-----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, Pg8xsPkgjYt1hwQMP8s7RJimt0IlO9wM2M5ELl5IRuUJXQRltjLydv+IYACFObKv 2OsgD6c7DohieZGAGaxKww== /in/edgar/work/0000033073-00-000015/0000033073-00-000015.txt : 20001116 0000033073-00-000015.hdr.sgml : 20001116 ACCESSION NUMBER: 0000033073-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VISKASE COMPANIES INC CENTRAL INDEX KEY: 0000033073 STANDARD INDUSTRIAL CLASSIFICATION: [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: 769481 BUSINESS ADDRESS: STREET 1: 6855 W. 65TH ST. CITY: CHICAGO STATE: IL ZIP: 60638 BUSINESS PHONE: 7084964200 FORMER COMPANY: FORMER CONFORMED NAME: ENVIRODYNE INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MGN INC DATE OF NAME CHANGE: 19790425 10-Q 1 0001.txt THIRD QTR - SEP 2000 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 30, 2000 ------------------ --- 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 --------- VISKASE COMPANIES, 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.) 6855 W. 65th Street, Chicago, Illinois 60638 - ---------------------------------------- -------------- Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 496-4200 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 ----- ----- As of November 14, 2000, there were 15,253,489 shares outstanding of the registrant's Common Stock, $.01 par value. INDEX TO FINANCIAL STATEMENTS VISKASE COMPANIES, INC. AND SUBSIDIARIES UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS Page ------ Consolidated balance sheets at September 30, 2000 (unaudited) and December 31, 1999 4 Unaudited consolidated statements of operations for the three months ended September 30, 2000 and September 30, 1999 and for the nine months ended September 30, 2000 and September 30, 1999 5 Unaudited consolidated statements of cash flows for the nine months ended September 30, 2000 and September 30, 1999 7 Notes to consolidated financial statements 8 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 31, 1999 (1999 Form 10-K). These quarterly financial statements should be read in conjunction with the financial statements and the notes thereto included in the 1999 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 31, 1999 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. VISKASE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2000 1999 ------------- ------------ (unaudited) (in thousands) ASSETS Current assets: Cash and equivalents $ 77,467 $ 6,243 Receivables, net 34,247 48,971 Inventories 45,366 78,672 Other current assets 73,062 14,540 -------- -------- Total current assets 230,142 148,426 Property, plant and equipment, including those under capital leases 305,113 488,369 Less accumulated depreciation and amortization 122,440 178,122 ------- ------- Property, plant and equipment, net 182,673 310,247 Deferred financing costs, net 238 3,059 Other assets 14,537 32,086 ------- ------- Total assets $427,590 $493,818 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligations under capital leases $ 220 $ 23,095 Accounts payable 14,437 35,202 Accrued liabilities 66,419 46,966 Current deferred income taxes 8,683 8,683 -------- -------- Total current liabilities 89,759 113,946 Long-term debt including obligations under capital leases 301,191 404,151 Accrued employee benefits 45,624 46,787 Deferred and noncurrent income taxes 24,606 18,376 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 15,111,456 shares issued and outstanding at September 30, 2000 and 15,058,439 shares at December 31, 1999 151 151 Paid in capital 137,558 137,454 Accumulated (deficit) (171,190) (229,212) Cumulative foreign currency translation adjustments (109) 2,165 --------- -------- Total stockholders' (deficit) (33,590) (89,442) --------- -------- Total liabilities and stockholders' equity $427,590 $493,818 ======== ======== The accompanying notes are an integral part of the consolidated financial statements.
VISKASE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Nine Months Ended -------------------- ----------------------- September September September September 30, 2000 30, 1999 30, 2000 30, 1999 -------- --------- --------- ---------- (in thousands, except for number of shares and per share amounts) NET SALES $48,389 $55,296 $151,293 $167,717 Patent infringement settlement income 54,750 - 54,750 - COSTS AND EXPENSES Cost of sales 36,964 40,006 116,354 121,004 Selling, general and administrative 11,037 11,285 33,160 34,027 Amortization of intangibles 250 500 1,250 1,500 Restructuring charges 7,639 - 10,339 - Patent infringement litigation expenses 7,850 - 7,850 - ------- ------- ---------- -------- OPERATING INCOME 39,399 3,505 37,090 11,186 Interest income 478 144 626 425 Interest expense 12,416 12,232 37,169 33,519 Other expense (income), net 2,598 (1,119) 3,222 1,993 ------- ------- ---------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 24,863 (7,464) (2,675) (23,901) Income tax provision (benefit) 473 2,345 (1,043) (16) ------- ------- ---------- -------- NET INCOME (LOSS) FROM CONTINUING OPERATIONS 24,390 (9,809) (1,632) (23,885) DISCONTINUED OPERATIONS: Income (loss) from operations net of income taxes (Note 6) 1,085 2,204 3,020 (3,129) Gain on sale of discontinued operations net of income tax provision of $15,304 56,634 - 56,634 - ------- ------- ---------- -------- NET INCOME (LOSS) 82,109 (7,605) 58,022 (27,014) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (1,829) 1,035 (3,919) (1,218) Reclassification adjustment for losses Included in net income 2,532 - 2,532 - Other comprehensive income (loss) net of tax 703 1,035 (1,387) (1,218) ------- ------- ---------- -------- COMPREHENSIVE INCOME (LOSS) $82,812 $(6,570) 56,635 $(28,232) ======= ======= ====== ======== WEIGHTED AVERAGE COMMON SHARES 15,104,446 14,998,213 15,095,231 14,914,072 ========== ========== ========== ========== - BASIC AND DILUTED PER SHARE AMOUNTS: BASIC EARNINGS (LOSS) PER SHARE: - basic and diluted Continuing operations $1.61 $(.65) $(.11) $(1.60) Discontinued operations: Income (loss) from operations .07 .14 .20 (.21) Gain on sale of discontinued operations 3.75 - 3.75 - ----- ----- ----- ------- Net Income (loss) $5.43 $(.51) $3.84 $(1.81) ===== ===== ===== ====== The accompanying notes are an integral part of the consolidated financial statements.
VISKASE COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended --------------------------------- September 30, September 30, 2000 1999 ------------ ------------ (in thousands) Cash flows from operating activities: Net Income (loss) $ 58,022 $(27,014) Adjustments to reconcile net income (loss) to net cash provided (used in) by operating activities: Depreciation and amortization under capital lease 27,026 30,053 Amortization of intangibles 3,500 3,750 Amortization of deferred financing fees and discount 4,825 2,166 Increase (Decrease) in deferred and noncurrent income taxes 9,372 (4,069) Foreign currency transaction loss 1,438 68 (Gain) loss on disposition of assets (71,894) 10 Bad debt provision 688 842 Changes in operating assets and liabilities: Receivables 11,215 (4,245) Inventories 2,186 7,182 Other current assets (62,870) (1,411) Accounts payable and accrued liabilities (5,715) (6,026) Other 3,400 2,383 ------- ------ Total adjustments (76,829) 30,703 ------- ------ Net cash provided by (used in) operating activities (18,807) 3,689 Cash flows from investing activities: Capital expenditures (10,935) (20,130) Proceeds from disposition of assets 228,851 97 ------- ------- Net cash provided by (used in) investing activities 217,916 (20,033) Cash flows from financing activities: Issuance of common stock 104 727 Deferred financing costs (2,092) (5,837) Net proceeds (repayments) from revolving loan, long-term borrowings, and capital lease obligation (125,662) 20,309 -------- ------ Net cash provided by (used in) financing activities (127,650) 15,199 Effect of currency exchange rate changes on cash (235) (554) -------- ------- Net increase (decrease) in cash and equivalents 71,224 (1,699) Cash and equivalents at beginning of period 6,243 9,028 -------- ------ Cash and equivalents at end of period $ 77,467 $ 7,329 ========= ======== Supplemental cash flow information: Interest paid $ 39,252 $ 28,075 Income taxes paid $ 1,882 $ 1,866 The accompanying notes are an integral part of the consolidated financial statements.
VISKASE COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CASH AND CASH EQUIVALENTS (dollars in thousands) September December 30, 2000 31, 1999 --------- ----------- Cash and cash equivalents $44,345 $6,243 Restricted cash and cash equivalents 33,122 - ------- ------ $77,467 $6,243 ======= ====== As of September 30, 2000, cash and cash equivalents of $43,394 and restricted cash and cash equivalents of $31,773 are invested in short term investments. Pursuant to the Purchase Agreement, two escrow accounts were established. These escrow accounts are classified as restricted cash. The $1,005 escrow account is restricted pending the final approval of the purchase price adjustment pursuant to the Purchase Agreement and the $30,768 escrow account is restricted pending government approval of funds transfer from Brazil. The remaining $1,349 of restricted cash is collateral for outstanding letters of credit under the Senior Revolving Credit Facility. 2. INVENTORIES (dollars in thousands) Inventories consisted of: September December 30, 2000 31, 1999 -------- --------- Raw materials $4,246 $10,361 Work in process 17,761 31,039 Finished products 23,359 37,272 ------- ------- $45,366 $78,672 ======= ======= Approximately 58% of the inventories at September 30, 2000 were valued at Last-In, First-Out (LIFO). These LIFO values exceeded current manufacturing cost by approximately $4,730 at September 30, 2000. 3. DEBT OBLIGATIONS (dollars in thousands) Outstanding short-term and long-term debt consisted of: September December 30, 2000 31, 1999 --------- --------- Short-term debt, current maturity of long-term debt, and capital lease obligation: Senior Term Facility $ 7,144 Current maturity of Viskase Capital Lease Obligation 14,377 Current maturity of Viskase Limited Term Loan (3.2%) 753 Other $220 821 ---- ------- Total short-term debt $220 $23,095 ==== ======= Long-term debt: Senior Revolving Credit Facility $8,551 Senior Term Facility 42,856 Junior Term Facility 35,000 10.25% Senior Notes due 2001 $219,262 219,262 Viskase Capital Lease Obligation 81,604 97,466 Other 325 1,016 -------- ------- Total long-term debt $301,191 $404,151 ======== ======== During the third quarter, the Company used proceeds from the sale of films business (Films Business) (see Note 6) to repay $56.1 million outstanding under the Senior Secured Credit Facility, $35 million of Junior Term Loans and to make a $47 million payment under the GECC Lease, consisting of $30.2 million of principal and $16.8 million of interest. In June 1999, Viskase Corporation and Viskase Sales Corporation entered into two-year secured credit agreements consisting of a $50 million senior term facility (Senior Term Facility), a $50 million senior revolving credit facility, including a $26 million sublimit for issuance of letters of credit (Senior Revolving Credit Facility), collectively the "Senior Secured Credit Facility", and $35 million of junior secured term loans (Junior Term Loans). The Senior Revolving Credit Facility has a maturity date of June 30, 2001. Currently, Letters of Credit in the amount of $25.3 million remain outstanding under the Senior Revolving Credit Facility. Under the terms of an April 13, 2000 Agreement and Amendment with GECC, the Company agreed to amend the amortization schedule of annual lease payments, maintain a letter of credit in the amount of $23.5 million at all times, limit additional borrowings and provide a subordinated security interest collateralized by the Collateral Pool. Holders of the Senior Secured Credit Facility and the Junior Term Loans consented to the payment extensions and the subordinated security interest granted to GECC. The revised amortization schedule is presented below: August 31, 2000 $46,998 November 1, 2001 11,750 February 28, 2002 11,749 February 28, 2003 23,499 February 28, 2004 23,499 February 28, 2005 23,499 The Company's Senior Secured Credit Facility contains a number of financial covenants that, among other things, require the maintenance of a minimum level of tangible net worth, a minimum fixed charge coverage ratio and a minimum leverage ratio of total liabilities to EBDIAT, and a limitation on capital expenditures. As of September 30, 2000, the Company received a waiver under the Company's Senior Secured Credit Facility. The Company determined that, as of September 30, 2000, without the waiver, it would not have been in compliance with the fixed charge coverage and leverage ratio covenants. The Company also received a waiver under the GECC lease. The Company determined that, as of September 30, 2000, without the waiver, it would not have been in compliance with the fixed charge coverage ratio in the GECC lease. The Company may need to obtain additional waivers in the fourth quarter due to the effect of the Films Business sale. The Company's 10.25% Notes, of which $219.3 million principal amount is outstanding as of September 30, 2000, will mature in December 2001. The Company anticipates it will refinance the 10.25% Notes using proceeds from its asset sales and the ANC settlement or seek alternative strategies including, but not limited to, selling additional equity capital. 4. 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 (the "ANC Litigation"). 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. In September 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 willfully 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 willful. 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. On August 19, 1998, the Court granted Viskase's motion for partial summary judgment finding that ANC's use of the "Affinity" brand resin infringed Viskase's patents. The Court also reinstated the permanent injunction. Viskase filed a motion to have the jury verdict as to compensatory damages reinstated. ANC filed a motion to dismiss the lawsuit claiming that Viskase's patents are invalid and Viskase failed to join an indispensable party to the lawsuit. On May 10, 1999, the Court granted Viskase's motion to have the jury verdict as to the compensatory damages reinstated. In May and June 1999, the parties briefed the issue of enhanced damages and on July 2, 1999, the Court awarded Viskase total damages of $164.9 million. ANC filed a motion for reconsideration which was denied. On May 3, 1999, ANC commenced legal action in the Federal District Court for the Northern District of Illinois seeking declaratory relief that one of the litigated patents is invalid. ANC also filed a motion to consolidate the declaratory action with the 1993 suit. ANC's motion to consolidate was granted and then the Court dismissed ANC's suit with prejudice at the same time the Court awarded Viskase total damages of $164.9 million. ANC has filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. Oral arguments before the United States Circuit of Appeals for the Federal Circuit were held on June 6, 2000 and Viskase expects a decision during fourth quarter of 2000 or first quarter of 2001. On January 14, 2000, Pechiney Plastic Packaging, Inc. and Pechiney Emballage Flexible Europe, Inc. (successors in interest in ANC) filed suit against the Company and Viskase in the United States District Court for the Northern District of Illinois, Eastern Division (the "Newsome Litigation"). This suit alleges infringement of U.S. Reissue Patent No. 35,567, which patent is set to expire on April 26, 2002, and further alleges patent interference with one of the five Viskase patents litigated in the ANC Litigation. In May 2000, the District Court dismissed the patent interference count. Pechiney filed an Amended Complaint on June 30, 2000 seeking to reinstate the dismissed count (Count III). On July 25, 2000, Viskase filed a Motion to Dismiss Count III of the Amended Complaint and also filed a Motion for Sanctions related thereto. On August 9, 2000, Viskase filed a Supplemental Motion for Sanctions. On August 24, 2000, Pechiney responded to these motions and Viskase filed its reply on September 14, 2000. On September 29, 2000, the Company and Viskase entered into a Settlement and License Agreement (the "Agreement") with ANC, American National Can Group, Inc., Pechiney Plastic Packaging, Inc. and Pechiney Emballage Flexible Europe (collectively, "Pechiney") partially resolving the ANC Litigation and fully resolving the Newsome Litigation. Pursuant to the Agreement, Viskase received a payment of $54.75 million on October 2, 2000. In addition, an additional payment of $60.25 million will be made to Viskase if the United States Court of Appeals for the Federal Circuit affirms the monetary award in its entirety in the ANC Litigation. In October 2000, pursuant to the agreement, Viskase withdrew its Motions for Sanctions and the Amended Complaint in the Newsome Litigation was dismissed with prejudice. The Company recorded $54.75 million as patent infringement settlement income during the third quarter 2000 and expensed $7.85 million patent defense costs. No portion of the potential additional payment of $60.25 million was recorded in the Company's financial statements. In addition, ANC has challenged two of the five Viskase patents in suit by filing requests for reexamination with the United States Patent and Trademark office (USPTO). Both patents under reexamination have been rejected by the USPTO. In both cases, Viskase has filed appeals to the Board of Patent Appeals and Interference of the USPTO. For the first patent, Viskase's brief was filed July 13, 2000. On October 20, 2000, the Examiner filed its answer and modified its rejection order and found two dependent claims to contain allowable subject matter. Viskase's reply to the Examiner's Answer is due by December 20, 2000. For the second patent, Viskase's brief is due November 22, 2000. Pursuant to the Agreement, the parties have agreed that neither will, directly or indirectly, except as required by any court order or the USPTO, seek to obtain or assist any other person or entity in seeking or obtaining the re-examination, invalidation or limitation on the patents licensed under the Agreement, including the two patents currently being challenged in the USPTO. In March 1997, Viskase 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. In September 1999, Viskase Corporation received a subpoena from the Antitrust Division of the United States Department of Justice relating to the expansion of the grand jury investigation into the specialty films industry. Viskase is cooperating fully with the investigations. In November 1999, the Company and certain of its subsidiaries and one other sausage casings manufacturer were named in a civil complaint, Leon's Sausage - --------------- Companies, Inc., Envirodyne Industries, Inc., Viskase Corporation, - ------------------------------------------------------------------- Devro-Teepak, Inc., Civil Action No. 99C7200, United States District - ------------------- Court for the Northern District of Illinois, Eastern Division. This complaint alleged that the defendants unlawfully conspired to fix prices and allocate business in the sausage casings industry. In December 1999, the plaintiff in this action voluntarily dismissed the complaint without prejudice. During 1999 and 2000, the Company and certain of its subsidiaries and one other sausage manufacturer were named in ten virtually identical civil complaints filed in the District of New Jersey by the following plaintiffs: Smith Provision Co., Inc.; Parks LLC (d/b/a Parks Sausage Company); Real Kosher Sausage Company, Inc.; Sahlen Packing Co., Inc.; Marathon Enterprises, Inc.; Ventures East, Inc.; Keniston's, Inc.; Smithfield Foods, Inc.; Clougherty Packing Co.; and Klement Sausage Co. The District Circuit ordered all of these cases consolidated in the District of New Jersey Civil Action No. 99-5195-MLC (D.N.J.). Each complaint brought on behalf of a purported class of sausage casings customers alleges that the defendants unlawfully conspired to fix prices and allocate business in the sausage casings industry. The Company and its subsidiaries have filed answers to each of these complaints denying liability. 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. 5. RESTRUCTURING CHARGE (dollars in millions) During the second and third quarters of 2000, the Company committed to a restructuring plan to re-focus its remaining business. The restructuring actions, which will reduce the Company's fixed cost structure, resulted in a before tax charge to continuing operations of $2.7 million during the second quarter and $7.6 million during the third quarter consisting of: Employee costs $3.2 Write-down of building and equipment 7.1 Decommissioning .3 Excess reserve (.3) ----- Restructuring charge $10.3 ===== In the third quarter of 2000, cash payments were $.9 million; total payments through September 30, 2000 were $1.0 million. During the third quarter of 1998, due to the business conditions leading to the Viskase plan of restructuring, the Company evaluated the recoverability of long-lived assets including property, plant and equipment, patents and excess reorganization on a consolidated basis. Based upon the analysis, the Company recognized an impairment because the estimated consolidated undiscounted future cash flows derived from long-lived assets were determined to be less than their carrying value. The amount of the impairment was calculated using the present value of the Company's estimated future net cash flows to determine the assets' fair value. Based on this analysis, an impairment charge of $91.2 million for excess reorganization and $4.3 million for the write-down of the Chicago facility was taken. In addition, the Viskase plan of restructuring included charges for the decommissioning of the Chicago plant and the decommissioning of some of its foreign operations. In the third quarter of 2000, cash payments against the reserve were $.7 million; total payments through September 30, 2000 were $10.5 million. In the second quarter of 2000, an amount of $.3 million identified as an excess reserve was reversed. The remaining restructuring reserve of $.7 million is included in accrued liabilities on the balance sheet. (see Note 10) 6. DISCONTINUED OPERATIONS (dollars in thousands) On January 17, 2000, the Company's Board of Directors announced its intent to sell the Company's plastic barrier and non-barrier shrink Films Business. The sale of the Films Business was completed on August 31, 2000. The aggregate purchase price of $245 million, subject to a working capital adjustment, was used to retire debt, including the Senior Secured Credit Facility and Junior Term Loans, pay GECC per the amended amortization schedule, and for general corporate purposes. The Company recognized a net gain in the amount of $56.6 million in the third quarter 2000 results. The business sold includes production facilities in the United States, United Kingdom, and Brazil. In conjunction with the sale of the Films Business, the Company shut down its oriented polypropylene (OPP) films business located in Newton Aycliffe, England and the films operation in Canada; the costs of this are included in the business discontinuance. Operating results from discontinued operations are as follows:
Three Months Ended Nine Months Ended ------------------------- ------------------------ September September September September 30, 2000 30, 1999 30, 2000 30, 1999 --------- --------- --------- --------- Net sales $30,290 $ 40,981 $110,017 $117,725 Costs and expenses Cost of sales 23,943 33,461 83,502 95,010 Selling, general and administrative 4,349 6,603 18,846 22,687 Amortization of intangibles 750 750 2,250 2,250 ------ ------- ------- -------- Operating income 1,248 167 5,419 (2,222) Interest income 19 - 19 - Interest expense 50 73 98 154 Other expense (income), net (60) 892 1,608 2,341 ------ ------- ------- -------- Income (loss) from discontinued operations before taxes 1,277 (798) 3,732 (4,717) Income tax provision (benefit) 192 (3,002) 712 (1,588) ------ ------- ------- -------- Net income (loss) from discontinued operations $1,085 $ 2,204 $3,020 $(3,129) ====== ======== ====== =======
The net assets of the films segment included in the accompanying Balance Sheet as of December 31, 1999 consisted of the following: December 31, 1999 ----------------- Accounts receivable, net $ 19,537 Inventories 33,965 Other current assets 4,156 -------- Total current assets 57,658 Property, plant and equipment, net 110,657 Long-term assets 12,459 -------- Total assets 180,774 Accounts payable and other current liabilities 28,396 Short-term debt 1,016 ------- Total current liabilities 29,412 Long-term debt and lease obligations 465 Deferred and noncurrent income taxes 5,762 -------- Total liabilities 35,639 Net Assets $145,135 ======== 7. COMPREHENSIVE INCOME (dollars in thousands) The following sets forth the components of other comprehensive income (loss) and the related income tax provision (benefit):
Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September September September September 30, 2000 30, 1999 30, 2000 30, 1999 ------------- ----------- ----------- ----------- Other Comprehensive Income: Foreign currency translation adjustment (1) $(1,829) $1,035 $(3,919) $(1,218) Less reclassification adjustment for losses included in net income (2) 2,532 - 2,532 - ------- ------- ------- -------- Other comprehensive income (loss) net of tax $703 $1,035 $(1,387) ($1,218) ======== ====== ======== ======== (1) Net of related tax provision (benefit) of ($1,170) and $662 for the third quarter ended 2000 and 1999, respectively, and ($2,506) and ($778) for the first nine months ended 2000 and 1999, respectively. (2) Reclassification adjustment for losses due to sale of Films Business, included in net income of $4,115, net of related tax provision of $1,619.
8. EARNINGS PER SHARE (EPS) Following are the reconciliations of the numerators and denominators of the basic and diluted EPS.
Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended September September September September 30, 2000 30, 1999 30, 2000 30, 1999 ------------ ----------- ----------- ------------ (in thousands, except for weighted average shares outstanding) NUMERATOR (in thousands): Net income (loss) available to common stockholders: From continuing operations: $24,390 $(9,809) $(1,632) $(23,885) Discontinued operations: Income (loss) from discontinued operations, net of tax: 1,085 2,204 3,020 (3,129) Gain on sale of discontinued operations, net of tax 56,634 - 56,634 - ------- -------- -------- -------- Net income (loss) available to common stockholders for basic and diluted EPS $82,109 $(7,605) $58,022 $(27,014) ======= ======== ======= ========= DENOMINATOR: Weighted average shares outstanding for basic EPS 15,104,446 14,998,213 15,095,231 14,914,072 Effect of dilutive securities - - - - ---------- ---------- ---------- --------- Weighted average shares outstanding for diluted EPS 15,104,446 14,998,213 15,095,231 14,914,072 ========== ========== ========== ==========
Common stock equivalents are excluded from the per share calculations because the result is antidilutive. 9. ACCOUNTING STANDARDS In September 2000, the FASB issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125" ("Statement 140"). Statement 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. Management believes that adoption of Statement 140 will not have a material effect on the Company's financial statements. In September 2000, the Emerging Issues Task Force (EITF) of the FASB issued EITF 00-10, "Accounting for Shipping and Handling Revenues and Cost". EITF 00-10 provides guidance on applying generally accepted accounting principles to shipping and handling revenues and costs in the financial statements. Management believes that adoption of EITF 00-10 will not have a material effect on the Company's financial statements. In July 2000, the EITF of the FASB issued EITF 00-14, "Accounting for Coupons, Rebates, and Discounts". EITF 00-14 provides guidance on applying generally accepted accounting principles to the accounting for coupons, rebates, and discounts in the financial statements. Management believes that adoption of EITF 00-14 will not have a material effect on the Company's financial statements. In December 1999, the U.S. Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 no later than the fourth quarter of fiscal year 2000. Management believes that adoption of SAB 101 will not have a material effect on the Company's financial statements. The Company will adopt the provisions of Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" (SFAS No. 137). SFAS No. 137 is effective for the Company's 2001 financial statements. 10. SUBSEQUENT EVENTS During October 2000, the Company advised its central works council in France of its intention to restructure its Thaon, France plant. The Company and the central works council are in the preliminary stages of consultation. A restructuring charge will be recorded during the fourth quarter of 2000. The Company expects the charge for the write-down of assets and related employee costs to be in excess of $23 million. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- 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 Nine Months Ended September September September September 30, 2000 30, 1999 30, 2000 30, 1999 ---------- --------- --------- ---------- (in thousands) Net sales: Casings - continuing operations $ 48,389 $55,296 $151,293 $167,717 Films - discontinued operations 30,290 40,981 110,017 117,725 -------- ------- -------- -------- $ 78,679 $96,277 $261,310 $285,442 ======== ======= ========= ======== Operating income (loss): Casings - continuing operations $39,399 $ 3,505 $37,090 $11,186 Films - discontinued operations 1,248 167 5 ,419 (2,222) ------- ------- ------- ------- $40,647 $ 3,672 $42,509 $ 8,964 ======= ======= ======= =======
September December 30, 2000 31, 1999 --------- --------- (in thousands) Identifiable assets: Casings - continuing operations $427,590 $313,044 Films - discontinued operations - 180,774 -------- -------- $427,590 $493,818 ======== ======== Results of Operations - --------------------- The Company's net sales from continuing operations for the first nine months and third quarter of 2000 were $151.3 million and $48.4 million, respectively, which represent a decrease of 9.8 % and 12.5%, respectively, from comparable periods of 1999. The decline in sales reflects the continuing effect of reduced selling prices in the casings industry. European sales were also negatively affected by foreign currency translation due to the strengthening of the U.S. dollar. Operating income from continuing operations for the first nine months and third quarter of 2000 were $37.1 million and $39.4 million, respectively. The operating income includes a gain on a partial resolution of the ANC Litigation in the amount of $54.75 million, offset by patent litigation expenses of $7.85 million associated with the partial resolution and a restructuring charge of $10.3 million. Operating income from continuing operations, excluding the ANC Litigation gain, ANC Litigation expenses and the restructuring charge, for the first nine months and third quarter of 2000 were $.5 million and $.1 million, respectively. This compares unfavorably to operating income from continuing operations for the comparable prior year periods of $11.2 million and $3.5 million, respectively. Reduced selling prices in the worldwide casing industry continue to negatively affect operating income. During the second and third quarters of 2000, the Company committed to a plan of restructuring its remaining business. The objective of this plan was to significantly reduce the manufacturing cost of casing products (see Note 5). Net interest expense from continuing operations for the nine- month period in 2000 totaled $36.5 million, representing an increase of $3.4 million from the nine-month period in 1999. The increase is primarily due to deferred fees amortization and interest cost due to the refinancing in June 1999 (see to Note 3). Other expense from continuing operations of approximately $3.2 million and $2.0 million for the first nine months of 2000 and 1999, respectively, consists principally of foreign exchange losses. The Company uses foreign exchange forward contracts to hedge some of its non-functional currency receivables and payables, which are denominated in major currencies that can be traded on open markets. This strategy is used to reduce the overall exposure to the effects of currency fluctuations on cash flows. The Company's policy is not to speculate in financial instruments. Receivables and payables, which are denominated in non- functional currencies, are translated to the functional currency at month end and the resulting gain or loss is taken to other income/expense on the income statement. Gains and losses on hedges of receivables and payables are marked to market. The result is recognized in other net expense on the income statement. The tax benefit for the first nine months of 2000 resulted primarily from the benefit of U.S. tax loss carryforwards. Due to permanent and temporary differences in the U.S., a tax benefit of $1.0 million was provided on a loss from continuing operations of $2.7 million and tax loss carryforwards which were recognized due to the gain on the sale of the Films Business. 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. Discontinued Operations - ----------------------- On January 17, 2000, the Company's Board of Directors announced its intent to sell the plastic barrier and non-barrier shrink Films Business. The sale of the Films Business was completed on August 31, 2000. The aggregate purchase price of $245 million (see Note 6), subject to a working capital adjustment, was used principally to retire debt, including the Senior Secured Credit Facility and Junior Term Loans, pay GECC per the amended amortization schedule, and for general corporate purposes. The Company recognized a gain on the sale, net of tax, in the amount of $56.6 million. The business sold includes production facilities in the United States, United Kingdom, and Brazil. In conjunction with the sale of the Films Business, the Company shut down its oriented polypropylene (OPP) films business located in Newton Aycliffe, England and the films operation in Canada; the costs of this are included in the business discontinuance. Other - ----- In September 2000, the FASB issued Statement of Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125" ("Statement 140"). Statement 140 revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures. This statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001. Management believes that adoption of Statement 140 will not have a material effect on the Company's financial statements. In September 2000, the Emerging Issues Task Force (EITF) of the FASB issued EITF 00-10, "Accounting for Shipping and Handling Revenues and Cost". EITF 00-10 provides guidance on applying generally accepted accounting principles to shipping and handling revenues and costs in the financial statements. Management believes that adoption of EITF 00-10 will not have a material effect on the Company's financial statements. In July 2000, the EITF of the FASB issued EITF 00-14, "Accounting for Coupons, Rebates, and Discounts". EITF 00- 14 provides guidance on applying generally accepted accounting principles to the accounting for coupons, rebates, and discounts in the financial statements. Management believes that adoption of EITF 00-14 will not have a material effect on the Company's financial statements. In December 1999, the U.S. Securities and Exchange Commission (the "SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition in financial statements. The Company is required to adopt SAB 101 no later than the fourth quarter of fiscal year 2000. Management believes that adoption of SAB 101 will not have a material effect on the Company's financial statements. The Company will adopt the provisions of Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" (SFAS No. 137). SFAS No. 137 is effective for the Company's 2001 financial statements. Liquidity and Capital Resources - ------------------------------- Cash and equivalents increased by $71.2 million during the nine months ended September 30, 2000. Cash flows provided by investing activities of $217.9 million exceeded funds used in operating activities of $18.8 million and financing activities of $127.7 million. Cash flows provided by investing activities were principally attributable to the Company's sale of the Films Business, offset by capital expenditures for property plant and equipment. Cash flows used in operating activities were principally attributable to the Company's gain from operations offset by an increase in working capital usage, the gain on the sale of the Films Business and the effect of depreciation and amortization. Cash flows used in financing activities were principally due to the payment of $58.6 million for the Senior Secured Credit Facility and $35.0 million for the Junior Term Loans and a $30.2 million principal payment under the GECC lease. The Company may need to obtain additional waivers in the fourth quarter due to the effect of the Films Business sale. In June 1999, Viskase Corporation and Viskase Sales Corporation entered into two-year secured credit agreements consisting of a $50 million senior term facility (Senior Term Facility), a $50 million senior revolving credit facility, including a $26 million sublimit for issuance of letters of credit (Senior Revolving Credit Facility), collectively the "Senior Secured Credit Facility", and $35 million of junior secured term loans (Junior Term Loans). The Senior Secured Credit Facility has a maturity date of June 30, 2001. The Company used proceeds from the sale of Films Business to repay $56.1 million outstanding under the Senior Secured Credit Facility and $35 million of Junior Term Loans and to make a $47 million payment under the GECC Lease consisting of $30.2 million of principal and $16.8 million of interest. Currently, letters of credit in the amount of $25.3 million remain outstanding under the Senior Revolving Credit Facility. The Company finances its working capital needs through a combination of its current cash position and internally generated cash from operations. There were no borrowings outstanding under the Senior Revolving Credit Facility at September 30, 2000. The availability of funds under the Senior Revolving Credit Facility is subject to the Company's compliance with certain covenants, borrowing base limitations measured by accounts receivable and inventory of the Company, and reserves that may be established at the discretion of the lenders. Under the terms of the April 13, 2000 Agreement and Amendment with GECC, the Company agreed to amend the amortization schedule of annual lease payments, maintain a letter of credit in the amount of $23.5 million at all times, limit additional borrowings and provide a subordinated security interest collateralized by the Collateral Pool. Holders of the Senior Secured Credit Facility and the Junior Term Loans consented to the payment extensions and the subordinated security interest granted to GECC. The revised amortization schedule is presented below: August 31, 2000 $46,998 November 1, 2001 11,750 February 28, 2002 11,749 February 28, 2003 23,499 February 28, 2004 23,499 February 28, 2005 23,499 The Company's Senior Secured Credit Facility contains a number of financial covenants that, among other things, require the maintenance of a minimum level of tangible net worth, a minimum fixed charge coverage ratio and a minimum leverage ratio of total liabilities to EBDIAT, and a limitation on capital expenditures. As of September 30, 2000, the Company received a waiver under the Company's Senior Secured Credit Facility. The Company determined that, as of September 30, 2000, without the waiver, it would not have been in compliance with fixed charge coverage and leverage ratio covenants. The Company also received a waiver under the GECC lease. The Company determined that, as of September 30, 2000, without the waiver, it would not have been in compliance with the fixed charge coverage ratio in the GECC lease. The Company anticipates that its current cash position, its operating cash flows, and proceeds from asset sales will be sufficient to meet its operating expenses and current debt service requirements. The Company's 10.25% Notes, of which $219.3 million principal amount is outstanding as of September 30, 2000, will mature in December 2001. The Company anticipates it will refinance the 10.25% Notes using proceeds from its assets sales and the ANC settlement or seek alternative strategies including, but not limited to, selling additional, equity capital. Capital expenditures for continuing operations for the first nine months of 2000 and 1999 totaled $9.7 million and $12.6 million, respectively. Capital expenditures for discontinued operations for the first nine months of 2000 totaled approximately $2 million. Significant 2000 and 1999 capital expenditures for continuing operations included costs associated with the Nucel(R) project and a new information technology system at Viskase. Capital expenditures for discontinued operations included additional production capacity for specialty films. Capital expenditures for continuing operations for 2000 are expected to be approximately $14 million. Capital expenditures for continuing operations for 2001 are expected to be $7 million. The Company has spent approximately $8 million annually on research and development programs, including product and process development, and on new technology development during each of the past three years. The 2000 research and development and product introduction expenses are expected to be in the $9.7 million range. Among the projects included in the current research and development efforts is the application of certain patents and technology licensed by Viskase to the manufacture of cellulosic casings under the Nucel(R) process. The commercialization of these applications and the related fixed asset expense associated with such commercialization may require substantial financial commitments in future periods. Forward-looking Statements - -------------------------- Forward-looking statements in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and Company plans and objectives to differ materially from those projected. Such risks and uncertainties include, but are not limited to, general business and economic conditions; competitive pricing pressures for the Company's products; changes in other costs; opportunities that may be presented to and pursued by the Company; determinations by regulatory and governmental authorities; and the ability to achieve synergistic and other cost reductions and efficiencies. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT ---------------------------------------------- MARKET RISK ----------- The Company is exposed to certain market risks related to foreign currency exchange rates. In order to manage the risk associated with this exposure to such fluctuations, the Company uses derivative financial instruments. The Company does not enter into derivatives for trading purposes. The Company also prepared sensitivity analyses to determine the impact of a hypothetical 10% devaluation of the U.S. dollar relative to the European receivables and payables denominated in U.S. dollars. Based on its sensitivity analyses at September 30, 2000, a 10% devaluation of the U.S. dollar would affect the Company's annual consolidated operating results, financial position and cash flows by approximately 0.7 million. The Company uses foreign exchange forward contracts to manage the risk associated with its exposure to foreign currency exchange rate fluctuations. At September 30, 2000, there were no foreign exchange forward contracts outstanding. PART II. OTHER INFORMATION Item 1 - Legal Proceedings ----------------- For a description of pending litigation and other contingencies, see Part 1, Note 4, Contingencies in Notes to Consolidated Financial Statements for Viskase Companies, Inc. and Subsidiaries. Item 2 - Changes in Securities --------------------- No reportable events occurred during the quarter ended September 30, 2000. 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 2.0 Purchase Agreement, dated July 7, 2000 among the Company and certain of its subsidiaries and Bemis Company, Inc. (incorporated herein by reference to Exhibit 2 to Form 8-K filed September 25, 2000). 2.1 Amendment No. 1 to Purchase Agreement, dated August 31, 2000, among the Company and certain of its subsidiaries and Bemis Company, Inc. 27 Financial Data Schedules. (b) Reports on Form 8-K 1. On July 10, 2000 the Company filed a Form 8-K to announce that it had signed a definitive agreement to sell its plastic barrier and non-barrier shrink business to Bemis Company, Inc. for a purchase price of $245 million which includes $228 million in cash upon consummation of the transaction and $18 million in accounts receivable excluded from the transaction. 2. On September 25, 2000, the Company filed a form 8-K to announce the completion of the sale of its plastic barrier and non-barrier shrink film business to Bemis Company, Inc. 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. VISKASE COMPANIES, INC. ------------------------- Registrant By: /s/ --------------------------- Gordon S. Donovan Vice President, Chief Financial Officer and Treasurer (Duly authorized oflicer and principal financial officer of the registrant) Date: November 14, 2000 EX-27 2 0002.txt
5 9-MOS DEC-31-2000 SEP-30-2000 77,467,000 0 36,191,000 (1,944,000) 45,366,000 230,142,000 305,113,000 122,440,000 427,590,000 89,759,000 301,191,000 0 0 151,000 (33,741,000) 427,590,000 151,293,000 206,043,000 116,354,000 116,354,000 0 688,000 37,169,000 (2,675,000) (1,043,000) (1,632,000) 59,654,000 0 0 58,022,000 3.84 3.84
EX-2.1 3 0003.txt AMENDMENT NO. 1 TO PURCHASE AGREEMENT THIS AMENDMENT NO. 1, dated as of August 31, 2000 (this "Amendment"), to Purchase Agreement, dated as of July 7, 2000 (the "Purchase Agreement"), by and among Viskase Companies, Inc., a Delaware corporation ("Parent"), Viskase Corporation, a Pennsylvania corporation ("Viskase"), Viskase Holding Corporation, a Delaware corporation ("US Holdings"), Viskase Sales Corporation, a Delaware corporation ("Sales"), Viskase Europe Limited, a company organized under the laws of the United Kingdom ("Europe"), Viskase S.A., a company organized under the laws of France ("Viskase France"), Viskase Limited, a company organized under the laws of the United Kingdom ("UK"), Viskase Canada Inc., a company organized under the laws of Ontario ("Canada"), Viskase Chile Embalajes, LTDA, a company organized under the laws of Chile ("Chile") and Viskase Ireland Limited, a company organized under the laws of Ireland ("Ireland") (Parent, Viskase, US Holdings, Sales, Europe, Viskase France, UK, Canada and Ireland are each referred to herein individually as "Seller" and collectively as "Sellers"), and Bemis Company, Inc., a Missouri corporation ("Buyer"). The parties agree that Chile is only signing to acknowledge that it will no longer be a party to the Purchase Agreement. W I T N E S E T H: WHEREAS, Buyer, Sellers and Chile have previously entered into the Purchase Agreement; and WHEREAS, in order to set forth certain mutual agreements with respect to the Purchase Agreement, the parties desire to enter into this Amendment. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. (a) In this Amendment, unless the context shall otherwise require, a term defined in the Purchase Agreement has the same meaning when used in this Amendment and a term defined anywhere in this Amendment has the same meaning throughout. (b) Section 1.1 of the Purchase Agreement shall be amended by deleting the definitions of "Asset Sellers," "Brazil Transactions," "Escrow Account" and "Escrow Amount" in their entirety and inserting the following definitions: "Asset Sellers" means Viskase, Sales, UK, Canada and Ireland. "Brazil Transactions" means the transactions pursuant to which Viskase Brazil will establish Newco Brazil through a split under the laws of Brazil pursuant to which all of Viskase Brazil's right, title and interest in and to the Purchased Assets and Assumed Liabilities will be transferred to Newco Brazil. "Escrow Amounts" means the Working Capital Escrow Amount and the Brazil Escrow Amount. (c) The following new definitions shall be added to Section 1.1 of the Purchase Agreement to read as follows: "Chile Rights" means all of the issued and outstanding equity rights of Chile. "UK Plan" means the Viskase Limited Pension Plan. 1.2. Interpretation. Each definition in this Amendment includes the singular and the plural, and reference to the neuter gender includes the masculine and feminine where appropriate. References to any statute or regulation means such statute or regulation as amended at the time and include any successor legislation or regulations. The heading to the Articles and Sections are for convenience of reference and shall not affect the meaning or interpretation of this Amendment. Except as otherwise stated, reference to Articles, Sections and Schedules mean the Articles, Sections and Schedules of this Amendment. ARTICLE II PURCHASE AND SALE 2.1. Transfer of Assets. (a) The introductory paragraph of Section 2.1 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "Subject to the Permitted Encumbrances and the terms and conditions of this Agreement, including Section 2.2, Sellers will sell, convey, assign, transfer and deliver to Buyer, or one or more Affiliates designated in writing by Buyer, and Buyer, or one or more Affiliates designated in writing by Buyer, will purchase, assume and acquire from Sellers, all of each Seller's right, title and interest in and to all of the assets used primarily in the Business, including the following assets (but not including the Excluded Assets) as they exist on the Closing Date (the following assets of Sellers being the "Purchased Assets," it being understood that such term includes the assets of Chile and the assets of Viskase Brazil to be transferred to Newco Brazil on or before the Closing Date pursuant to the Brazil Transactions):" (b) Subsection (g) of Section 2.1 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "(g) Newco Brazil Shares and Chile Rights. All of the Newco Brazil Shares and Chile Rights, in each case free and clear of all Encumbrances." 2.2. Excluded Assets. Section 2.2 of the Purchase Agreement shall be amended by adding the following as the final sentence of that Section: "Inventory of the Business located in Poland and Italy shall also be Excluded Assets." 2.3. Chile and Brazil Matters. A new Section 2.5 shall be added to the Purchase Agreement to read as follows: "Section 2.5. Chile and Brazil Matters. Notwithstanding anything contained herein to the contrary, it is understood that (i) cash and cash equivalents in an amount equal to 4.0 million reals of Viskase Brazil shall be a Purchased Asset transferred to Newco Brazil as of the Closing Date and shall be reflected as an asset on the Valuation Date Statement and (ii) the accounts receivable of Chile as of the Closing Date shall be Purchased Assets, shall be indirectly owned by Buyer after the Closing Date in connection with the acquisition by Buyer of the Chile Rights and shall be included in the Valuation Date Statement. Notwithstanding anything contained herein to the contrary, it is understood that the payable as of the Closing Date from Chile to Viskase Brazil shall remain outstanding after the Closing Date and shall continue to be paid as originally agreed. Viskase Brazil agrees that it will promptly pay to Newco Brazil, when, as and if received from Chile, the amount of such payable from Chile to Viskase Brazil, and such payable from Chile and such receivable of Newco Brazil from Viskase Brazil shall be reflected as a liability and an asset, respectively, in equal amounts on the Valuation Date Statement." ARTICLE III PURCHASE PRICE Section 3.4 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "Section 3.4. Escrow. At the Closing Date, two escrow accounts shall be established with the Norwest Bank Minnesota, N.A. (the "Escrow Agent"). The escrow accounts will consist of the following: (i) an amount equal to $1,000,000 (the "Working Capital Escrow Amount") as security for the purchase price adjustment set forth in Section 3.2 hereof and (ii) an amount equal to $30,611,000, $29,861,000 of which is payable to Sellers in respect of the sale of the Newco Brazil Shares (the "Shares Escrow Amount") and $750,000 of which may be paid to Sellers as Buyer's share of withholding Taxes in Brazil pursuant to Section 8.2(a)(v) hereof (the "Tax Escrow Amount" and, together with the Shares Escrow Amount, the "Brazil Escrow Amount"). The Working Capital Escrow Amount and the Shares Escrow Amount are being paid out of the Closing Purchase Price and are being paid to the Escrow Agent in lieu of being paid directly to Sellers. The two escrow accounts shall be established pursuant to agreements among the parties hereto and the Escrow Agent in substantially the forms attached hereto as Exhibit I (the "Escrow Agreements"). The Escrow Amounts so delivered to the Escrow Agent and any other property or cash, and any income earned with respect thereto, from time to time held by the Escrow Agent pursuant to the terms of the Escrow Agreements are herein referred to as the "Escrow Fund." The Escrow Fund shall be held by the Escrow Agent in escrow subject to the terms and conditions of the Escrow Agreements. Buyer and Sellers agree to cooperate in good faith and to use all commercially reasonable efforts to disburse the Shares Escrow Amount as soon as practicable." ARTICLE IV CLOSING 4.1. Payment on the Closing Date. Section 4.2 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "Section 4.2. Payment on the Closing Date. Subject to fulfillment or waiver (where permissible) of the conditions set forth in Article IX, at the Closing Buyer shall pay (a) Sellers an amount equal to the Closing Purchase Price, minus (i) the Working Capital Escrow Amount, (ii) the Shares Escrow Amount, and (iii) the amount of the Cryovac Assignment Fee, by write transfer of immediately available funds to the bank account or accounts specified by Sellers, (b) the Escrow Agent, an amount equal to the Escrow Amounts by wire transfer of immediately available funds to the bank account specified by the Escrow Agent, to be held in escrow pursuant to Section 3.4, and (c) Cryovac, Inc., an amount equal to the Cryovac Assignment Fee, as payment of such fee, by wire transfer of immediately available funds, to the bank account specified by Cryovac, Inc. Without in any way limiting Buyer's obligation to pay the Tax Escrow Amount to Sellers in accordance with Section 8.2(a)(v) hereof, the parties agree that Buyer will deduct the amount of any withholding Taxes required as a result of the sale of the Newco Brazil Shares (the "Brazil Withholding Tax Liability") from the Shares Escrow Amount and that Buyer will remit the Brazil Withholding Tax Liability to the appropriate Governmental Body in Brazil." 4.2. Buyer's Additional Closing Date Deliveries. A new Section 4.3(g) shall be added to read as follows: "(g) An assignment of rights agreement of Chile, duly executed by Buyer." 4.2. Sellers' Closing Date Deliveries. (a) Section 4.4(c) of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "(c) The certificate (s) or other evidences of ownership representing all of the Newco Brazil Shares and the Chile Rights, duly endorsed to Buyer or accompanied by duly executed stock powers or duly executed assignments, as the case may be, to the extent required by and in accordance with the laws of Brazil and Chile, respectively;" (b) A new section 4.4(n) shall be added to read as follows: "(n) An assignment of rights agreement of Chile, duly executed by US Holdings." ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLERS Section 5.16 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "5.16 Employee Benefits. Set forth on Schedule 5.16 is a list of all Pension Plans, Welfare Plans and any other material employee benefit plans, including stock purchase, stock option, bonus, incentive compensation and deferred compensation plans, supplemental or executive benefit plans, non-qualified retirement plans, severance or separation plans, and any other material employee benefit plans, practices, policies or arrangements of any kind, whether written or oral, which are maintained by any Seller for the benefit of any of its officers or employees (including former employees) employed in the Business, or under which any Seller has any current or potential liability with respect to any employee or former employee of the Business, (hereinafter collectively referred to as "Plans"). Except as specifically disclosed on Schedule 5.16: (a) Each Pension Plan and each Welfare Plan (and each related trust, insurance contract or fund) is in compliance in form and in operation in all material respects with all applicable requirements of ERISA, the Code and any applicable state law or regulation and, in relation to the UK Plan only, in all material respects with all applicable United Kingdom laws or regulations and European laws, treaties or directives (except for the adoption of any required amendments for which the remedial amendment period has not expired as of the Closing Date). Each Pension Plan and each Welfare Plan has been administered in all material respects in accordance with its plan documents and the applicable laws and regulations, and there has been no material breach of fiduciary duty, prohibited transaction or other event with respect to a Plan which is reasonably likely to result in a material excise tax or other material claim or liability against Sellers, any Plan or any fiduciary of a Plan. The requirements of Code Section 4980B and Parts 6 and 7 of Subtitle B of Title I of ERISA, including but not limited to the provisions of said statutes relating to COBRA continuation of health coverage, and any similar requirement under any state or local law relating to continuation of employee welfare benefits, have been satisfied in all material respects with respect to each Welfare Plan that is subject to such requirements. (b) Each Pension Plan listed in Schedule 5.16 which is intended to be a "qualified plan" for purposes of the Code has received a favorable determination letter from the Internal Revenue Service regarding its qualified status, and nothing has occurred since the date such determination letter was issued that would adversely affect such qualified status, and the UK Plan is approved by the Commissioners of Inland Revenue as an exempt approved scheme for the purposes of Part I Chapter XIV Income and Corporation Taxes Act 1988 and is a contracted-out scheme for the purposes of the Pension Schemes Act 1993 on the "reference scheme test" basis and nothing has occurred since the date such determination letter was issued or such exempt approval was granted or such contracted-out status was conferred (as applicable) that would adversely affect such qualified or exempt approved and contracted-out status. (c) Each Pension Plan and each Welfare Plan is in compliance in all material respects with the applicable requirements for reporting and disclosure to participants under ERISA or, in the case of the UK Plan only, Inland Revenue Requirements and Pension Schemes Act 1995, with respect to that plan. Sellers have made available to Buyer with respect to each Plan correct and complete copies of all current Plan documents and summary plan descriptions. (d) At no time during the six calendar years preceding the calendar year which the Closing Date occurs has any Seller or any entity which is or was aggregated with any Seller under Code Section 414 maintained or made any contributions to any multiemployer pension plan which is subject to Title IV of ERISA. (e) Buyer will not have any liability under ERISA Title IV after the Closing Date with respect to any Pension Plan which is or was maintained or contributed to by any Seller or by any entity that is aggregated with a Seller under Code Section 414. (f) No representation has been made to any Affected Employee (as defined in Section 8.3) with respect to any Plan which would entitle the employee to benefits greater than or in addition to the benefits provided by the actual terms of the Plan, including, without limitation, representations as to post-retirement health or death benefits. Except as contemplated by this Agreement, no representation or promise has been made to any such employee that any new Plan is to be established. (g) No material action, suit, proceeding, hearing or investigation with respect to the administration of any Plan, the investment of the assets of any Plan or any violation of a law or regulation with respect to any Plan (other than routine claims for benefits) is currently pending and, in relation to the UK Plan only, to the knowledge of Sellers, no report has been made to the Occupational Pensions Regulatory Authority and no complaint or dispute has been made to or preferred to the Pensions Ombudsman. To the Knowledge of Sellers, no such action, suit, proceeding, hearing or investigation, report, complaint or dispute has been threatened." ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Taxes. A new Section 8.2(f) shall be added to the Purchase Agreement to read as follows: "(f) (i) It is the intention of Sellers and Buyer that the provisions of Section 49 Value Added Tax Act 1994 ("VATA") and Article 5 of the Value Added Tax (Special Provisions) Order 1995 No. 1268 (the "Order") shall apply to the transfer of that part of the Business and the Purchased Assets to be sold by UK under this Agreement (the "UK Business"). (ii) As soon as reasonably practicable following Closing UK shall write to H.M. Customs & Excise giving full particulars of the sale of the UK Business pursuant to this Agreement and seeking confirmation that such sale falls to be treated as neither a supply of goods nor a supply of services in accordance with Section 49 VATA and Article 5 of the Order. (iii) If, notwithstanding Sections 8.2(f)(i) through (iii) above, United Kingdom value added tax ("VAT") is properly chargeable in respect of the sale of all or any of the UK Business under this Agreement, Buyer (against delivery of a valid VAT tax invoice in respect thereof addressed to Buyer or the Buyer Group Member which is the purchaser of the UK Business), shall promptly pay to UK a sum equal to the amount of VAT properly so chargeable. (iv) Buyer undertakes to Sellers that it will pay any United Kingdom stamp duty (including any interest or penalties properly assessed thereon) which may be chargeable on or in respect of this Agreement or any documents executed pursuant hereto. (v) In the event of any inconsistency between the provisions of this Section 8.2(f) and the other provisions of this Section 8.2, the provisions of this Section 8.2(f) shall prevail." 6.2 Non-Competition. Section 8.9 is amended to add the following provisions: "(c) Buyer believes the COOK-TITE(r) products require the addition of nylon to the structure in order to remain competitive. Therefore, notwithstanding anything contained herein to the contrary, it is agreed that Buyer and its Affiliates may modify the COOK-TITE(r) products by including the use of nylon, but only for such products' applications as of the Closing Date, and such modified products shall not be a Competing Casings Product. (d) Nothing contained herein shall prohibit Buyer or its Affiliates from engaging in the manufacture, sale or distribution of any printed or unprinted non-tubular roll stock film containing nylon." ARTICLE VII CONDITIONS Section 9.6 of the Purchase Agreement is hereby deleted in its entirety and the following shall be substituted in lieu thereof: "Section 9.6. Escrow Agreements. The Escrow Agreements shall have been duly executed by Sellers." Section 10.4 of the Purchase Agreement shall be deleted in its entirety and the following shall be substituted in lieu thereof: "Section 10.4. Escrow Agreements. The Escrow Agreements shall have been executed by Buyer." ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1. Counterparts. This Amendment may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 8.2. Entire Agreement. With respect to the subject matter hereof, this Amendment shall supersede anything to the contrary contained in the Purchase Agreement. 8.3. Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. 8.4. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Illinois (without regard to the conflicts of law provisions thereof), except to the extent that the application of substantive laws of the United States or another jurisdiction is mandatory. 8.5. Waiver. Any term or provision of this Amendment may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Amendment if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Amendment shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Amendment or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Amendment shall be held to constitute a waiver of any other or subsequent breach. IN WITNESS WHEREOF, this Amendment has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first above written. VISKASE COMPANIES, INC. By: ___________________________ Name: Title: VISKASE CORPORATION By: ___________________________ Name: Title: VISKASE HOLDING CORPORATION By: ___________________________ Name: Title: VISKASE SALES CORPORATION By: ___________________________ Name: Title: VISKASE EUROPE LIMITED By: ___________________________ Name: Title: VISKASE S.A. By: ___________________________ Name: Title: VISKASE LIMITED By: ___________________________ Name: Title: VISKASE CANADA INC. By: ___________________________ Name: Title: VISKASE CHILE EMBALAJES, LTDA By: ___________________________ Name: Title: VISKASE IRELAND LIMITED By: ___________________________ Name: Title: BEMIS COMPANY, INC. By: ___________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----