-----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, T8dQPoEvUVOKx9cWO8GUfQc4wcSh/V2woTtKeELnftpduuE6GpkVG9V4P4CSyrH6 bRnTMEYYwTI6BJGMPEkTfg== 0000033073-97-000020.txt : 19971111 0000033073-97-000020.hdr.sgml : 19971111 ACCESSION NUMBER: 0000033073-97-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970925 FILED AS OF DATE: 19971110 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: SEC FILE NUMBER: 000-05485 FILM NUMBER: 97711980 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 25, 1997 ------------------- OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ----------- Commission file number 0-5485 ---------- ENVIRODYNE INDUSTRIES, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-2677354 - ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Harger Road, Suite 190, Oak Brook, Illinois 60523 - ------------------------------------------------ ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (630) 571-8800 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------- APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No ------ ------ As of November 7, 1997, there were 14,693,143 shares outstanding of the registrant's Common Stock, $.01 par value. Page 1 of 29 Pages INDEX TO FINANCIAL STATEMENTS ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheets at September 25, 1997 (unaudited) and December 26, 1996 4 Unaudited consolidated statements of operations for the three months ended September 25, 1997 and September 26, 1996 and for the nine months ended September 25, 1997 and September 26, 1996 5 Unaudited consolidated statements of cash flows for the nine months ended September 25, 1997 and September 26, 1996 6 Notes to consolidated financial statements 7 VISKASE HOLDING CORPORATION AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheets at September 25, 1997 (unaudited) and December 26, 1996 19 Unaudited consolidated statements of operations for the three months ended September 25, 1997 and September 26, 1996 and for the nine months ended September 25, 1997 and September 26, 1996 20 Unaudited consolidated statements of cash flows for the nine months ended September 25, 1997 and September 26, 1996 21 Notes to consolidated financial statements 22 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS -------------------- The financial information included in this quarterly report has been prepared in conformity with the accounting principles and practices reflected in the financial statements included in the annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 26, 1996 (1996 Form 10-K). These quarterly financial statements should be read in conjunction with the financial statements and the notes thereto included in the 1996 Form 10-K. The accompanying financial information, which is unaudited, reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet as of December 26, 1996 was derived from the audited consolidated financial statements in the Company's annual report on Form 10-K. Reported interim results of operations are based in part on estimates which may be subject to year-end adjustments. In addition, these quarterly results of operations are not necessarily indicative of those expected for the year. ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 25, December 26, 1997 1996 -------------- ------------ (in thousands) ASSETS Current assets: Cash and equivalents $ 16,772 $ 41,794 Receivables, net 77,351 79,174 Inventories 99,005 95,012 Other current assets 27,285 22,141 -------- -------- Total current assets 220,413 238,121 Property, plant and equipment, including those under capital leases 585,877 578,704 Less accumulated depreciation and amortization 138,896 116,896 -------- -------- Property, plant and equipment, net 446,981 461,808 Deferred financing costs 5,045 5,902 Other assets 39,465 42,809 Excess reorganization value 117,499 125,107 -------- -------- $829,403 $873,747 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of ong-term debt and obligations under capital leases $ 13,688 $ 11,291 Accounts payable 36,466 37,015 Accrued liabilities 83,724 82,109 -------- -------- Total current liabilities 133,878 130,415 Long-term debt including obligations under capital leases 509,579 521,179 Accrued employee benefits 52,813 53,697 Deferred and noncurrent income taxes 44,493 64,811 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 14,693,143 shares issued and outstanding at September 25, 1997 and 14,545,107 shares at December 26, 1996 147 145 Paid in capital 135,880 135,100 Accumulated (deficit) (49,624) (38,813) Cumulative foreign currency translation adjustments 2,298 7,305 Unearned restricted stock issued for future service (61) (92) -------- -------- Total stockholders' equity 88,640 103,645 -------- -------- $829,403 $873,747 ======== ======== 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 25, 1997 26, 1996 25, 1997 26, 1996 --------------- -------------- -------------- ---------------- (in thousands, except for number of shares and per share amounts) NET SALES $155,004 $163,825 $466,072 $489,308 COSTS AND EXPENSES Cost of sales 116,334 122,763 350,061 366,525 Selling, general and administrative 28,534 28,134 82,734 83,080 Amortization of intangibles and excess reorganization value 3,966 4,220 12,064 12,426 Restructuring charges 3,500 3,500 -------- -------- -------- -------- OPERATING INCOME 2,670 8,708 17,713 27,277 Interest income 97 414 855 1,186 Interest expense 13,927 14,582 42,335 43,954 Other (income) expense, net 363 1,064 1,814 4,325 -------- -------- -------- -------- (LOSS) BEFORE INCOME TAXES (11,523) (6,524) (25,581) (19,816) Income tax (benefit) (7,770) (2,600) (14,770) (5,800) -------- -------- -------- -------- NET (LOSS) $ (3,753) $ (3,924) $(10,811) $(14,016) ======== ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES 14,645,809 14,514,721 14,587,810 14,255,987 PER SHARE AMOUNTS: NET (LOSS) $(.26) $(.27) $(.74) $(.98) ===== ===== ===== ===== 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 25, September 26, 1997 1996 ------------- ------------- (in thousands) Cash flows from operating activities: Net (loss) $(10,811) $(14,016) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization under capital lease 32,024 32,329 Amortization of intangibles and excess reorganization value 12,064 12,426 Amortization of deferred financing fees and discount 1,298 1,742 (Decrease) in deferred and noncurrent income taxes (17,392) (10,157) Foreign currency transaction loss (gain) 1,231 (111) Net (gain) on disposition of assets (928) (200) Changes in operating assets and liabilities: Accounts receivable (1,614) 7,440 Inventories (9,171) (1,839) Other current assets (5,833) (5,509) Accounts payable and accrued liabilities 6,116 16,704 Other 601 1,054 ------- -------- Total adjustments 18,396 53,879 ------- -------- Net cash provided by operating activities 7,585 39,863 Cash flows from investing activities: Capital expenditures (36,036) (22,832) Proceeds from disposition of assets 11,873 2,129 -------- -------- Net cash (used in) investing activities (24,163) (20,703) Cash flows from financing activities: Issuance of common stock 813 20 Proceeds from revolving loan and long-term borrowings 314 1,130 Deferred financing costs (522) (91) Repayment of revolving loan, long-term borrowings and capital lease obligation (8,043) (10,909) ------- ------- Net cash (used in) financing activities (7,438) (9,850) Effect of currency exchange rate changes on cash (1,006) (440) ------- ------- Net increase (decrease) in cash and equivalents (25,022) 8,870 Cash and equivalents at beginning of period 41,794 30,325 ------- ------- Cash and equivalents at end of period $16,772 $39,195 - --------------------------------------------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $33,706 $34,639 Income taxes paid $ 3,908 $ 1,090 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 December 25, 1997 26, 1996 --------- -------- Raw materials $ 17,543 $ 14,960 Work in process 30,525 29,057 Finished products 50,937 50,995 -------- -------- $ 99,005 $ 95,012 ======== ======== Approximately 62% of the inventories at September 25, 1997 were valued at Last-In, First-Out (LIFO). These LIFO values exceeded current manufacturing cost by approximately $6 million at September 25, 1997. 2. DEBT OBLIGATIONS (dollars in thousands) Outstanding short-term and long-term debt consisted of: September December 25, 1997 26, 1996 --------- -------- Short-term debt, current maturity of long-term debt, and capital lease obligation: Current maturity of Viskase Capital Lease Obligation $ 9,675 $ 6,633 Current maturity of Viskase Limited Term Loan (3.9%) 1,648 1,876 Other 2,365 2,782 ------- ------- Total short-term debt $13,688 $11,291 ======= ======= Long-term debt: 12% Senior Secured Notes due 2000 $160,000 $160,000 10.25% Senior Notes due 2001 219,262 219,262 Viskase Capital Lease Obligation 124,873 134,549 Viskase Limited Term Loan (3.9%) 3,296 4,690 Other 2,148 2,678 -------- -------- Total long-term debt $509,579 $521,179 ======== ======== 3. CONTINGENCIES In late 1993, Viskase commenced a legal action against American National Can Company (ANC) in Federal District Court for the Northern District of Illinois, Eastern Division, 93C7651. Viskase claimed that ANC's use of two different very low density polyethylene plastic resins in the manufacture of ANC's multi-layer barrier shrink film products was infringing various Viskase patents relating to multi- layer barrier plastic films used for fresh red meat, processed meat and poultry product applications. In November 1996, after a three-week trial, a jury found that ANC had willfully infringed Viskase's patents and awarded Viskase $102.4 million in compensatory damages. The Court also entered an order permanently enjoining ANC from making or selling infringing products after December 23, 1996. On September 29, 1997, the Court set aside the jury verdict in part and ordered a retrial on certain issues. The Court upheld the jury finding on the validity of all of Viskase's patents and the jury finding that ANC had wilfully infringed Viskase's patents by ANC's use of Dow Chemical Company's "Attane" brand polyethylene plastic resin in ANC's products. However, the Court ordered a new trial on the issue of whether ANC's use of Dow Chemical Company's "Affinity" brand polyethylene plastic resin infringed Viskase's patents and whether such conduct was wilful. Because the jury rendered one general damage verdict, the Court ordered a retrial of all damage issues. By operation of the Court's order, the injunction in respect of ANC's future use of the "Affinity" brand resin was removed. No new trial date has been set. The Company expects ANC to vigorously contest this matter and to appeal any final judgment. No part of the pending claims have been recorded in the Company's financial statements. Litigation is pending with respect to events arising out of the Envirodyne bankruptcy case and the 1989 acquisition of Envirodyne by Emerald Acquisition Corporation (Emerald) with respect to which, although Envirodyne is not presently a party to such litigation, certain defendants have asserted indemnity rights against Envirodyne. In ARTRA Group Incorporated v. Salomon Brothers Holding Company Inc, ----------------------------------------------------------------- Salomon Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly, - -------------------------------------------------------------------- Charles K. Bobrinskoy, James L. Massey, William Rifkin and Michael - ------------------------------------------------------------------ Zimmerman, Case No. 93 A 1616, United States Bankruptcy Court for the - --------- Northern District of Illinois, Eastern Division, ARTRA Group Incorporated (ARTRA) alleges breach of fiduciary duty and tortious inference in connection with the negotiation and consummation of the Plan of Reorganization. The plaintiff seeks damages in the total amount of $136.2 million plus interest and punitive damages of $408.6 million. D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkin and Zimmerman have asserted common law and contractual rights of indemnity against Envirodyne for attorneys' fees, costs and any ultimate liability relating to the claims set forth in the complaints. Upon a motion of the defendants, the Bankruptcy Court dismissed ARTRA's claims. ARTRA appealed to the U.S. District Court and on October 31, 1996, the U.S. District Court affirmed the Bankruptcy Court's decision. ARTRA has appealed to the U.S. Court of Appeals for the Seventh Circuit. The appeal has been fully briefed and oral arguments heard in May 1997. The parties are awaiting the U.S. Court of Appeals decision. Envirodyne is continuing its evaluation of the merits of the indemnification claims against Envirodyne and the underlying claims in the litigation. Upon the undertaking of D.P. Kelly & Associates, L.P. to repay such funds in the event it is ultimately determined that there is no right to indemnity, Envirodyne is advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for the payment of legal fees. Although the Company is not a party to the case, the Company believes that the plaintiff's claims raise similar factual issues to those raised in the Envirodyne bankruptcy case which, if adjudicated in a manner similar to that in the Envirodyne bankruptcy case, would render it difficult for the plaintiff to establish liability or prove damages. Accordingly, the Company believes that the indemnification claims will not have a material adverse effect upon the business or financial position of the Company, even if the claimants were successful in establishing their right to indemnification. In 1993, the Antitrust Division of the United States Department of Justice began an investigation of the disposable plastic cutlery industry. This investigation has resulted in the indictment, trial and conviction of certain companies and individuals in the industry, but did not include Clear Shield National or any of its present or former employees. In February 1996 Clear Shield National and three other plastic cutlery manufacturers were named as defendants in the following three civil complaints: Eisenberg Brothers, Inc., on behalf ----------------------------------- of itself and all others similarly situated, v. Amcel Corp., Clear - ------------------------------------------------------------------ Shield National, Inc., Dispoz-O Plastics Corp. and Benchmark Holdings, - --------------------------------------------------------------------- Inc. t/a Winkler Products, Civil Action No. 96-728, United States - ------------------------- District Court for the Eastern District of Pennsylvania; St. Cloud --------- Restaurant Supply Company v. Amcel Corp., Clear Shield National, Inc., - --------------------------------------------------------------------- Dispoz-O Plastics Corp. and Benchmark Holdings, Inc. t/a Winkler - ---------------------------------------------------------------- Products, Case No. 96C 0777, United States District Court for the - -------- Northern District of Illinois, Eastern Division; and Servall Products, ---------------- Inc., on behalf of itself and all others similarly situated, v. Amcel - --------------------------------------------------------------------- Corporation, Clear Shield National, Inc., Dispoz-O Plastics - ----------------------------------------------------------- Corporation and Benchmark Holdings, Inc. t/a Winkler Products, Civil - ------------------------------------------------------------- Action No. 96-1116, United States District Court for the Eastern District of Pennsylvania. Each of the complaints alleges, among other things, that from October 1990 through April 1992 the defendants unlawfully conspired to fix the prices at which plastic cutlery would be sold. The Company informed the plaintiffs that such claims as they relate to Clear Shield were discharged by the order of the Bankruptcy Court and Plan of Reorganization and that the plaintiffs are permanently enjoined from pursuing legal action to collect discharged claims. On February 27, 1996, the plaintiff in the St. Cloud case voluntarily --------- dismissed the action without prejudice and refiled its action in the United States District Court for the Eastern District of Pennsylvania but did not name Clear Shield National as a defendant. On March 14, 1996, Eisenberg Brothers Inc., St. Cloud and Servall filed a motion in Clear Shield National's bankruptcy proceeding in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division, contending that the Bankruptcy Court's order did not discharge the plaintiffs' claims. On March 19, 1997, the Bankruptcy Court denied their motion and granted the Company's cross motion for summary judgement. Eisenberg Brothers, Inc. has appealed the Bankruptcy Court's decision to the U.S. District Court. On October 24, 1997, the District Court upheld the Bankruptcy Court's decision. The plaintiff's period for appeal is running. In March 1997 Viskase Corporation received a subpoena from the Antitrust Division of the United States Department of Justice relating to a grand jury investigation of the sausage casings industry. Viskase Corporation is cooperating fully with the investigation. The Company and its subsidiaries are involved in various legal proceedings arising out of their business and other environmental matters, none of which is expected to have a material adverse effect upon results of operations, cash flows or financial position. 4. ACCOUNTING STANDARDS The Company will implement the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 128 simplifies the previous standards for computing earnings per share, replacing the presentation of primary earnings per share with a presentation of basic earnings per share. It also requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with complex capital structures, which applies to the Company. Management believes that adoption of SFAS No. 128 will not have a material effect on the Company's earnings per share amounts. The Company will implement the provisions of Statement of Financial Accounting Standards No. 129, "Disclosure of Information About Capital Structure" (SFAS No. 129), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 129 requires that companies include additional detail in disclosures about capital structure related to rights and privileges associated with outstanding security issues. Management believes that adoption of SFAS No. 129 will not have a material effect on the Company. The Company will implement the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Management believes that adoption of SFAS No. 130 will not have a material effect on the Company. The Company will implement the provisions of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 131 specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be disclosed. Management believes that adoption of SFAS No. 131 will not have a material effect on the Company. 5. RESTRUCTURING CHARGES (dollars in thousands) During the third quarter, the Company's Viskase subsidiary committed to a plan of restructuring whereby it will adjust its operations from a segregated regional focus to a more congruent global focus. These actions are directly related to lowering Viskase's fixed costs. Restructuring actions identified resulted in charges to continuing operations of $3.5 million before tax and included costs associated with voluntary and involuntary severance expense and the consolidation of a finishing plant. In the third quarter, $.7 million was charged against the reserve. 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 25, 1997
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total -------- ------------ ------------ ------------ ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 9,711 $ (1,335) $ 8,396 $ 16,772 Receivables and advances, net 79,584 53,194 49,041 $ (104,468) 77,351 Inventories 67,188 33,119 (1,302) 99,005 Other current assets 925 16,042 10,318 27,285 -------- -------- -------- --------- -------- Total current assets 90,220 135,089 100,874 (105,770) 220,413 Property, plant and equipment including those under capital lease 144 446,518 139,215 585,877 Less accumulated depreciation and amortization 115 111,134 27,647 138,896 -------- -------- -------- --------- -------- Property, plant and equipment, net 29 335,384 111,568 446,981 Deferred financing costs 4,519 526 5,045 Other assets 37,603 1,862 39,465 Investment in subsidiaries 50,534 120,570 (171,104) Excess reorganization value 82,587 34,912 117,499 -------- -------- -------- --------- -------- $145,302 $711,233 $249,742 $(276,874) $829,403 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital lease $ 10,227 $ 3,461 $ 13,688 Accounts payable and advances $ 35 107,064 33,835 $(104,468) 36,466 Accrued liabilities 16,113 44,081 23,530 83,724 -------- -------- -------- --------- -------- Total current liabilities 16,148 161,372 60,826 (104,468) 133,878 Long-term debt including obligation under capital lease 379,262 126,970 3,347 509,579 Accrued employee benefits 48,666 4,147 52,813 Deferred and noncurrent income taxes 27,653 (5,077) 21,917 44,493 Intercompany loans (366,401) 340,022 26,379 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 14,693,143 shares issued and outstanding 147 3 32,738 (32,741) 147 Paid in capital 135,880 87,899 87,871 (175,770) 135,880 Accumulated earnings (deficit) (49,624) (50,860) 10,279 40,581 (49,624) Cumulative foreign currency translation adjustments 2,298 2,238 2,238 (4,476) 2,298 Unearned restricted stock issued for future services (61) (61) -------- -------- -------- --------- -------- Total stockholders' equity 88,640 39,280 133,126 (172,406) 88,640 -------- -------- -------- --------- -------- $145,302 $711,233 $249,742 $(276,874) $829,403 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEETS DECEMBER 26, 1996
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total -------- ------------ ------------ ------------ ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 25,785 $ (162) $ 16,171 $41,794 Receivables and advances, net 61,960 70,258 46,032 $ (99,076) 79,174 Inventories 59,730 36,509 (1,227) 95,012 Other current assets 187 11,730 10,224 22,141 -------- -------- -------- --------- -------- Total current assets 87,932 141,556 108,936 (100,303) 238,121 Property, plant and equipment including those under capital lease 133 420,396 158,175 578,704 Less accumulated depreciation and amortization 95 86,715 30,086 116,896 -------- -------- -------- --------- -------- Property, plant and equipment, net 38 333,681 128,089 461,808 Deferred financing costs 5,144 758 5,902 Other assets 40,784 2,025 42,809 Investment in subsidiaries 64,433 123,236 (187,669) Excess reorganization value 87,702 37,405 125,107 -------- -------- -------- --------- -------- $157,547 $726,959 $277,213 $(287,972) $873,747 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital lease $ 7,182 $4,109 $ 11,291 Accounts payable and advances $ 35 85,156 50,900 $ (99,076) 37,015 Accrued liabilities 6,197 44,235 31,677 82,109 -------- -------- -------- --------- -------- Total current liabilities 6,232 136,573 86,686 (99,076) 130,415 Long-term debt including obligation under capital lease 379,262 137,063 4,854 521,179 Accrued employee benefits 49,366 4,331 53,697 Deferred and noncurrent income taxes 29,088 10,824 24,899 64,811 Intercompany loans (360,680) 340,000 20,681 (1) Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 14,545,107 shares issued and outstanding 145 3 32,738 (32,741) 145 Paid in capital 135,100 87,899 87,871 (175,770) 135,100 Accumulated earnings (deficit) (38,813) (42,050) 7,872 34,178 (38,813) Cumulative foreign currency translation adjustments 7,305 7,281 7,281 (14,562) 7,305 Unearned restricted stock issued for future services (92) (92) -------- -------- -------- --------- -------- Total stockholders' equity 103,645 53,133 135,762 (188,895) 103,645 -------- -------- -------- --------- -------- $157,547 $726,959 $277,213 $(287,972) $873,747 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR NINE MONTHS ENDED SEPTEMBER 25, 1997
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $312,332 $184,711 $(30,971) $466,072 COSTS AND EXPENSES Cost of sales 240,661 140,313 (30,913) 350,061 Selling, general and administrative $3,735 45,707 33,292 82,734 Amortization of intangibles and excess reorganization value 9,666 2,398 12,064 Restructuring charges 3,500 3,500 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (3,735) 12,798 8,708 (58) 17,713 Interest income 584 271 855 Interest expense 32,410 8,767 1,158 42,335 Intercompany interest expense (income) (30,380) 28,135 2,245 Management fees (income) (3,393) 2,615 778 Other expense (income), net 1,392 179 243 1,814 Equity loss (income) in subsidiary 8,868 (2,407) (6,461) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (12,048) (24,491) 4,555 6,403 (25,581) Income tax provision (benefit) (1,237) (15,681) 2,148 (14,770) -------- -------- -------- --------- -------- NET INCOME (LOSS) $(10,811) $(8,810) $ 2,407 $6,403 $(10,811) ======== ======= ======== ========= ========
CONSOLIDATING STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED SEPTEMBER 25, 1997
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) NET SALES $104,865 $59,905 $(9,766) $155,004 COSTS AND EXPENSES Cost of sales 81,004 45,164 (9,834) 116,334 Selling, general and administrative $1,320 16,258 10,956 28,534 Amortization of intangibles and excess reorganization value 3,133 833 3,966 Restructuring charges 3,500 3,500 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (1,320) 970 2,952 68 2,670 Interest income 93 4 97 Interest expense 10,697 2,878 352 13,927 Intercompany interest expense (income) (10,145) 9,435 710 Management fees (income) (1,050) 854 196 Other expense (income), net 529 1,098 (1,264) 363 Equity loss (income) in subsidiary 2,983 (1,727) (1,256) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (4,241) (11,568) 2,962 1,324 (11,523) Income tax provision (benefit) (488) (8,517) 1,235 (7,770) -------- -------- -------- --------- -------- NET INCOME (LOSS) $(3,753) $(3,051) $ 1,727 $ 1,324 $ (3,753) ======= ======= ======== ======= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR NINE MONTHS ENDED SEPTEMBER 25, 1997
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total -------- ------------ ------------ ------------ ------------- (in thousands) Net cash provided by (used in) operating activities $(10,997) $31,008 $(12,426) $ 7,585 Cash flows from investing activities: Capital expenditures (11) (26,285) (9,740) (36,036) Proceeds from disposition of assets 1,151 10,722 11,873 -------- -------- -------- --------- -------- Net cash provided by (used in) investing activities (11) (25,134) 982 (24,163) Cash flows from financing activities: Issuance of common stock 813 813 Proceeds from revolving loan and long-term borrowings 314 314 Deferred financing costs (522) (522) Repayment of revolving loan, long-term borrowings and capital lease obligations (7,047) (996) (8,043) Increase (decrease) in Envirodyne loan (5,357) 5,357 -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities (5,066) (7,047) 4,675 (7,438) Effect of currency exchange rate changes on cash (1,006) (1,006) -------- -------- -------- --------- -------- Net (decrease) in cash and equivalents (16,074) (1,173) (7,775) (25,022) Cash and equivalents at beginning of period 25,785 (162) 16,171 41,794 -------- -------- -------- --------- -------- Cash and equivalents at end of period $ 9,711 $(1,335) $ 8,396 $16,772 ======= ======= ======= ========= ======= /TABLE 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) ======== ========= ====== ======== ========
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 disposition of assets 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 VISKASE HOLDING CORPORATION AND SUBSIDIARIES The financial information included in this quarterly report has been prepared in conformity with the accounting principles and practices reflected in the financial statements included in the annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 26, 1996 (1996 Form 10-K). These quarterly financial statements should be read in conjunction with the financial statements and the notes thereto included in the 1996 Form 10-K. The accompanying financial information, which is unaudited, reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The condensed consolidated balance sheet as of December 26, 1996 was derived from the audited Viskase Holding Corporation's consolidated financial statements included in Envirodyne Industries, Inc.'s annual report on Form 10-K. Reported interim results of operations are based in part on estimates which may be subject to year-end adjustments. In addition, these quarterly results of operations are not necessarily indicative of those expected for the year. VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 25, December 26, 1997 1996 ------------ ----------- (in thousands) ASSETS Current assets: Cash and equivalents $ 8,396 $ 16,171 Receivables, net 43,392 43,634 Receivables, affiliates 53,069 51,269 Inventories 33,119 36,509 Other current assets 10,318 10,224 -------- -------- Total current assets 148,294 157,807 Property, plant and equipment 139,215 158,175 Less accumulated depreciation 27,647 30,086 -------- -------- Property, plant and equipment, net 111,568 128,089 Deferred financing costs 526 758 Other assets 1,862 2,025 Excess reorganization value 34,912 37,405 -------- -------- $297,162 $326,084 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Short-term debt including current portion of long-term debt $ 3,461 $ 4,109 Accounts payable 11,753 13,736 Accounts payable and advances, affiliates 32,160 51,891 Accrued liabilities 23,530 31,677 -------- -------- Total current liabilities 70,904 101,413 Long-term debt 3,347 4,854 Accrued employee benefits 4,147 4,331 Deferred and noncurrent income taxes 21,917 24,899 Intercompany loans 64,389 58,691 Commitments and contingencies Stockholder's equity: Common stock, $1.00 par value, 1,000 shares authorized; 100 shares issued and outstanding Paid in capital 103,463 103,463 Retained earnings 26,757 21,152 Cumulative foreign currency translation adjustments 2,238 7,281 -------- -------- Total stockholders' equity 132,458 131,896 -------- -------- $297,162 $326,084 ======== ======== 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 25, 1997 26, 1996 25, 1997 26, 1996 --------------- --------------- --------------- --------------- (in thousands, except for number of shares and per share amounts) NET SALES $59,905 $70,628 $184,711 $203,838 COSTS AND EXPENSES Cost of sales 45,164 53,205 140,313 154,734 Selling, general and administrative 9,554 9,767 29,017 28,161 Amortization of intangibles and excess reorganization value 833 873 2,398 2,622 ------- ------- -------- -------- OPERATING INCOME 4,354 6,783 12,983 18,321 Interest income 4 168 271 537 Interest expense 352 524 1,158 1,619 Intercompany interest expense 710 662 2,245 2,620 Management fees 196 257 778 1,009 Other (income) expense, net (1,264) 1,177 (757) 2,376 ------- ------- -------- -------- INCOME BEFORE INCOME TAXES 4,364 4,331 9,830 11,234 Income tax provision 1,790 2,021 4,225 5,181 ------- ------- -------- -------- NET INCOME $ 2,574 $ 2,310 $5,605 $6,053 ======= ======== ====== ====== WEIGHTED AVERAGE COMMON SHARES 100 100 100 100 PER SHARE AMOUNTS: NET INCOME $25,740 $23,100 $56,050 $60,530 ======= ======= ======= ======= 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 25, September 26, 1997 1996 ------------ ------------ (in thousands) Cash flows from operating activities: Net income $ 5,605 $ 6,053 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 7,488 8,334 Amortization of intangibles and excess reorganization value 2,398 2,622 Amortization of deferred financing fees and discount 152 170 (Decrease) in deferred and noncurrent income taxes (254) (578) (Gain) on disposition of assets (878) (6) Changes in operating assets and liabilities: Accounts receivable (3,195) 6,469 Accounts receivable, affiliates (5,741) (4,351) Inventories (492) 2,010 Other current assets (691) (430) Accounts payable and accrued liabilities (285) 9,474 Accounts payable and advances, affiliates (17,134) (1,731) Other (399) ------- -------- Total adjustments (19,031) 21,983 ------- -------- Net cash provided by (used in) operating activities (13,426) 28,036 Cash flows from investing activities: Capital expenditures (9,740) (3,482) Proceeds from disposition of assets 11,722 231 ------- -------- Net cash provided by (used in) investing activities 1,982 (3,251) Cash flows from financing activities: Proceeds from revolving loan and long-term borrowings 314 Repayment of revolving loan and long-term borrowings (996) (4,555) Increase (decrease) in Envirodyne loan 5,357 (23,450) ------- -------- Net cash provided by (used in) financing activities 4,675 (28,005) Effect of currency exchange rate changes on cash (1,006) (440) ------- -------- Net (decrease) in cash and equivalents (7,775) (3,660) Cash and equivalents at beginning of period 16,171 11,826 ------- -------- Cash and equivalents at end of period $ 8,396 $ 8,166 ======= ======== - ---------------------------------------------------------------------------------------------------- Supplemental cash flow information: Interest paid $186 $520 Income taxes paid $3,579 $710 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 25, December 26, 1997 1996 ------------ ------------- Raw materials $ 4,365 $ 3,728 Work in process 8,893 11,395 Finished products 19,861 21,386 ------- ------- $33,119 $36,509 ======= ======= 2. CONTINGENCIES In late 1993, Viskase commenced a legal action against American National Can Company (ANC) in Federal District Court for the Northern District of Illinois, Eastern Division, 93C7651. Viskase claimed that ANC's use of two different very low density polyethylene plastic resins in the manufacture of ANC's multi-layer barrier shrink film products was infringing various Viskase patents relating to multi- layer barrier plastic films used for fresh red meat, processed meat and poultry product applications. In November 1996, after a three-week trial, a jury found that ANC had willfully infringed Viskase's patents and awarded Viskase $102.4 million in compensatory damages. The Court also entered an order permanently enjoining ANC from making or selling infringing products after December 23, 1996. On September 29, 1997, the Court set aside the jury verdict in part and ordered a retrial on certain issues. The Court upheld the jury finding on the validity of all of Viskase's patents and the jury finding that ANC had wilfully infringed Viskase's patents by ANC's use of Dow Chemical Company's "Attane" brand polyethylene plastic resin in ANC's products. However, the Court ordered a new trial on the issue of whether ANC's use of Dow Chemical Company's "Affinity" brand polyethylene plastic resin infringed Viskase's patents and whether such conduct was wilful. Because the jury rendered one general damage verdict, the Court ordered a retrial of all damage issues. By operation of the Court's order, the injunction in respect of ANC's future use of the "Affinity" brand resin was removed. No new trial date has been set. The Company expects ANC to vigorously contest this matter and to appeal any final judgment. No part of the pending claims have been recorded in the Company's financial statements. In March 1997 Viskase Corporation received a subpoena from the Antitrust Division of the United States Department of Justice relating to a grand jury investigation of the sausage casings industry. Viskase Corporation is cooperating fully with the investigation. The Company and its subsidiaries are involved in various legal proceedings arising out of their business and other environmental matters, none of which is expected to have a material adverse effect upon results of operations, cash flows or financial position. 3. ACCOUNTING STANDARDS The Company will implement the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 128 simplifies the previous standards for computing earnings per share, replacing the presentation of primary earnings per share with a presentation of basic earnings per share. It also requires dual presentation of basic and diluted earnings per share on the face of the income statement for all entities with complex capital structures, which applies to the Company. Management believes that adoption of SFAS No. 128 will not have a material effect on the Company's earnings per share amounts. The Company will implement the provisions of Statement of Financial Accounting Standards No. 129, "Disclosure of Information About Capital Structure" (SFAS No. 129), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 129 requires that companies include additional detail in disclosures about capital structure related to rights and privileges associated with outstanding security issues. Management believes that adoption of SFAS No. 129 will not have a material effect on the Company. The Company will implement the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Management believes that adoption of SFAS No. 130 will not have a material effect on the Company. The Company will implement the provisions of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131), which will be effective for interim and annual financial statements issued for periods ending after December 15, 1997. SFAS No. 131 specifies revised guidelines for determining an entity's operating segments and the type and level of financial information to be disclosed. Management believes that adoption of SFAS No. 131 will not have a material effect on the Company. 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 September 25, 1997 26, 1996 ---------- ---------- (in thousands) Net sales: Food packaging products $132,282 $142,944 Disposable foodservice supplies 22,722 20,881 -------- -------- $155,004 $163,825 ======== ======== Operating income: Food packaging products $1,925 $8,027 Disposable foodservice supplies 2,065 1,880 Other and eliminations (1,320) (1,199) ------- ------- $2,670 $8,708 ======= ======= Depreciation and amortization under capital lease and amortization of intangible expense: Food packaging products $12,770 $13,426 Disposable foodservice supplies 1,335 1,250 Other 6 12 ------- ------- $14,111 $14,688 ======= ======= Capital expenditures: Food packaging products $ 8,711 $ 5,730 Disposable foodservice supplies 2,322 533 Other 1 ------- ------- $11,033 $ 6,264 ======= ======= Results of Operations - --------------------- The Company's net sales for the first nine months and third quarter of 1997 were $466.1 million and $155.0 million, respectively, which represented decreases of 4.7% and 5.4%, respectively, from comparable periods of 1996. Third quarter net sales at Viskase decreased by 5.9% from the prior year. The benefits of a stronger presence in the Latin American markets were offset by lower pricing on small diameter cellulosic casings. European sales were also negatively affected by foreign currency translation due to the strengthening of the U.S. dollar. Third quarter net sales at Clear Shield increased 8.8% from the prior year due to volume expansion in the western region markets partially offset by lower pricing due to competitive pressures. Third quarter net sales at Sandusky decreased by 29.1%. Thermoform sales increased 9.8% for the quarter. This increase was offset by the absence of injection molding sales due to the previously announced closing of its injection molding operations. Operating income for the first nine months and third quarter of 1997 was $17.7 million and $2.7 million. The Company's 1997 third quarter operating results included a $3.5 million restructuring charge (see Note 5). Operating income for the first nine months and third quarter of 1997, excluding the effect of the restructuring charge, decreased 22.2% and 29.1%, respectively, from comparable periods of 1996. The decrease in operating income resulted primarily from declines in gross margins caused by continued price competition in the U.S. and Europe, particularly within the casing product lines. Additionally, lower volumes at Sandusky negatively affected gross margins. The British beef industry continues to be affected by concerns over bovine spongiform encephalopathy (BSE), or mad cow disease. While certain of our film product lines in Europe are sold to customers in affected industries, management believes that Viskase's results will not be significantly affected. Net interest expense for the nine-month period totaled $41.5 million representing a decrease of $1.3 million from the first nine months of 1996. The decrease is a result of the combination of lower borrowing levels, a reduction in amortization of deferred financing fees and the effects of translation. Other income (expense) approximated $(1.8) million and $(4.3) million for the first nine months of 1997 and 1996, respectively. The 1997 expense consists principally of foreign exchange losses. The $1.0 million gain recorded on the January 1997 sale of the oriented polystyrene business is offset by a $(1.0) million reserve on the loss of the sale of the Puerto Rico facility. The 1996 expense included a $(2.0) million charge for the termination of the Management Agreement with D.P. Kelly & Associates, L.P. The Company has entered into forward foreign exchange contracts to hedge certain foreign currency transactions on a continuing basis for periods consistent with its committed foreign exchange exposures. This practice minimizes the effect of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to additional exchange risk because gains and losses on these contracts offset losses and gains on the transactions being hedged. The cash flows from forward contracts are classified consistent with the cash flows from the transactions or events being hedged. The tax benefit for the first nine months resulted from the benefit of U.S. losses partially offset by the provision related to income from foreign subsidiaries. The Company's effective tax rate reflects the permanent differences in the U.S. resulting from non-deductible amortization, foreign losses for which no tax benefit is provided, and the reduction of a prior year valuation allowance. The reduction in the valuation allowance in the third quarter has affected the rate in the third quarter. A benefit of $14.8 million was provided on a loss before income taxes of $25.6 million. The U.S. tax benefit is recorded as a reduction of the deferred tax liability and does not result in a refund of income taxes. Other - ----- The Company entered into a contract to sell its Barceloneta, Puerto Rico facility. The transaction was completed in the fourth quarter at a loss of approximately $1.0 million; this loss was recognized in the third quarter. In September 1997, the Company announced that it has retained Donaldson, Lufkin and Jenrette Securities Corporation to assist the Board of Directors in evaluating the Company's strategic alternatives. In March 1997, the Company announced that it was exploring the potential sale of Viskase Corporation's PVC film business and on July 11, 1997, the Company announced that Viskase Corporation had entered into a non-binding letter of intent with LINPAC Plastics Limited for the purchase of such PVC film business. Viskase's plants in Aurora, Ohio, and Sedgefield, England, would be affected by a sale. The purchase is subject to a number of contingencies and is expected to be consummated during the fourth quarter. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). This statement will be adopted by the Company, as required, for periods ending after December 15, 1997. Implementation of this statement is not expected to have a material impact on the earnings-per-share data presented by the Company. In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information About Capital Structure." This statement will be adopted by the Company, as required, for periods ending after December 15, 1997. Implementation of this statement is not expected to have a material impact on the Company. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." This statement will be adopted by the Company, as required, for periods ending after December 15, 1997. Implementation of this statement is not expected to have a material impact on the Company. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement will be adopted by the Company, as required, for periods ending after December 15, 1997. Implementation of this statement is not expected to have a material impact on the Company. Liquidity and Capital Resources - ------------------------------- Cash and equivalents decreased by $25.0 million during the nine months ended September 25, 1997. Cash flows used in investing activities of $24.2 million and used in financing activities of $7.4 million exceeded funds provided by operations of $7.6 million. Cash flows provided by operating activities were principally attributable to the Company's loss from operations and the Company's seasonal increase in working capital offset by the effect of depreciation and amortization. Cash flows used for financing activities were principally attributable to the principal repayment under the GECC Lease. Cash flows used in investing activities consist principally of capital expenditures for property, plant and equipment net of the proceeds from the sale of certain assets principally related to the Company's former oriented polystyrene business. The Company finances its working capital needs through a combination of cash generated through operations and borrowings under the Revolving Credit Facility and proceeds available from asset sales. The availability of funds under the Revolving Credit Facility is subject to the Company's compliance with certain covenants (which are substan- tially similar to those included in the Indenture), to borrowing base limitations measured by accounts receivable and inventory of the Company and to reserves which may be established in the discretion of the lenders. Currently, there are no drawings under the $20 million Revolving Credit Facility. The Company's Senior Secured Notes, Revolving Credit Facility and Letter of Credit Facility contain a number of financial covenants that, among other things, require the maintenance of a minimum level of tangible net worth, maximum ratios of debt and senior debt to total capitalization, and a minimum fixed charge coverage. The Company solicited and received the required consents from the holders of Senior Secured Notes for certain amendments to certain financial covenants, and waivers under, the Senior Secured Notes Indenture. In addition, the Company has amended, and received substantially similar waivers under, the Revolving Credit Facility and Letter of Credit Facility. The Company is currently in compliance with the amended covenants under the Senior Secured Notes Indenture, Revolving Credit Facility and Letter of Credit Facility. There are no significant restrictions on the Company's ability to transfer funds among its operations under the terms of its principal debt agreements. The Company anticipates that its operating cash flow, asset sales, and borrowings under the Revolving Credit Facility will be sufficient to meet its operating expenses and to service its interest payments on the Senior Secured Notes, the 10.25% Notes and its other outstanding indebtedness. The Company will be required to satisfy its $80 million mandatory redemption obligation with respect to the Senior Secured Notes in 1999 and to pay the remaining principal amount of the Senior Secured Notes in 2000. Additionally, the Company's 10.25% Notes, of which $219.3 million principal amount is outstanding, will mature in December 2001. The Company expects that in order to make these payments it will be required to pursue one or more alternative strategies, such as refinancing its indebtedness, selling additional equity capital, reducing or delaying capital expenditures, or selling assets. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. Capital expenditures for the first nine months of 1997 and 1996 totaled $36.0 million and $22.8 million, respectively. Capital expenditures for 1997 are expected to be approximately $45 million. The Company spent approximately $7 million in 1996 on research and development programs, including product and process development, and on new technology development. The 1997 and future research and development and product introduction expenses are expected to approximate $8 million to $9 million annually. Among the projects included in the current research and development efforts is the application of certain patents and technology licensed by Viskase to a new process for the manufacture of cellulosic casings. The first production unit is currently under construction and is expected to begin full production in late 1998. The commercialization of these applications and the related capital expenditures associated with such commercialization will require substantial financial commitments in future periods. The Company and its subsidiaries are taking actions to provide that their computer systems are capable of processing for the periods of the year 2000 and beyond. The costs associated with this are not expected to significantly affect operating cash flow. PART II. OTHER INFORMATION Item 1 - Legal Proceedings ----------------- For a description of pending litigation and other contingencies, see Part 1, Note 3, Contingencies in Notes to Consolidated Financial Statements for Envirodyne Industries, Inc. and Subsidiaries. Item 2 - Changes in Securities --------------------- No reportable events occurred during the quarter ended September 25, 1997. Item 3 - Defaults Upon Senior Securities ------------------------------- None. Item 4 - Submission of Matters to a Vote of Security Holders --------------------------------------------------- None. Item 5 - Other Information ----------------- None. Item 6 - Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 10.22 Second Amendment to/Consent and Waiver under Revolving Credit Agreement, dated as of August 4, 1997, between Envirodyne Industries, Inc. and the Prudential Insurance Company of America. 10.23 Second Supplemental Indenture, dated as of September 2, 1997, between Envirodyne Industries, Inc. and Fleet National Bank (formerly Shawmut Bank of Connecticut, National Association), as Trustee. 10.24 Amendment No. 2 to Credit Agreement, dated as of August 5, 1997, between Envirodyne Industries, Inc. and BT Commercial Corporation, individually and as agent. (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, Chief Financial Officer and Treasurer (Duly authorized officer and principal financial officer of the registrant) Date: November 10, 1997 EX-10.22 2 EXHIBIT 10.22 August 4, 1997 The Prudential Insurance Company of America c/o Prudential Capital Group Two Prudential Plaza, Suite 5600 Chicago, Illinois 60601 Re: Second Amendment to/Consent and Waiver under Revolving Credit Agreement Ladies and Gentlemen: Reference is made to the Revolving Credit Agreement ("Agreement"), dated as of June 20, 1995 and amended as of October 13, 1995, between Envirodyne Industries, Inc. ("Envirodyne") and The Prudential Insurance Company of America ("Prudential"). Unless otherwise defined herein, terms used herein which are defined in the Agreement shall have the meanings as given in the Agreement. Envirodyne has requested that Prudential amend the Agreement and Prudential has agreed to make the amendments specified herein. In addition, Envirodyne has requested that Prudential waive any prior default by Envirodyne of Paragraph 4A(a), Paragraph 4A(b) or Paragraph 4C(a) of the Agreement, if any. Envirodyne and Prudential therefore agree as follows: 1. Paragraphs 4A(a)(iii),(iv) and (v) of the Agreement is hereby amended by deleting such paragraphs in their entirety and substituting in lieu thereof the following: (iii) During each "Clause (iii) Test Period" (as defined below) occurring during the period commencing on December 27, 1996 and ending on December 25, 1997, to be less than an amount (the "Clause (iii) Amount") equal to (1) the greater of (X) the Clause (ii) Amount at December 26, 1996, and (Y) negative $47,000,000, plus (2) 50% of ---- Consolidated Net Income for such Clause (iii) Test Period (or zero in the case of a deficit), plus ---- (3) the amount of any net gain realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iii) Test Period; where "Clause (iii) Test Period" means, at any time, the period (taken as a one accounting period) commencing on December 27, 1996 and ending on the then most recently ended fiscal quarter of the Company; (iv) During each "Clause (iv) Test Period" (as defined below) occurring during the period commencing on December 26, 1997 and ending on December 31, 1998, to be less than an amount (the "Clause (iv) Amount") equal to (1) the greater of (X) the Clause (iii) Amount at December 25, 1997, and (Y) negative $47,000,000, plus (2) 50% of ---- Consolidated Net Income for such Clause (iv) Test Period (or zero in the case of a deficit), plus ---- (3) the amount of any net gain realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iv) Test Period; where "Clause (iv) Test Period" means, at any time, the period (taken as one accounting period) commencing on December 26, 1997 and ending on the then most recently ended fiscal quarter of the Company; and (v) During each "Clause (v) Test Period" (as defined below) occurring after January 1, 1999 and thereafter, to be less than an amount equal to (1) the greater of (X) the Clause (iv) Amount at December 31, 1998, and (Y) negative $47,000,000, plus (2) the greater of (X) 50% of Consolidated Net ---- Income for such Clause (v) Test Period (or zero in the case of a deficit), and (Y) $1,250,000 multiplied by the number of the Company's fiscal quarters that have ended during such Clause (v) Test Period, plus (3) the amount of any net gain ---- realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (v) Test Period; where "Clause (v) Test Period" commencing on January 1, 1999 and ending on the then most recently ended fiscal quarter of the Company. 2. Paragraph 4A(b) of the Agreement is hereby amended by deleting such paragraph in its entirety and substituting in lieu thereof the following: (b) Fixed Charge Coverage Ratio. The Company --------------------------- covenants that it will not cause or permit the ratio of (i) Consolidated Cash Flow for the twelve month period ending at the end of any fiscal quarter of the Company to (ii) Consolidated Fixed Charges for each such twelve month period to be less than the ratio set forth below for the period set forth below in which such fiscal quarter ends: Ratio Period ----- ------ 1.45:1 Closing Day through December 28, 1995 1.50:1 December 29, 1995 through December 31, 1998 1:55:1 January 1, 1999 and thereafter provided, however, for purposes of determining -------- ------- Consolidated Cash Flow for the calculation of the Fixed Charge Coverage Ratio only and notwithstanding any tax effect of such restructuring charges, restructuring charges in amounts not to exceed $3,500,000 and $1,500,000 shall be added back, each on a one-time basis prior to December 25, 1997 and June 25, 1998, respectively, to the calculation of Consolidated Net Income to the extent deducted therefrom. In addition, as a condition to the Company's request for a drawing under the Agreement, the Company shall certify through delivery of the Revolving Loan Request that at the time of the request, the Fixed Charge Coverage Ratio for the preceding twelve month period (ending on the month ending not earlier than thirty-five (35) days prior to the date of the Revolving Loan Request) of the Company is at least 1.55:1. 3. Paragraph 4C(a) of the Agreement shall be amended by deleting the last clause of such paragraph, beginning with "provided, however" and substituting in lieu thereof the following: -------- ------- provided, however, that at no time shall (1) -------- ------- Consolidated Senior Debt be more than 52.5% of Consolidated Total Capitalization, or (2) Consolidated Debt be more than 88% of Consolidated Total Capitalization. 4. Exhibit J to the Agreement is hereby amended by deleting such Exhibit in its entirety and replacing it with the form of Exhibit J attached hereto as Exhibit A. --------- 5. Prudential hereby waives any prior default by Envirodyne of Paragraphs 4A(a), Paragraph 4A(b) or Paragraph 4C(a) of the Agreement, if any. The provisions of Paragraphs 4A(a)(iii),(iv) and (v), Paragraph 4A(b) and Paragraph 4C(a) of the Agreement, as amended by this letter, shall be deemed effective for all purposes as of December 27, 1996, provided, however, that this letter shall not become effective until (a) Envirodyne has entered into amendments that are substantially identical to the amendments to the Agreement contained herein with respect to (i) the Indenture, dated as of June 20, 1995 and amended as of October 13, 1995, between Envirodyne and Fleet National Bank (formerly Shawmut Bank Connecticut, National Association) ("Indenture"), as trustee and (ii) the Credit Agreement ("Credit Agreement"), dated as of June 20, 1995 and amended as of October 13, 1995, among Envirodyne, the lenders identified therein and BT Commercial Corporation, as Agent ("BT"), and (b) Prudential shall have received from the Required Holders (as defined in the Indenture) and BT written consents satisfactory to it of the amendments of the Agreement set forth herein. Prudential hereby consents to amendments to the Indenture and Credit Agreement in substantially the respective forms attached hereto as Exhibit B and Exhibit C. --------- --------- Envirodyne represents and warrants as follows: (i) it has all necessary power and authority to execute and deliver this letter; (ii) the execution, delivery and performance of this letter have been duly authorized by it, (iii) this letter and the Agreement, as amended hereby, constitute the legal, valid and binding obligations of Envirodyne and are enforceable against Envirodyne in accordance with their terms; (iv) the approval, execution, delivery and performance of the terms hereof do not violate any contractual provision to which it is a party or by which it is or its properties are bound or any law applicable to it; and (v) after giving effect to the amendments to the Agreement set forth herein, no Default or Event of Default has occurred and is continuing. Upon the effective date of this letter, each reference in the Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Agreement as amended hereby and each reference to the Agreement in all other Transaction Documents shall mean and be a reference to the Agreement, as amended hereby. This letter shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the internal law of the State of New York. Except as specifically amended above, the Agreement, and all other Transaction Documents, shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and effectiveness of this letter shall not, except as expressly provided herein, operate as an amendment to any provision of the Agreement, a waiver of any right, power or remedy of Prudential, or constitute a waiver of, or consent to any departure from, any provision of the Agreement or any other Transaction Document. This letter may be executed by one or more of the parties to this letter on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Please acknowledge the foregoing and your agreement thereto by signing the two copies of this letter agreement where indicated below and returning one copy to me. Very truly yours, ENVIRODYNE INDUSTRIES, INC. By: _____________________________ Gordon S. Donovan Vice President, Chief Financial Officer and Treasurer Accepted and Agreed to as of the date written above: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: _____________________________ Title: ____________________________ EX-10.23 3 EXHIBIT 10.23 SECOND SUPPLEMENTAL INDENTURE THIS SECOND SUPPLEMENTAL INDENTURE, dated as of September 2, 1997 (this "Supplemental Indenture"), between ENVIRODYNE INDUSTRIES, INC., a Delaware corporation (the "Company"), and FLEET NATIONAL BANK (formerly Shawmut Bank of Connecticut, National Association), as trustee (the "Trustee"), under the Indenture dated as of June 20, 1995 and amended by the First Supplemental Indenture, dated as of October, 13, 1995, both between the Company and the Trustee (the "Indenture"). WHEREAS, the Company has issued, the Trustee has authenticated and there have been delivered pursuant to the Indenture $160,000,000 aggregate principal amount of the Company's First Priority Senior Secured Notes due 2000, all of which are currently outstanding; WHEREAS, the Company desires, by this Supplemental Indenture, to amend the negative covenants contained in Sections 4.01(a)(iii),(iv) and (v), Section 4.01(b) and Section 4.03(a) of the Indenture (collectively, the "Amendment"). WHEREAS, Section 8.02 of the Indenture provides that the Company and the Trustee may enter into a supplemental indenture, with the consent of the holders of not less than a majority in aggregate principal amount of the then outstanding Securities (as defined therein), for the purpose of changing any provisions of the Indenture except as otherwise set forth therein; WHEREAS, pursuant to Section 5.05 of the Indenture, the holders of not less than a majority in aggregate principal of the then outstanding Securities, as of 5:00 p.m., New York time, on July 21, 1997, the record date for such purposes, have waived any prior default by the Company of Sections 4.01(a), 4.01(b) or 4.03(a) of the Indenture, if any. WHEREAS, the holders of not less than a majority in principal amount of the Securities outstanding, as of 5:00 p.m, New York City time, on July 21, 1997, the record date for such purpose, have consented to the Amendment; and WHEREAS, the Company is legally empowered and has been duly authorized by the necessary corporate action to make, execute and deliver this Supplemental Indenture, and all acts and things whatsoever necessary to make this Supplemental Indenture, when executed and delivered by the Company and the Trustee, a valid, binding and legal instrument have been taken; NOW, THEREFORE, each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the holders of the Securities: ARTICLE 1 --------- DEFINITIONS ----------- All terms used in this Supplemental Indenture which are defined in the Indenture shall have the meanings assigned to them in the Indenture. ARTICLE 2 --------- AMENDMENT OF INDENTURE ---------------------- 2.1 Sections 4.01(a)(iii),(iv) and (v) of the Indenture are hereby amended by deleting such sections in their entirety and substituting in lieu thereof the following: (iii) During each "Clause (iii) Test Period" (as defined below) occurring during the period commencing on December 27, 1996 and ending on December 25, 1997, to be less than an amount (the "Clause (iii) Amount") equal to (1) the greater of (X) the Clause (ii) Amount at December 26, 1996, and (Y) negative $47,000,000, plus (2) 50% of ---- Consolidated Net Income for such Clause (iii) Test Period (or zero in the case of a deficit), plus (3) the amount ---- of any net gain realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iii) Test Period; where "Clause (iii) Test Period" means, at any time, the period (taken as a one accounting period) commencing on December 27, 1996 and ending on the then most recently ended fiscal quarter of the Company; (iv) During each "Clause (iv) Test Period" (as defined below) occurring during the period commencing on December 26, 1997 and ending on December 31, 1998, to be less than an amount (the "Clause (iv) Amount") equal to (1) the greater of (X) the Clause (iii) Amount at December 25, 1997, and (Y) negative $47,000,000, plus (2) 50% of ---- Consolidated Net Income for such Clause (iv) Test Period (or zero in the case of a deficit), plus (3) the amount of ---- any net gain realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iv) Test Period; where "Clause (iv) Test Period" means, at any time, the period (taken as one accounting period) commencing on December 26, 1997 and ending on the then most recently ended fiscal quarter of the Company; and (v) During each "Clause (v) Test Period" (as defined below) occurring after January 1, 1999 and thereafter, to be less than an amount equal to (1) the greater of (X) the Clause (iv) Amount at December 31, 1998, and (Y) negative $47,000,000, plus (2) the greater of (X) 50% of ---- Consolidated Net Income for such Clause (v) Test Period (or zero in the case of a deficit), and (Y) $1,250,000 multiplied by the number of the Company's fiscal quarters that have ended during such Clause (v) Test Period, plus ---- (3) the amount of any net gain realized by the Company or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (v) Test Period; where "Clause (v) Test Period" commencing on January 1, 1999 and ending on the then most recently ended fiscal quarter of the Company. 2.2 Section 4.01(b) of the Indenture is amended by deleting such section in its entirety and substituting in lieu thereof the following: (b) Fixed Charge Coverage Ratio. The Company --------------------------- covenants that it will not cause or permit the ratio of (i) Consolidated Cash Flow for the twelve month period ending at the end of any fiscal quarter of the Company to (ii) Consolidated Fixed Charges for each such twelve month period to be less than the ratio set forth below for the period set forth below in which such fiscal quarter ends: Ratio Period ----- -------- 1.45:1 Effective Date through December 28, 1995 1.50:1 December 29, 1995 through December 31, 1998 1.55:1 January 1, 1999 and thereafter provided, however, for purposes of determining Consolidated -------- ------- Cash Flow for the calculation of the Fixed Charge Coverage Ratio only and notwithstanding any tax effect of such restructuring charges, restructuring charges in amounts not to exceed $3,500,000 and $1,500,000 shall be added back, each on a one-time basis, prior to December 25, 1997 and June 25, 1998, respectively, to the calculation of the Consolidated Net Income to the extent deducted therefrom. 2.3 Section 4.03(a) of the Indenture is hereby amended by deleting the last clause of such section beginning with "provided, -------- however" and substituting in lieu thereof the following: - ------- provided, however, that at no time shall (1) Consolidated -------- ------- Senior Debt be more than 52.5% of Consolidated Total Capitalization, or (2) Consolidated Debt be more than 88% of Consolidated Total Capitalization. ARTICLE 3 --------- MISCELLANEOUS -------------- 3.1 This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. 3.2 The internal laws of the State of New York shall govern this Supplemental Indenture without regard to principles of conflicts of law. 3.3 All provisions of this Supplemental Indenture shall be deemed to be incorporated in, and made a part of, the Indenture; and the Indenture, as amended and supplemented by this Supplemental Indenture, shall be read, taken and construed as one and the same instrument. 3.4 The provisions of Sections 4.01(a)(iii),(iv) and (v), Section 4.01(b) and Section 4.03(a), as amended by Article 2 of this Supplemental Indenture, shall be deemed effective for all purposes as of December 27, 1996; provided, however, that this Supplemental -------- ------- Indenture shall not become effective as of such date until the Company has entered into amendments that are substantially identical to the Amendment contained herein with respect to (i) the Revolving Credit Agreement, dated as of June 20, 1995 and amended as of October 13, 1995, between the Company and The Prudential Insurance Company of America and (ii) the Credit Agreement, dated as of June 20, 1995 and amended as of October 13, 1995, among the Company, the lenders identified therein and BT Commercial Corporation, as Agent. The Company shall provide to the Trustee written notice that it has entered into such amendments and that this Supplemental Indenture has become effective. 3.5 The recitals to this Supplemental Indenture shall not be construed as representations of the Trustee and the Trustee makes no representation as to the accuracy of such recitals. 3.6 The Trustee enters into this Supplemental Indenture in its capacity as Trustee under the Indenture and in reliance on an Opinion of Counsel and Officers' Certificate. IN WITNESS WHEREOF, the parties have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. ENVIRODYNE INDUSTRIES, INC. By:_________________________________ Gordon S. Donovan Vice President, Chief Financial Officer and Treasurer Attest: ______________________ Stephen M. Schuster Vice President and Secretary FLEET NATIONAL BANK By:_________________________________ Title:______________________________ Attest: By:_________________________________ Title:_____________________________ EX-10.24 4 EXHIBIT 10.24 AMENDMENT NO. 2 TO CREDIT AGREEMENT WITH ENVIRODYNE INDUSTRIES, INC. DATED AS OF JUNE 20, 1995 (as amended through October 13, 1995) THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT ("Amendment") is dated as of August 5, 1997, by and between ENVIRODYNE INDUSTRIES, INC., a Delaware corporation ("Borrower"), and BT COMMERCIAL CORPORATION, a Delaware corporation, individually and as agent (in such capacity, the "Agent") for the "Lenders" under and as defined in the Credit Agreement referred to below. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement. WITNESSETH: ---------- WHEREAS, Borrower, Agent and Lenders have entered into that certain Credit Agreement, dated as of June 20, 1995 and amended pursuant to Amendment No. 1 to Credit Agreement dated October 13, 1995. (the "Credit Agreement"), pursuant to which Lenders have agreed to make certain loans and other financial accommodations to or for the account of Borrower; WHEREAS, Borrower has requested that Agent and Lenders (i) amend the Credit Agreement, (ii) consent to the amendments to the Prudential Revolving Credit Agreement and the First Priority Notes Indenture, in substantially the respective forms attached hereto as Exhibits A and A-1 (collectively, the "Other Amendments") and (iii) waive any prior default by Borrower of Section 8.1(a), Section 8.1(b) or Section 8.3(a) of the Credit Agreements, if any; and WHEREAS, Lenders and Agent have agreed (i) to amend the Credit Agreement; (ii) to consent to the Other Amendments, in each case on the terms and subject to the conditions hereinafter set forth; and (iii) to waive any prior default by Borrower of Section 8.1(a), Section 8.1(b) or Section 8.3(a) of the Credit Agreement, if any. NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the respective parties hereto hereby agree as follows: 1. Amendment to Credit Agreement. Effective as of December ----------------------------- 27, 1996, upon satisfaction of the conditions precedent set forth in Section 4 below, and in reliance upon the representations and warranties of Borrower set forth herein, the Credit Agreement is hereby amended as follows: 1.1 Sections 8.1(a)(iii),(iv) and (v) of the Credit Agreement are hereby amended by deleting such sections in their entirety and substituting in lieu thereof the following: (iii) During each "Clause (iii) Test Period" (as defined below) occurring during the period commencing on December 27, 1996 and ending on December 25, 1997, to be less than an amount (the "Clause (iii) Amount") equal to (1) the greater of (X) the Clause (ii) Amount at December 26, 1996, and (Y) negative $47,000,000, plus (2) 50% of ---- Consolidated Net Income for such Clause (iii) Test Period (or zero in the case of a deficit), plus (3) the amount ---- of any net gain realized by the Borrower or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iii) Test Period; where "Clause (iii) Test Period" means, at any time, the period (taken as a one accounting period) commencing on December 27, 1996 and ending on the then most recently ended fiscal quarter of the Borrower; (iv) During each "Clause (iv) Test Period" (as defined below) occurring during the period commencing on December 26, 1997 and ending on December 31, 1998, to be less than an amount (the "Clause (iv) Amount") equal to (1) the greater of (X) the Clause (iii) Amount at December 25, 1997, and (Y) negative $47,000,000, plus (2) 50% of Consolidated Net ---- Income for such Clause (iv) Test Period (or zero in the case of a deficit), plus (3) the amount of any net gain realized ---- by the Borrower or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (iv) Test Period; where "Clause (iv) Test Period" means, at any time, the period (taken as one accounting period) commencing on December 26, 1997 and ending on the then most recently ended fiscal quarter of the Borrower; and (v) During each "Clause (v) Test Period" (as defined below) occurring after January 1, 1999 and thereafter, to be less than an amount equal to (1) the greater of (X) the Clause (iv) Amount at December 31, 1998, and (Y) negative $47,000,000, plus (2) the greater of (X) 50% of Consolidated ---- Net Income for such Clause (v) Test Period (or zero in the case of a deficit), and (Y) $1,250,000 multiplied by the number of the Borrower's fiscal quarters that have ended during such Clause (v) Test Period, plus (3) the amount of ---- any net gain realized by the Borrower or any of its Subsidiaries on the exchange, redemption, purchase or other acquisition of any of its debt securities (including, without limitation, the 10.25% Notes) during such Clause (v) Test Period; where "Clause (v) Test Period" commencing on January 1, 1999 and ending on the then most recently ended fiscal quarter of the Borrower. 1.2 Section 8.1(b) of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof the following: (b) Fixed Charge Coverage Ratio. The Borrower --------------------------- covenants that it will not cause or permit the ratio of (i) Consolidated Cash Flow for the twelve month period ending at the end of any fiscal quarter of the Borrower to (ii) Consolidated Fixed Charges for each such twelve month period to be less than the ratio set forth below for the period set forth below in which such fiscal quarter ends: Ratio Period ----- ------ 1.45:1 Closing Day through December 28, 1995 1.50:1 December 29, 1995 through December 31, 1998 1:55:1 January 1, 1999 and thereafter provided, however, for purposes of determining -------- ------- Consolidated Cash Flow for the calculation of the Fixed Charge Coverage Ratio only and notwithstanding any tax effect of such restructuring charges, restructuring charges in amounts not to exceed $3,500,000 and $1,500,000 shall be added back, each on a one-time basis, prior to December 25, 1997 and June 25 1998, respectively, to the calculation of the Consolidated Net Income to the extent deducted therefrom. 1.3 Section 8.3(a) of the Credit Agreement is hereby amended by deleting the last clause of such section beginning with "provided, however" and substituting in lieu thereof the following: -------- ------- provided, however, that at no time shall (1) Consolidated -------- ------- Senior Debt be more than 52.5% of Consolidated Total Capitalization, or (2) Consolidated Debt be more than 88% of Consolidated Total Capitalization. 2. Waiver. Agent, on behalf of itself individually and the ------ Lenders, as agent, hereby waives any prior default by Borrower of Section 8.1(a), Section 8.1(b) or Section 8.3(a) of the Credit Agreement, if any. 3. Consent. Effective as of the date hereof, upon ------- satisfaction of the conditions precedent set for in Section 4 below, and in reliance upon the representations and warranties of Borrower set forth herein, Lenders hereby consent to the execution and delivery by Borrower of each of the Other Amendments. 4. Conditions Precedent. This Amendment shall become -------------------- effective as of December 27, 1996, upon satisfaction of each of the following conditions: (a) As of the date first above written (after giving effect to this Amendment) no Default or Event of Default shall have occurred and be continuing. (b) Agent shall have received two (2) copies of this Amendment duly executed by Borrower. (c) Each of the Other Amendments shall have been executed and delivered by Borrower and prior to or concurrently with the effectiveness of this Amendment shall have become effective pursuant to the respective terms thereof. 5. Representations, Warranties and Covenants. ----------------------------------------- 5.1 Borrower hereby represents and warrants to the Agent and each of the Lenders that: (a) this Amendment, and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of Borrower and are enforceable against Borrower in accordance with their respective terms; (b) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing; and (c) the execution and delivery by Borrower of this Amendment does not require the consent or approval of any Person, except such consents and approvals as shall have been obtained. 6. Reference to and Effect on the Credit Agreement and --------------------------------------------------- the Other Credit Documents. -------------------------- 6.1 Upon the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import, and each reference in each of the other Credit Documents to the "Credit Agreement," shall in each case mean and be a reference to the Credit Agreement as amended hereby. 6.2 Except as expressly set forth herein, (i) the execution and delivery of this Amendment shall in no way affect any right, power or remedy of Agent or any of the Lenders with respect to any Event of Default nor constitute a waiver of any provision of the Credit Agreement or any of the other Credit Documents, and (ii) all terms and conditions of the Credit Agreement, the other Credit Documents and all other documents, instruments, amendments and agreements executed and/or delivered by the Borrower pursuant thereto or in connection therewith shall remain in full force and effect and are hereby ratified and confirmed in all respects. The execution and delivery of this Amendment by Agent and each of the Lenders shall in no way obligate Agent or any of the Lenders, at any time hereafter, to consent to any other amendment or modification of any term or provision of the Credit Agreement or any of the other Credit Documents, whether of a similar or different nature. 7. Governing Law. The validity, interpretation and ------------- enforcement of this Amendment and any dispute arising out of or in connection with this Amendment, whether sounding in contract, tort, equity or otherwise, shall be governed by the internal laws (as opposed to the conflicts of laws provisions) and decisions of the state of Illinois. 8. Headings. Section headings in this Amendment are -------- included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 9. Counterparts. This Amendment may be executed in ------------ any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the date first set forth above. BORROWER: ENVIRODYNE INDUSTRIES, INC. By:_________________________________ Gordon S. Donovan Vice President, Chief Financial Officer and Treasurer AGENT: BT COMMERCIAL CORPORATION, as Agent By:_________________________________ Title:______________________________ LENDERS: BT COMMERCIAL CORPORATION, in its individual capacity By:_________________________________ Title:______________________________ EX-27 5
5 9-MOS DEC-25-1997 SEP-25-1997 16,772,000 0 78,883,000 (1,532,000) 99,005,000 220,413,000 585,877,000 138,896,000 829,403,000 133,878,000 509,579,000 0 0 147,000 86,195,000 829,403,000 466,072,000 466,072,000 350,061,000 350,061,000 0 43,000 42,335,000 (25,581,000) (14,770,000) (10,811,000) 0 0 0 (10,811,000) (0.74) (0.74)
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