-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V+aJrXGWk4vbIQ5Vpuebh8FJKIIKU/Xaw2+7kpJnlnHzU/843QdvfJwz5EkhyUA2 KX1zUB9Gte6MIe9YFJs2dQ== 0000033073-96-000012.txt : 19961113 0000033073-96-000012.hdr.sgml : 19961113 ACCESSION NUMBER: 0000033073-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960926 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENVIRODYNE INDUSTRIES INC CENTRAL INDEX KEY: 0000033073 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 952677354 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05485 FILM NUMBER: 96658894 BUSINESS ADDRESS: STREET 1: 701 HARGER ROAD STE 190 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085718800 FORMER COMPANY: FORMER CONFORMED NAME: MGN INC DATE OF NAME CHANGE: 19790425 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 26, 1996 ------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ----------- Commission file number 0-5485 ---------- ENVIRODYNE INDUSTRIES, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-2677354 - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Harger Road, Suite 190, Oak Brook, Illinois 60521 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 571-8800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------- APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ------ ------ As of November 8, 1996, there were 14,545,107 shares outstanding of the registrant's Common Stock, $.01 par value. Page 1 of 26 Pages INDEX TO FINANCIAL STATEMENTS ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Page ---- Consolidated balance sheets at September 26, 1996 (unaudited) and December 28, 1995 4 Unaudited consolidated statements of operations for the three months ended September 26, 1996 and September 28, 1995 and for the nine months ended September 26, 1996 and September 28, 1995 5 Unaudited consolidated statements of cash flows for the nine months ended September 26, 1996 and September 28, 1995 6 Notes to consolidated financial statements 7 VISKASE HOLDING CORPORATION AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheets at September 26, 1996 (unaudited) and December 28, 1995 18 Unaudited consolidated statements of operations for the three months ended September 26, 1996 and September 28, 1995 and for the nine months ended September 26, 1996 and September 28, 1995 19 Unaudited consolidated statements of cash flows for the nine months ended September 26, 1996 and September 28, 1995 20 Notes to consolidated financial statements 21 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The financial information included in this quarterly report has been prepared in conformity with the accounting principles and practices reflected in the financial statements included in the annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 28, 1995 (1995 Form 10-K). These quarterly financial statements should be read in conjunction with the financial statements and the notes thereto included in the 1995 Form 10-K. The accompanying financial information, which is unaudited, reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet as of December 28, 1995 was derived from the audited consolidated financial statements in the Company's annual report on Form 10-K. Reported interim results of operations are based in part on estimates which may be subject to year-end adjustments. In addition, these quarterly results of operations are not necessarily indicative of those expected for the year. ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 26, December 28, 1996 1995 ------------- ------------ (in thousands) ASSETS Current assets: Cash and equivalents $ 39,195 $ 30,325 Receivables, net 80,968 89,454 Inventories 100,737 99,474 Other current assets 26,973 21,646 --------- --------- Total current assets 247,873 240,899 Property, plant and equipment, including those under capital leases 562,711 545,491 Less accumulated depreciation and amortization 107,398 75,987 --------- --------- Property, plant and equipment, net 455,313 469,504 Deferred financing costs 6,392 8,090 Other assets 41,708 45,589 Excess reorganization value 127,700 135,485 --------- --------- $ 878,986 $ 899,567 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligations under capital leases $ 9,807 $ 12,504 Accounts payable 32,814 39,117 Accrued liabilities 89,716 67,553 --------- --------- Total current liabilities 132,337 119,174 Long-term debt including obligations under capital leases 522,550 530,181 Accrued employee benefits 56,610 55,626 Deferred and noncurrent income taxes 65,944 77,490 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 14,514,721 shares issued and outstanding at September 26, 1996 and 13,579,460 shares at December 28, 1995 145 136 Paid in capital 134,977 134,864 Accumulated (deficit) (39,147) (25,131) Cumulative foreign currency translation adjustments 5,672 7,227 Unearned restricted stock issued for future services (102) --------- --------- Total stockholders' equity 101,545 117,096 --------- --------- $ 878,986 $ 899,567 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Nine Months Nine Months Ended September Ended September Ended September Ended September 26, 1996 28, 1995 26, 1996 28, 1995 --------------- --------------- --------------- --------------- (in thousands, except for number of shares and per share amounts) NET SALES $163,825 $166,688 $489,308 $487,696 COSTS AND EXPENSES Cost of sales 122,763 125,876 366,525 364,235 Selling, general and administrative 28,134 28,252 83,080 84,308 Amortization of intangibles and excess reorganization value 4,220 3,907 12,426 11,722 -------- -------- -------- -------- OPERATING INCOME 8,708 8,653 27,277 27,431 Interest income 414 43 1,186 126 Interest expense 14,582 14,866 43,954 42,096 Other (income) expense, net 1,064 1,305 4,325 166 -------- -------- -------- -------- (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (6,524) (7,475) (19,816) (14,705) Income tax (benefit) (2,600) (3,000) (5,800) (3,018) -------- -------- -------- -------- (LOSS) BEFORE EXTRAORDINARY ITEM (3,924) (4,475) (14,016) (11,687) Extraordinary (loss), net of tax (4,196) -------- -------- -------- -------- NET (LOSS) $ (3,924) $ (4,475) $(14,016) $(15,883) ======== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES 14,514,721 13,515,000 14,255,987 13,515,000 PER SHARE AMOUNTS: (LOSS) BEFORE EXTRAORDINARY ITEM $(.27) $ (.33) $(.98) $ (.86) ===== ======= ===== ====== NET (LOSS) $(.27) $ (.33) $(.98) $(1.18) ===== ======= ===== ====== The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended ------------------------------- September 26, September 28, 1996 1995 ------------- ------------- (in thousands) Cash flows from operating activities: (Loss) before extraordinary item $(14,016) $(11,687) Extraordinary (loss) on debt extinguishment (4,196) -------- -------- Net (loss) (14,016) (15,883) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization under capital lease 32,329 29,756 Amortization of intangibles and excess reorganization value 12,426 11,722 Amortization of deferred financing fees and discount 1,742 1,604 Increase (decrease) in deferred and noncurrent income taxes (10,157) (7,773) Loss on debt extinguishment 6,778 Foreign currency transaction (gain) (111) (935) (Gain) on sales of property, plant and equipment (200) (3) Changes in operating assets and liabilities: Accounts receivable 7,440 (10,369) Inventories (1,839) (3,632) Other current assets (5,509) (2,959) Accounts payable and accrued liabilities 16,704 9,555 Other 1,054 (582) -------- -------- Total adjustments 53,879 33,162 -------- -------- Net cash provided by operating activities 39,863 17,279 Cash flows from investing activities: Capital expenditures (22,832) (24,208) Proceeds from sale of property, plant and equipment 2,129 47 -------- -------- Net cash (used in) investing activities (20,703) (24,161) Cash flows from financing activities: Issuance of common stock 20 Proceeds from revolving loan and long-term borrowings 1,130 206,053 Deferred financing costs (91) (7,701) Repayment of revolving loan, long-term borrowings and capital lease obligation (10,909) (179,419) -------- -------- Net cash provided by (used in) financing activities (9,850) 18,933 Effect of currency exchange rate changes on cash (440) 24 -------- -------- Net increase in cash and equivalents 8,870 12,075 Cash and equivalents at beginning of period 30,325 7,289 -------- -------- Cash and equivalents at end of period $39,195 $ 19,364 ======= ======== - --------------------------------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $34,639 $33,974 Income taxes paid $ 1,090 $ 4,537 The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. INVENTORIES (dollars in thousands) Inventories consisted of: September 26, December 28, 1996 1995 ------------ ------------ Raw materials $ 16,800 $ 17,150 Work in process 29,800 32,800 Finished products 54,137 49,524 -------- -------- $100,737 $ 99,474 ======== ======== Approximately 58% of the inventories at September 26, 1996 were valued at Last-In, First-Out (LIFO). These LIFO values exceeded current manufacturing cost by approximately $5.1 million at September 26, 1996. 2. DEBT OBLIGATIONS (dollars in thousands) Outstanding short-term and long-term debt consisted of:
September December 26, 1996 28, 1995 ---------- ---------- Short-term debt, current maturity of long-term debt, and capital lease obligation: Current maturity of Viskase Capital Lease Obligation $ 6,633 $ 6,012 Current maturity of Viskase Limited Term Loan (3.9%) 1,928 2,033 Other 1,246 4,459 ------- ------- Total short-term debt $ 9,807 $12,504 ======= ======= Long-term debt: 12% Senior Secured Notes due 2000 $160,000 $160,000 10.25% Senior Notes due 2001 219,262 219,262 Viskase Capital Lease Obligation 134,549 141,182 Viskase Limited Term Loan (3.9%) 5,782 7,115 Other 2,957 2,622 -------- -------- Total long-term debt $522,550 $530,181 ======== ========
3. EXECUTIVE STOCK COMPENSATION PLAN (dollars in thousands) In March 1996 the Board approved a stock compensation plan as part of the employment agreement between the Company and its chief executive officer. Pursuant to the employment agreement, the Company issued 35,000 shares of common stock. These shares carry voting and dividend rights; however, sale of the shares is restricted prior to vesting. Subject to continued employment, vesting occurs three years from the March 27, 1996 date of the employment agreement. The shares issued under the plan have been recorded at their fair market value on date of grant with a corresponding charge to stockholders' equity for the unearned portion of the award. The grant date is the date the employment agreement was consummated between the parties. The unearned portion is being amortized as compensation expense on a straight-line basis over the related vesting period. Compensation expense for the first nine months of 1996 totaled $20. 4. CONTINGENCIES Although Envirodyne is not a direct party, litigation is pending from events arising out of Envirodyne's 1993 bankruptcy case and the 1989 acquisition of Envirodyne by Emerald Acquisition Corporation (Emerald) with respect to which litigation certain defendants have asserted indemnity rights against Envirodyne. In ARTRA Group Incorporated v. --------------------------- Salomon Brothers Holding Company Inc, Salomon Brothers Inc, D.P. - ---------------------------------------------------------------- Kelly & Associates, L.P., Donald P. Kelly, Charles K. Bobrinskoy, - ----------------------------------------------------------------- James L. Massey, William Rifkin and Michael Zimmerman, Case No. 93 - ----------------------------------------------------- A 1616, United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (Bankruptcy Court), ARTRA Group Incorporated (ARTRA) alleges breach of fiduciary duty and tortious inference by the defendants in connection with the negotiation and consummation of Envirodyne's plan of reorganization (Plan of Reorganization) in 1993. A motion for summary judgment was granted in favor of all defendants, which decision was affirmed by the District Court. The summary judgment may be subject to further appeal. In ARTRA ----- Group Incorporated v. Salomon Brothers Holding Company Inc, Salomon - ------------------------------------------------------------------- Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly, Charles - --------------------------------------------------------------------- K. Bobrinskoy and Michael Zimmerman, Case No. 93 L 2198, Circuit Court - ----------------------------------- of the Eighteenth Judicial Circuit, County of DuPage, State of Illinois, ARTRA alleges breach of fiduciary duty, fraudulent and negligent misrepresentation and breach of contract in connection with the 1989 acquisition of Envirodyne by Emerald. The plaintiff seeks damages in the total amount of $136.2 million plus interest and punitive damages of $408.6 million. All claims against Mr. Kelly and D.P. Kelly & Associates, L.P. have been dismissed by the Circuit Court and some of those decisions have been appealed to the Illinois Appellate Court. D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkin and Zimmerman have asserted common law and contractual rights of indemnity against Envirodyne for attorneys' fees, costs and any ultimate liability relating to the claims set forth in the complaints. Envirodyne is continuing its evaluation of the merits of the indemnification claims against Envirodyne and the underlying claims in the litigation. Upon the undertaking of D.P. Kelly & Associates, L.P. to repay such funds in the event it is ultimately determined that there is no right to indemnity, Envirodyne is advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for the payment of legal fees in the case pending before the Bankruptcy Court. Although the Company is not a party to either case, the Company believes that the plaintiff's claims raise similar factual issues to those raised in the Envirodyne bankruptcy case which, if adjudicated in a manner similar to that in the Envirodyne bankruptcy case, would render it difficult for the plaintiff to establish liability. Accordingly, the Company believes that the indemnification claims would not have a material adverse effect upon the business or financial position of the Company, even if the claimants were ultimately successful in establishing their right to indemnification. In February 1996 Clear Shield National and three other plastic cutlery manufacturers were named as defendants in three civil actions filed in the United States District Court for the Eastern District of Pennsylvania. Each of the complaints alleges, among other things, that from October 1990 through April 1992 the defendants unlawfully conspired to fix the prices at which plastic cutlery would be sold. The Company has informed the plaintiffs that such claims as they relate to Clear Shield were discharged by the order of the Bankruptcy Court and Plan of Reorganization and that the plaintiffs are permanently enjoined from pursuing legal action to collect discharged claims. The plaintiffs have filed motions for summary judgment before the judge who presided over the bankruptcy case, seeking a ruling that the Bankruptcy Court's order did not discharge the plaintiffs' claims. Clear Shield National has filed a cross motion for summary judgment. The claims pending against Clear Shield National in the Eastern District of Pennsylvania have been stayed pending the decision in the Bankruptcy Court on the cross motions for summary judgment. The Company and its subsidiaries are involved in various legal proceedings arising out of its business and other environmental matters, none of which is expected to have a material adverse effect upon its results of operations, cash flows or financial position. 5. SUBSEQUENT EVENT On November 8, 1996, a jury awarded $102.4 million in damages in Viskase Corporation's (Viskase) patent infringement lawsuit against American National Can Co. Viskase brought suit against American National Can Co. for infringing on various Viskase patents relating to multilayer barrier plastic films used for fresh red meat, processed meat and poultry product applications. The jury found that American National Can Co. had willfully infringed on Viskase's patents. Envirodyne expects American National Can Co. to appeal the award. This award has not been recorded in the Company's financial statements. Viskase will petition the court to declare the case exceptional and increase the damages up to threefold and to award attorneys' fees. The Company will also seek prejudgment interest from December 1989. In addition, Viskase will seek to enjoin American National Can Co. from further violation of Viskase's patent rights. 6. SUBSIDIARY GUARANTORS Envirodyne's payment obligations under the Senior Secured Notes are fully and unconditionally guaranteed on a joint and several basis (collectively, Subsidiary Guarantees) by Viskase Corporation, Viskase Holding Corporation, Viskase Sales Corporation, Clear Shield National, Inc., Sandusky Plastics, Inc. and Sandusky Plastics of Delaware, Inc., each a direct or indirect wholly-owned subsidiary of Envirodyne and each a "Guarantor." These subsidiaries represent substantially all of the operations of Envirodyne conducted in the United States. The remaining subsidiaries of Envirodyne generally are foreign subsidiaries or otherwise relate to foreign operations. The obligations of each Guarantor under its Subsidiary Guarantee are the senior obligation of such Guarantor, and are collateralized, subject to certain permitted liens, by substantially all of the domestic assets of the Guarantor and, in the case of Viskase Holding Corporation, by a pledge of 65% of the capital stock of Viskase S.A. The Subsidiary Guarantees and security are shared with the lenders under the Revolving Credit Agreement on a pari passu basis and are ---- ----- subject to the priority interest of the holders of obligations under the Letter of Credit Facility, each pursuant to an intercreditor agreement. The following consolidating condensed financial data illustrate the composition of the combined Guarantors. No single Guarantor has any significant legal restrictions on the ability of investors or creditors to obtain access to its assets in the event of default on the Subsidiary Guarantee other than its subordination to senior indebtedness described above. Separate financial statements of the Guarantors are not presented because management has determined that these would not be material to investors. Based on the book value and the market value of the pledged securities of Viskase Corporation, Viskase Sales Corporation, Clear Shield National, Inc., Sandusky Plastics, Inc. and Sandusky Plastics of Delaware, Inc., these Subsidiary Guarantors do not constitute a substantial portion of the collateral and, therefore, the separate financial statements of these subsidiaries have not been provided. Separate unaudited interim financial statements of Viskase Holding Corporation are being filed within this quarterly report. Investments in subsidiaries are accounted for by the parent and Subsidiary Guarantors on the equity method for purposes of the supplemental consolidating presentation. Earnings of subsidiaries are therefore reflected in the parent's and Subsidiary Guarantors' investment accounts and earnings. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEETS SEPTEMBER 26, 1996
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total -------- ------------ ------------ ------------ ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 31,898 $ (869) $ 8,166 $ 39,195 Receivables and advances, net 70,561 66,295 51,472 $ (107,360) 80,968 Inventories 67,490 34,663 (1,416) 100,737 Other current assets 362 17,378 9,233 26,973 -------- -------- -------- --------- -------- Total current assets 102,821 150,294 103,534 (108,776) 247,873 Property, plant and equipment including those under capital leases 134 412,313 150,264 562,711 Less accumulated depreciation and amortization 88 79,422 27,888 107,398 -------- -------- -------- --------- -------- Property, plant and equipment, net 46 332,891 122,376 455,313 Deferred financing costs 5,567 825 6,392 Other assets 40,301 1,407 41,708 Investment in subsidiaries 63,783 119,482 (183,265) Excess reorganization value 89,518 38,182 127,700 -------- -------- -------- --------- -------- $172,217 $732,486 $266,324 $(292,041) $878,986 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital leases $ 7,183 $ 2,624 $ 9,807 Accounts payable and advances $ 15 94,119 46,040 $ (107,360) 32,814 Accrued liabilities 17,964 40,137 31,615 89,716 -------- -------- -------- --------- -------- Total current liabilities 17,979 141,439 80,279 (107,360) 132,337 Long-term debt including obligation under capital leases 379,262 137,198 6,090 522,550 Accrued employee benefits 52,258 4,352 56,610 Deferred and noncurrent income taxes 33,073 8,943 23,928 65,944 Intercompany loans (359,642) 340,000 19,641 1 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 14,514,721 shares issued and outstanding 145 3 32,738 (32,741) 145 Paid in capital 134,977 87,899 87,871 (175,770) 134,977 Accumulated earnings (deficit) (39,147) (40,878) 5,801 35,077 (39,147) Cumulative foreign currency translation adjustments 5,672 5,624 5,624 (11,248) 5,672 Unearned restricted stock issued for future services (102) (102) -------- -------- -------- --------- -------- Total stockholders' equity 101,545 52,648 132,034 (184,682) 101,545 -------- -------- -------- --------- -------- $172,217 $732,486 $266,324 $(292,041) $878,986 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts. /TABLE ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEETS DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total -------- ------------ ------------ ------------ ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 18,013 $ 486 $ 11,826 $ 30,325 Receivables and advances, net 52,462 70,458 57,082 $ (90,548) 89,454 Inventories 63,355 38,233 (2,114) 99,474 Other current assets 176 12,364 9,106 21,646 -------- -------- -------- --------- -------- Total current assets 70,651 146,663 116,247 (92,662) 240,899 Property, plant and equipment including those under capital leases 261 394,813 150,417 545,491 Less accumulated depreciation and amortization 150 55,620 20,217 75,987 -------- -------- -------- --------- -------- Property, plant and equipment, net 111 339,193 130,200 469,504 Deferred financing costs 7,048 1,042 8,090 Other assets 43,720 1,869 45,589 Investment in subsidiaries 77,766 117,578 (195,344) Excess reorganization value 94,968 40,517 135,485 -------- -------- -------- --------- -------- $155,576 $742,122 $289,875 $(288,006) $899,567 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital leases $ 6,407 $ 6,097 $ 12,504 Accounts payable and advances $ 80 78,848 50,737 $ (90,548) 39,117 Accrued liabilities 8,126 37,488 21,939 67,553 -------- -------- -------- --------- -------- Total current liabilities 8,206 122,743 78,773 (90,548) 119,174 Long-term debt including obligation under capital leases 379,262 143,198 7,721 530,181 Accrued employee benefits 51,345 4,281 55,626 Deferred and noncurrent income taxes 34,088 17,507 25,895 77,490 Intercompany loans (383,076) 340,000 43,083 (7) Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 13,579,460 shares issued and outstanding 136 3 32,738 (32,741) 136 Paid in capital 134,864 87,899 87,871 (175,770) 134,864 Accumulated earnings (deficit) (25,131) (27,752) 2,334 25,418 (25,131) Cumulative foreign currency translation adjustments 7,227 7,179 7,179 (14,358) 7,227 -------- -------- -------- --------- -------- Total stockholders' equity 117,096 67,329 130,122 (197,451) 117,096 -------- -------- -------- --------- -------- $155,576 $742,122 $289,875 $(288,006) $899,567 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 26, 1996
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $314,794 $203,838 $(29,324) $489,308 COSTS AND EXPENSES Cost of sales 241,813 154,734 (30,022) 366,525 Selling, general and administrative $4,021 46,626 32,433 83,080 Amortization of intangibles and excess reorganization value 9,804 2,622 12,426 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (4,021) 16,551 14,049 698 27,277 Interest income 649 537 1,186 Interest expense 32,605 9,730 1,619 43,954 Intercompany interest expense (income) (30,676) 28,056 2,620 Management fees (income) (4,656) 3,647 1,009 Other expense (income), net 1,958 (9) 2,376 4,325 Equity loss (income) in subsidiary 12,428 (3,467) (8,961) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (15,031) (21,406) 6,962 9,659 (19,816) Income tax provision (benefit) (1,015) (8,280) 3,495 (5,800) -------- -------- -------- --------- -------- NET INCOME (LOSS) $(14,016) $ (13,126) $3,467 $ 9,659 $(14,016) ======== ========= ====== ======== ========
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 26, 1996
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $104,382 $70,628 $(11,185) $163,825 COSTS AND EXPENSES Cost of sales 80,898 53,205 (11,340) 122,763 Selling, general and administrative $1,208 15,660 11,266 28,134 Amortization of intangibles and excess reorganization value 3,347 873 4,220 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (1,208) 4,477 5,284 155 8,708 Interest income 246 168 414 Interest expense 10,834 3,224 524 14,582 Intercompany interest expense (income) (10,017) 9,355 662 Management fees (income) (1,467) 1,210 257 Other expense (income), net (125) 12 1,177 1,064 Equity loss (income) in subsidiary 3,810 (1,403) (2,407) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (3,997) (7,921) 2,832 2,562 (6,524) Income tax provision (benefit) (73) (3,956) 1,429 (2,600) -------- -------- -------- --------- -------- NET INCOME (LOSS) $(3,924) $(3,965) $1,403 $ 2,562 $ (3,924) ======== ========= ====== ======== ======== /TABLE ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR NINE MONTHS ENDED SEPTEMBER 26, 1996
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) Net cash provided by (used in) operating activities $(9,626) $21,453 $28,036 $39,863 Cash flows from investing activities: Capital expenditures (4) (19,346) (3,482) (22,832) Proceeds from sales of property, plant and equipment 136 1,762 231 2,129 -------- -------- -------- --------- -------- Net cash provided by (used in) investing activities 132 (17,584) (3,251) (20,703) Cash flows from financing activities: Issuance of common stock 20 20 Proceeds from revolving loan and long-term borrowings 1,130 1,130 Deferred financing costs (91) (91) Repayment of revolving loan, long-term borrowings and capital lease obligations (6,354) (4,555) (10,909) Increase (decrease) in Envirodyne loan 23,450 (23,450) -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities 23,379 (5,224) (28,005) (9,850) Effect of currency exchange rate changes on cash (440) (440) -------- -------- -------- --------- -------- Net increase (decrease) in cash and equivalents 13,885 (1,355) (3,660) 8,870 Cash and equivalents at beginning of period 18,013 486 11,826 30,325 -------- ------- ------- --------- -------- Cash and equivalents at end of period $ 31,898 $ (869) $ 8,166 $39,195 ======== ======= ======= ======== ======= /TABLE ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $317,424 $196,627 $(26,355) $487,696 COSTS AND EXPENSES Cost of sales 236,071 154,523 (26,359) 364,235 Selling, general and administrative $4,734 49,977 29,597 84,308 Amortization of intangibles and excess reorganization value 9,199 2,523 11,722 -------- -------- -------- -------- -------- OPERATING INCOME (LOSS) (4,734) 22,177 9,984 4 27,431 Interest income 34 42 50 126 Interest expense 29,159 10,412 2,525 42,096 Intercompany interest expense (income) (28,417) 25,500 2,917 Management fees (income) (5,550) 4,820 730 Other expense (income), net (1,607) 129 1,644 166 Equity Loss (income) in subsidiary 13,423 455 (13,878) -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (11,708) (19,097) 2,218 13,882 (14,705) Income tax provision (benefit) 669 (5,670) 1,983 (3,018) -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (12,377) (13,427) 235 13,882 (11,687) Extraordinary (loss), net of tax (3,506) (690) (4,196) -------- -------- -------- -------- -------- NET INCOME (LOSS) $(15,883) $ (13,427) $ (455) $ 13,882 $(15,883) ======== ========= ====== ======== ========
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $106,244 $67,413 $(6,969) $166,688 COSTS AND EXPENSES Cost of sales 81,384 51,577 (7,085) 125,876 Selling, general and administrative $ 1,609 16,586 10,057 28,252 Amortization of intangibles and excess reorganization value 3,066 841 3,907 -------- -------- -------- -------- -------- OPERATING INCOME (LOSS) (1,609) 5,208 4,938 116 8,653 Interest income 30 4 9 43 Interest expense 10,927 3,379 560 14,866 Intercompany interest expense (income) (9,976) 8,500 1,476 Management fees (income) (1,850) 1,601 249 Other expense (income), net 1,107 120 78 1,305 Equity loss (income) in subsidiary 3,351 (1,914) (1,437) -------- -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES (5,138) (6,474) 2,584 1,553 (7,475) Income tax provision (benefit) (663) (3,007) 670 (3,000) -------- -------- -------- -------- -------- NET INCOME (LOSS) $(4,475) $(3,467) $ 1,914 $1,553 $(4,475) ======== ========= ====== ======== ======== /TABLE ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR NINE MONTHS ENDED SEPTEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) Net cash provided by (used in) operating activities $ (13,300) $ 23,209 $7,370 $ 17,279 Cash flows from investing activities: Capital expenditures (34) (18,936) (5,238) (24,208) Proceeds from sale of property, plant and equipment 47 47 -------- -------- -------- -------- -------- Net cash (used in) investing activities (34) (18,936) (5,191) (24,161) Cash flows from financing activities: Proceeds from revolving loan and long term borrowings 164,000 42,053 206,053 Deferred financing costs (7,667) (34) (7,701) Repayment of revolving loan, long-term borrowings and capital lease obligations (123,275) (7,682) (48,462) (179,419) Increase (decrease) in Envirodyne loan (8,751) 8,751 -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities 24,307 (7,682) 2,308 18,933 Effect of currency exchange rate changes on cash 24 24 -------- -------- -------- -------- -------- Net increase (decrease) in cash and equivalents 10,973 (3,409) 4,511 12,075 Cash and equivalents at beginning of period 555 1,853 4,881 7,289 -------- -------- -------- -------- -------- Cash and equivalents at end of period $11,528 $ (1,556) $9,392 $19,364 ======== ========= ====== ======== ======== /TABLE VISKASE HOLDING CORPORATION AND SUBSIDIARIES The financial information included in this quarterly report has been prepared in conformity with the accounting principles and practices reflected in the financial statements included in the annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 28, 1995 (1995 Form 10-K). These quarterly financial statements should be read in conjunction with the financial statements and the notes thereto included in the 1995 Form 10-K. The accompanying financial information, which is unaudited, reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet as of December 28, 1995 was derived from the audited Viskase Holding Corporation's consolidated financial statements included in Envirodyne Industries, Inc.'s annual report on Form 10-K. Reported interim results of operations are based in part on estimates which may be subject to year-end adjustments. In addition, these quarterly results of operations are not necessarily indicative of those expected for the year. VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 26, December 28, 1996 1995 ------------ ----------- (in thousands) ASSETS Current assets: Cash and equivalents $ 8,166 $ 11,826 Receivables, net 45,909 53,022 Receivables, affiliates 54,385 51,829 Inventories 34,663 38,233 Other current assets 9,233 9,106 -------- -------- Total current assets 152,356 164,016 Property, plant and equipment 150,264 150,417 Less accumulated depreciation 27,888 20,217 -------- -------- Property, plant and equipment, net 122,376 130,200 Deferred financing costs 825 1,042 Other assets 1,407 1,869 Excess reorganization value 38,182 40,517 -------- -------- $315,146 $337,644 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt $ 2,624 $ 6,097 Accounts payable 12,631 13,720 Accounts payable and advances, affiliates 49,014 54,152 Accrued liabilities 31,616 21,942 -------- -------- Total current liabilities 95,885 95,911 Long-term debt 6,090 7,721 Accrued employee benefits 4,352 4,281 Deferred and noncurrent income taxes 23,928 25,895 Intercompany loans 57,651 81,094 Commitments and contingencies Stockholders' equity: Common stock, $1.00 par value, 1,000 shares authorized; 100 shares issued and outstanding Paid in capital 103,463 103,463 Retained earnings 18,153 12,100 Cumulative foreign currency translation adjustments 5,624 7,179 -------- -------- Total stockholders' equity 127,240 122,742 -------- -------- $315,146 $337,644 ======== ======== The accompanying notes are an integral part of the consolidated financial statements. VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months Nine Months Nine Months Ended September Ended September Ended September Ended September 26, 1996 28, 1995 26, 1996 28, 1995 --------------- --------------- --------------- --------------- (in thousands, except for number of shares and per share amounts) NET SALES $70,628 $67,413 $203,838 $196,627 COSTS AND EXPENSES Cost of sales 53,205 51,577 154,734 154,523 Selling, general and administrative 9,767 9,933 28,161 27,202 Amortization of intangibles and excess reorganization value 873 841 2,622 2,523 ------- ------- -------- -------- OPERATING INCOME 6,783 5,062 18,321 12,379 Interest income 168 9 537 50 Interest expense 524 560 1,619 2,525 Intercompany interest expense 662 1,476 2,620 2,905 Management fees 257 249 1,009 730 Other (income) expense, net 1,177 78 2,376 1,339 ------- ------- -------- -------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 4,331 2,708 11,234 4,930 Income tax provision 2,021 1,611 5,181 3,868 ------- ------- -------- -------- INCOME BEFORE EXTRAORDINARY ITEM 2,310 1,097 6,053 1,062 Extraordinary (loss), net of tax (690) ------- ------- -------- -------- NET INCOME $ 2,310 $ 1,097 $ 6,053 $ 372 ======= ======= ======== ======== WEIGHTED AVERAGE COMMON SHARES 100 100 100 100 PER SHARE AMOUNTS: INCOME BEFORE EXTRAORDINARY ITEM $23,100 $10,970 $ 60,530 $ 10,620 ======= ======= ======== ======== NET INCOME $23,100 $10,970 $ 60,530 $ 3,720 ======= ======= ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended --------------------------------- September 26, September 28, 1996 1995 ------------ ------------ (in thousands) Cash flows from operating activities: Income before extraordinary item $6,053 $ 1,062 Extraordinary (loss) on debt extinguishment (690) ------ ------- Net income 6,053 372 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,334 8,164 Amortization of intangibles and excess reorganization value 2,622 2,523 Amortization of deferred financing fees and discount 170 94 Increase (decrease) in deferred and noncurrent income taxes (578) (210) Loss on debt extinguishment 1,030 (Gain) on sales of property, plant and equipment (6) (3) Changes in operating assets and liabilities: Accounts receivable 6,469 (7,661) Accounts receivable, affiliates (4,351) (2,918) Inventories 2,010 (1,965) Other current assets (430) (309) Accounts payable and accrued liabilities 9,474 (2,859) Accounts payable and advances, affiliates (1,731) 10,052 Other (260) -------- -------- Total adjustments 21,983 5,678 -------- -------- Net cash provided by operating activities 28,036 6,050 Cash flows from investing activities: Capital expenditures (3,482) (5,238) Proceeds from sale of property, plant and equipment 231 47 -------- -------- Net cash (used in) investing activities (3,251) (5,191) Cash flows from financing activities: Proceeds from revolving loan and long-term borrowings 42,053 Deferred financing costs (34) Repayment of revolving loan and long-term borrowings (4,555) (48,462) Increase (decrease) in Envirodyne loan (23,450) 8,751 -------- -------- Net cash provided by (used in) financing activities (28,005) 2,308 Effect of currency exchange rate changes on cash (440) 24 -------- -------- Net increase (decrease) in cash and equivalents (3,660) 3,191 Cash and equivalents at beginning of period 11,826 6,201 -------- -------- Cash and equivalents at end of period $ 8,166 $ 9,392 ======== ======== - -------------------------------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $520 $1,517 Income taxes paid $710 $3,999 The accompanying notes are an integral part of the consolidated financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. INVENTORIES (dollars in thousands) Inventories consisted of: September 26, December 28, 1996 1995 ------------ ------------ Raw materials $ 3,811 $ 5,299 Work in process 11,704 13,342 Finished products 19,148 19,592 ------- ------- $34,663 $38,233 ======= ======= 2. CONTINGENCIES (dollars in thousands) The Company and its subsidiaries are involved in various legal proceedings arising out of its business and other environmental matters, none of which is expected to have a material adverse effect upon its results of operations, cash flows or financial position. 3. SUBSEQUENT EVENT On November 8, 1996, a jury awarded $102.4 million in damages in Viskase Corporation's (Viskase) patent infringement lawsuit against American National Can Co. Viskase brought suit against American National Can Co. for infringing on various Viskase patents relating to multilayer barrier plastic films used for fresh red meat, processed meat and poultry product applications. The jury found that American National Can Co. had willfully infringed on Viskase's patents. Envirodyne expects American National Can Co. to appeal the award. This award has not been recorded in the Company's financial statements. Viskase will petition the court to declare the case exceptional and increase the damages up to threefold and to award attorneys' fees. The Company will also seek prejudgment interest from December 1989. In addition, Viskase will seek to enjoin American National Can Co. from further violation of Viskase's patent rights. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- (dollars in thousands) ---------------------- The accompanying management's discussion and analysis of financial condition and results of operations should be read in conjunction with the following table: Three Months Ended --------------------------- September 26, September 28, 1996 1995 ------------ ------------ (in thousands) Net sales: Food packaging products $142,944 $146,874 Disposable foodservice supplies 20,881 19,814 -------- -------- $163,825 $166,688 ======== ======== Operating income: Food packaging products $8,027 $9,596 Disposable foodservice supplies 1,880 666 Other and eliminations (1,199) (1,609) ------ ------ $8,708 $8,653 ====== ====== Depreciation and amortization under capital lease and amortization of intangible expense: Food packaging products $13,426 $12,355 Disposable foodservice supplies 1,250 1,157 Other 12 19 ------- ------- $14,688 $13,531 ======= ======= Capital expenditures: Food packaging products $ 5,730 $ 9,530 Disposable foodservice supplies 533 1,080 Other 1 1 ------- ------- $ 6,264 $10,611 ======= ======= Results of Operations - --------------------- The Company's net sales for the first nine months and third quarter of 1996 were $489.3 million and $163.8 million, respectively, which represented a slight increase of 0.3% and decrease of 1.7%, respectively, over comparable periods of 1995. Third quarter net sales at Viskase decreased by 3.2% over the prior year. The benefits of a stronger presence in the Latin American and Asian Pacific markets were offset by lower pricing due to competitive pressures in both the domestic and European markets as well as lower casing volumes in the U.S. Third quarter net sales at Sandusky increased by 6.3% from the prior year. Sales to dairy customers were lower than expected following a general softness in dairy product sales in the U.S. Third quarter net sales at Clear Shield increased 5.4% from the prior year primarily due to volume increases from new business. These increases more than offset volume loss from softness in the quick serve restaurant market segment. Operating income for the first nine months and third quarter of 1996 was $27.3 million and $8.7 million, respectively, representing a decrease of 0.6% and an increase of 0.6%, respectively, from the comparable periods of 1995. The decrease in operating income resulted primarily from declines in gross margins caused by continued price competition in the U.S. and Europe, particularly within the casing product lines. Additionally, lower volumes at Sandusky negatively impacted gross margins. On November 8, 1996, a jury awarded $102.4 million in damages in Viskase Corporation's (Viskase) patent infringement lawsuit against American National Can Co. Viskase brought suit against American National Can Co. for infringing on various Viskase patents relating to multilayer barrier plastic films used for fresh red meat, processed meat and poultry product applications. The jury found that American National Can Co. had willfully infringed on Viskase's patents. Envirodyne expects American National Can Co. to appeal the award. This award has not been recorded in the Company's financial statements. Viskase will petition the court to declare the case exceptional and increase the damages up to threefold and to award attorneys' fees. The Company will also seek prejudgment interest from December 1989. In addition, Viskase will seek to enjoin American National Can Co. from further violation of Viskase's patent rights. The British beef industry continues to be affected by concerns over bovine spongiform encephalopathy (BSE), or mad cow disease. While certain of our film product lines in Europe are sold to customers in affected industries, management believes that Viskase's results will not be significantly impacted. Net interest expense for the nine-month period totaled $42.8 million representing an increase of $0.8 million from the first nine months of 1995. The increase is the result of borrowings at higher interest rates, which more than offset the effect of lower borrowing levels. Other income (expense) totaled $(4.3) million and $(0.2) million for the first nine months of 1996 and 1995, respectively. The 1996 expense included a $(2.0) million charge for the termination of the management agreement with D.P. Kelly & Associates, L.P. The remaining expense in 1996 and income in 1995 consisted principally of foreign currency transaction gains and losses. The Company has entered into forward foreign exchange contracts to hedge certain foreign currency transactions on a continuing basis for periods consistent with its committed foreign exchange exposures. The effect of this practice is to minimize the effect of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to additional exchange risk because gains and losses on these contracts offset losses and gains on the transactions being hedged. The cash flows from forward contracts are classified consistent with the cash flows from the transactions or events being hedged. The tax benefit for the first nine months resulted from the benefit of U.S. losses partially offset by the provision related to income from foreign subsidiaries. Due to the permanent differences in the U.S. resulting from non-deductible amortization and foreign losses for which no tax benefit is provided, a benefit of $5.8 million was provided on a loss before income taxes of $(19.8) million. The U.S. tax benefit is recorded as a reduction of the deferred tax liability and does not result in a refund of income taxes. Liquidity and Capital Resources - ------------------------------- Cash and equivalents increased by $8.9 million during the nine months ended September 26, 1996. Cash flows provided by operating activities of $39.9 million exceeded the cash flows used by investing activities of $20.7 million and for financing activities of $9.9 million. Cash flows provided by operating activities were principally attributable to the Company's loss from operations offset by the effect of depreciation and amortization and funds generated through the improved management of working capital. Cash flows used in investing activity consist principally of capital expenditures for property, plant and equipment. Cash flows used for financing activities were principally attributable to the principal repayment under the General Electric Capital Corporation Lease and reduction of foreign borrowing. The Company finances its working capital needs through a combination of cash generated through operations and borrowings under the Revolving Credit Facility. The availability of funds under the Revolving Credit Facility is subject to the Company's compliance with certain covenants (which are substantially similar to those included in the Indenture), to borrowing base limitations measured by accounts receivable and inventory of the Company and to reserves which may be established in the discretion of the lenders. Currently, there are no drawings under the Revolving Credit Facility. The available borrowing capacity under the Revolving Credit Facility was $20 million at September 26, 1996. There are no significant restrictions on the Company's ability to transfer funds among its operations under the terms of its principal debt agreements. The Company anticipates that its operating cash flow will be sufficient to meet its operating expenses and to service its interest payments on the Senior Secured Notes, the 10.25% Notes and its other outstanding indebtedness. The Company will be required to satisfy its $80 million mandatory redemption obligation with respect to the Senior Secured Notes in 1999 and to pay the remaining principal amount of the Senior Secured Notes in 2000. Additionally, the Company's 10.25% Notes, of which $219.3 million principal amount is outstanding, will mature in December 2001. The Company expects that in order to make these payments it will be required to pursue one or more alternative strategies, such as refinancing its indebtedness, selling additional equity capital, reducing or delaying capital expenditures, or selling assets. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. Capital expenditures for the first nine months of 1996 and 1995 totaled $22.8 million and $24.2 million, respectively. Capital expenditures for 1996 are expected to be approximately $34 million and $31 million in future years. The Company has entered into interest rate agreements that cap $50 million of interest rate exposures at an average LIBOR rate of 6.50% until January 1997. These interest rate cap agreements were entered into under terms of the senior bank financing that was repaid on June 20, 1995. Interest expense includes $459 of amortization of interest rate cap premium during the nine-month period ended September 26, 1996. The Company has not received any payments under the interest rate protection agreements. The Company has spent approximately $11 million to $17 million annually on research and development programs, including product and process development, and on new technology development during each of the past three years, and the 1996 research and development and product introduction expenses are expected to be approximately $10 million. Among the projects included in the current research and development efforts is the application of certain patents and technology licensed by Viskase to the manufacture of cellulosic casings. The commercialization of these applications and the related fixed asset expense associated with such commercialization may require substantial financial commitments in future periods. PART II. OTHER INFORMATION Item 1 - Legal Proceedings ----------------- For a description of pending litigation and other contingencies, see Part 1, Note 4, Contingencies. Item 2 - Changes in Securities --------------------- No reportable events occurred during the quarter ended September 26, 1996. Item 3 - Defaults Upon Senior Securities ------------------------------- None. Item 4 - Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. Item 5 - Other Information ----------------- None. Item 6 - Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits None. (b) Reports on Form 8-K None. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENVIRODYNE INDUSTRIES, INC. ---------------------------- Registrant By: /s/ ------------------------- Gordon S. Donovan Vice President and Treasurer (Duly authorized officer and principal financial officer of the registrant) Date: November 12, 1996 EX-27 2
5 9-MOS DEC-26-1996 SEP-26-1996 39,195,000 0 83,660,000 (2,692,000) 100,737,000 247,873,000 562,711,000 107,398,000 878,986,000 132,337,000 522,550,000 145,000 0 0 95,728,000 878,986,000 489,308,000 489,308,000 366,525,000 366,525,000 0 985,000 43,954,000 (19,816,000) (5,800,000) (14,016,000) 0 0 0 (14,016,000) (0.98) (0.98)
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