UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] 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)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange
Common Stock, $.01 Par Value None
5% Subordinated Debentures None
due January 1, 1994
10% Subordinated Debentures None
due November 15, 2003
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
requirement for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Shares and aggregate market value of voting stock held at March 31, 1995:
93,270,917 Shares, Market value not available.
PART I
ITEM 1. BUSINESS
(a) General Development of Business
NVF Company, a Delaware corporation, was incorporated in 1904.
Reference herein to "NVF" or the "Company" includes collectively
NVF Company and its wholly-owned subsidiaries unless the context
indicates otherwise.
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 copy of the Plan was filed as
Exhibit 2.1 to Form 8-K by the Company on August 4, 1994. 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 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 implemented those procedures and recommended to NVF and
the Committee what they believe to be the highest and best offer
which would 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 had 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. On December 29, 1995 the Bankruptcy Court signed
an order approving the bid of First Security as the highest and
best bid. On January 29, 1996 the Joint Plan of Reorganization of
NVF Company and The Official Committee of Unsecured Creditors ("the
Plan") and the Disclosure Statement was filed with the Bankruptcy
Court (See Form 8-K dated January 29, 1996, Exhibits 2 and 99). On
March 4, 1996 the Bankruptcy Court approved the Disclosure
Statement. The Plan has been submitted to the creditors for
ratification. A hearing date in Bankruptcy Court concerning
confirmation of the Plan has been scheduled for April 25, 1996.
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
had approximately $2.5 million face value of APL's 10-3/4%
Subordinated Sinking Fund Debentures. However a settlement of
litigation commenced by the Committee (See Note 18 of notes to
consolidated financial statements) called for the holders of 11-
3/4% Secured NVF Promissory Notes to return such notes in exchange
for the return of the APL 10-3/4% Subordinated Sinking Fund
Debentures. Other income of approximately $2,609,000 was recognized
in 1995 as a result of the settlement.
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
management, IRM's business became 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 taken 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 year ended December 31, 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 December 31, 1995 and December
31, 1994 of $102,000 and $342,000, respectively. NVF has also
received liquidating dividends of $240,000, $133,333 and $1,066,667
in 1995, 1994 and 1993, respectively.
(b) Financial Information About Industry Segments
The Company's business is presently carried out in two
principal operating segments: Industrial laminated plastics and
vulcanized fibre.
The Company does not have any customer that makes up 10% of
the Company's total consolidated revenue.
Segment information for the three years ended December 31,
1995 is set forth in Note 13 of the Notes to Consolidated Financial
Statements.
(c) Narrative Description of the Business
The Company is engaged in the manufacture and sale of
vulcanized fibre (a converted cellulose product) and industrial
laminated plastics. NVF is also engaged to a lesser extent in the
manufacture and sale of material handling containers and
correspondence and business papers.
INDUSTRIAL LAMINATED PLASTICS SEGMENT
The industrial laminated plastic products segment manufactures
products which have their principal application in the electronics
field such as for printed circuit boards. In addition, this
segment produces industrial plastic sheet and tube materials for
use as electrical insulation and for other applications.
Industrial laminated plastics are marketed by manufacturer's
representatives located in major commercial centers throughout the
United States, who receive incentive compensation for sales. The
plastic laminate industry is highly competitive and this segment
has many competitors, none of which is dominant in the industry and
many of which are larger than the Company. The principal elements
of competition are price, quality and customer service. Research
and development expenditures have been insignificant in the
industrial laminated plastics segment.
VULCANIZED FIBRE SEGMENT
The Company is the largest manufacturer of vulcanized fibre in
the United States. Vulcanized fibre is an extremely sturdy and
lightweight converted cellulose product widely used in such
applications as backing for abrasive discs (consumed principally by
the automotive industry) and in the manufacture of electrical
insulation, such as railway track insulation, fuses and lightning
arresters. Vulcanized fibre also serves as a structural material
for such applications as textile bobbins, material handling
containers and building construction. NVF is the exclusive
producer of YorkiteTM, a vulcanized fibre product used for
furniture surfaces, cross-banding and edge-banding.
Vulcanized fibre products are marketed by manufacturer's
representatives, located in major commercial centers throughout the
United States, who receive incentive compensation for sales. NVF
has two foreign principal competitors in the vulcanized fibre
industry. The vulcanized fibre industry, in turn, competes against
numerous manufacturers of materials which may be alternatives to
vulcanized fibre, many of which are larger than the Company.
Research and development expenditures have been insignificant in
the vulcanized fibre segment.
OTHER SEGMENTS
A division of NVF also manufacturers material handling
containers used in a wide variety of applications including the
transportation of components to assembly points in factories, the
movement of goods in retail stores, reusable shipping containers
and containers for shipping delicate instruments. The containers
are fabricated from vulcanized fibre, plastic and steel. There are
many competitors in the container segment, none of which is
dominant.
In addition, NVF through Parsons Paper, a subsidiary 100%
owned by NVF Canada, which in turn is a 100% owned subsidiary of
NVF located in Toronto, Canada, manufacturers paper which includes,
among other products, bond and writing papers for communication and
correspondence; ledger paper for durable and/or permanent records;
index and bristol stock for record keeping and mechanized postings;
and covers and text papers of Lunar LaidTM and parchment for
distinctive announcements and presentations. There are many
competitors in the paper segment, none of which is dominant. In
1995, one customer accounted for 19.7% of paper products sales.
The Company does not believe that the loss of this customer would
have a material adverse effect on the business of NVF taken as a
whole.
NVF Canada is also engaged in the warehousing, fabrication and
sale of industrial laminated plastics and vulcanized fibre and in
the manufacture and sale of material handling containers. NVF's
foreign operations are not significant. Research and development
expenditures have been insignificant in the container, paper and
foreign segments.
OTHER INFORMATION
Other than its brand names and trademarks referred to above,
patents, licenses, franchises and concessions are not material to
the business of the Company. No portion of the Company's business
is subject to renegotiation of profits or termination of contracts
at the sole election of the Government. The business of the
Company's industry segments is not seasonal. Most raw materials
for the Company's business segments are available from a number of
sources, however the plastic products segment uses production
quantities of natural gas, fuel oil and electricity in their
production processes and currently does not have significant
emergency or alternative capability. Although the Company has
increased energy storage capacity at all of its plants, prolonged
energy shortages or marked price increases in energy supplies and
materials could adversely affect operations in this segment. No
segment of the Company's business is dependent upon a single
customer or a few customers, the loss of any one or more of which
would a have a material adverse effect on such segment, and no
customer accounted for 10% or more of the Company's consolidated
revenues in 1995.
The Company has taken steps to retrofit its boilers to burn
gas and/or oil at its two largest plants (Kennett Square,
Pennsylvania and Yorklyn, Delaware) in an effort to protect its
operations from variations in availability and prices for energy
supplies and raw materials. The Kennett Square plant retrofit has
been completed and the Yorklyn plant is to be completed in 1996.
The Company's backlog at December 31, 1995 and 1994 was as
follows:
1995 1994
(thousands of dollars)
Industrial laminated plastics $ 7,162 5,736
Vulcanized fibre 6,855 14,421
Containers, papers and foreign segments 1,119 2,401
$ 15,136 22,558
The backlog represents approximately two months of production.
LABOR RELATIONS
At December 31, 1995, NVF employed approximately 230 salaried
and 543 hourly employees. The hourly employees are primarily
represented by the United Paper Workers International ("United
Paper Workers"). The contract between NVF and the hourly workers
represented by the United Paper Workers expires April 28, 1996.
NVF is currently in negotiations for a new contract with the United
Paper Workers although no assurance can be given that such a
contract will be negotiated or ratified or what the terms and
conditions thereof will be. If such contract is not successfully
negotiated, it could result in a strike which may have a material
adverse effect on NVF. Group life insurance and medical benefits
are in effect for most employees. NVF believes that relations with
its employees are generally satisfactory. There have been no
significant strikes or work stoppages during the past five years.
ENVIRONMENTAL MATTERS
The Company's operations are subject to regulation by all
levels of government designed to protect the environment. NVF is
engaged in a continuing program of installing environmental control
equipment at its facilities to meet the requirement of applicable
environmental quality regulations. For the five years from 1991
through 1995, NVF spent approximately $328,000 on environmental
control equipment. NVF presently estimates that it will spend
approximately $1,000,000 for such equipment during the three-year
period 1996-1998. Additional expenditures, however, will or may be
required in connection with the matters set forth below. As
requirements for pollution control are subject to revision and
control and technology is constantly evolving, it is not possible
at this time to estimate the full extent of future expenditures
which may be required for pollution abatement equipment or the
resulting effect of such expenditures on earnings.
As discussed fully elsewhere herein (See "Item 1 - Business -
General Development"), NVF has filed for bankruptcy protection
which could affect certain environmental claims pending against the
Company. 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, if the purchase option of the
plan is approved all prepetition environmental claims will be paid
by the reorganized Company on an equal basis with the amount to be
paid to the unsecured creditors.
Tybouts Corner Landfill
In October 1980, the Environmental Protection Agency (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
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
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 tributory 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 tributory. 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
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/tributory 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 is
seeking to retain 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
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 the 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
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).
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.
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, and 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 December
31, 1995 included elsewhere herein, include accruals 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
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
National Priorities Listing ("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.
ITEM 2. PROPERTIES
The Company and its subsidiaries maintain a large number of
diverse properties. Management believes that these properties,
taken as a whole, are adequate for current and foreseeable business
needs. The majority of the properties are owned. Substantially
all of the Company's materially important physical properties are
being fully utilized with the exception of inactive properties
described below. Certain information about the major facilities
maintained by each segment is set forth in the following table:
Owned
or Approximate
Location leased Use square feet
NVF FACILITIES
Multi-Segment Facilities
Kennett Square, PA (1)(3) Owned Manufacturing/Fabrication 342,000
Yorklyn, DE (2) Owned Manufacturing/Fabrication 552,000
Wilmington, DE (1)(2)(3) Owned Fabrication 186,000
Hartwell, GA (2)(5)(6) Owned Manufacturing/Fabrication 144,000
Chicago, IL (1)(2) Owned Fabrication 27,000
Toronto, Canada (1)(2)
(expires 4/96) Manufacturing/Fabrication 40,000
Paper Products Segment
Holyoke, MA Owned Manufacturing 313,000
Inactive
Newark, DE (4) Owned Closed 356,000
Yorklyn, DE (3) Owned Unimproved Land 130 acres
Investment Property
Kennett Township Owned Unimproved Land 88 acres
(1) Industrial Laminated Plastic Segment
(2) Vulcanized Fibre Segment
(3) Subject to First Mortgage lien securing NVF's 10% Secured
Notes.
(4) Newark, DE operations were terminated in September, 1991 and
such operations were transferred to the Yorklyn, DE facility.
(5) Subject to First Mortgage lien securing NVF's UDAG loan.
(6) Subject to Second Mortgage lien securing NVF's 10% Secured
Notes.
ITEM 3. LEGAL PROCEEDINGS
By order of the Bankruptcy Court all litigation against NVF
has been stayed pursuant to 11 USC Section 362 and unless otherwise
ordered such proceedings will be resolved in context of the
bankruptcy case.
On August 27, 1993 three creditors of NVF filed an involuntary
bankruptcy petition against NVF under the Bankruptcy Code
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 copy of the Plan was filed as
Exhibit 2.1 to Form 8 by the Company on August 4, 1994. 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 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 had 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. On December 29, 1995 the Bankruptcy Court signed
an order approving the bid of First Security as the highest and
best bid. On January 29, 1996 the Joint Plan of Reorganization
("the Plan") of NVF Company and The Official Committee of Unsecured
Creditors and the Disclosure Statement was filed with the
Bankruptcy Court (See Form 8-K dated January 29, 1996, Exhibits 2
and 99). On March 4, 1996 the Bankruptcy Court approved the
Disclosure Statement. The Plan has been submitted to the creditors
for ratification. A hearing date in Bankruptcy Court concerning
confirmation of the Plan has been scheduled for April 25, 1996.
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
had approximately $2.5 million face value of APL's 10-3/4%
Subordinated Sinking Fund Debentures. However a settlement of
litigation commenced by the Committee (See Note 18) called 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. Other income of approximately $2,609,000 was recognized
in 1995 as a result of the settlement.
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 certiorari 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 June 17, 1994, the
plaintiff filed a Motion to Expedite the Proceeding on the grounds
that it is a summary proceeding under 8 Del. C. 211(c) and based
upon allegations in the complaint. Subsequently, Vice Chancellor
Berger directed the Debtor to file its answer in the Chancery Court
Action on or before June 27, 1994. On June 27, 1994, the Debtor
filed its answer in the Chancery Court Action. On July 6, 1994,
Beltzhoover filed a Motion for Relief From Stay, or in the
Alternative, To Compel Annual Shareholders Meeting. Beltzhoover
requested an expedited hearing on the matter. On July 19, 1994
Beltzhoover filed the same motion in Bankruptcy Court. It was then
decided that this case would be heard in Bankruptcy Court rather
than in Chancery Court where the action has been stayed. A trial
to hear the Application to Compel an Annual Meeting of NVF
Shareholders was scheduled for October 3, 1994, however Beltzhoover
requested a continuance on that date and all parties agreed to
adjourn such action until November 28, 1994. 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, Richard Beltzhoover and Kim Del
Fabro were elected 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 had 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".
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. New
Castle County has agreed to the treatment of their claim as set
forth in the Plan. Under this proposal an aggregate amount of
$1,813,507.27 claim of principal and interest shall be recognized.
Interest shall accrue at 9% per annum from November 1, 1995 until
the consummation date of the Plan. On the consummation date, or as
soon as practicable thereafter, the holder of the claim shall
receive twelve payments at monthly intervals of interest only at 8%
per annum on the sum of $1,813,507.27 plus interest accrued between
November 1, 1995 and the date of the first payment. Thereafter the
remaining balance will be amortized over forty-eight months at a
rate of 8% per annum. The Company reserved the right to contest
this claim under this proposal and has filed such with
Court on .
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, if the purchase option of the plan
is approved all prepetition environmental claims will be paid by
the reorganized Company pari passu with the amount to be paid to
the unsecured creditors.
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. On November 22,
1995 an Order and Final Judgment approving the settlement was
signed by the Bankruptcy Court. A Stipulation and Order of
Dismissal was ordered by the United States District Court on
December 15, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The principal market for NVF's common stock was the Pacific
Stock Exchange. In July 1992, NVF was informed that the Equity
Listing Committee of the Pacific Stock Exchange voted unanimously
to delist the securities of the Company and suspended its common
stock from trading as of July 14, 1992. NVF 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. Since then the Company's stock has been traded between
brokers. To estimate the sales price of the Company's stock would
be unreliable and not all inclusive of trading activity, therefore
no estimate can be made.
The approximate number of equity security holders is as
follows:
Number of Stockholders of
Title of Class Record as of April 5, 1994
Common Stock, $.01 par value 14,227
Under the Delaware Corporation Law, dividends may be paid only
out of surplus, or if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or the
preceding fiscal year. There were no cash dividends or stock
distributions in 1995 or 1994.
ITEM 6. SELECTED FINANCIAL DATA
Year Ended December 31,
1995 1994 1993(2) 1992(1) 1991(1)
(In thousands of dollars except per share amounts)
Selected Income Statement Information:
Net sales and operating
revenues $ 96,891 93,981 90,046 94,868 95,973
Operating income from
continuing operations $ 1,165 4,616 2,133 3,676 88
Debt costs $ (1,116) (2,207) (5,599) (7,070) (7,474)
Income (loss) from continuing
operations $ 17,369 (10,813) (701) (6,088) (7,856)
Loss from discontinued
operations $ - - (5,304) (22,697) (22,803)
Net income (loss) $ 17,369 (10,813) (6,005) (28,785) (30,659)
Primary per share data:
Income (loss) from
continuing operations $ .19 (.12) (.01) (.07) (.09)
Loss from discontinued
operations $ - - (.06) (.24) (.24)
Net income (loss) $ .19 (.12) (.07) (.31) (.33)
Market price at year-end $ N/A N/A N/A .005 .016
Selected Balance Sheet Information:
Year Ended December 31,
1995 1994 1993 1992 1991
Current assets $ 45,915 31,018 31,465 30,127 36,245
Current liabilities $ 22,319 24,327 21,460 80,375 30,748
Working capital
(deficit) $ 23,596 6,691 10,005 (50,248) 5,497
Total assets $ 67,571 52,261 53,911 54,850 64,978
Long-term debt $ 176 35 36 10,090 10,423
Total stockholders'
deficiency $(45,542) (63,220) (52,237) (122,514) (92,592)
The foregoing "Selected Financial Data" should be read in
conjunction with "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the "Report of
Independent Public Accountants" set forth elsewhere herein and is
subject to the material uncertainties described therein.
(1) Restated to treat APL as a discontinued operation.
(2) Reflects deconsolidation of APL Corporation effective
June 30, 1993 (See Note 1 of Notes to Consolidated
Financial Statements).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
TRENDS
The vulcanized fibre segment declined during 1995 as a result
of the main part of the plant being shutdown temporarily for a
capital expansion project and higher cost of materials and
benefits. The industrial laminated plastics segment rebounded due
to a slight improvement in the economy, operating efficiencies and
a lessening of competition.
CAPITAL RESOURCES
Capital expenditures for the years 1995, 1994 and 1993 were
$180,000, $326,000 and $230,000, respectively, for the industrial
laminated plastics segment; $2,418,000, $1,231,000 and $650,000,
respectively, for the vulcanized fibre segment and $310,000,
$109,000 and $460,000, respectively, for the Company's other
operations. The Company presently anticipates capital expenditures
for 1996 will be less than those in 1995. The Company anticipates
financing its future capital expenditure through cash flow from
operations, from capitalized leases, possible sales of assets and
from its accounts receivable financing arrangements.
On September 20, 1994, the Company filed a Motion For Order
Authorizing Debtor To Make Expenditures Pursuant to Section 363(b).
The Company requested authority to spend $2.15 million to expand
its production capacity for vulcanized fibre due to a serious
backlog problem caused by increased demand for vulcanized fibre.
The Committee agreed to the capital expenditure in the full amount
and the Bankruptcy Court authorized the expenditures on October 27,
1994. The Company has completed the capital expenditure project.
LIQUIDITY
NVF's consolidated working capital at December 31, 1995
increased by approximately $16,905,000 from December 31, 1994.
Proceeds from a settlement of litigation entitled the Official
Creditors' Committee of NVF Company v. Victor Posner, et al. (See
Note 18 of Notes to Consolidated Financial Statements) of
$20,750,000 and other terms of such settlement, i.e., the return to
the Company of its 11-3/4% Secured Promissory Notes in exchange for
previously written off APL 10-3/4% Subordinated Sinking Fund
Debentures, were principally responsible for the increase. However,
terms of the settlement also dictate that such proceeds may only be
used in matters relating to the bankruptcy, resulting in the
restricted cash (See Note 2 of Notes to Consolidated Financial
Statements) of $16,336,000.
Cash provided by operating activities and cash used for
financing activities came principally from the settlement of the
lawsuit entitled Official Creditors' Committee of NVF Company v.
Victor Posner et al. (See Note 18 of Notes to Consolidated
Financial Statements). Cash used for investing activities resulted
from a capital expenditure program to increase vulcanized fibre production.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY (Contd.)
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 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 copy of the Plan was filed as
Exhibit 2.1 to Form 8-K by the Company on August 4, 1994. 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 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 had 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. On December 29, 1995 the Bankruptcy Court signed
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY (Contd.)
an order approving the bid of First Security as the highest and
best bid. On January 29, 1996 the Joint Plan of Reorganization
("the Plan") of NVF Company and The Official Committee of Unsecured
Creditors and the Disclosure Statement was filed with the
Bankruptcy Court (See Form 8-K dated January 29, 1996, Exhibits 2
and 99). On March 4, 1996 the Bankruptcy Court approved the
Disclosure Statement. The Plan has been submitted to the creditors
for ratification. A hearing date in Bankruptcy Court concerning
confirmation of the Plan has been scheduled for April 25, 1996.
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. NVF did not make sinking
fund payments of approximately $284,375 on November 14, 1993,
November 14, 1994 and November 14, 1995 nor did it make interest
payments of $568,757 on its 10% Subordinated Debentures due
November 14, 1993, May 14, 1994, November 14, 1994, May 14, 1995
and November 14, 1995. The Company did not make interest payments
of approximately $373,000 due November 22, 1993, May 22, 1994,
November 22, 1994, May 22, 1995 and November 22, 1995 on its 10%
Secured Notes.
The Company reduced long-term debt by exchanging its APL 10-
3/4% Subordinated Sinking Fund debentures for 11-3/4% Secured NVF
notes. During 1993 APL went into bankruptcy. The Company's
investment in APL 10-3/4% Subordinated Sinking Fund Debentures plus
interest was deemed uncollectable and no determination could be
made what part, if any, would be collected, therefore the entire
$2,786,000 was written off in 1993. The above exchange provided
approximately $2,609,000 of Other Income in 1995. 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 and
the remainder of the Company's unsecured debt are expected to be
compromised within the course of the bankruptcy and paid from a
pool created by the sale of the Company and the proceeds from
litigation entitled as the Official Creditor's Committee of NVF
Company v. Victor Posner, et al. The short-term financing needs of
the Company will be satisfied by an accounts receivable financing
facility which the Company is confident, but cannot assure, it will
obtain.
The Company has an accounts receivable financing arrangement
with CIT Group ("CIT") covering substantially all of its accounts
receivable. Such arrangement provides the Company a line of credit
up to the lesser of $8,000,000 or 80% of the eligible accounts
receivable at an interest rate of prime (8.75% at December 31,
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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY (Contd.)
At December 31, 1995 the Company had open a balance of $3.6 million
under this arrangement. On , 1996 CIT advised the
Company that it would not be interested in financing arrangement
after the Company emerges from bankruptcy. The Company believes it
will be successful in finding alternative financing, however there
can be no assurance that the Company will be able to obtain such
financing or that it will be available on terms the Company deems
acceptable.
The Company's consolidated financial statements at December
31, 1995 included elsewhere herein, include reserves of
approximately $6.8 million for costs in connection with the known
environmental matters except for future speculative matters
relating to Kennett Square and Yorklyn. This accrual has been
recorded on a gross basis and has not been adjusted for third party
recoveries. 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 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 though could have a material
impact on the Company. The Company notes that (1) the Company was
advised by the EPA that it is reviewing the Kennett Square Plant
area and/or adjacent areas for possible listing on the NPL as a
Superfund Site (the "Potential Superfund Area") 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 Potential Superfund
Area 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 could be $10 million or higher if Kennett Square is named as
a Superfund Site. The likelihood (1) that the Kennett Square
and/or adjacent 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 against the
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY (Contd.)
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 carriers.
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 accounts receivable financing will
be sufficient to enable NVF to maintain its operations until such
time as a plan can be confirmed by the Bankruptcy Court. The
financial statements included herein have been prepared on a going
concern basis and, accordingly, 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 16 included elsewhere
herein for information concerning the estimated liquidation value
of NVF on a consolidated basis.
Inflation and Changing Prices
Management believes that inflation did not have a significant
effect on gross margins during the last three years through
September 1995, since during such period inflation rates generally
remained at relatively low historical levels. However, since then
energy price increases have had a significant effect on gross
margins. The Company is seeking to combat these higher energy
prices by increasing energy storage capacity by retrofiting boilers
at certain locations to use either oil or gas.
The Company has consolidated its raw material purchases among
a few strong suppliers who in return for the increased volume have
provided a specific warning period prior to price increases. At no
time is the Company dependent on just one supplier base (wherever
possible) for its critical material. However, certain raw materials
(fiberglass, copperfoil) are presently being allocated to consumers
world-wide and such demand has increased prices of this material,
however the Company has so far successfully passed on such
increases to its customers.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Year Ended December 31,
1995 Compared with 1994
Net Sales
and Operating Revenues Operating Income (Loss)
Percent Percent
1995 1994 Change 1995 1994 Change
(thousands of dollars)
Industrial laminated
plastics $ 55,258 47,667 15.9% 3,760 2,976 26.3%
Vulcanized fibre 29,581 32,451 (8.8)% 4,371 7,397 (40.9)%
Other segments 12,052 13,836 (13.1)% (1,973) (659) (199.4)%
General corporate
expenses - - - (4,993) (5,098) 0.0%
Net sales and operating
revenues $ 96,891 93,981 3.1%
Operating income 1,165 4,616
Other income (expense), net 24,644 (6,433)
Debt costs (1,116) (2,207)
Income (loss) before reorganization
items, taxes, equity in earnings
of affiliates, and discontinued
operations $ 24,693 (4,024)
Net sales increased 3.1% or approximately $2,910,000 mainly
due to better marketing conditions and effort in the industrial
laminated plastics segment which increased sales 15.9% or
approximately $7,591,000. Net sales declined in the vulcanized
fibre segment 8.8% or approximately $2,870,000 as a plant shutdown
for capital renovations caused reduced production. Container sales
declined 25.8% or approximately $1,221,000 as a result of textile
industries converting from fibre containers to less expensive
plastic containers. Paper sales declined 10.6% or approximately
$730,000 due to increased competition and depressed market
conditions.
Operating income declined approximately $3.5 million.
Generally, higher energy and benefit (workmen's compensation,
pension, medical) costs were attributable for such decline.
Industrial laminated plastics segment operating profit increased
26.3% or approximately $784,000 due to increased volume and
operating efficiencies. Vulcanized fibre segment operating profit
declined 40.9% or approximately $3,026,000 due to decreased
production caused by a plant shutdown for capital renovations and
higher costs for raw materials. Container and paper losses
increased by approximately $331,000 and approximately $408,000
respectively, mainly due to volume decreases.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (continued)
Other income (expense) was impacted by the settlement of the
Creditors' Committee adversary action against Victor Posner, et al
(See Note 19 of the Notes to Consolidated Financial Statements)
which provided for payment by Victor Posner of $20,750,000 to the
NVF estate. The settlement also provided that the holders of the
11-3/4% Secured NVF notes exchange such notes for the previously
written off APL 10-3/4% Subordinated Sinking Fund Debentures held
by NVF resulting in $2,609,000 of other income. In addition there
was a favorable settlement with an insurance carrier for an
environmental claim (approximately $1 million). Also losses
incurred in 1994 for indemnification of workmen's compensation
claims of companies formerly affiliated with NVF (approximately
$4.5 million) and environmental accruals (approximately $1.2
million) did not recur.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
Year Ended December 31,
1994 Compared with 1993
Net Sales
and Operating Revenues Operating Profits (Loss)
Percent Percent
1994 1993 Change 1994 1993 Change
(thousands of dollars)
Industrial laminated
plastics $ 47,667 46,561 2.4% 2,976 2,446 21.7%
Vulcanized fibre 32,451 29,231 11.0% 7,397 6,722 10.0%
Other segments 13,863 14,254 -2.7% (659) (4) -
General corporate
expenses - - - (5,098) (7,031) 68.6%
Net sales and operating
revenues $ 93,981 90,046 4.4%
Operating profit 4,616 2,133
Other income (expense), net (6,433) 4,805
Debt costs (2,207) (5,599)
Income (loss) before reorganization items,
taxes, equity in earnings of affiliates,
and discontinued operations $(4,024) (1,339)
Vulcanized fibre segment sales increased by $3,220,000 between
1993 and 1994. Volume represented $2,201,000 of such increase and
price represented $1,019,000. Sales increases in the industrial
laminated plastic segment were the result of marketing
effort/increased volume, not price increases. Paper segment sales
decreased due to increased competition and depressed market
conditions.
Operating profits in the valcanized fibre segment increased by
$675,000 between 1993 and 1994. Price increases as noted above
directly increased profits by the same amount, $1,019,000. Volume
increases contributed $901,000 to profits. However, these
increases were partially offset by increased cost of $1,245,00.
Union contracted labor rate increases for 1994 as well as benefit
increases and increases in raw materials were the major components
on the increased costs in 1994. Operating profits in the
industrial laminated plastics segment increased as a result of the
efficiency gained by increased volume. Operating profits in the
paper segment decreased due to volume decrease. General corporate
expense decreased as salaries, insurance, executive administration
and bad debt expenses were reduced.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (continued)
In 1993 Other Income (Expense) was positively impacted by non-
recurring events, i.e., $3.6 million gain on proceeds from fire
losses, $3.6 million gain on sale of CFC Holding stock and $.7
million gain on sale of property whereas in 1994 Other Income
(Expense) was negatively impacted by non-recurring events, i.e.,
accrued reserves for a workmen's compensation indemnification claim
by Insurance Company of the North America of $4.5 million and
additional reserves provided for potential EPA liabilities of $2.8
million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
NVF COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants
Consolidated Balance Sheets
December 31, 1995 and 1994
Consolidated Statements of Operations
Three Years Ended December 31, 1995
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1995
Consolidated Statements of Changes in Stockholders' Deficit
Three Years Ended December 31, 1995
Notes to Consolidated Financial Statements
Schedules are omitted either because they are not applicable
or because the information is included in the Consolidated
Financial Statements or notes thereto.
ARTHUR ANDERSEN & COMPANY
101 Eisenhower Parkway
Roseland, New Jersey 07068
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To NVF Company:
We have audited the accompanying consolidated balance sheets of NVF
Company (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1994 and the related consolidated statements of
operations, cash flows and changes in stockholders' deficit for
each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards required that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of NVF Company and subsidiaries as of December 31, 1995
and 1994 and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Notes 1 and 15 to the consolidated
financial statements, the Company suffered recurring losses from
operations through 1994 and has a net capital deficiency. In
addition, as described in Note 15 to the accompanying consolidated
financial statements, in September 1993 the Company filed a
voluntary petition for relief under Chapter 11 of the U.S.
Bankruptcy Code. Management's plans in regard to these matters
including its submission of a plan of reorganization to the
Bankruptcy Court and the Company's creditors are also described in
Notes 1 and 15. In the event that this plan of reorganization is
confirmed, continuation of the business thereafter is dependent on
the Company's ability to achieve successful future operations. The
-2-
accompanying consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the Company be unable to
continue as a going concern.
Roseland, New Jersey
April 5, 1996
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Balance Sheets
December 31, 1995 and 1994
(thousands of dollars)
Assets 1995 1994
Current assets:
Cash and equivalents $ 652 1,274
Restricted cash 16,336 -
Receivables, less allowance for doubtful
accounts of $366 and $380 13,583 14,884
Inventories 13,888 14,389
Other current assets 1,456 471
Total current assets 45,915 31,018
Investment in affiliate 102 342
Properties, at cost 88,269 85,652
Less accumulated depreciation and amortization (69,465) (67,068)
Net properties 18,804 18,584
Other assets 2,750 2,317
$ 67,571 52,261
Liabilities and Stockholders' Deficiency
Current liabilities:
Current portion of long-term debt $ 7,584 9,849
Accounts receivable financing 3,616 3,641
Accounts payable 2,700 1,558
Accrued professional liabilities 3,032 5,214
Accrued interest payable 1,385 1,336
Accrued taxes 1,502 -
Accrued wages and other employee costs 2,074 1,865
Other current liabilities 426 864
Total current liabilities 22,319 24,327
Other noncurrent liabilities 2,865 2,770
Long-term debt 176 35
Liabilities subject to compromise (A) 87,753 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 (273,089) (290,767)
Treasury common stock, 2,292,544 shares
at cost (8,352) (8,352)
Total stockholders' deficiency (45,542) (63,220)
$ 67,571 52,261
See accompanying notes to consolidated financial statements
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Balance Sheets
December 31, 1995 and 1994
(thousands of dollars)
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 5,355 5,378
Post retirement benefit obligations, net 513 527
Subordinated debentures, 5% 48,046 48,046
Subordinated debentures, 10% 11,375 11,375
Other accrued liabilities 11,282 11,340
Current portion of long-term debt 16 39
Noncurrent portion of long term debt 11 123
$ 87,753(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 Operations
Three Years Ended December 31, 1995
(thousands of dollars)
1995 1994 1993
Net sales and operating revenues $ 96,891 93,981 90,046
Cost of goods sold 81,546 75,904 72,786
Depreciation and amortization 2,597 2,828 3,099
Selling, general and administrative
expenses 11,583 10,633 12,028
95,726 89,365 87,913
Operating income from
continuing operations 1,165 4,616 2,133
Other income (expense):
Settlement with principal shareholder 23,359 - -
Other income (expense), net 1,285 (6,433) 4,805
Debt costs, other (contractual interest
of $4,656, $6,001 and $6,631) (1,116) (2,207) (5,599)
23,528 (8,640) (794)
Income (loss) from continuing
operations before reorganization
items, taxes on income, equity in
net earnings of affiliates and
discontinued operations 24,693 (4,024) 1,339
Reorganization items:
Professional fees 5,822 6,916 1,000
Bond discount - - 1,143
5,822 6,916 2,143
Income (loss) from continuing operations
before taxes on income, equity in
net earnings of affiliates and
discontinued operations 18,871 (10,940) (804)
Provision for (benefit from) taxes
on income 1,502 (38) 77
Income (loss) from continuing
operations before equity in net
earnings of affiliates and
discontinued operations 17,369 (10,902) (881)
Equity in net earnings of affiliates - 89 180
Income (loss) from continuing operations
before discontinued operations 17,369 (10,813) (701)
Loss from discontinued operations - - (5,304)
Net Income (Loss) $ 17,369 (10,813) (6,005)
Weighted average number of common shares
outstanding, in thousands of shares 93,271 93,271 93,271
Income (loss) per share:
From continuing operations $ .19 (.12) (.01)
Discontinued operations - - (.06)
Net income (loss) per share $ .19 (.12) (.07)
See accompanying notes to consolidated financial statements.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1995
(thousands of dollars)
1995 1994 1993
Cash flows from operations:
Net income (loss) $ 17,369 (10,813) (6,005)
Loss from discontinued operations - - 5,304
Income (loss) from continuing
operations 17,369 (10,813) (701)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,597 2,828 3,099
Reduction (Excess) of additional minimum
liability over prior service cost 309 (170) (833)
Amortization of deferred debt discount - - 1,511
Exchange of long term debt (2,305) - -
Write-off of investment - - 2,786
Equity in earnings of affiliates - (89) (180)
Total Adjustments 601 2,569 6,383
17,970 (8,244) 5,682
(Increase) decrease in assets:
Receivables, net 1,301 (1,245) 632
Inventories 501 888 (1,411)
Other current assets (985) 99 (355)
Other assets long-term (433) 46 202
Increase (decrease) in liabilities:
Accounts payable 751 (141) (922)
Due to affiliates - - (3,381)
Accrued interest payable 49 752 1,224
Accrued professional liabilities (2,182) 4,958 256
Accrued wages and other employee costs 2,044 206 (441)
Accrued taxes 1,502 - -
Other current liabilities (496) 7,507 510
Other noncurrent liabilities (1,752) (758) 883
Total 300 12,312 (2,803)
Net cash provided by operating
activities 18,270 4,068 2,879
Cash flows from investing activities:
Capital expenditures (2,810) (1,614) (1,283)
Net disposals:
Proceeds from asset sales 7 47 753
Book value of assets sold (14) (15) (511)
Net gain (loss) on disposal (7) 32 242
Liquidating dividends in affiliates 240 - -
Net cash used for investing
activities (2,577) (1,582) (1,041)
See accompanying notes to consolidated financial statements.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Cash Flows
Three Years Ended December 31, 1995
(thousands of dollars)
1995 1994 1993
Cash flows financing from activities:
Proceeds (repayments) from accounts
receivable financing (25) (3,232) (1,438)
Payment of long term debt - - (376)
New capital leases 98 106 137
Payment of capital leases (52) (52) (57)
Retirement of capital leases - (13) (97)
Proceeds from sale of CFC Holdings - - 197
Net cash used for financing
activities 21 (3,191) (1,634)
Net (decrease) increase in cash and
equivalents 15,714 (705) 204
Cash and equivalents at
beginning of year 1,274 1,979 1,775
Cash and equivalents and restricted cash
at end of year $ 16,988 1,274 1,979
Supplemental disclosures of cash flow
information:
Cash (received) paid during the year for:
Interest $ 811 1,472 3,923
Income taxes $ (40) (60) 258
Supplemental schedule of noncash investing
and financing activities:
Capital expenditures, net of
capitalized leases:
Total capital expenditures $ 2,908 1,666 1,340
Amounts representing capital leases (98) (52) (57)
Capital expenditures paid in cash $ 2,810 1,614 1,283
See accompanying notes to consolidated financial statements.
NVF COMPANY AND SUBSIDIARIES
(Debtor-in-Possession)
Consolidated Statements of Changes in Stockholder's Deficit
Three Years Ended December 31, 1995
(thousands of dollars)
Capital In Treasury
Common Excess of Accumulated Common
Stock Par Value Deficit Stock
Balance at December 31, 1992 $ 956 234,943 (350,061) (8,352)
Reduction (excess) of additional
minimum liability over unrecognized
prior service cost - - (833) -
Net effect of deconsolidation of APL - - 77,115 -
Net loss - - (6,005) -
Balance at December 31, 1993 $ 956 234,943 (279,784) (8,352)
Reduction (excess) of additional
minimum liability over unrecognized
prior service cost - - (170) -
Net loss - - (10,813) -
Balance at December 31, 1994 $ 956 234,943 (290,767) (8,352)
Reduction (excess) of additional
minimum liability over unrecognized
prior service cost - - 309 -
Net income - - 17,369 -
Balance at December 31, 1995 $ 956 234,943 (273,089) (8,352)
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
NVF Company and its wholly-owned subsidiaries, ("NVF" or the
"Company") unless the context otherwise indicates. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Basis of Presentation
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.
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".
The Company's subsidiaries, Parsons Paper and NVF Canada, are not
part of the bankruptcy thus there was no change made in the manner
they are accounted for. Stand alone statements for NVF can be
found in Note 19.
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 (See Note 3) or alternate facility will be sufficient to
enable NVF to maintain its operations until such time as a plan can
be confirmed by the Bankruptcy Court. The consolidated financial
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1995, 1994 and 1993
Note 1 - Summary of Significant Accounting Policies - (continued)
statements included herein have been prepared on a going concern
basis and, accordingly, 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 16 included elsewhere
herein for information concerning the estimated liquidation value
of NVF on a consolidated basis.
On April 23, 1993 Insurance and Risk Management ("IRM"),
repurchased from DWG Corporation ("DWG") 25% of the issued and
outstanding common stock of IRM. (See Note 5). As a result of such
purchase, NVF's ownership of the issued and outstanding common
stock of IRM increased from 45% to 60%. Due to the fact that IRM
has not taken 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.
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 management, IRM's business became 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.
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
had approximately $2.5 million face value of APL's 10-3/4%
Subordinated Sinking Fund Debentures as of December 31, 1994.
However a November 1995 settlement of litigation commenced by the
Committee (See Note 18) called for the holders of 11-3/4% Secured
NVF Promissory Notes to return such notes in exchange for the
return of the APL 10-3/4% Subordinated Sinking Fund Debentures.
Other income of approximately $2,609,000 was recognized in 1995 as
a result of the settlement.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
December 31, 1995, 1994 and 1993
Note 1 - Summary of Significant Accounting Policies - (continued)
Inventories
Inventories are valued at the lower of average cost or market
on a first-in, first-out (FIFO) basis. Inventory costs generally
include materials, labor costs, manufacturing overhead and
depreciation.
Depreciation and Amortization
In general, depreciation and amortization of buildings,
machinery and equipment is provided on the straight-line method
over the estimated useful lives of depreciable properties,
principally eleven years on equipment, forty-five years on
buildings and ten years on building improvements.
Retirement and Disposal of Properties
The cost of properties retired or otherwise disposed of is
eliminated from the accounts. When units of depreciable property
are retired or disposed of, the net gain or loss is recognized in
other income.
Maintenance and Repairs
Routine maintenance, repairs and replacements are charged to
operations. Expenditures that materially increase values, change
capacities or extend useful lives are capitalized. Capitalized
renewals or replacements are charged to the property accounts. The
properties that were renewed or replaced are correspondingly
removed from the property accounts.
Revenue Recognition
Revenue from the sale of products is recognized upon passage
of title to the customer, which in most cases coincides with
shipment of the related products.
Retirement and Pension Plans
The Company and its subsidiaries have non contributory pension
plans covering substantially all its hourly employees. Company
contributions are actuarially determined using the projected unit
credit method, taking into consideration estimated future salary
increases where applicable.
In December 1990, the Financial Accounting Standards Board
issued a new standard on accounting for postretirement benefits
other than pensions. This new standard requires that the expected
cost of these benefits must be charged to expense during the years
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 1 - Summary of Significant Accounting Policies - (continued)
that employees render service. This was a significant change from
the Company's policy of recognizing these costs on the cash basis.
The Company adopted the new standard effective January 1, 1993.
The Company is amortizing the discounted present value of the
obligation, $4,851,259, to expense over a twenty year period of
which seventeen years remain.
Income Taxes
The Financial Accounting Standards Board issued statement of
Financial Accounting Standards No. 109 ("SFAS No. 109") "Accounting
for Income Taxes". The Company adopted the new standard effective
January 1, 1993 and the new standard did not have a material effect
on the Company's consolidated financial position.
Income (loss) Per Share
Income (loss) per share has been computed by dividing net
income (loss) by the weighted average number of outstanding shares
of common stock during each period. Common stock equivalents were
not used to compute the loss per share in 1994 and 1993 because
such inclusion would be antidilutive. Such common stock equivalents
(options) expired in 1995. (See Note 11).
Cash and Equivalents
The Company classifies as cash and equivalents all highly
liquid investments with a maturity of three months or less when
purchased.
Liquidity
As discussed more fully in Note 15 - Liquidity, the Company
has sustained losses in each of the last seven years prior to 1995.
For a discussion of the ability of the Company to meet its cash
requirements see Note 15.
Reclassification
Certain prior year amounts have been reclassified in order to
conform to the current year presentation.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 2 - Restricted Cash
Restricted cash of approximately $16,336,000 represents the
settlement paid by the Company's principal shareholder of
$20,750,000 (See Note 18) plus net interest accrued since payment
(approximately $626,000) less payments made to professionals
incurred in the bankruptcy matter (approximately $5,040,000). This
cash is held in an escrow account which the Company can only access
with approval of the Unsecured Creditors' Committee. The funds are
restricted for use in resolving claims associated with the
bankruptcy.
Note 3 - Accounts Receivable
The Company has an accounts receivable financing arrangement
with CIT Group ("CIT") covering substantially all of its accounts
receivable. Such arrangement provides the Company a line of credit
up to the lesser of $8,000,000 or 80% of the eligible accounts
receivable at an interest rate of prime (8.75% at December 31,
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.
At December 31, 1995 the Company had open a balance of $3.6 million
under this arrangement. On , 1996 CIT advised the
Company that it would not be interested in financing arrangement
after the Company emerges from bankruptcy. The Company believes it
will be successful in finding alternative financing, however there
can be no assurance that the Company will be able to obtain such
financing or that it will be available on terms the Company deems
acceptable.
Note 4 - Inventories
The following is a summary of the major classifications of
inventories:
December 31,
1995 1994
(thousands of dollars)
Raw materials and supplies $ 5,520 3,984
Work in process 2,023 3,177
Finished goods 6,345 7,228
$ 13,888 14,389
Note 5 - Investment in Affiliates
On April 23, 1993, the Company sold to DWG Corporation, which
up until that date may have been deemed to be an affiliate of the
Company as a result of common ownership and control by Victor
Posner, all 141,000 shares of common stock of CFC Holdings Corp.,
a subsidiary of DWG, held by the Company representing 1.4% of the
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 5 - Investment in Affiliates (continued)
issued and outstanding capital stock of CFC Holdings for $3.6
million. At December 31, 1992, the aggregate book value of the
141,000 shares of CFC Holdings Common Stock sold by the Company was
approximately $270,000. DWG made payment of the purchase price to
the Company. Substantially all of these proceeds were used to pay
DWG amounts owed by the Company under cost sharing arrangements.
A gain of approximately $3.4 million is recorded in Other Income
(Expense) for 1993.
The Company's investment in CFC Holdings was accounted for on
the equity method on a quarter lag basis. The Company's equity in
net earnings of CFC Holdings amounted to $73,000 in 1993.
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, the Company'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 of IRM. 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 that IRM's equity went from negative to positive, therefore,
the Company, as a 60% owner, recorded its share of the equity in
IRM, approximately $1.5 million. The Company'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. As a result of
the April 23, 1993 transactions, DWG is no longer affiliated with
the Company and IRM.
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 management, IRM's business became 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
For the years ended December 31, 1995, 1994 and 1993 NVF had
income of $-0-, $89,000 and $180,000 respectively, from its equity
investment in IRM and NVF had a carrying value of its investment in
IRM at December 31, 1995 and 1994 of $102,000 and $342,000,
respectively. NVF has also received liquidating dividends of
$1,066,667 in 1993, $133,333 in 1994 and $240,000 in 1995.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 6 - Properties
Properties are recorded at cost, less accumulated
depreciation. Management continuously reviews the carrying value
of its properties based on its review of third party appraisals,
market trends, changes in the way the property is used and physical
changes in the property. If Management determines the property has
been impaired the property is written down to a new carrying value
and an impairment loss is recognized.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Standards No. 121 "Accounting for the
Impairment of Long Lived Assets to be Disposed Of" (SFAS 121).
SFAS 121 establishes accounting standards for the impairment of
related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of.
SFAS 121 is effective for the year ended December 31, 1996.
Management has not yet determined how the adoption of SFAS 121 will
impact its financial statements.
At December 31, 1995 and 1994, the major classifications of
properties (at cost) consisted of the following:
1995 1994
(thousands of dollars)
Land and land improvements $ 1,994 1,989
Buildings, machinery and equipment 85,047 82,443
Buildings, machinery and equipment
under capitalized leases 305 247
Construction in progress 923 973
Total properties at cost $ 88,269 85,652
Amortization of properties under capitalized leases is
included with depreciation expense. At December 31, 1995 and 1994,
the accumulated amortization of properties under capitalized leases
was $89,000 and $78,000, respectively.
Note 7 - Taxes on Income
NVF and Parsons Paper file separate consolidated federal
income tax returns. The difference between the reported provision
and the computed expected tax (benefit) based on book income (loss)
at the federal income tax rate for the three years ended December
31, 1995 are reconciled as follows:
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 7 - Taxes on Income (continued)
Year Ended December 31,
1995 1994 1993
(thousands of dollars)
Federal taxes (benefit) at statutory
rates 6,168 (3,829) (2,137)
Increase (decrease) in taxes
resulting from:
State taxes net of federal benefit 1,249 - -
Net operating loss (utilized) not
currently realizable (4,420) 3,829 2,137
Alternative minimum taxes 253 - -
Contractual interest (1,225) - -
Insurance settlement (350) - -
Other, net (173) (38) -
Provision for taxes on income $ 1,502 (38) 77
As described in Note 1, the Company adopted SFAS No. 109
effective January 1, 1993.
At December 31, 1995 and 1994, the deferred tax assets and
liabilities are comprised of:
12/31/94 12/31/95
Deferred Deferred Tax
Tax (Benefit) Assets/
Assets Expense (Liabilities)
Current:
Allowance for doubtful accounts $ 133 $ (7) $ 126
Inventory overhead capitalization 141 (42) 99
Unrealized loss on securities 104 - 104
Insurance recovery - (350) (350)
Accrued vacation 337 9 346
Noncurrent:
Contractual interest - (1,225) (1,225)
Pension costs 662 - 662
Accelerated depreciation 213 (426) (213)
Environmental reserves 2,394 (174) 2,220
Contingency reserves 1,575 - 1,575
Net operating loss carryforward 37,987 (4,420) 33,567
Capital loss carryforward 33,064 - 33,064
ITC credit carryforward 531 - 531
Other, net - (173) (173)
Less valuation reserve (77,142) 6,808 (70,334)
$ 0 0 0
Based on the weight of available evidence, management has
determined that it is more likely than not that none of the
deferred tax assets identified above will be realized and therefore
has recorded a valuation allowance of $69,983 against the entire
amount.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 7 - Taxes on Income (continued)
In June 1989, NVF obtained an appeal bond in favor of the
Commonwealth of Pennsylvania in connection with certain taxes for
the year 1985 in the amount of $1.3 million which was reduced
subsequent to September 30, 1989 to $320,000. The taxes of
approximately $250,000 were paid in May 1993 to facilitate the sale
of the Company's Willow Grove property. In January, 1995, the
Company resolved this matter with the Commonwealth and received an
$82,000 refund.
Note 8 - Notes Payable and Long-Term Debt
At December 31, 1995 and 1994, long-term debt consisted of the
following:
1995 1994
(thousands of dollars)
NVF Company:
11-3/4% Secured amortizing
promissory notes $ - 2,305
10% Secured notes payable 7,461 7,461
Capitalized lease obligations 210 164
Urban Development Action Grant 116 116
7,787 10,046
Less: Amounts included in
liabilities subject to compromise 27 162
Current portion of long-term debt 7,584 9,849
Long-term debt $ 176 35
A settlement of litigation commenced by the Committee (See
Note 18) called for interest on the 10% Secured Notes to be fixed
at $765,000 through September 30, 1995 plus additional interest at
a rate of 10% per annum (simple interest with no compounding) from
September 30, 1995 until (1) the consummation date of the plan
which brings the Company out of bankruptcy or (2) May 22, 1996
which is the date the first semi-annual payment is due. As of
December 31, 1995 the Company has accrued $951,000 of interest on
the 10% Secured Notes in "Accrued Interest Payable". The settlement
also called 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. Other income of approximately $2,609,000
was recognized in 1995 as a result of the settlement.
The scheduled principal payments on notes payable and long-
term debt outstanding at December 31, 1995 (other than subordinated
indebtedness) for each of the succeeding five years, without regard
to bankruptcy proceedings, are as follows:
1996 1997 1998 1999 2000
$7,584 108 52 37 6
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 9 - Subordinated Indebtedness
At December 31, 1995 and 1994, subordinated indebtedness
consisted of the following:
1995 1994
(thousands of dollars)
NVF Company:
5% Subordinated sinking fund debentures
due 1994 less unamortized deferred
discount of $-0- and $-0- $ 48,046 48,046
10% Subordinated sinking fund debentures
due 2003 less unamortized deferred
discount of $-0- and $-0- 11,375 11,375
59,421 59,421
Total subordinated indebtedness 59,421 59,421
Current portion of subordinated
indebtedness 59,421 59,421
Long term subordinated indebtedness $ - -
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, 1995 and 1994 was
approximately $48,046,000. NVF did not make sinking fund payments
of approximately $284,375 on November 14, 1993, November 14, 1994
and November 14, 1995 nor did it make interest payments of $568,757
on November 14, 1993, May 14, 1994, November 14, 1994, May 14, 1995
and November 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, 1995 and 1994 was approximately $11,375,000. 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 the proceeds from litigation entitled
as the Official Creditor's Committee of NVF Company v. Victor
Posner, et al.
Amortization of deferred debt discount, amounting to $368,000
in 1993, is classified with "debt costs" in the Company's
statements of operations. Amortization of deferred debt discount
on the 5% and 10% Subordinated Debentures was on the "Bonds
outstanding" method. In accordance with AICPA Statement of
Position 90-7 the remaining unamortized deferred debt discount of
$1,143,000 was expensed in 1993.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 9 - Subordinated Debentures (continued)
The scheduled principal payments on subordinated indebtedness
outstanding at December 31, 1995 for each of the succeeding five
years, without regard to bankruptcy proceedings, are as follows:
1996 1997 1998 1999 2000
$ 59,421 - - - -
Note 10 - Stockholders' Equity
NVF has authorized 10,000,000 shares of $1 par value preferred
stock, with no shares issued or presently contemplated to be
issued.
Note 11 - Stock Option Plans
All options under the 1970 Stock Option Plan for officers and
key employees of NVF and its subsidiaries have expired. No stock
options remain outstanding at December 31, 1995.
Note 12 - Retirement and Incentive Compensation Plans
At December 31, 1995 and 1994, the Company recorded additional
minimum liabilities of $3,381,000 and $3,906,000, respectively,
included in "Liabilities subject to compromise", and intangible
assets of $1,851,000 and $2,067,000, respectively, included in
noncurrent "Other assets", and a credit to equity of $309,000 and
a charge to equity of $170,000 at December 31, 1995 and December
31, 1994, respectively. The additional minimum liabilities
represent the excess of the estimated accumulated benefit
obligations over the estimated fair value of plan assets and the
unfunded accrued pension costs at December 31, 1995, 1994 and 1993.
In general, the Company's funding policy is to contribute the
minimum required by the Employee Retirement Income Security Act of
1974.
The components of the 1995, 1994 and 1993 pension expense are
as follows:
Year Ended December 31,
1995 1994 1993
(thousands of dollars)
Service cost $ 561 510 498
Interest cost on projected benefit
obligation 2,367 2,350 2,381
Actual return on plan assets (1,879) 841 (2,302)
Amortization and deferral 205 (2,780) 367
Net periodic pension cost $ 1,254 921 944
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 12 - Retirement and Incentive Compensation Plans (continued)
The following table sets forth a reconciliation of the funding
status of the plans as of December 31, 1995 and 1994:
Aggregate of Plans Whose
Assets Exceed Accumulated
Accumulated Benefits
Benefits Exceed Assets
1995 1994 1995 1994
(thousands of dollars)
Actuarial present value of service
obligations:
Vested benefit obligation $ 13,887 13,455 18,729 17,343
Projected (and accumulated)
benefit obligation $ 13,991 13,556 19,139 17,661
Plan assets at fair value 14,953 13,688 12,712 11,143
Reconciliation of funded status:
Projected benefit obligation less
than (in excess of) plan assets 962 132 (6,427) (6,518)
Unrecognized prior service costs - - 400 436
Unrecognized net loss (gain) from
plan experience (19) 910 1,513 1,819
Unamortized net (asset) obligation
at transition (124) (140) 1,433 1,612
Prepaid (accrued pension cost) $ 819 902 (3,081) (2,651)
An assumed discount rate of 7.5%, an expected long-term rate
of return on assets of 8%, and a rate of increase in future
compensation levels of 6% where applicable, were used in developing
this data for 1995 and 1994. The actuary's calculations resulted
in a $309,000 credit, $170,000 charge and a $333,000 charge to
equity in 1995, 1994 and 1993, respectively. Plan assets are
invested in a managed portfolio consisting primarily of corporate
bonds and common stock of unaffiliated issuers.
Included in the accompanying balance sheets under the captions
"Accrued wages and other employee costs", "Other noncurrent
liabilities" and "Liabilities subject to compromise" were pension
liabilities of approximately $129,000, $159,000 and $5,355,000
respectively, at December 31, 1995 and $69,000, $207,000 and
$5,378,000, respectively at December 31, 1994.
NVF adopted a 401(k) defined contribution plan effective
January 1, 1990 for eligible employees who elect to participate.
Employees may contribute from 1% to 15% of their compensation
subject to certain limitations. At its discretion, NVF will
determine how much, if anything, it will contribute to such plan.
In 1995 and 1994 the Company accrued a matching contribution of
$.25 for each dollar contributed by employees at a cost of
approximately $78,000 and $65,000, respectively. There were no
contributions in 1993.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 12 - Retirement and Incentive Compensation Plans (continued)
NVF provides certain health care and life insurance benefits
for retired employees. Substantially all of the Company's
employees may become eligible for those benefits if they reach
normal retirement age while working for NVF. Postretirement
medical benefits are self-insured by the Company and administered
by Delaware Blue Cross and Blue Shield. Postretirement life
insurance benefits are provided through an insurance company whose
premiums are based on the benefits paid during the year. Prior to
adopting FAS 106, the Company expensed the related cost on a pay-
as-you-go basis. The Company has not funded the Accumulated
Postretirement Benefit Obligation because the Plan is not pay-
related there are no Plan assets.
The effect of a one-percentage point increase in the assumed
health cost trend rates on the aggregate of the service and
interest cost component of net periodic postretirement health care
costs for 1995 would be an increase of approximately $38,000. The
related effect on the accumulated postretirement benefit obligation
for health care benefits would be an increase of approximately
$43,000.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 12 - Retirement and Incentive Compensation Plans (continued)
In December 1990, the Financial Accounting Standards Board
issued a new standard on accounting for postretirement benefits
other than pensions. This standard requires that the expected cost
of these benefits must be charged to expense during the years that
employees render service. The Company adopted the new standard
prospectively effective January 1, 1993. The Company is amortizing
the discounted present value of the transition obligation,
$4,851,259, to expense over a twenty year period of which seventeen
years remain. At December 31, 1995 and 1994 a net liability of
$564,000 and $551,000 respectively, is recorded in "Liabilities
subject to compromise" on the balance sheet for postretirement
benefits. The following table reconciles the plan's funded status
to the accrued postretirement benefit cost liability as reflected
on the consolidated balance sheet as of December 31, 1995 and 1994:
1995 1994
(000's) (000's)
Accumulated Postretirement Benefit Obligation:
Retirees $ (2,659) (2,707)
Other fully eligible participants (318) (836)
Other active participants (1,215) (1,421)
(4,192) (4,964)
Reduction of prior service cost (861) -
Unrecognized actuarial loss 365 47
Unrecognized transition obligation 4,124 4,366
Accrued postretirement health care
cost liability $ (564) $ (551)
Net postretirement health care cost included
the following components:
Service cost - benefits attributed to service
during the period $ 69 109
Interest cost on accumulated postretirement
benefit obligation 286 385
Amortization of transition obligation over
20 years 243 243
Amortization of unrecognized prior
service cost (54) -
Amortization of unrecognized net
(gain)/loss (5) -
Net postretirement health care cost $ 539 $ 737
For measurement purposes, a twelve percent annual rate of
increase in the per capita cost of covered health care claims was
assumed for 1993; the rate was assumed to decrease gradually in
increments of 1 percent per year to an ultimate rate of 6 percent
and remain at that level thereafter.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 12 - Retirement and Incentive Compensation Plans (continued)
Incentive Compensation
In October 1988, the new Ad Hoc Intercorporate Transactions
and Common Officer Committee, NVF's Compensation Committee and
NVF's Board of Directors approved, subject to the approval of
stockholders, a new Management Incentive Plan of NVF, and
terminated NVF's prior incentive compensation plans. The new plan,
which was approved by the stockholders on December 28, 1990, became
effective for the year ending December 31, 1988. The new plan
provides for the establishment for each fiscal year for two
separate incentive compensation funds, the first to be used
primarily based on net operating earnings and not to exceed 10% of
such earnings, and the second to be based on net earnings from
sales or other disposition of assets, such as sales of
subsidiaries, divisions, investments, and other assets not in the
ordinary course of business, and not to exceed 10% of earnings from
such sources. The new plan is to be administered by NVF's
Compensation Committee and awards for elected corporate officers of
NVF are to be approved by NVF's Board of Directors following review
and recommendation by NVF's Compensation Committee after review by
the new Ad Hoc Intercorporate Transactions and Common Officer
Compensation Committee where such review is required. The new plan
sets forth certain objective factors used in determining the
allocation of awards to persons eligible to participate in such
plan. Among such factors are experience, level of responsibility,
efforts expended, participation in decision making, contribution of
the employee to the achievement of profits, past performance,
duties and responsibilities and length of employment. The
objectives of the new plan are to encourage the development of
aggressive, growth-oriented business plans and strategies
consistent with philosophies of the Board of Directors, to motivate
exemplary commitment and performance of managerial personnel, to
provide a competitive level of remuneration to those managerial
personnel who have made a meaningful contribution to NVF's
financial results and business objectives and to provide NVF's
stockholders with an optimum return on their investment by
maximizing the long term growth and profitability of NVF. NVF did
not accrue any amounts under such plan with respect to 1995, 1994
and 1993.
Note 13 - Industry Segments
The Company is engaged in the manufacture and sale of
industrial laminated plastic products which have their principal
application in the electronic fields such as for printed circuit
boards; manufacture and sale of vulcanized fibre which is an
extremely sturdy and lightweight converted cellulose widely used in
such applications as backing abrasive disks, electrical insulation,
material handling containers and furniture surfaces and, to a
lesser extent, the manufacture of material handling containers and
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 13 - Industry Segments (continued)
correspondence and business papers. The Company principally
markets its products in the North American market. Less than 10%
is exported.
Year ended December 31,
1995 1994 1993
(thousands of dollars)
Amount % Amount % Amount %
Net Sales and Operating Revenues
Industrial laminated plastics $ 56,233 58 48,650 52 47,758 53
Vulcanized fibre 31,656 33 35,064 37 31,382 35
Other 12,052 12 13,836 15 14,254 16
Total segment net sales and
operating revenues 99,941 97,577 93,394
Elimination of intersegment sales
(transferred at market prices):
Industrial laminated plastics $ (975)(1) (983)(1) (1,197)(1)
Vulcanized fibre (2,075)(2) (2,613)(3) (2,151)(3)
Consolidated net sales and
operating revenues $ 96,891 100 93,981 100 90,046 100
Operating Income (Losses):
Industrial laminated plastics $ 3,760 2,976 2,446
Vulcanized fibre 4,371 7,397 6,722
Other (1,973) (659) (4)
General corporate expenses, net (4,993) (5,098) (7,031)
Operating income 1,165 4,616 2,133
Reorganization expenses (5,822) (6,916) (2,143)
Adversary action settlement 23,359 - -
Other income (expense) 1,285 (6,433) 4,805
Debt costs (1,116) (2,207) (5,599)
Provision for taxes on income (1,502) - -
Consolidated income (loss) before
taxes on income, equity in net
earnings (loss) of affiliates
and discontinued operations $ 17,369 (10,940) (804)
Year ended December 31,
1995 1994 1993
(thousands of dollars)
Identifiable assets:
Industrial laminated plastics $ 23,942 25,424 27,327
Vulcanized fibre 16,968 16,317 14,442
Other 7,253 8,630 9,307
Total identifiable assets 48,163 50,371 51,076
General corporate assets 21,599 4,440 5,107
Elimination of intersegment
receivables (2,191) (2,550) (2,272)
Consolidated assets $ 67,571 52,261 53,911
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 13 - Industry Segments (continued)
Year ended December 31,
1995 1994 1993
(thousands of dollars)
Capital expenditures:
Industrial laminated plastics $ 180 326 230
Vulcanized fibre 2,418 1,231 650
Other 143 76 400
General corporate 167 33 60
$ 2,908 1,666 1,340
Depreciation and amortization:
Industrial laminated plastics $ 1,358 1,687 1,880
Vulcanized fibre 770 648 684
Other 418 435 480
General corporate 51 58 55
$ 2,597 2,828 3,099
NVF's foreign operation (which is not significant) has been
grouped with other segments in the foregoing industry segment data
because it is not practical to isolate the industrial laminated
plastics or vulcanized fibre portion of the foreign operation.
Note 14 - Transactions with Related Parties
Pursuant to a Stock Purchase Agreement entered into by Victor
Posner and certain entities controlled by him (collectively, the
"Sellers") with respect to the sale and exchange of all of the
shares of common stock of DWG owned by them, Sellers agreed to
terminate or cause to be terminated all such cost sharing
arrangements within six months after April 23, 1993 and agreed that
DWG would be reimbursed for any space or service provided to
Seller's affiliates, including the Company during the period from
April 23, 1993 to the date of termination at commercially
reasonable rates no less than the rate DWG would charge an
unaffiliated third party. The sale and exchange of shares
contemplated by the Stock Purchase Agreement was consummated on
April 23, 1993 and as a result the Sellers ceased to hold any
shares of DWG and DWG and its subsidiaries ceased on such date to
be affiliates of the Company. DWG and NVF were affiliated as a
result of common ownership and control by Victor Posner. DWG
provided management services, office facilities (including the cost
of space leased from a trust for the benefit of Victor Posner and
his children) and other services to the Company in 1993 at a cost
of approximately $529,000. In addition, the Company incurred
interest expense to DWG of $73,000 in 1993.
The Company maintained certain insurance coverage with
Chesapeake Insurance, a subsidiary of DWG with whom the Company was
affiliated with until April 23, 1993. Premiums attributable to
such insurance coverage which consisted principally of property
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 14 - Transactions with Related Parties (continued)
coverage amounted to approximately $70,000 in 1993. In addition,
the Company maintained insurance coverage with unaffiliated
insurance companies for which a subsidiary of Chesapeake Insurance
reinsured a portion of the risk. Net premiums attributable to such
reinsurance were approximately $1,465,000 in 1993. In addition,
IRM acts as agent or broker in connection with insurance coverage
obtained by the Company and provides claims processing services for
the Company. The commissions and payments for services paid to
such Company were $14,000 in 1993 after which the Company
discontinued utilizing IRM. Included in "Liabilities subject to
compromise" on the accompanying balance sheet was approximately
$43,000 the Company owed IRM at December 31, 1995.
Note 15 - Liquidity
NVF's consolidated working capital at December 31, 1995
increased by approximately $16,905,000 from December 31, 1994.
Proceeds from a settlement of litigation entitled as the Official
Creditors' Committee of NVF Company v. Victor Posner, et al. (See
Note 18) of $20,750,000 and other terms of such settlement, i.e.,
the return to the Company of its 11-3/4% Secured Promissory Notes
in exchange for previously written off APL 10-3/4% Subordinated
Sinking Fund Debentures, were principally responsible for the
increase. However, the terms of the settlement also dictate that
such proceeds may only be used in matters relating to the
bankruptcy, which results in the restricted cash (See Note 2) of
$16,336,000.
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 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 copy of the Plan was filed as
Exhibit 2.1 to Form 8-K by the Company on August 4, 1994. A hearing
on the adequacy of the First Amended Disclosure Statement was set
for September 13, 1994. On September 7, 1994, the Company filed
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 15 - Liquidity (continued)
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 Statement was taken off calendar
due to the agreement (the "Joint Agreement") reached before the
Bankruptcy Court between NVF 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 had 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. On December 29, 1995 the Bankruptcy Court signed
an order approving the bid of First Security as the highest and
best bid. On January 29, 1996 the Joint Plan of Reorganization
("the Plan") of NVF Company and The Official Committee of Unsecured
Creditors and the Disclosure Statement was filed with the
Bankruptcy Court (See Form 8-K dated January 29, 1996, Exhibits 2
and 99). On March 4, 1996 the Bankruptcy Court approved the
Disclosure Statement. The Plan has been submitted to the creditors
for ratification. A hearing date in Bankruptcy Court concerning
confirmation of the Plan has been scheduled for April 25, 1996.
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. NVF did not make sinking
fund payments of approximately $284,375 on November 14, 1993,
November 14, 1994 and November 14, 1995 nor did it make interest
payments of $568,757 on its 10% Subordinated Debentures due
November 14, 1993, May 14, 1994, November 14, 1994, May 14, 1995
and November 14, 1995. The Company did not make interest payments
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 15 - Liquidity (continued)
of approximately $373,000 due November 22, 1993, May 22, 1994,
November 22, 1994, May 22, 1995 and November 22, 1995 on its 10%
Secured Notes. 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 the proceeds from
litigation entitled as the Official Creditor's Committee of NVF
Company v. Victor Posner, et al.
The Company has an accounts receivable financing arrangement
with CIT Group ("CIT") covering substantially all of its accounts
receivable. Such arrangement provides the Company a line of credit
up to the lesser of $8,000,000 or 80% of the eligible accounts
receivable at an interest rate of prime (8.75% at December 31,
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.
At December 31, 1995 the Company had open a balance of $3.6 million
under this arrangement. On , 1996 CIT advised the
Company that it would not be interested in financing arrangement
after the Company emerges from bankruptcy. The Company believes it
will be successful in finding alternative financing, however there
can be no assurance that the Company will be able to obtain such
financing or that it will be available on terms the Company deems
acceptable.
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 accounts receivable financing
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. The financial statements
included herein have been prepared on a going concern basis and,
accordingly, 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 16 included elsewhere herein for
information concerning the estimated liquidation value of NVF on a
consolidated basis.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 16 - 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 unaudited 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. No adjustment has been made with respect to any
liabilities for any compromise or other settlement thereof in
connection with a liquidation or the related cost of such
liquidation to reflect that the liabilities of the Company
substantially exceed its assets.
The assumptions and methodology in estimating the liquidating
value of NVF assets were as follows; Current assets are made up
primarily of cash, 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. The Company believes 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 materials, etc. Management
feels that there would be a 75% recovery. Properties were valued
at current market values and do not reflect a true liquidation
valuation. Liabilities are recorded at book value.
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 16 - Pro Forma Liquidating Balance Sheet - NVF (Unaudited)
December 31, 1995
Historical ProForma
Assets (In thousands)
Current assets $ 45,915 33,730
Properties, net 18,804 11,832
Other assets 2,852 -
$ 67,571 45,562
Liabilities and Stockholders' Deficiency
Current liabilities 20,817 20,817
Long-term debt and other liabilities 90,794 90,794
Stockholders' deficiency (44,040) (66,049)
$ 67,571 45,562
Note 17 - Supplementary Income Statement Information
Year Ended December 31,
1995 1994 1993
(In thousands)
Maintenance and Repairs $ 5,651 5,561 4,908
Rent and Lease Commitments
The Company has capital leases for a manufacturing facility
and certain manufacturing equipment. The Company is committed
through 1997 on a lease for the manufacturing facility located in
Canada at $32,000 per year.
The future minimum lease payments under capital leases at
December 31, 1995 are as follows:
Year Ending December 31, Capital Leases
(In thousands)
1996 $ 91
1997 78
1998 63
1999 41
Thereafter 5
Total minimum lease payments 278
Less amounts representing interest 68
Present value of minimum lease payments $ 210
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 18 - Legal Matters
By order of the Bankruptcy Court 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 August 27, 1993 three creditors of NVF filed an involuntary
bankruptcy petition against NVF under the Bankruptcy Code
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 copy of the Plan was filed as
Exhibit 2.1 to Form 8-K by the Company on August 4, 1994. 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 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 had permitted the mover to review the
findings and conclusions of Alex. Brown's decision. Eventually,
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 18 - Legal Matters (continued)
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. On December 29, 1995 the Bankruptcy Court signed
an order approving the bid of First Security as the highest and
best bid. On January 29, 1996 the Joint Plan of Reorganization
("the Plan") of NVF Company and The Official Committee of Unsecured
Creditors and the Disclosure Statement was filed with the
Bankruptcy Court (See Form 8-K dated January 29, 1996, Exhibits 2
and 99). On March 4, 1996 the Bankruptcy Court approved the
Disclosure Statement. The Plan has been submitted to the creditors
for ratification. A hearing date in Bankruptcy Court concerning
confirmation of the Plan has been scheduled for April 25, 1996.
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
had approximately $2.5 million face value of APL's 10-3/4%
Subordinated Sinking Fund Debentures. However a settlement of
litigation commenced by the Committee (See Note 18) called 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. Other income of approximately $2,609,000 was recognized
in 1995 as a result of the settlement.
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
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 18 - Legal Matters (continued)
States Court of Appeals for the Second Circuit has affirmed the
lower court's judgment and centiorari 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 June 17, 1994, the
plaintiff filed a Motion to Expedite the Proceeding on the grounds
that it is a summary proceeding under 8 Del. C. 211(c) and based
upon allegations in the complaint. Subsequently, Vice Chancellor
Berger directed the Debtor to file its answer in the Chancery Court
Action on or before June 27, 1994. On June 27, 1994, the Debtor
filed its answer in the Chancery Court Action. On July 6, 1994,
Beltzhoover filed a Motion for Relief From Stay, or in the
Alternative, To Compel Annual Shareholders Meeting. Beltzhoover
requested an expedited hearing on the matter. On July 19, 1994
Beltzhoover filed the same motion in Bankruptcy Court. It was then
decided that this case would be heard in Bankruptcy Court rather
than in Chancery Court where the action has been stayed. A trial
to hear the Application to Compel an Annual Meeting of NVF
Shareholders was scheduled for October 3, 1994, however Beltzhoover
requested a continuance on that date and all parties agreed to
adjourn such action until November 28, 1994. 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 Consolidated Financial Statements - Continued
Note 18 - Legal Matters (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. New
Castle County has agreed to the treatment of their claim as set
forth in the Plan. Under this proposal an aggregate amount of
$1,813,507.27 claim of principal and interest shall be recognized.
Interest shall accrue at 9% per annum from November 1, 1995 until
the consummation date of the Plan. On the consummation date, or as
soon as practicable thereafter, the holder of the claim shall
receive twelve payments at monthly intervals of interest only at 8%
per annum on the sum of $1,813,507.27 plus interest accrued between
November 1, 1995 and the date of the first payment. Thereafter the
remaining balance will be amortized over forty-eight months at a
rate of 8% per annum. The Company reserved the right to contest
this claim under this proposal and has filed such with
Court on .
The Company and the EPA, subject to obtaining necessary
approvals, have reached agreement in principle with respect to
treatment of environmental claims under the Plan. Under this
agreement, among other things, environmental obligations will pass
through to NVF after reorganization. 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, if
the purchase option of the plan is approved all prepetition
environmental claims will be paid by the reorganized Company pari
passu with the amount to be paid to the unsecured creditors.
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
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 18 - Legal Matters (continued)
filed a motion seeking leave to file a third amended complaint and
a motion seeking reconsideration of the order dismissing the
RICOclaims. 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 was approved by the Bankruptcy
Court on November 22, 1995, 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 stipulation and
Order of Dismissal was ordered by the United States District Court
on December 15, 1995.
NVF is also involved in certain litigation and proceedings
with respect to matters related to the environment (See "Item 1 -
Business - Environmental Matters") and certain other litigation as
either plaintiff or defendant as a result of claims that arise in
the ordinary course of its business. NVF does not believe any of
such litigation will have a material adverse effect on its
consolidated financial position or results of operations.
The Company's consolidated financial statements at December
31, 1995 and December 31, 1994 included elsewhere herein, include
accruals of approximately $6.8 million for costs in connection with
the environmental matters. 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. The amounts
the Company will ultimately have to pay to resolve these matters
could differ from the estimate in the near term.
At the off site areas, the Company belongs to ("Potentially
Responsible Party") 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
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 18 - Legal Matters (continued)
for accrual purposes, the 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 settlements, 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 ("National Priorities Listing") 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 19 - 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
December 31, 1995
(thousands of dollars)
Unaudited
December 31,
Assets 1995
Current assets:
Cash and equivalents $ 526
Restricted cash 16,336
Receivables, less allowance for doubtful
accounts of $360 12,379
Intercompany receivables, net 8,159
Inventories 12,323
Other current assets 1,448
Total current assets 51,171
Investment in affiliate 102
Properties, at cost 87,716
Less accumulated depreciation and amortization (68,941)
Net properties 18,775
Other assets 2,662
$ 72,710
Liabilities and Stockholders' Deficiency
Current liabilities not subject to compromise:
Current portion of long-term debt $ 7,583
Accounts receivable financing 3,616
Accounts payable 1,679
Accrued interest payable 1,385
Accrued payroll and benefits 1,807
Accrued professional liabilities 3,032
Accrued taxes 1,502
Other current liabilities 293
Total current liabilities 20,897
Investment in subsidiaries 6,619
Other long-term liabilities 2,752
Long-term debt 176
Liabilities subject to compromise (A) 87,753
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 (273,034)
Treasury common stock, 2,292,544 shares, at cost (8,352)
Total stockholders' deficiency (45,487)
$ 72,710
Note 19 - NVF Stand Alone Financial Statements - Unaudited
NVF COMPANY
(Debtor-in-Possession)
Balance Sheet
December 31, 1995
(thousands of dollars)
Unaudited
December 31,
1995
(A) Liabilities subject to compromise consist
of the following:
Trade and other miscellaneous claims $ 9,079
Accrued interest 2,076
Pension obligations 5,355
Post retirement benefit obligations, net 513
Subordinated debentures, 5% 48,046
Subordinated debentures, 10% 11,375
Other accrued liabilities 11,282
Current portion of long-term debt 16
Noncurrent portion of long term debt 11
$ 87,753 (B)
(B) Certain liabilities have been separately classified in the Plan of
Reorganization filed on April 13, 1994 and July 14, 1994.
Note 19 - NVF Stand Alone Financial Statements - Unaudited
NVF COMPANY
(Debtor-in-Possession)
Statements of Operations
(In thousands except per share amounts)
Unaudited
Twelve Months Ended
December 31, 1995
Net sales and operating revenues $ 89,526
Cost of goods sold 74,339
Depreciation and amortization 2,585
Selling, general and administrative
expenses 10,272
87,196
Income from operations 2,330
Other income (expense):
Settlement with principal shareholder 23,359
Other income (expense), net 2,346
Debt costs (1,005)
24,700
Income from operations before
reorganization items, taxes and
equity in net loss of affiliates 27,030
Reorganization items:
Professional fees 5,822
Income (loss) before taxes and equity in net
loss of affiliates 21,208
Tax provision 1,502
Income (loss) before equity in net loss
of affiliates 19,706
Equity in net loss of affiliates (2,337)
Net income $ 17,369
Weighted average number of common and
common equivalent shares outstanding,
in thousands of shares 93,271
Net income per share 0.19
NVF COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements - Continued
Note 20 - Subsequent Events
In January 1996, a flooding of Red Clay Creek resulted in
approximately four feet of water in certain plants and offices of
the Company located in Yorklyn, Delaware. This caused numerous
production delays including the shutdown of the papermill facility
for approximately two months. Estimated damages are approximately
$2 million. The Company has submitted approximately $2 million in
claims to various insurance carriers and has received an advance of
$250,000 from one such carrier.
On January 29, 1996 the Bankruptcy Court approved the First
Amended Disclosure Statement to Accompany the First Amended Joint
Plan of Reorganization of NVF Company and the Official Committee of
Unsecured Creditors under Chapter 11 of the Bankruptcy Code.
On CIT has advised the Company that it
would not be interested in this financing arrangement after the
Company emerges from bankruptcy. The Company believes it will be
successful in obtaining alternative financing, however there can be
no assurance that the Company will be able to obtain such financing
or that it will be available on terms the Company deems acceptable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS OF FORM 8-K
(A) FINANCIAL STATEMENTS
See INDEX TO FINANCIAL STATEMENTS - ITEM 8. for Financial
Statements and Financial Statements Schedules.
(B) REPORTS ON FORM 8-K - NONE
(C) EXHIBITS
Copies of the following exhibits are available at a charge of
$.25 per page upon written request to the Secretary of the Company
at 6917 Collins Avenue, Miami Beach, Florida 33141.
3.1 - Composite Certificate of Incorporation, and all
amendments thereto, of NVF Company, incorporated herein
by reference to NVF Company Form 10-K for 1980, Exhibit
3.1.
3.2 - By-laws of NVF Company as amended to date, incorporated
herein by reference to NVF Company Registration Statement
on Form S-16 (No.2-57235), Exhibit 1(e).
4.1 - Indenture, dated as of November 15, 1973 between NVF
Company and Sterling National Bank, as Trustee, relating
to NVF's 10% Subordinated Debentures due November 15,
2003, incorporated herein by reference to NVF Company
Form 10-K for 1986, Exhibit 4.1.
4.2 - Indenture, dated as of January 1, 1969 between NVF
Company and Bankers Trust, as Trustee, relating to NVF's
Subordinated Debentures due January 1, 1994, incorporated
herein by reference to NVF Company Form 10-K for 1986,
Exhibit 4.2.
10.1 - NVF Company 1970 Stock Option Plan, as amended,
incorporated herein by reference to Appendix B of the NVF
Company Proxy Statement dated May 29, 1980.
10.2 - Revolving Credit Agreement among NVF Company and The CIT
Group/Business Credit, Inc. dated as of April 27, 1995.*
10.3 - Agreement between Parsons Paper Division of NVF Company
Hourly Workers and the United Paper Workers International
Union, AFL-CIO and Its Affiliates dated June 1, 1993,
incorporated herein by reference to NVF Company From 10-K
for 1993, Exhibit 10.3.
10.4 - Agreement between NVF Company and the United Paper
Workers International Union, AFL-CIO and Its Affiliates
dated April 28, 1993, incorporated herein by reference
to NVF Company From 10-K for 1993, Exhibit 10.4.
10.5 - Agreement between NVF Industries of Canada Ltd. and
National Automobile, Aerospace and Agricultural Implement
Workers Union of Canada dated .*
(C) EXHIBITS (Continued)
10.6 - NVF Management Incentive Plan, incorporated by reference
to Appendix A to the Notice of Annual Meeting of
Stockholders and Proxy Statement dated November 29, 1990,
incorporated herein by reference to NVF Company Form 10-
K for 1990, Exhibit 10.8.
22.1 - Listing of subsidiaries of NVF Company *
* being filed separately on Form SE.
(D) FINANCIAL STATEMENT SCHEDULES
SEE INDEX TO FINANCIAL STATEMENTS - ITEM 8. for Financial
Statements Schedules.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: April 12, 1996 NVF COMPANY
By:/s/ Robert W. Flack
Robert W. Flack
Acting Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below on the 12th day of April,
1996 by the following persons on behalf of the registrant in the
capacities indicated:
Signatures Title
Principal Financial Officer:
/s/ Robert W. Flack Acting Chief Financial Officer and
Robert W. Flack Principal Accounting Officer
/s/ Richard L. Beltzhoover Director
Richard L. Beltzhoover
/s/ Brenda N. Castellano Executive Vice President and Director
Brenda N. Castellano
/s/ Melvin R. Colvin Director
Melvin R. Colvin
/s/ Kim Del Fabro Director
Kim Del Fabro
/s/ Marco B. Loffredo, Jr. Director
Marco B. Loffredo, Jr.
/s/ Bernard I. Posner Director
Bernard I. Posner
/s/ Martin J. Posner Executive Vice President and Director
Martin J. Posner
/s/ Willie C. Robinson Director
Willie C. Robinson
/s/ Thomas M. Thompson Director
Thomas M. Thompson
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 16988
<SECURITIES> 0
<RECEIVABLES> 13949
<ALLOWANCES> 366
<INVENTORY> 13888
<CURRENT-ASSETS> 45915
<PP&E> 88269
<DEPRECIATION> 69465
<TOTAL-ASSETS> 67571
<CURRENT-LIABILITIES> 22319
<BONDS> 0<F1>
0
0
<COMMON> 956
<OTHER-SE> (46498)
<TOTAL-LIABILITY-AND-EQUITY> 67571
<SALES> 96891
<TOTAL-REVENUES> 96891
<CGS> 84143
<TOTAL-COSTS> 84143
<OTHER-EXPENSES> 7107<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1116
<INCOME-PRETAX> 18871
<INCOME-TAX> 1502
<INCOME-CONTINUING> 17369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17369
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
<FN>
<F1>The Company is in Chapter 11 Bankruptcy and has liabilities subject to
compromise of $87,753. The amount of bonds included in that number
is $59,421.
<F2>The $7,107 includes $5,822 of professional fees expensed relating to the
reorganization of the Company from Chapter 11.
</FN>
</TABLE>
