debt $ 9,886
Accounts receivable financing 4,819
Accounts payable 767
Accrued interest payable 1,369
Accrued professional fees 7,321
Other current liabilities 1,440
Total current liabilities 25,602
Investment in subsidiaries 5,935
Other long-term liabilities 2,753
Long-term debt 182
Liabilities subject to compromise (A) 88,348
Stockholders' deficiency:
Common stock, $.01 par value; authorized
200,000,000 shares; issued 95,563,461 shares 956
Capital in excess of par value 234,943
Accumulated deficit (294,702)
Treasury common stock, 2,292,544 shares,
at cost (8,352)
Total stockholders' deficiency (67,155)
$ 55,665
Note 10 - NVF Stand Alone Financial Statements - Unaudited
NVF COMPANY
(Debtor-in-Possession)
Balance Sheet
September 30, 1995
(thousands of dollars)
Unaudited
September 30,
1995
(A) Liabilities subject to compromise consist
of the following:
Trade and other miscellaneous claims $ 9,079
Accrued interest 2,076
Pension obligations 5,699
Post retirement benefit obligations, net 734
Subordinated debentures, 5% 48,046
Subordinated debentures, 10% 11,375
Other accrued liabilities 11,308
Current portion of long-term debt 16
Noncurrent portion of long term debt 15
$ 88,348 (B)
(B) Certain liabilities have been separately classified in the Plans of
Reorganization filed on April 13, 1994 and July 14, 1994.
Note 10 - NVF Stand Alone Financial Statements - Unaudited
NVF COMPANY
(Debtor-in-Possession)
Statements of Operations
(In thousands except per share amounts)
Unaudited
Nine Months Ended
September 30, 1995
Net sales and operating revenues $ 68,639
Cost of goods sold 56,247
Depreciation and amortization 1,997
Selling, general and administrative
expenses 7,831
66,075
Income from operations 2,564
Other income (expense):
Other income (expense), net 771
Debt costs (599)
172
Income from operations before
reorganization items, taxes and
equity in net loss of affiliates 2,736
Reorganization items:
Professional fees 5,073
Income (loss) before taxes and equity
in net loss of affiliates (2,337)
Taxes -
Income before equity in net loss
of affiliates (2,337)
Equity in net loss of affiliates (1,653)
Net loss $ (3,990)
Weighted average number of common and
common equivalent shares outstanding,
in thousands of shares 93,271
Net loss per share (0.04)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
NVF's consolidated working capital at September 30, 1995
decreased by approximately $3,889,000 from December 31, 1994. The
decrease is primarily attributable to increased borrowings on
accounts receivable and increased accrued professional fees
incurred for reorganization. Although net losses continued, cash
flow from operations was positive as accrued professional fees
increased approximately $2.1 million. Cash flow from investing
activities was negative as the Company's capital program to
increase fibre production was completed. Cash flow from financing
activities was positive as the Company increased its utilization of
accounts receivable financing to complete its capital program.
On August 27, 1993 three creditors of NVF filed an involuntary
bankruptcy petition against NVF under Chapter 11 of the Bankruptcy
Code in Bankruptcy Court, Case No. 93-1020. On September 15, 1993,
NVF filed its answer to the involuntary petition, and an order for
relief was entered by the Bankruptcy Court. NVF continues to
operate its business and is in possession of its assets as a debtor
in possession in accordance with the Bankruptcy Code. No trustee
or examiner has been appointed.
On September 13, 1994 the Joint Agreement was reached before
the Court between NVF and the Committee. Pursuant to the Joint
Agreement the parties agreed to jointly select an investment
banking firm for the purpose of maximizing the value of the NVF
estate by either marketing and selling or recapitalizing the NVF
estate. In that connection NVF and the Committee jointly retained
Alex. Brown. Alex. Brown made procedural recommendations that
were agreed upon by NVF and the Committee and approved by the
Bankruptcy Court. Alex. Brown has implemented those procedures and
recommended to NVF and the Committee what they believe to be the
highest and best offer which will realize the greatest value to the
creditors. In accordance with the procedures approved by the
Bankruptcy Court, Alex. Brown contacted a total of 147 potential
purchasers for NVF. Eventually, Alex Brown determined that the bid
by First Security and Investment Corp. was the highest and the best
bid. On October 27, 1995, NVF and the Committee filed their motion
with the Bankruptcy Court seeking approval to enter into and
execute a stock purchase agreement with First Security. A hearing
is scheduled in mid November. No later than thirty days after the
Bankruptcy Court approves the motion, an overbid sale will be
conducted. The winning bid is expected to be incorporated into a
plan of reorganization that will be proposed jointly by NVF and the
Committee. The plan will set forth the distributions and treatment
for all creditors of the bankruptcy case. The Bankruptcy Court has
granted NVF an extension of its exclusivity period to November 14,
1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
NVF did not make sinking fund payments of $4.8 million due on
January 1, 1993 and $43.2 million due January 1, 1994 nor did it
make $1.2 million interest payments due July 1, 1993 and January 1,
1994 on its 5% Subordinated Debentures. According to the terms of
the debentures, the debentures are in default and may be called for
100% of principal plus interest. The aggregate principal amount of
the 5% Subordinated Notes at December 31, 1994 and September 30,
1995 was $48,046,000. NVF did not make a sinking fund payment of
approximately $285,000 on November 14, 1993 and November 14, 1994
nor did it make interest payments totaling $568,757 on November 14,
1993, May 14, 1994, November 14, 1994 and May 14, 1995 on its 10%
Subordinated Debentures. According to the terms of the debentures,
the debentures are in default and may be called for 100% of
principal plus interest. The aggregate principal amount of the 10%
Subordinated Notes at December 31, 1994 and June 30, 1995 was
$11,375,000.
NVF did not make interest payments totaling approximately
$373,000 on November 22, 1993, May 22, 1994, November 22, 1994 and
May 22, 1995 on its 10% Secured Notes. According to the terms of
the notes the notes are in default and may be called for 100% of
the principal ($7,461,644) plus interest. NVF also did not make
monthly payments of approximately $36,000 on its 11-3/4% Secured
Promissory Notes since July, 1993. According to the terms of the
notes, the notes are in default and may be called for 100% of
principal ($2,305,451) plus interest.
The Company anticipates a reduction of the current portion of
long-term debt by exchanging its APL 10-3/4% Subordinated Sinking
Fund debentures for 11-3/4% Secured NVF notes. The Company
anticipates that the remainder of the current portion of long term
debt will be restructured as part of its reorganization plan to
emerge from bankruptcy. The 5% and 10% Subordinated Debentures are
expected to be compromised within the course of the bankruptcy and
paid from a pool created by the sale of the Company and all
proceeds from litigation commenced by The Official Committee of
Unsecured Creditors of NVF Company vs. Victor Posner, et al. The
settlement with Victor Posner has been submitted to the Bankruptcy
Court for approval but has not yet been finalized. The settlement
will have no effect on liquidity as it will be held in an escrow
account for settlement of creditors' claims against the Company in
their bankruptcy proceedings.
The Company had an accounts receivable financing arrangement
with Schottenstein Stores Corporation covering substantially all of
its accounts receivable. Such arrangement provided for advances to
be made against eligible accounts receivable of up to 75% of the
full net amount of such receivables, interest on such advances at
the prime rate plus 2%, the payment of a commission of 1% of the
face amount of all accounts for which advances are made and the
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
payment of an administrative fee of $100,000 per year. On March 8,
1995 the Company petitioned the Bankruptcy Court to change
financing arrangements of its accounts receivable. CIT offered the
Company a line of credit up to the lesser of $8,000,000 or 80% of
eligible accounts receivable at an interest rate of prime (9.25% at
September 30, 1995) plus 1/2%, a line of credit fee of 1/2% per
annum on the unused balance and a $3,000 per month Collateral
Management fee. On April 28, 1995 the Bankruptcy Court approved
the CIT financing agreement and on May 1, 1995 the Company began
using CIT as its accounts receivable financier. At September 30,
1995, the Company had outstanding advances under the CIT
arrangement aggregating approximately $4.8 million.
NVF's ability to meet its cash requirements in the next twelve
months is dependent upon increased cash flow being generated from
NVF's operations, the continuing of financing of accounts
receivable, available borrowings, the compromising of liabilities
within the framework of bankruptcy and possible sale of any assets.
No assurance can be given that any of such conditions can be
achieved or, if achieved, what the terms and conditions thereof
will be. NVF believes, but cannot assure, that cash generated
from operations and funds from the CIT Group revolving credit line
facility or alternative facility will be sufficient to enable NVF
to maintain its operations until such time as a plan can be
confirmed by the Bankruptcy Court. It is the Company's current
estimate that approximately $2.5 million may need to be paid by the
Company during the next twelve months for environmental
liabilities. The payment of such amount of money might have an
adverse affect on the Company's liquidity. The Company believes
that such cash can be generated through a combination of additional
borrowings on its line of credit, increased cash flow generated
from operations and possibly sale of any assets. No assurance can
be given that any of such conditions can be achieved or, if
achieved, what the terms and conditions thereof will be.
The Company's consolidated financial statements at September
30, 1995 included elsewhere herein, include reserves of
approximately $6.8 million for costs in connection with the known
environmental matters described above except for future speculative
matters relating to Kennett Square and Yorklyn. However,
environmental liabilities are inherently uncertain and future
events and/or additional information may require adjustments to
this reserve figure. In connection with the various claims
asserted against NVF by the EPA and others in connection with
environmental matters, NVF has commenced an action against various
insurance carriers for coverage of some or all of the amount for
which NVF might be held liable in connection therewith and the
defense costs thereof. Except as noted above, NVF is unable at
this time to predict the outcome of such action or the amounts, if
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY (CONTINUED)
any, which may be paid by such insurers. NVF believes that the
outcome of such environmental matters described above will not have
a material adverse effect on its financial position or its results
of operations.
Future environmental matters could have a material impact on
the Company. The Company notes that subsequent to filing its Form
10-K (March 31, 1995) (1) the Company was advised by the EPA that
it is reviewing the Kennett Square site and/or surrounding areas
for possible listing on the NPL as a Superfund Site and (2) the
Company has received notification from the EPA seeking information
regarding potential liability for zinc contamination related to the
Yorklyn Plant site (the "Yorklyn Contamination"). The Company
further notes that in the event that (1) the Kennett Square site
and/or surrounding areas is, in fact, named as a Superfund Site or
(2) remediation of the Yorklyn Contamination is required, and it is
determined that the Company is liable for costs thereof, the
Company would likely expect to incur significant additional
expenses with respect to environmental matters for those areas. In
a letter dated April 13, 1995, the EPA informed the Company that
costs related to Kennett Square site and/or surrounding areas could
be $10 million or higher if any of those areas is named as a
Superfund site. The likelihood (1) that the Kennett Square and/or
any surrounding areas will be named as a Superfund Site or (2) that
remediation of the Yorklyn Contamination will be required and that
a determination will be made that the Company is responsible for
the costs therefore cannot be predicted with certainty at the
present time. In connection with the various claims asserted
against the Company by the EPA and others in connection with
environmental matters, the Company has commenced an action against
various insurance carriers for coverage of some or all of the
amount for which the Company might be held liable in connection
therewith and the defense costs thereof. The Company is unable at
this time to predict the outcome of such action or the amounts, if
any, which may be paid by such insurers.
The financial statements included herein have been prepared
assuming that the Company will continue as a going concern and,
accordingly, they do not include any adjustments relating to the
recoverability and classification of recorded asset amounts nor the
amounts and classification of liabilities that might be necessary
should NVF be unable to continue in existence or be required to
sell its assets. As a result of the uncertainties described above,
reference is made to Note 8 included elsewhere herein for
information concerning the estimated liquidation value of NVF on a
consolidated basis.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995
Compared with Nine Months Ended September 30, 1994
Consolidated net sales increased approximately $3.7 million or
5.3%. This was primarily due to increased sales in the Laminated
Plastics segment which increased approximately $5.3 million due to
increased demand in the industry. Fibre segment sales decreased by
approximately $1.1 million. This decrease was due to a downturn in
the industry supplied as well as a partial facility shutdown while
certain machinery was being reconditioned or upgraded. Container
segment sales decreased approximately $.3 million as a result of
the textile industry changing from fibre to plastic containers.
Income from operations decreased approximately $2.0 million or
53.3%. This was primarily due to the fibre segment operating
profit which decreased approximately $1.5 million from the same
period last year due to a downturn in the industry supplied as well
as a partial facility shutdown while certain machinery was being
rebuilt or upgraded and increased overtime, maintenance, fringe
benefits and raw material costs. Paper segment operating profit
decreased over $.2 million for the nine months as a result of a
downturn in the paper industry. Selling, general and
administrative expenses were up approximately $.5 million due to
increased commission and fringe benefit expenses.
Other income (expense) improved as an insurance settlement on
fire losses resulted in approximately $.5 million income. Debt
costs were reduced as no interest was accrued on secured debt in
1995.
Quarter Ended September 30, 1995
Compared with Quarter Ended September 30, 1994
Sales for the comparable period increased approximately $.4
million or 1.9%. Laminated plastics segment sales increased
approximately $1.6 million due to increased demand in the industry.
This was offset by decreases in the fibre and container segments of
approximately $.7 million and $.3 million, respectively. The fibre
segment sales decrease was due to a downturn in the economy as well
as a partial facility shutdown while certain machinery was being
reconditioned or upgraded. Container segment sales decrease was
due to the textile industry changing from fibre to plastic
containers.
Income from operations decreased approximately $.7 million.
This was primarily due to a $.6 million decrease in fibre segment
operating profits. This decrease was a result of a slow economy
resulting in reduced sales volume as well as higher raw material
and fringe benefit costs.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Other income (expense) improved due to an insurance settlement
on fire losses which resulted in $.5 million income. Debts costs
were reduced as no interest was accrued on secured debt in the
period.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
By virtue of NVF's Bankruptcy all litigation against NVF has
been stayed pursuant to 11 USC Section 362 and such proceedings
will be resolved in context with the bankruptcy proceedings. See
Note 10 of the Notes to Financial Statements for a description of
litigation.
Item 3. Defaults Upon Senior Securities
NVF did not make sinking fund payments of $4.8 million due on
January 1, 1993 and $43.2 million due January 1, 1994 nor did it
make $1.2 million interest payments due July 1, 1993 and January 1,
1994 on its 5% Subordinated Debentures. According to the terms of
the debentures, the debentures are in default and may be called for
100% of principal plus interest. The aggregate principal amount of
the 5% Subordinated Notes at December 31, 1994 and June 30, 1995
was $48,046,000. NVF did not make a sinking fund payment of
approximately $285,000 on November 14, 1993 and November 14, 1994
nor did it make interest payments of $568,757 on November 14, 1993,
May 14, 1994, November 14, 1994 and May 14, 1995 on its 10%
Subordinated Debentures. According to the terms of the debentures,
the debentures are in default and may be called for 100% of
principal plus interest. The aggregate principal amount of the 10%
Subordinated Notes at December 31, 1994 and September 30, 1995 was
$11,375,000.
NVF did not make interest payments of approximately $373,000
on November 22, 1993, May 22, 1994, November 22, 1994 and May 22,
1995 on its 10% Secured Notes. According to the terms of the notes
the notes are in default and may be called for 100% of the
principal ($7,461,644) plus interest. NVF also did not make
monthly payments of approximately $36,000 on its 11-3/4% Secured
Promissory Notes since July, 1993. According to the terms of the
notes, the notes are in default and may be called for 100% of
principal ($2,305,451) plus interest.
PART II. OTHER INFORMATION
Item 5. Other Information
In July 1992, The Company was informed that the Equity Listing
Committee of the Pacific Stock Exchange voted unanimously to delist
the common stock of the Company and suspended its common stock from
trading as of July 14, 1992. The Company is informed that such
Committee based its decision upon the Company's failure to meet the
Exchange's net tangible assets and "going concern" maintenance
standards. On November 8, 1995 the Company was informed that the
Exchange has delisted the Company's 10% Subordinated Debentures and
suspended trading for the same reason.
On December 1, 1993, in an action brought by the Securities &
Exchange Commission not involving the Company, a judge in the
United States District Court for the Southern District of New York
issued a decision stating that the Court would issue a decree,
among other things, barring Victor Posner and Steven Posner from
serving as officers and directors of any reporting company under
the Securities Exchange Act of 1934, as amended, and ordering that
the stock Victor Posner and Steven Posner own in reporting
companies which they control (as defined in that Act) be placed in
voting trusts. On December 29, 1993 such decree was issued. On
January 4, 1994 Victor Posner resigned his positions as Director,
President and Chief Executive Officer of the Company. The United
States Court of Appeals for the Second Circuit has affirmed the
lower court's judgment and certiori has been denied by the United
States Supreme Court.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 - Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NVF COMPANY
Date: November 14, 1995 By: /s/ Robert W. Flack
Robert W. Flack
Acting Chief Financial Officer
Date: November 14, 1995 By: /s/ Martin J. Posner
Martin J. Posner
Executive Vice President
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 463
<SECURITIES> 0
<RECEIVABLES> 15637
<ALLOWANCES> 566
<INVENTORY> 13888
<CURRENT-ASSETS> 29875
<PP&E> 88010
<DEPRECIATION> 69089
<TOTAL-ASSETS> 51284
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<BONDS> 0<F1>
<COMMON> 956
0
0
<OTHER-SE> (68166)
<TOTAL-LIABILITY-AND-EQUITY> 51284
<SALES> 74529
<TOTAL-REVENUES> 74529
<CGS> 63990
<TOTAL-COSTS> 63990
<OTHER-EXPENSES> 5073<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 682
<INCOME-PRETAX> (3990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3990)
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<FN>
<F1>The Company is currently in Chapter 11 Bankruptcy and has liablities
subject to compromise of $ 88,348. The dollar amount of the bonds
included in that number is $ 59,421.
<F2>The Company is currently in Chapter 11 Bankruptcy and the amount
in the other-expenses line item of $ 5,073 represents the
professional fees expensed for reorganization items.
</FN>
</TABLE>
