-----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, Us2J6QC0Ox94hTGCkmVXJ3jf6rEvzU5ht+Q+eVvKoohperqlS/kucgN9zBHl8SCy S2WtpA+wV5X4AcwfQ18yhQ== 0000033073-96-000003.txt : 19960328 0000033073-96-000003.hdr.sgml : 19960328 ACCESSION NUMBER: 0000033073-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19951228 FILED AS OF DATE: 19960327 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05485 FILM NUMBER: 96539304 BUSINESS ADDRESS: STREET 1: 701 HARGER ROAD STE 1190 CITY: OAK BROOK STATE: IL ZIP: 60521 BUSINESS PHONE: 7085718800 FORMER COMPANY: FORMER CONFORMED NAME: MGN INC DATE OF NAME CHANGE: 19790425 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ----- SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 28, 1995 --------------------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to -------------- -------------- Commission file number 0-5485 ---------- ENVIRODYNE INDUSTRIES, INC. ----------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-2677354 - --------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 701 Harger Road, Suite 190, Oak Brook, Illinois 60521 - ----------------------------------------------- ----------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 571-8800 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value Warrants to Purchase Common Stock 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- As of March 26, 1996, the aggregate market value of the voting stock held by non-affiliates of the registrant was $44,654,582. 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 March 26, 1996, there were 14,479,721 shares outstanding of the registrant's Common Stock, $.01 par value. DOCUMENTS INCORPORATED BY REFERENCE: The information required by Part III is incorporated by reference from the registrant's definitive proxy statement to be filed with the Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report. PART I ------ ITEM 1. BUSINESS -------- (a) General development of business: -------------------------------- General Envirodyne Industries, Inc. is a Delaware corporation organized in 1970. As used herein, the "Company" means Envirodyne Industries, Inc. and its subsidiaries. The Company, through Viskase Corporation (Viskase), is the leading producer of cellulosic casings used in preparing and packaging processed meat products and is a major producer of heat shrinkable plastic bags and specialty films for packaging and preserving fresh and processed meat products, poultry and cheeses. The Company is also a leading domestic and international manufacturer of plasticized polyvinyl chloride (PVC) films, primarily for use in packaging food items. Through Sandusky Plastics, Inc. (Sandusky), the Company is a producer of thermoformed and injection molded plastic containers, used in the packaging of cultured dairy and delicatessen products, and of horticultural trays and inserts. Finally, through Clear Shield National, Inc. (Clear Shield), the Company is a major domestic producer of disposable plastic cutlery, drinking straws, custom dining kits and related products. The market positions of the Company's subsidiaries set forth in this Form 10-K represent management's belief based upon internally generated information. No independent marketing information has been used to confirm the stated market position. On January 7, 1993, Envirodyne and certain of its subsidiaries (collectively, the Debtors) filed petitions under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (Bankruptcy Court). On December 31, 1993, the Debtors consummated a plan of reorganization (Plan of Reorganization) and emerged from bankruptcy. For additional information regarding the Plan of Reorganization, see Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements. (b) Financial information about industry segments: -------------------------------------------- Reference is made to Part IV, Item 14, Note 21 of Notes to Consolidated Financial Statements. (c) Narrative description of business: --------------------------------- The Company's operations include food packaging products (Viskase and Sandusky) and disposable foodservice supplies (Clear Shield). VISKASE - ------- General Viskase developed the basic process for producing cellulosic casings and began commercial production in 1925. Since that time, management believes that Viskase has been the leading worldwide producer of cellulosic casings. In 1964 Viskase entered the specialty films business. Since then, it has continued to introduce new specialty film products to customers in the fresh and processed meat, poultry and cheese industries. Viskase also manufactures and sells PVC plastic film for wrapping fresh meats, poultry and other products. Cellulosic Casings Cellulosic casing products are used in the production of processed meat and poultry products, such as hot dogs, salami and bologna. To manufacture these products, meat is stuffed into the casings prior to smoking and cooking. The casings, which are non-edible, serve to hold the shape of the product during these processes. For certain products, such as hot dogs, the casings are removed and discarded prior to retail sale. Casings made of regenerated cellulose were developed by Viskase to replace casings made of animal intestines. Cellulosic casings generally afford greater uniformity, lower cost and greater reliability of supply. The production of regenerated cellulose casings generally involves three principal steps: production of a viscose slurry from wood pulp, extrusion of a continuous tube during the regeneration process, and "shirring" of the final product. Shirring is a process of folding or compressing the casing in tubular form for subsequent use in high-speed stuffing machines. The production of regenerated cellulose involves a complex and continuous series of chemical and manufacturing processes, and Viskase believes that its facilities and expertise in the manufacturing of extruded cellulose are important factors in maintaining its product quality and operating efficiencies. Viskase's product line includes both NOJAX(R) cellulosic casings for small sausage products such as hot dogs and paper-reinforced cellulosic casings for large sausages, salami, hams and other processed meat products. Reinforced cellulosic casings are known in the meat industry as fibrous casings. Specialty Film Products Since developing a technology for the extrusion of bioriented plastic films in 1964, Viskase has continued to expand its product line of heat shrinkable bags made from its specialty films. These shrinkable bags are sold under the brand name PERFLEX(R). Viskase's shrinkable plastic bags are used by major poultry, fresh and processed meat and cheese producers to package and preserve their products during wholesale and retail distribution. Viskase produces single layer and multilayer heat shrinkable plastic bags. Single layer film bags are used primarily to protect fresh and frozen whole turkeys and chickens from moisture loss and handling damage. Multilayer film bags, referred to in the food industry as "barrier bags," are made of layers of coextruded films, each of which contributes a special property. For example, individual layers can provide mechanical strength or can reduce the transmission of moisture, oxygen or ultraviolet light and can protect bagged products, such as fresh meats, from weight loss and spoilage. As part of its service orientation, Viskase also provides graphic art and design services to its customers. Viskase's ability to print on the bags and films directly with designs, illustrations and text in up to eight colors further enhances the appeal of its customers' products. PVC and Other Film Products Viskase manufactures PVC stretch and single layer shrink films under the Filmco (R) brand name, used for wrapping grocery products and for packaging foods. In Europe, Viskase also converts oriented polypropylene films for use in packaging bakery goods and manufactures rigid food packaging materials made from oriented polystyrene. International Operations Viskase has seven manufacturing facilities located outside the continental United States, in Beauvais, France; Thaon, France; Lindsay, Ontario, Canada; Sedgefield, England (Great Britain); Swansea, Wales (Great Britain); Guarulhos, Brazil and Nuevo Laredo, Mexico. The aggregate of domestic exports and net sales of foreign operations represents approximately 46% of Viskase's total net sales. International sales and operations may be subject to various risks including, but not limited to, possible unfavorable exchange rate fluctuations, political instability, governmental regulations (including import and export controls), restrictions on currency repatriation, embargoes, labor relations laws and the possibility of governmental expropriation. Viskase's foreign operations generally are subject to taxes on the repatriation of funds. International operations in certain parts of the world may be subject to international balance of payments difficulties which may raise the possibility of delay or loss in the collection of accounts receivable from sales to customers in those countries. Viskase believes that its allowance for doubtful accounts makes adequate provision for the collectibility of its receivables. Management believes that growth potential exists for many of Viskase's products outside the United States and that Viskase is well positioned to participate in these markets. Sales and Distribution Viskase has a broad base of customers, with no single customer accounting for more than 5% of sales. Viskase sells its products in virtually every country in the world. In the United States, Viskase has a staff of technical sales representatives responsible for sales to fresh meat, processed meat and poultry producers. Approximately 50 distributors market Viskase products to customers in Europe, Africa, Asia, and Latin America. Its products are marketed through its own subsidiaries in the United Kingdom, Germany, France, Italy, Russia, Brazil, Mexico and Australia. In the United States, Viskase sells its PVC film products primarily to the retail grocery industry through packaging material distributors, food wholesalers and a direct sales force. Additionally the sales organization is supported by a technical service group. The United Kingdom operation sells directly and through distributors, primarily to the retail grocery and foodservice industries in Europe. In the United States, Viskase operates casings service centers in Atlanta, Georgia, and Bensalem, Pennsylvania, as well as service centers within the Chicago, Illinois, and Pauls Valley, Oklahoma, plants. In Europe, Viskase operates casings service centers in Milan, Italy, Pulheim, Germany, and Moscow, Russia. Viskase also operates a service center in Brisbane, Australia. These service centers provide finishing, inventory and delivery services to Viskase customers. Competition Viskase is the world's leading producer of cellulosic casings and is a major producer of films. Viskase seeks to maintain a competitive advantage by introducing new products having superior performance characteristics over competitive products, by responding quickly to customer product requirements, by providing customers with assistance in production or formulation problems, by producing niche products to fill particular individual customer requirements, by providing technical support services to its customers and by manufacturing products having outstanding quality and performance. From time to time, Viskase experiences reduced market share or reduced profits due to price competition. Viskase's principal competitors in cellulosic casings are Teepak, Inc., located in the U.S. and Belgium, and Viscofan, S.A., located in Spain and Brazil. Some of the other important competitors in the cellulosic casings industry are Kalle Niederlassung der Hoechst AG located in Germany; Wolff Walsrode AG, a wholly-owned subsidiary of Bayer AG, located in Germany; Oy Visko AB located in Finland; and Celanese Mexicana located in Mexico. In the specialty films area, the largest producer of heat shrinkable bags is the Cryovac Division of W.R. Grace & Company. Cryovac developed heat shrinkable films and a vacuumizing process for applying them in the early 1960's. Cryovac sells bags on a worldwide basis to all segments of the food industry, including meat and poultry producers. American Can Company, a subsidiary of Pechiney Corp., is another competitor in the specialty films area. Management believes that Viskase is in the number two position in the world behind Cryovac in the sale of heat shrinkable bags. In the PVC films area, major competitors in the U.S. and Europe include Borden, Inc.; Huntsman Film Products Corporation; and Anchor Plastics. These competitors have substantially greater financial and other resources than those of the Company. Research and Development; Customer Support Viskase's continuing emphasis on research and development is central to its ability to maintain industry leadership. In particular, Viskase focuses on the development of new products that increase customers' operating efficiency, reduce their operating costs and expand their markets. Viskase's projects include development of new processes and products to improve its manufacturing efficiencies. Viskase's research scientists, engineers and technicians are engaged in continuing product and equipment development and also provide direct technical and educational support to its customers. Viskase founded its Food Science and Quality Institute (Institute) in 1941 to assist the meat and poultry industry in the development of new food items and more efficient production and packaging methods using Viskase products. The Institute's staff works closely with Viskase's sales and marketing professionals providing responsible, high-quality technical service to, and support of, Viskase customers. The Institute is able to reproduce customers' products and processes in order to help customers to solve their problems and to experiment with new foods and production techniques. The Institute conducts Meat Science Seminars that are attended by Viskase customers and production, research and quality assurance personnel, as well as food scientists from leading academic institutions. Seasonality Historically, domestic sales and profits of Viskase have been seasonal in nature, increasing in the spring and summer months and again near the year-end holiday season. Sales of specialty films to the fresh meat industry and sales outside of the United States follow a relatively stable pattern throughout the year. Sales of PVC films experience only minor seasonality with sales generally increasing during the second and third quarters. Raw Materials Raw materials used by Viskase include cellulose (from wood pulp), fibrous paper, petroleum based resins, plasticizers and various other chemicals. Viskase generally purchases its raw materials from a single or small number of suppliers with whom it maintains good relations. Certain primary and alternative sources of supply are located outside the United States. Viskase believes, but there can be no assurance, that adequate alternative sources of supply currently exist for all of Viskase's raw materials or raw material substitutes that Viskase could modify its processes to utilize. SANDUSKY - --------- Sandusky is a leading producer of thermoformed and injection molded plastic containers, used in the packaging of cultured dairy and delicatessen products, and of horticultural trays and inserts. Sandusky sells a majority of its products to dairy product manufacturers for packaging items such as yogurt and cottage cheese and to supermarkets for in-store packaging of take-home foods. The containers are normally custom printed in various colors with product identification, company names, logos, nutritional informa- tion and universal product codes in accordance with the customers' requirements. Sandusky sells directly to its dairy and non-food customers through its sales and marketing group. Delicatessen containers and horticultural products are sold both directly and through commissioned brokers. Sandusky markets its products primarily in the northeastern, southern and midwestern regions of the United States. Plastic container sales are somewhat seasonal in nature, with slightly higher delicatessen container sales in late spring and summer and higher dairy sales in the fourth quarter. All of Sandusky's thermoformed and injection molded products are produced at its two Sandusky, Ohio plants. Thermoforming is a process by which plastic resin pellets are melted and extruded into sheet stock, which is then heated and formed into finished containers, lids and trays. Injection molding is a process by which polypropylene and polyethylene pellets are melted and injected at high pressure into precision molds to produce a finished container. The principal raw materials used by Sandusky are prime high impact polystyrene, polypropylene and polyethylene resins, which currently are available from several domestic sources. The dairy and delicatessen containers industry is highly fragmented. Sandusky competes in the manufacture and sale of dairy and delicatessen containers with several domestic manufacturers of thermoformed and injection molded plastic containers. Major competitive factors in the dairy and delicatessen container business are price, quality and customer service. Major competitive factors in the specialized thermoformed container business are price and technical and customer service capabilities. CLEAR SHIELD - ------------ Clear Shield, headquartered in Wheeling, Illinois, is a major domestic producer of disposable plastic cutlery, drinking straws, custom dining kits and related foodservice products. Clear Shield is one of the largest producers of plastic cutlery and drinking straws in the United States. These products are sold primarily to institutional users, principally consisting of major quick serve restaurant chains, schools, and hospitals, and also to consumers through retail outlets. Sales are made under registered trade names including CLEAR SHIELD (R) and CARNIVAL (R). Institutional customers include such leading quick serve restaurant chains as McDonald's Corporation, Burger King Corporation, Taco Bell, Hardee's, KFC Restaurants and Pizza Hut. In addition, retail customers include Wal-Mart Stores, Inc.; The Kroger Co. and other major retail companies. Clear Shield's products are produced at plants in Wheeling, Illinois; Leominster, Massachusetts; and Shreveport, Louisiana. Plastic cutlery is made by melting polystyrene or polypropylene beads, which are then injected into specially designed custom molds within high-speed injection molding machines. Drinking straws are made by extruding molten polypropylene through specially designed dies within high-speed extrusion machines. Certain completed products are then specially wrapped using high-speed wrapping machines. Raw materials used in the manufacturing process currently are available from alternative sources. Raw material costs, in particular of polystyrene and polypropylene, are a major portion of Clear Shield's production costs. Although Clear Shield is generally able to pass on most raw material cost increases to customers, there can be a delay that varies by customer and market. Sales are made predominantly in the United States, primarily east of the Rocky Mountains, using Clear Shield's own sales force augmented by a network of non-exclusive, independent sales rep- resentatives. The majority of Clear Shield's sales, consisting of bulk and individually packaged products for institutional users, generally is not seasonal. Sales of retail packaged products are seasonal, however, with the highest sales and operating profits historically being achieved in the second and third quarters. While competitive pricing generally is of key importance, Clear Shield also competes by emphasizing responsive service to customers, by maintaining consistent quality in its products and by capitalizing on its efficient and flexible operations. These efficiencies stem largely from proprietary improvements to the manufacturing process, high-volume manufacturing facilities and a flexible work force that enable Clear Shield to produce and ship more than 50 million items per working day. Clear Shield's primary competitors include several major corporations, some of which are larger and better capitalized than Clear Shield and, in some cases, offer a wider product line than Clear Shield. Clear Shield's competitors periodically engage in aggressive price discounting to gain business. Clear Shield believes, however, that such market conditions will not result in any long-term material loss of business for Clear Shield, although its profit margins may be affected from time to time. General Business Matters - ------------------------ Employees - --------- The Company generally maintains productive and amicable relationships with its 4,900 employees worldwide. One of Viskase's domestic plants, located in Loudon, Tennessee, is unionized, and its Canadian and European plants have unions. From time to time union organization efforts have occurred at other individual plant locations. Unions represent a total of approximately 1,500 of Viskase's 4,000 employees. None of Clear Shield's approximate 514 employees is represented by a union. Certain of the hourly production personnel of Sandusky's Ohio thermoforming facility are members of a union. Trademarks and Patents - ---------------------- Viskase holds patents on many of its major technologies, including those used in its manufacturing processes and the technology embodied in products sold to its customers. Because it believes its ongoing market leadership depends heavily upon its technology, Viskase vigorously protects and defends its patents against infringement by competitors on an international basis. Viskase, as part of its research and development program, has developed and expects to continue to develop new proprietary technology and has licensed proprietary technology from third parties. Management believes these activities will enable Viskase to maintain its com- petitive position. Viskase also owns numerous trademarks and registered tradenames that are used actively in marketing its products. Viskase periodically licenses its process and product patents to competitors to generate royalty income. The other Company operations also own trademarks and tradenames that are used actively in marketing products. Sandusky has patents on new product developments, but, with the exception of Viskase, patent protection is not currently material to any of the opera- tions as now conducted. Research and Development - ------------------------ Research and development costs are expensed as incurred and, on a consolidated basis, totaled $11,034,000, $16,852,000, and $15,216,000 for 1995, 1994 and 1993, respectively. The majority of such costs are attributable to Viskase's extensive research and development program. Viskase believes it has achieved and maintained its position as a leading producer of cellulosic casings and as a major domestic producer of specialty films for packaging meats through significant expenditures on research and development. The Company expects to continue its research and development efforts. The commercialization of certain of these product and process applications and related capital expenditures to achieve commercialization may require substantial financial commitments in future periods. Should these activities be curtailed or if capital resources are not available to develop its projects, Viskase's ability to maintain its present market share could be materially impaired. Environmental Regulations - ------------------------- In manufacturing its products, the Company employs certain hazardous chemicals and generates toxic and hazardous wastes. The use of these chemicals and the disposal of such waste are subject to stringent regulation by several governmental entities, including the United States Environmental Protection Agency (USEPA) and similar state, local and foreign environmental control entities. The Company is subject to various environmental, health and safety laws, rules and regulations including those of the United States Occupational Safety and Health Administration and USEPA. These laws, rules and regulations are subject to amendment and to future changes in public policy or interpretation, which may affect the operations of the Company. The Company uses its best reasonable efforts to comply with promulgated laws, rules and regulations and participates in the rulemaking process. Certain of the Company's facilities are or may become potentially responsible parties with respect to other off-site waste disposal facilities. As noted above, new environmental and health and safety laws can impose significant compliance costs, including two forthcoming rules. Under the Clean Air Act Amendments of 1990, various industries, including casings manufacturers, will be required to meet air emissions standards for certain chemicals based on use of the "maximum achievable control technology" (MACT). MACT standards for casings manufacturers have not yet been proposed or promulgated; therefore, at this time no estimate of the cost of complying with MACT standards can be made. Such rules, however, will likely impose similar costs on all casings manufacturers in the United States. Under the Resource Conservation and Recovery Act (RCRA), regulations have been recently proposed that would, in come cases, impose additional effluent limitations on wastewater discharged from wastewater treatment systems employing surface impoundments. In addition, RCRA regulations to be proposed in the future may impose design and/or operating requirements on such impoundments. Two of Viskase's plants use surface impoundments. The Company is currently assessing the potential impact of the proposed regulations. Various state, local and foreign governments have enacted or are considering enacting laws, rules or regulations concerning the disposal of plastic products. While such legislative action has had a minor effect on certain product sales and may have further effect in the future, the Company is not aware of any existing legislative action that it currently expects to have a material adverse effect on the Company. (d) Financial information about foreign and domestic ------------------------------------------------ operations and export sales --------------------------- Reference is made to Part IV, Item 14, Note 21 of Notes to Consolidated Financial Statements. EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------ The following table sets forth the names and ages of the Company's executive officers, together with the positions with the Company held by such executive officers, and a summary of their recent business experience. Under the Company's Amended and Restated By- Laws, the Company's officers are elected for such terms as may be determined from time to time by the Board of Directors. On January 7, 1993, Envirodyne and its major domestic subsidiaries filed petitions under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"). On December 31, 1993, Envirodyne and the debtor subsidiaries consummated a plan of reorganization and emerged from bankruptcy. In addition, Emerald Acquisition Corporation (Emerald), the sole stockholder of Envirodyne prior to Envirodyne's emergence from bankruptcy, filed a petition under Chapter 11 of the Bankruptcy Code on August 20, 1993. The Emerald case is still pending before the Bankruptcy Court. In addition to the positions with Envirodyne held by the persons specified below for the periods indicated, Mr. Kelly has served as a director and executive officer of Emerald, and Messrs. Gustafson, Corcoran and Schuster have served as executive officers of Emerald, since May 1989.
Name, Age and Office Business Experience - -------------------------- ----------------------------------------------------------------- Donald P. Kelly, 74, Mr. Kelly has been a director and Chairman of the Board, President, Chairman of the Board, and Chief Executive Officer of the Company since May 1989. President and Chief Mr. Kelly has also served as President and Chief Executive Officer Executive Officer of D.P. Kelly & Associates, L.P. ("DPK"), a management services and private investment firm, since November 1988. F. Edward Gustafson, 54, Mr. Gustafson has been Executive Vice President and Chief Operating Executive Vice President Officer of the Company since May 1989 and a director of the and Chief Operating Company since December 1993. Mr. Gustafson was President of Officer Viskase from February 1990 to August 1994. Mr. Gustafson has also served as Executive Vice President and Chief Operating Officer of DPK since November 1988. J.S. Corcoran, 53, Mr. Corcoran has been Executive Vice President and Chief Financial Executive Vice President Officer of the Company since May 1989. Mr. Corcoran has also and Chief Financial served as Executive Vice President and Chief Financial Officer of Officer DPK since November 1988. Stephen M. Schuster, 39, Mr. Schuster has been Vice President, Secretary and General Counsel Vice President, Secretary of the Company since May 1989. Mr. Schuster has also served as and General Counsel Vice President and General Counsel of DPK since January 1989. Gordon S. Donovan, 42, Mr. Donovan has been Treasurer of the Company since November Vice President, Treasurer 1989 and was elected Vice President in May 1995. and Assistant Secretary
ITEM 2. PROPERTIES ---------- VISKASE FACILITIES LOCATION SQUARE FEET PRIMARY USE - -------------- ----------- ----------------- Manufacturing Facilities Aurora, Ohio 73,000 PVC film production Barceloneta, Puerto Rico 156,000 Idle plant facilities held for sale Beauvais, France (a) 235,000 Casings production and finishing Centerville, Iowa 223,000 Specialty films production and finishing Chicago, Illinois 991,000 Casings production, administration and research Guarulhos, Brazil 81,000 Specialty films production and casings finishing Huntsville, Alabama 27,000 Idle plant facilities held for sale Kentland, Indiana 125,000 Casings finishing Lindsay, Ontario, Canada 269,000 Casings finishing and specialty films finishing Loudon, Tennessee 250,000 Casings production Nuevo Laredo, Mexico (a) 22,000 Casings finishing Osceola, Arkansas 223,000 Casings production and finishing Pauls Valley, Oklahoma 110,000 Casings finishing, specialty films production and finishing Sedgefield, England 132,000 PVC and rigid OPS production and OPP conversion Swansea, Wales (Great Britain) 77,000 Specialty films production and finishing Swansea, Wales (a) 28,000 Administrative facilities Thaon, France 239,000 Casings production and finishing Service Centers Atlanta, Georgia (a) Bensalem, Pennsylvania Brisbane, Australia (a) Chicago, Illinois Milan, Italy Pauls Valley, Oklahoma Pulheim, Germany (a) Santa Fe Springs, California Idle plant facilities held for sale Headquarters Worldwide: Chicago, Illinois Europe: Paris, France (a) - ------------------------ (a) Leased. All other properties are owned by the respective company or its subsidiaries. CLEAR SHIELD FACILITIES LOCATION SQUARE FEET PRIMARY USE - -------------------------- -------------- -------------------- Leominster, Massachusetts 135,000 Cutlery, straws and combination kits Shreveport, Louisiana 148,000 Cutlery, straws and combination kits Wheeling, Illinois (two plants) 260,000 Cutlery, straws and combination kits; Headquarters SANDUSKY FACILITIES LOCATION SQUARE FEET PRIMARY USE - -------------------------- --------------- ------------------ Sandusky, Ohio 195,000 Manufacturing; Headquarters Sandusky, Ohio 31,000 Warehouse Sandusky, Ohio (a) 97,000 Warehouse Sandusky, Ohio (a) 90,000 Manufacturing - ------------------------ (a) Leased. All other properties are owned by the respective company or its subsidiaries. The Company's headquarters are located in leased facilities in Oak Brook, Illinois. The Company believes that its properties generally are suitable and adequate to satisfy the Company's present and anticipated needs. The Company's United States real property collateralizes the Company's obligations under various financing arrangements. For a discussion of these financing arrangements, refer to Part IV, Item 14, Note 9 of Notes to Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS ----------------- Lumpkin Litigation - ------- In March 1996 the Company completed a settlement resolving all claims of the former union employees of its former steel and mining subsidiary, WSC Corp. Under the settlement of Frank Lumpkin, et al. -------------------- v. Envirodyne Industries, Inc., the Company was released and - ----------------------------- discharged from all claims in exchange for 900,000 shares of Envirodyne common stock without any admission or finding of liability or wrongdoing. In February 1989, a complaint was filed against Envirodyne in the United States District Court for the Northern District of Illinois (District Court) by a plaintiff class consisting of former union employees of WSC Corp. (WSC). WSC was a wholly-owned subsidiary of EDC Holding Company (EDC) whose operations consisted of the former steel and mining segment (SMD) of Navistar International Corp. (Navistar). EDC, then a wholly-owned subsidiary of Envirodyne, acquired SMD from Navistar in 1977 and transferred the SMD assets to WSC and to other wholly-owned subsidiaries of EDC. In 1980, EDC and WSC filed voluntary bankruptcy petitions and halted operations. The plaintiffs were seeking to recover from Envirodyne certain pension and other benefits allegedly owed by WSC under a collective bargaining agreement to which WSC (but not Envirodyne) was a party. The complaint sought to hold Envirodyne directly liable for these benefits on an alter ego theory of liability. The plaintiffs sought (1) damages under the WSC 1977-1980 collective bargaining agreement of $80 million to $100 million (less the amount of the plaintiffs' $14.8 million received in settlement of litigation with Navistar), (2) unspecified equitable relief under ERISA Section 502, and (3) other compensatory damages and punitive damages, unspecified in amount, under ERISA Section 502 and Section 301 of the Labor Management Relations Act. The Lumpkin litigation was stayed by the commencement of the ------- Envirodyne bankruptcy case in January 1993. During 1995 Envirodyne and the plaintiffs participated in a mediation process to attempt to resolve the case. Because the claims relating to the Lumpkin ------- litigation arose prior to the commencement of the Envirodyne bankruptcy case, such claims were subject to the Plan of Reorganization. Indemnification Claims 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 Rifkind 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. In ARTRA Group ----------- Incorporated v. Salomon Brothers Holding Company Inc, Salomon - ------------------------------------------------------------- Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly, - ------------------------------------------------------------ Charles K. Bobrinskoy and Michael Zimmerman, Case No. 93 L 2198, - ------------------------------------------- Circuit Court of the Eighteenth Judicial Circuit, DuPage County, Illinois, ARTRA alleges breach of fiduciary duty, fraudulent and negligent misrepresentation and breach of contract in connection with the 1989 acquisition of Envirodyne by Emerald. The plaintiff seeks damages in the total amount of $136.2 million plus interest and punitive damages of $408.6 million. D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkind and Zimmerman have asserted common law and contractual rights of indemnity against Envirodyne for attorneys' fees, costs and any ultimate liability relating to the claims set forth in the complaints. Envirodyne is continuing its evaluation of the merits of the indemnification claims against Envirodyne and the underlying claims in the litigation. Upon the undertaking of D.P. Kelly & Associates, L.P. to repay such funds in the event it is ultimately determined that there is no right to indemnity, Envirodyne is advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for the payment of legal fees in the case pending before the Bankruptcy Court. Although the Company is not a party to either case, the Company believes that the plaintiff's claims raise similar factual issues to those raised in the Envirodyne bankruptcy case which, if adjudicated in a manner similar to that in the Envirodyne bankruptcy case, would render it difficult for the plaintiff to establish liability. Accordingly, the Company believes that the indemnification claims would not have a material adverse effect upon the business or financial position of the Company, even if the claimants were successful in establishing their right to indemnification. Treatment of Untendered Shares Under Plan of Reorganization Certain of Envirodyne's stockholders prior to the acquisition of Envirodyne by Emerald failed to exchange their certificates representing old Envirodyne common stock for the $40 per share cash merger consideration specified by the applicable acquisition agreement. In the Envirodyne bankruptcy case, Envirodyne sought to equitably subordinate the claims of the holders of untendered shares, so that such holders would not receive a distribution under the Plan of Reorganization. The Bankruptcy Court granted Envirodyne's motion for summary judgment and equitably subordinated the claims of the holders of untendered shares to the claims of other general unsecured creditors. Certain of the affected holders appealed and both the U.S. District Court and the U.S. Seventh Circuit Court of Appeals affirmed the Bankruptcy Court decision. The time period for further appeal has not passed. Envirodyne believes that, even in the event of further appeal, if any, and reversal of the prior decisions, the maximum number of shares of common stock that it would be required to issue to such claimants is approximately 106,000. Other Clear Shield National, Inc. and some of its employees have received subpoenas from the Antitrust Division of the United States Department of Justice relating to a grand jury investigation of the disposable plastic cutlery industry. The U.S. Department of Justice has advised a former officer and an existing employee that they are targets of the investigation. Both individuals were invited to appear and testify before the grand jury but both declined. Clear Shield National is cooperating fully with the investigation. 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 has informed the plaintiffs that such claims as they relate to Clear Shield were discharged by the order of the Bankruptcy Court and Plan of Reorganization and that the plaintiffs are permanently enjoined from pursuing legal action to collect discharged claims. On February 27, 1996, the plaintiff in the St. Cloud case --------- voluntarily dismissed the action without prejudice and refiled its action in the U.S. 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. filed a motion in Clear Shield National's Bankruptcy proceeding in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division. Eisenberg Brothers Inc.'s motion contends that the Bankruptcy Court's order did not discharge the plaintiff's claim. For a description of certain environmental matters affecting the Company, refer to Part I, Item 1, "Environmental Regulations." The Company and its subsidiaries are involved in various other legal proceedings arising out of its business, none of which is expected to have a material adverse effect upon its business or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- Not applicable. PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED ------------------------------------------------- STOCKHOLDER MATTERS ------------------- (a) Market Information. Envirodyne's Common Stock is traded in the ------------------ over-the-counter market on the Nasdaq SmallCap Market. The high and low closing bid prices of the Common Stock during 1995 and 1994 are set forth in the following table. Such prices reflect interdealer prices without markup, markdown or commissions and may not represent actual transactions. 1995 First Quarter Second Quarter Third Quarter Fourth Quarter - ------ ------------- -------------- ------------- -------------- High $4.88 $4.75 $4.88 $4.63 Low 3.50 3.75 4.13 2.88 1994 First Quarter Second Quarter Third Quarter Fourth Quarter - ------ ------------- -------------- ------------- -------------- High $10.88 $8.63 $5.50 $5.63 Low 7.00 3.50 4.13 3.38 (b) Holders. As of March 22, 1996, there were approximately ------- 123 holders of record of Envirodyne's Common Stock. (c) Dividends. Envirodyne has never paid a cash dividend on shares --------- of its Common Stock. The payment of dividends is restricted by the terms of various financing agreements to which the Company is a party. The Company has no present intention of paying dividends in the foreseeable future. ITEM 6. SELECTED FINANCIAL DATA -----------------------
Post-consummation Pre-consummation ---------------------------------- ----------------------------------------------- December January 1 January 1 December December 30, 1994 to to to 27, 1991 to 28, 1990 to December December December December December 28, 1995 (1) 29, 1994 (1) 31, 1993 (1) 31, 1992 26, 1991 ------------ ------------ ------------ ----------- ---------- (in thousands, except for per share amounts) Net sales $650,212 $599,029 $587,385 $ 575,705 $ 543,969 (Loss) before extra- ordinary gain (loss) (2)(3) (17,323) (3,612) (98,195) (36,996) (29,253) Income (loss) including extra- ordinary gain (loss) (4)(5) (21,519) (3,612) 85,589 (36,996) (31,755) Per share (loss) before extraordinary gains (loss) (2)(3) (1.28) (.27) (306,859) (115,613) (91,416) Per share income (loss) including extraordinary gain (loss) (4)(5) (1.59) (.27) 267,466 (115,613) (99,234) Cash and equivalents and time deposits 30,325 7,289 7,743 14,062 16,075 Working capital (6) 121,725 91,727 82,440 (736,643) (708,064) Total assets 899,567 896,636 867,680 1,026,962 1,086,457 Debt obligations: Short-term debt (7) 12,504 25,798 15,610 40,365 34,937 Long-term debt reclassified as current 758,300 792,557 Long-term debt 530,181 489,358 482,379 12,524 18,833 Stockholders' equity (deficit) 117,096 135,349 135,000 (83,545) (40,303) Cash dividends none none none none none (1) Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, financial statements including outstanding shares for the new restructured company (effective December 31, 1993) are not comparable to those of the prior years. (Refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements.) (2) Includes $5.8 million of income (net of book tax provision) in 1994 from the settlement of a patent infringement suit. (3) Includes charges of $104,745 of Reorganization items, net, in 1993. (Refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements.) (4) Includes an extraordinary gain of $183,784 in 1993 from the implementation of the Plan of Reorganization. (Refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements.) (5) Includes an extraordinary loss on debt extinguishment in 1995 and in 1991. (6) Includes $758,300 and $792,557 of long-term debt reclassified as current at December 31, 1992 and December 26, 1991, respectively. (7) Includes current portion of long-term debt.
ITEM 7. 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: December 30, January 1 January 1 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- (in thousands) Net sales: Food packaging products $574,266 $530,179 $522,363 Disposable foodservice supplies 76,138 68,996 66,383 Other and eliminations (192) (146) (1,361) -------- -------- -------- $650,212 $599,029 $587,385 ======== ======== ======== Operating income: Food packaging products $39,183 $ 48,145 $ 53,432 Disposable foodservice supplies 4,959 6,514 5,223 Other and eliminations (6,007) (5,982) (5,023) -------- -------- -------- $38,135 $ 48,677 $ 53,632 ======== ======== ======== Depreciation and amortization under capital lease and amortization of intangibles expense: Food packaging products $51,404 $47,207 $ 46,715 Disposable foodservice supplies 4,581 4,125 5,624 Corporate and other 76 55 59 -------- -------- -------- $56,061 $ 51,387 $ 52,398 ======== ======== ======== Capital expenditures: Food packaging products $30,744 $ 28,534 $ 37,673 Disposable foodservice supplies 3,687 4,012 3,100 Corporate and other 34 20 114 -------- -------- -------- $34,465 $32,566 $ 40,887 ======== ======== ======== Results of Operations - --------------------- The Company's 1995 net sales were $650.2 million, which represented an 8.5% increase over the prior year's sales of $599.0 million. Net sales in 1995 for Viskase increased 10.4% over the prior year due to the expansion of European, Latin American and Asian Pacific sales, selected price increases, increased worldwide film sales, combined with the favorable effects of foreign currency translation. External factors affected casing sales in both the domestic and foreign markets. These included a general softness in hot dog sales in the U.S. and a weakening of processed meat sales in Europe. In addition, Viscofan, S.A., a Spanish small diameter casing producer entered the U.S. market in November 1994. Although the Company has yet to experience significant volume loss to Viscofan, management believes that Viskase will experience further pricing pressures as a result of Viscofan's entrance into the domestic market. Sandusky's sales declined 15% due to an 11% reduction in dairy and deli container sales combined with the loss of Scott Paper Company's premoistened baby wipe container business. The loss in container sales is primarily attributed to a shift in demand from thermoformed to injection molded containers. The Company has added and will add additional injection molding equipment in 1996 to increase capacity. This effort is expected to substantially contribute to improving the Company's competitiveness in this market. Clear Shield's net sales increased 10.4% primarily due to selling price increases along with an increase in the retail product group sales volume. The Company's 1994 net sales were $599 million, which represented a 2.0% increase over the prior year's sales of $587.4 million. Net sales for 1994 for Viskase increased 2.5% over the prior year due to the impact of increased film sales and foreign currency translation. Sandusky's sales declined 8.1% due to the reduction in the baby wipe container sales partially offset by an increase in dairy and deli container volumes. Clear Shield's net sales increased 3.9% primarily due to the impact of third and fourth quarter price increases combined with some volume increases in the wrapped cutlery and retail product lines. Operating income for 1995 was $38.1 million, which represented a decline of $10.5 million from the prior year. Operating income in 1994 benefitted from a net $8.7 million settlement of a patent infringement suit. The decline in gross margins in 1995 was due to price competition in domestic and foreign markets, lower casing volumes, continued effect of resin price increases through the third quarter of 1995, primarily at Clear Shield and Sandusky, and loss of dairy and deli container and baby wipe container volume. Operating income in 1995 reflected increased selling, general and administrative expenses resulting from strategic expansion in foreign markets including Europe, Latin America and Australia, partially offset by lower research and development costs and the consolidation of Sandusky's manufacturing operations. Operating income for 1994 was $48.7 million, which represented a decline of $5.0 million from the prior year. Pro forma operating income for 1993, giving effect to fresh start reporting and the implementation of the Plan of Reorgniazation with the related financing as if such events had taken place on January 1, 1993, was $54.6 million. The decline in gross margins in 1994 was due to the impact of price competition in dairy and deli containers and in foreign markets, reduced by baby wipe container sales and increased resin prices. Selling, general and administrative expenses in 1994 included $1.6 million of additional patent legal expenses (approximately $.8 million of which were legal expenses related to the $9.5 million patent infringement litigation settlement), expansion in Central and South America, additional corporate costs relating to increased insurance and other costs associated with Envirodyne's status as a public company following its emergence from bankruptcy, as well as increased expenditures on research and development. During 1993, Scott notified Sandusky of its intention to purchase containers from other suppliers, and the change was completed in September 1994. Sandusky closed its Clayton, Delaware facility, which was primarily dedicated to the production of baby wipe containers, in December 1994, and has consolidated its manufacturing operations at its Sandusky, Ohio thermoforming facility. Net interest expense for 1995 totaled $56.7 million, which represented an increase of $7.5 million from 1994. The increase is attributable equally to an increase in borrowing levels and an increased weighted interest rate during 1995. Other income (expense) of $(1.7) million and $1.7 million in 1995 and 1994, respectively, includes net foreign currency translation gains (losses) of $(.1) million and $2.7 million, respectively. The extraordinary loss represents the write-off of unamortized financing fees related to the Company's senior secured bank facility that was refinanced by a private placement. The extraordinary loss of $4.2 million is net of a tax benefit of $2.6 million. (Refer to Part IV, Item 14, Note 9 of Notes to Consolidated Financial Statements.) The Company has entered into forward foreign exchange contracts to hedge certain foreign currency transactions on a continuing basis for periods consistent with its committed foreign exchange exposures. The effect of this practice is to minimize the effect of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to additional exchange risk because gains and losses on these contracts offset losses and gains on the transactions being hedged. The cash flows from forward contracts are classified consistent with the cash flows from the transactions or events being hedged. Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," was issued in March 1995 and established financial accounting and reporting standards for the impairment of long-lived assets and certain identifiable intangibles to be disposed of. The Company's adoption of this statement in 1995 did not have a significant impact on the Company's income from continuing operations nor cash flows. The 1995 tax benefit consisted of the benefit of U.S. losses partially offset by the provision related to income from foreign subsidiaries. The 1994 and 1993 tax provisions consisted of the provisions on income from the U.S. and foreign subsidiaries. Due to the permanent differences in the U.S. resulting from non-deductible amortization and foreign losses for which no tax benefit is provided, a benefit of $2.9 million and a provision of $4.8 million, respectively, was provided on income (loss) before income taxes and extraordinary items of $(20.2) million and $1.2 million, respectively, for 1995 and 1994. Domestic cash income taxes paid in 1995, 1994 and 1993 were $640 thousand, $1.5 million and $91 thousand, respectively. Foreign cash income taxes paid in 1995, 1994 and 1993 were $4.3 million, $3.5 million, and $1.1 million, respectively. 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. The 1993 reorganization items of $104.7 million consisted of $4.1 million for the write-off of deferred financing fees on the bank credit agreement, $14.9 million for legal, financial advisory and other fees incurred in connection with the Envirodyne bankruptcy case and $85.7 million of adjustment to the fair value of assets and liabilities due to the reorganization and adoption of Fresh Start Reporting (refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements). The 1993 extraordinary gain of $183.8 million results from the reorganization cancellation of indebtedness offset by the fair value of debt and equity issued and is net of a tax provision of $8.3 million. For a further discussion, refer to Part IV, Item 14, Note 1 of Notes to Consolidated Financial Statements. The Company's 1993 net sales were $587.4 million, which represented a 2.0% increase over the prior year's sales of $575.7 million. Net sales in 1993 for Viskase were comparable to the prior year. Sandusky's sales increased by 26.3% due to container volume increases resulting from the liquidation of a major competitor offset partially by the effects of intense price competition. Clear Shield's net sales increased 5.5% due to strong volumes across all major product lines offset partially by competitive price conditions. Operating income for 1993 was $53.6 million, which represented a decline of $13.6 million from the prior year. The decline in operating income resulted from intense price competition in containers and large diameter casings as well as price pressure in European, Latin American, Japanese and Canadian markets. The Company also recorded an additional $2 million of before tax expense for postretirement benefits due to the adoption on January 1, 1993 of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." For further discussion, refer to Part IV, Item 14, Note 11 of Notes to Consolidated Financial Statements. Liquidity and Capital Resources - ------------------------------- Cash and equivalents increased by $23.0 million during the fiscal year ended December 28, 1995. Cash flows provided by operating activities of $39.0 million and cash flows provided by financing activities of $18.7 million exceeded cash flows used in investing activities of $34.4 million. Cash flows provided by operating activities were principally attributable to the effect of depreciation and amortization and a decrease in operating assets and liabilities offset by the Company's loss from operations. Cash flows provided by financing activities were principally attributable to issuance of the Company's senior secured notes net of the repayment of the Company's senior secured bank credit facility, Viskase's capital lease obligation and Viskase Limited's term loan. Cash flows used in investing activities consist principally of capital expenditures for property, plant and equipment. On June 20, 1995, Envirodyne completed the sale of $160 million aggregate principal amount of senior secured notes to certain institutional investors in a private placement. The senior secured notes were issued pursuant to an indenture dated June 20, 1995 (Indenture) and consist of (i) $151.5 million of 12% Senior Secured Notes due 2000 and (ii) $8.5 million of Floating Rate Senior Secured Notes due 2000 (collectively, the Senior Secured Notes). Envirodyne used the net proceeds of the offering primarily to (i) repay the Company's $86.1 million domestic term loan, (ii) repay the $68.3 million of obligations under the Company's domestic and foreign revolving loans and (iii) pay transaction fees and expenses. Concurrently with the June 20, 1995 private placement, Envirodyne entered into a new $20 million domestic revolving credit facility (Revolving Credit Facility) and a new $28 million letter of credit facility (Letter of Credit Facility). The Senior Secured Notes and the obligations under the Revolving Credit Facility and the Letter of Credit Facility are guaranteed by Envirodyne's significant domestic subsidiaries and secured by a collateral pool (Collateral Pool) comprised of: (i) all domestic accounts receivable (including intercompany receivables) and inventory; (ii) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements); (iii) substantially all domestic fixed assets (other than assets subject to a lease agreement with General Electric Capital Corporation); and (iv) a senior pledge of 100% of the capital stock of Envirodyne's significant domestic subsidiaries and 65% of the capital stock of Viskase S.A. Such guarantees and security are shared by the holders of the Senior Secured Notes and the holders of the obligations under the Revolving Credit Facility on a pari passu basis pursuant to an intercreditor agreement. Pursuant to such intercreditor agreement, the security interest of the holders of the obligations under the Letter of Credit Facility has priority over all other liens on the Collateral Pool. The Company finances its working capital needs through a combination of cash generated through operations and borrowings under the Revolving Credit Facility. The availability of funds under the Revolving Credit Facility is subject to the Company's compliance with certain covenants (which are substantially similar to those included in the Indenture), to borrowing base limitations measured by accounts receivable and inventory of the Company and to reserves which may be established in the discretion of the lenders. Currently, there are no drawings under the Revolving Credit Facility. The available borrowing capacity under the Revolving Credit Facility was $20 million at December 28, 1995. The Company anticipates that its operating cash flow will be sufficient to meet its operating expenses and to service its interest payments on the Senior Secured Notes 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 fiscal 1995 and 1994 totaled $34.4 million and $32.6 million, respectively. Capital expenditures for 1996 are expected to be approximately $34 million and in future years $31 million. The Company has entered into interest rate agreements that cap $50 million of interest rate exposures at an average LIBOR rate of 6.50% until January 1997. These interest rate cap agreements were entered into under terms of the senior bank financing that was repaid on June 20, 1995. Interest expense includes $613 thousand of amortization of interest rate cap premium during the fiscal year ended December 28, 1995. The Company has not received any payments under the interest rate protection agreements. The Company acquired the minority shareholder's interest in Viskase's Brazilian subsidiary for $4.2 million during the first quarter of 1994. The Company has spent approximately $11 million to $17 million annually on research and development programs, including product and process development, and on new technology development during each of the past three years, and the 1996 research and development and product introduction expenses are expected to be approximately $10 million. Among the projects included in the current research and development efforts is the application of certain patents and technology licensed by Viskase to the manufacture of cellulosic casings. The commercialization of these applications and the related fixed asset expense associated with such commercialization may require substantial financial commitments in future periods. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- Financial statements and supplementary financial information meeting the requirements of Regulation S-X are listed in the index to financial statements and schedules, as included under Part IV, Item 14 of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------------------------------------------------ ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------- There were no disagreements on accounting and financial disclosure required to be disclosed under this Item. PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- The information required by this Item is set forth in the Company's definitive Proxy Statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (Proxy Statement) in the section entitled "Election of Directors," in the last paragraph of the section entitled "Security Ownership" and in the third paragraph of the section entitled "Certain Relationships and Related Transactions," and is incorporated herein by reference to the Proxy Statement. For information regarding executive officers of the Company, see the information set forth under "Executive Officers of the Registrant" in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION ---------------------- The information required by this Item is set forth in the Proxy Statement in the section entitled "Compensation of Directors and Executive Officers" and is incorporated herein by reference to the Proxy Statement. The information set forth in the Proxy Statement in the sections entitled "Compensation Committee Report on Executive Compensation" and "Performance Graph" is not required by this Item and is not incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND --------------------------------------------------- MANAGEMENT ---------- The information required by this Item is set forth in the Proxy Statement in the section entitled "Security Ownership" (except for the last paragraph thereof) and is incorporated herein by reference to the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- The information required by this Item is set forth in the Proxy Statement in the section entitled "Certain Relationships and Related Transactions" and is incorporated by reference to the Proxy Statement. See also Part IV, Item 14, Note 20 of Notes to Consolidated Financial Statements. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS --------------------------------------------------- ON FORM 8-K ----------- (a) 1. Financial statements: PAGE -------------------- Report of independent accountants Consolidated balance sheets, December 28, 1995 and December 29, 1994 Consolidated statements of operations, for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Consolidated statements of stockholders' equity (deficit), for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Consolidated statements of cash flows, for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Notes to consolidated financial statements (a) 2. Financial statement schedules for the periods December 30, --------------------------------------------------------- 1994 to December 28, 1995; January 1 to December 29, 1994; --------------------------------------------------------- and January 1 to December 31, 1993: ---------------------------------- II Valuation and qualifying accounts Schedules other than those listed are omitted because they are not required, are not applicable, or because equivalent information has been included in the financial statements and notes thereto or elsewhere herein. (b) Reports on Form 8-K. On December 13, 1995, Envirodyne filed ------------------- a Current Report on Form 8-K to disclose the settlement agreement relating to Frank Lumpkin, et al. v. Envirodyne ----------------------------------- Industries, Inc. --------------- (c) Exhibits: -------- Exhibit No Description of Exhibits Page - ---------- ------------------------------------------ 2.1 Debtors First Amended Joint Plan of Reorganization as Twice Modified dated December 15, 1993 of Envirodyne Industries, Inc. and certain of its subsidiaries (incorporated herein by reference to Exhibit 2 to Form 8-K filed January 19, 1994 of Envirodyne Industries, Inc.) * 3.1 Amended and Restated Certificate of Incorporation of Envirodyne Industries, Inc. (incorporated herein by reference to Exhibit 3.1 to Form 8-K filed January 19, 1994, of Envirodyne Industries, Inc.). * 3.2 Amended and Restated By-Laws of Envirodyne Industries, Inc. (incorporated herein by reference to Exhibit 3.2 to Form 8-K filed February 21, 1995 of Envirodyne Industries, Inc.). * 4.1 Indenture dated as of December 31, 1993 between Envirodyne Industries, Inc. and Bankers Trust Company, as Trustee, relating to the 10- 1/4% Notes Due 2001 of Envirodyne Industries, Inc. including form of 10-1/4% Note Due 2001 (incorporated herein by reference to Exhibit 4.1 to Form 8-K filed January 19, 1994 of Envirodyne Industries, Inc.). * 4.2 Warrant Agreement dated as of December 31, 1993 between Envirodyne Industries, Inc. and Bankers Trust Company, as Warrant Agent, relating to the Warrants to Purchase Common Stock of Envirodyne Industries, Inc., including form of Warrant to Purchase Common Stock (incorporated herein by reference to Exhibit 4.2 to Form 8-K filed January 19, 1994 of Envirodyne Industries, Inc.). * 4.3 Indenture dated as of June 20, 1995 (the "Indenture") between Envirodyne Industries, Inc. and Shawmut Bank Connecticut, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 4.4 Forms of the Notes issued pursuant to the Indenture (included in Exhibit 4.3). * 4.5 Exchange and Registration Rights Agreement dated as of June 20, 1995 between Envirodyne Industries, Inc. and the purchasers of the Notes (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 4.6 Guaranty Agreement, dated as of June 20, 1995, made by Clear Shield National, Inc., Sandusky Plastics, Inc., Sandusky Plastics of Delaware, Inc., Viskase Corporation, Viskase Holding Corporation and Viskase Sales Corporation, in favor of BT Commercial Corporation, as Collateral Agent (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 4.7 Pledge Agreement, dated as of June 20, 1995, made by Envirodyne Industries, Inc. to BT Commercial Corporation, as Collateral Agent (incorporated by reference to Exhibit 4.7 to Amendment No. 2 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed September 21, 1995). * 4.8 Security Agreement, dated as of June 20, 1995, made by Envirodyne Industries, Inc. in favor of BT Commercial Corporation, as Collateral Agent (incorporated by reference to Exhibit 4.8 to Amendment No. 2 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed September 21, 1995). * 4.9 Form of Subsidiary Security Agreement, dated as of June 20, 1995, made by each applicable Subsidiary in favor of BT Commercial Corporation, as Collateral Agent (incorporated by reference to Exhibit 4.9 to Amendment No. 2 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed September 21, 1995). * 4.10 Intellectual Property Security Agreement, dated as of June 20, 1995, made by Viskase Corporation in favor of BT Commercial Corporation, as Collateral Agent (incorporated by reference to Exhibit 4.10 to Amendment No. 2 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed September 21, 1995). * 4.11 First Supplemental Indenture, dated as of October 13, 1995, between Envirodyne Industries, Inc. and Shawmut Bank Connecticut, National Association, as Trustee (incorporated by reference to Exhibit 4.11 to Amendment No. 3 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed October 17, 1995). * 10.1 Participation Agreement dated as of December 18, 1990 among Viskase Corporation, as Lessee, Envirodyne Industries, Inc., as Guarantor, General Electric Capital Corporation, as Owner Participant, and The Connecticut National Bank, as Owner Trustee (incorporated herein by reference to Exhibit 10.24 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.2 Lease Agreement dated as of December 18, 1990 between The Connecticut National Bank, Owner Trustee, as Lessor and Viskase Corporation, as Lessee (incorporated herein by reference to Exhibit 10.25 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.3 Appendix A; Definitions relating to the Participation Agreement, the Lease and the Ground Lease (incorporated herein by reference to Exhibit 10.26 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.4 Ground Lease dated as of December 18, 1990 between Viskase Corporation, as Ground Lessor, and The Connecticut National Bank, as Ground Lessee (incorporated herein by reference to Exhibit 10.27 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.5 Guaranty Agreement dated as of December 18, 1990, among Envirodyne Industries, Inc.; Clear Shield National, Inc.; Sandusky Plastics of Delaware, Inc.; Viskase Sales Corporation, all as Guarantors; The Connecticut National Bank, as Owner Trustee; and General Electric Capital Corporation, as Owner Participant (incorporated herein by reference to Exhibit 10.28 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.6 Trust Agreement dated as of December 18, 1990 between General Electric Capital Corporation, as Owner Participant, and The Connecticut National Bank, as Owner Trustee (incorporated herein by reference to Exhibit 10.29 to Form 8-K, filed January 22, 1991, of Envirodyne Industries, Inc.). * 10.7 Amended and Restated Management Services Agreement Dated December 31, 1993 between Envirodyne Industries, Inc. and D.P. Kelly and Associates, L.P. (incorporated herein by reference to Exhibit 99.2 to Form 8-K filed January 19, 1994 of Envirodyne Industries, Inc.). + * 10.8 Envirodyne Industries, Inc. 1993 Stock Option Plan (incorporated herein by reference to Exhibit 10.10 to Form 10-K filed March 29, 1994 of Envirodyne Industries, Inc.). + * 10.9 Envirodyne Industries, Inc. Corporate Office Management Incentive Plan for Fiscal Year 1995. + 10.10 Envirodyne Industries, Inc. Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.34 to Form 10-Q for the fiscal quarter ended June 27, 1991, filed August 12, 1991, of Envirodyne Industries, Inc.). + * 10.11 Envirodyne Industries, Inc. Parallel Envirodyne Non-Qualified Thrift Plan (incorporated herein by reference to Exhibit 10.35 to Form 10-Q for the fiscal quarter ended June 27, 1991, filed August 12, 1991, of Envirodyne Industries, Inc.). + * 10.12 Note Agreement, dated as of June 20, 1995, between Envirodyne Industries, Inc. and each of the purchasers identified therein (incorporated by reference to Exhibit 10.10 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.13 Letter Agreement, dated as of June 20, 1995, between Envirodyne Industries, Inc. and certain purchasers of the Notes (incorporated by reference to Exhibit 10.11 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.14 Revolving Credit Agreement, dated as of June 20, 1995, between Envirodyne Industries, Inc. and The Prudential Insurance Company of America (incorporated by reference to Exhibit 10.12 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.15 Credit Agreement, dated as of June 20, 1995, among Envirodyne Industries, Inc., the lenders identified therein and BT Commercial Corporation, as Agent (incorporated by reference to Exhibit 10.13 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.16 Intercreditor and Collateral Agency Agreement, dated as of June 20, 1995, among BT Commercial Corporation, The Prudential Insurance Company of America, Shawmut Bank Connecticut, National Association, and certain other parties identified therein (incorporated by reference to Exhibit 10.14 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.17 GECC Intercreditor Agreement, dated as of June 20, 1995, among BT Commercial Corporation, General Electric Capital Corporation, Shawmut Bank Connecticut, National Association, Envirodyne Industries, Inc. and Viskase Corporation (incorporated by reference to Exhibit 10.15 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed July 20, 1995). * 10.18 First Amendment under Revolving Credit Agreement, dated as of June 20, 1995, between Envirodyne Industries, Inc. and The Prudential Insurance Company of America (incorporated by reference to Exhibit 10.16 to Amendment No. 3 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed October 17, 1995). * 10.19 Amendment No. 1 to Credit Agreement, dated as of June 20, 1995, between Envirodyne Industries, Inc. and BT Commercial Corporation, individually and as agent (incorporated by reference to Exhibit 10.17 to Amendment No. 3 to the Registration Statement on Form S-4 of Envirodyne Industries, Inc. filed October 17, 1995). * 11.1 Statement re computation of per share earnings. ** 21.1 Subsidiaries of the registrant. ** 23.1 Consent of Independent Accountants ** * Previously filed, incorporated by reference. ** Filed herewith + Management contract or compensatory plan or arrangement. (d) Financial statement schedules required by Regulation S-X. -------------------------------------------------------- Index to financial statements of Viskase Holding Corporation and subsidiaries. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ENVIRODYNE INDUSTRIES, INC. -------------------------- (Registrant) By: /s/ --------------------------- Donald P. Kelly Chairman, Chief Executive Officer and President By:/s/ ---------------------------- J.S. Corcoran Executive Vice President and Chief Financial Officer Date: March 27, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on this 27th day of March 1996. /s/ /s/ - ------------------------------ ----------------------------- Robert N. Dangremond (Director) Michael E. Heisley (Director) /s/ /s/ - ------------------------------ ----------------------------- Avram A. Glazer (Director) Gregory R. Page (Director) /s/ /s/ - ------------------------------ ----------------------------- Malcolm I. Glazer (Director) Mark D. Senkpiel (Director) /s/ - ------------------------------ F. Edward Gustafson (Director) REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Envirodyne Industries, Inc. We have audited the consolidated financial statements and the financial statement schedules of Envirodyne Industries, Inc. and Subsidiaries listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1 to the consolidated financial statements, on December 31, 1993, the Company completed a comprehensive financial restructuring through the implementation of reorganization under Chapter 11 of the United States Bankruptcy Code and applied fresh start reporting. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Envirodyne Industries, Inc. and Subsidiaries as of December 28, 1995 and December 29, 1994, and the consolidated results of their operations and their cash flows for the period December 30, 1994 to December 28, 1995 and January 1 to December 29, 1994 (Post-consummation) and January 1 to December 31, 1993 (Pre-consummation), in conformity with generally accepted accounting principles. In addition, in our opinion the schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. Chicago, Illinois March 26, 1996 ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 28, December 29, 1995 1994 ------------ ----------- (in thousands) ASSETS Current assets: Cash and equivalents $ 30,325 $ 7,289 Receivables, net 89,454 86,868 Inventories 99,474 110,483 Other current assets 21,646 19,466 -------- -------- Total current assets 240,899 224,106 Property, plant and equipment, including those under capital leases 545,491 506,099 Less accumulated depreciation and amortization 75,987 35,761 -------- -------- Property, plant and equipment, net 469,504 470,338 Deferred financing costs 8,090 9,143 Other assets 45,589 47,181 Excess reorganization value 135,485 145,868 -------- -------- $899,567 $896,636 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligations under capital leases $ 12,504 $ 25,798 Accounts payable 39,117 34,335 Accrued liabilities 67,553 72,246 -------- -------- Total current liabilities 119,174 132,379 Long-term debt including obliga- tions under capital leases 530,181 489,358 Accrued employee benefits 55,626 56,217 Deferred and noncurrent income taxes 77,490 83,333 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 13,579,460 shares issued and outstanding at December 28, 1995 and 13,515,000 shares at December 29, 1994 136 135 Paid in capital 134,864 134,865 Accumulated (deficit) (25,131) (3,612) Cumulative foreign currency translation adjustments 7,227 3,961 -------- -------- Total stockholders' equity 117,096 135,349 -------- -------- $899,567 $896,636 ======== ======== The accompanying notes are an integral part of the consolidated financial statements. ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
52 weeks 52 weeks 52 weeks December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- (in thousands, except for number of shares and per share amounts) NET SALES $650,212 $599,029 $ 587,385 Patent infringement settlement income 9,457 COSTS AND EXPENSES Cost of sales 485,048 435,760 418,692 Selling, general and administrative 111,230 108,437 99,350 Amortization of intangibles and excess reorganization value 15,799 15,612 15,711 -------- -------- -------- OPERATING INCOME 38,135 48,677 53,632 Interest income 670 307 931 Interest expense 57,336 49,514 31,190 Other expense (income), net 1,710 (1,668) 5,540 Minority interest in loss of subsidiary 50 717 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES, REORGANIZATION ITEMS AND EXTRAORDINARY ITEMS (20,241) 1,188 18,550 Reorganization items, net 104,745 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS (20,241) 1,188 (86,195) Income tax provision (benefit) (2,918) 4,800 12,000 -------- -------- -------- (LOSS) BEFORE EXTRAORDINARY ITEMS (17,323) (3,612) (98,195) Extraordinary gain (loss), net of tax (4,196) 183,784 -------- -------- -------- NET INCOME (LOSS) $(21,519) $ (3,612) $ 85,589 ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES 13,516,771 13,500,703 320 ========== ========== === PER SHARE AMOUNTS: (LOSS) BEFORE EXTRAORDINARY ITEMS $ (1.28) $ (.27) $(306,859) ======== ========== ========= NET INCOME (LOSS) $ (1.59) $ (.27) $ 267,466 ======== ========== ========= Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the consolidated statement of operations for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Cumulative Foreign Total Currency Stockholders' Common Paid in Accumulated Translation Equity Stock Capital (Deficit) Adjustments (Deficit) ------ ------- ----------- ----------- ---------- (in thousands) Balance December 31, 1992 $ 1 $ 12,900 $(98,776) $ 2,330 $(83,545) Net income 85,589 85,589 Translation adjustments (2,044) (2,044) Cancellation of preconsummation Common Stock (1) (12,900) (12,901) Elimination of accumulated deficit and cumulative foreign currency translation adjustments 13,187 (286) 12,901 ---- -------- -------- ------- -------- $ 0 $ 0 $ 0 $ 0 $ 0 ======================================================================================================== Issuance of new Common Stock $135 $134,865 $135,000 ---- -------- -------- Balance December 31, 1993 135 134,865 135,000 Net (loss) $ (3,612) (3,612) Translation adjustments $ 3,961 3,961 ---- -------- -------- ------- -------- Balance December 29, 1994 135 134,865 (3,612) 3,961 135,349 Net (loss) (21,519) (21,519) Issuance of Common Stock 1 (1) Translation adjustments 3,266 3,266 ---- -------- -------- ------- -------- Balance December 28, 1995 $136 $134,864 $(25,131) $7,227 $117,096 ==== ======== ======== ====== ======== Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the stockholders' equity for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- (in thousands) Cash flows from operating activities: (Loss) before extraordinary item $(17,323) $ (3,612) $ (98,195) Extraordinary gain (loss) (4,196) 183,784 -------- -------- --------- Net income (loss) (21,519) (3,612) 85,589 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization under capital leases 40,262 35,775 36,687 Amortization of intangibles and excess reorganization value 15,799 15,612 15,711 Amortization of deferred financing fees and discount 2,196 1,569 2,418 Increase (decrease) in deferred and noncurrent income taxes (6,450) (52) 9,547 Loss on debt extinguishment 6,778 Foreign currency transaction loss (gain) (1,233) (3,465) 3,380 Loss (gain) on sales of property, plant and equipment 73 (9) 650 Reorganization items and fresh start reporting (79,039) Changes in operating assets and liabilities: Accounts receivable (839) (11,257) (1,319) Inventories 12,741 (10,548) 4,163 Other current assets (1,837) (1,607) (2,152) Accounts payable and accrued liabilities (1,670) 3,774 15,894 Other (5,334) (2,894) 672 -------- -------- --------- Total adjustments 60,486 26,898 6,612 -------- -------- --------- Net cash provided by operating activities before reorganization expense 38,967 23,286 92,201 Net cash used for reorganization items (14,929) -------- -------- --------- Total net cash provided by operating activities 38,967 23,286 77,272 Cash flows from investing activities: Capital expenditures (34,465) (32,566) (40,887) Proceeds from sale of property, plant and equipment 86 359 124 Purchase of minority interest in subsidiary (4,200) -------- -------- --------- Net cash (used in) investing activities (34,379) (36,407) (40,763) Cash flows from financing activities: Proceeds from revolving loan and long-term borrowings 207,922 37,668 106,003 Deferred financing costs (7,887) (1,608) (9,779) Repayment of revolving loan, long-term borrowings and capital lease obligations (181,375) (22,617) (138,736) -------- -------- --------- Net cash provided by (used in) financing activities 18,660 13,443 (42,512) Effect of currency exchange rate changes on cash (212) (776) (316) -------- -------- --------- Net increase (decrease) in cash and equivalents 23,036 (454) (6,319) Cash and equivalents at beginning of period 7,289 7,743 14,062 -------- -------- --------- Cash and equivalents at end of period $30,325 $ 7,289 $ 7,743 ======= ======== ========= - --------------------------------------------------------------------------------------------------- Supplemental cash flow information and noncash investing and financing activities: Interest paid $55,030 $ 43,484 $ 28,001 Income taxes paid $ 4,895 $ 5,058 $ 1,154 Capital lease obligations (machinery and equipment) $ 2,081 Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the consolidated statement of cash flows for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) The accompanying notes are an integral part of the consolidated financial statements.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. CHAPTER 11 REORGANIZATION PROCEEDINGS (dollars in thousands) On January 6, 1993, a group of bondholders filed an involuntary petition for reorganization of Envirodyne Industries, Inc. under Chapter 11 of the U.S. Bankruptcy Code. On January 7, 1993 Viskase Corporation, Viskase Sales Corporation, Viskase Holding Corporation, Clear Shield National, Inc., Sandusky Plastics of Delaware, Inc., Sandusky Plastics, Inc. and Envirodyne Finance Company each filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy Court). On December 17, 1993, the Bankruptcy Court confirmed the First Amended Joint Plan of Reorganization as twice modified (Plan of Reorganization) with respect to Envirodyne Industries, Inc. (Envirodyne) and certain of its subsidiaries. The Plan of Reorganization was consummated and Envirodyne and certain of its subsidiaries emerged from Chapter 11 on December 31, 1993 (Effective Date). For accounting purposes, the Plan of Reorganization was deemed to be effective as of December 31, 1993. Pursuant to the Plan of Reorganization, Envirodyne's shares of common stock that were outstanding prior to the effective date were canceled. Emerald Acquisition Corporation, the sole stockholder of Envirodyne prior to the consummation of the bankruptcy, received no distribution pursuant to the Plan of Reorganization. The Plan of Reorganization provided for the initial issuance of approximately 13,500,000 new shares of Envirodyne common stock (subject to adjustment), warrants to purchase an additional 1,500,000 shares and distributions to major creditors as follows: -- Holders of Envirodyne's former Senior Discount Notes Due 1997 (14.5%) (Old Discount Notes) with an accreted value as of January 6, 1993 of $200,838 became entitled to receive a pro rata portion of $219,262 principal amount of 10 1/4% Senior Notes Due 2001 (10 1/4% Notes). -- Holders of Envirodyne's former $200,000 principal amount of 14% Senior Subordinated Debentures Due 2001 (Old 14% Debentures), with accrued but unpaid interest through January 6, 1993 of $42,812 became entitled to receive a pro rata portion of 12,142,737 shares of the Envirodyne common stock, par value $.01 per share, representing in the aggregate approximately 89.95% of the common stock initially issued pursuant to the Plan of Reorganization. -- Holders of the Envirodyne's former $91,350 principal amount of 13 1/2% Subordinated Notes Due 1996 (Old 13 1/2% Notes), with accrued but unpaid interest through January 6, 1993 of $13,604 became entitled to receive a pro rata portion of (i) 903,625 shares of Envirodyne common stock, representing in the aggregate approximately 6.69% of the common stock initially issued pursuant to the Plan of Reorganization, and (ii) warrants (Warrants) to purchase 1,500,000 shares of common stock. The Warrants were issued pursuant to a Warrant Agreement dated as of December 31, 1993 between Envirodyne and Bankers Trust Company, as Warrant Agent. The Warrants are exercisable at any time until December 31, 1998 at an exercise price of $17.25 per share. The number of shares of common stock for which a Warrant is exercisable, and the exercise price of the Warrants, are subject to adjustment upon the occurrence of certain events. In addition, holders of Old 13 1/2% Notes, other than Salomon Brothers Inc (Salomon Brothers) and certain of its affiliates, who elected to grant a limited release to Salomon Brothers and its affiliates pursuant to the Plan of Reorganization, of all claims arising out of the 1989 leveraged buyout acquisition of Envirodyne, the Old 13 1/2% Notes or Envirodyne, were entitled to share ratably in 445,928 shares of common stock, representing in the aggregate approximately 3.30% of the common stock initially issued pursuant to the Plan of Reorganization. -- Holders of allowed general unsecured claims of Envirodyne (as opposed to subsidiaries of Envirodyne) became entitled to receive 32.28 shares of common stock for each five hundred dollars amount of their prepetition claims, or a total of 8,070 shares of common stock, representing .06% of the common stock initially issued pursuant to the Plan of Reorganization. These claims totaled approximately $125. If the allowed amount of general unsecured claims of Envirodyne exceeds $125, for example upon the resolution of disputed claims, additional shares of common stock will have to be issued to the holders of allowed general unsecured claims of Envirodyne in order to provide equitable allocation of value among Envirodyne's unsecured creditors under the Plan of Reorganization. Such additional shares of common stock would be distributed with respect to allowed general unsecured claims of Envirodyne as follows: (i) approximately 2.58 additional shares per five hundred dollars in claims in the event allowed general unsecured claims of Envirodyne are between $125 and $25,000; (ii) approximately 5.61 additional shares per five hundred dollars in claims in the event allowed general unsecured claims of Envirodyne are between $25,000 and $50,000; (iii) approximately 9.22 additional shares per five hundred dollars in claims in the event allowed general unsecured claims of Envirodyne are between $50,000 and $75,000; and (iv) approximately 13.58 additional shares per five hundred dollars in claims in the event allowed general unsecured claims of Envirodyne are between $75,000 and $100,000. Refer to Note 23 for discussion on certain settled claims and open claims which, if determined adversely to Envirodyne, would result in the issuance of common stock. -- Holders of Envirodyne subsidiary allowed trade claims were paid in full. -- Salomon Brothers Holding Company Inc 11.25% Pay-in-Kind Notes issued by Envirodyne with an accreted value as of January 6, 1993 of $5,658 were canceled. The contracts constituting the sale and leaseback transaction with General Electric Capital Corporation were assumed by the relevant Envirodyne subsidiaries under the Plan of Reorganization with minor changes thereto. The Chapter 11 filing was related only to the Company's domestic operations and did not include the foreign subsidiaries and various inactive domestic subsidiaries. The Company accounted for the reorganization using the principles of fresh start reporting in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." Accordingly, all assets and liabilities have been restated to reflect their reorganization value, which approximates fair value. The reorganization value of the Company's equity of $135,000 was based on the consideration of many factors and various valuation methods, including discounted cash flows and comparable multiples of earnings valuation techniques believed by management and its financial advisors to be representative of the Company's business and industry. Factors considered by the Company included the following: . Forecasted operating and cash flow results which gave effect to the estimated impact of debt restructuring and other operational reorganization. . Discounted residual value at the end of the forecasted period based on the capitalized cash flows for the last year of that period. . Competition and general economic considerations. . Projected sales growth. . Potential profitability. . Seasonality and working capital requirements. The excess of the reorganization value over the fair value of net assets and liabilities is reported as excess reorganization value and is being amortized over a fifteen-year period. The Company continues to evaluate the recoverability of excess reorganization value based on the operating performance and expected future undiscounted cash flows of the operating business units. The reorganization and the adoption of Fresh Start Reporting resulted in the following adjustments to the Company's Consolidated Statement of Operations for the period January 1 to December 31, 1993: Income (Expense) Reorganization Items - ----------------------- ------------- Legal, financial advisory and other fees associated with the Chapter 11 proceedings $ (14,929) Write-off of deferred financing fees associated with the Bank Credit Agreement (4,071) Write-off of existing excess investment over net assets acquired, net of excess reorganization value recorded, and fair market value adjustments to assets and liabilities (85,745) --------- $(104,745) ========= Extraordinary Gain - ------------------ Accreted value of the Old Discount Notes less unamortized deferred financing $ 197,379 Principal amount of Old 14% Debentures plus accrued interest less unamortized deferred financing 237,125 Principal amount of Old 13 1/2% Notes plus accrued interest less unamortized deferred financing 103,918 Accreted value of 11 1/4% Pay-in-Kind Notes due to Related Party 5,658 Envirodyne untendered shares 2,176 Envirodyne general unsecured creditors allowed claims 90 Principal amount of 10 1/4% Notes exchanged for Old Discount Notes (219,262) Fair value of equity exchanged for Old 14% Debentures, Old 13 1/2% Notes and Envirodyne unsecured claims (135,000) --------- Extraordinary gain before tax provision 192,084 Tax provision on extraordinary gain 8,300 --------- Extraordinary gain net of taxes $ 183,784 ========= Had the Fresh Start reporting and the Plan of Reorganization been implemented with the related financing at the beginning of 1993, the pro forma Envirodyne consolidated statement of operations would have been as follows: (in thousands, except for number of shares and per share amounts) Pro forma January 1 to December 31, 1993 ----------------- (unaudited) Net sales $587,385 Cost of sales 417,780 Selling, general and administrative 99,350 Amortization of intangibles and excess reorganization cost 15,612 -------- Operating income 54,643 Interest income 931 Interest expense 51,198 Other expense (income), net 5,540 Minority interest in loss of subsidiary 717 -------- Income before income taxes (447) Income tax provision 6,140 -------- Net (loss) $ (6,587) ======== Weighted average common shares 13,500,703 Net (loss) per share $(.49) ===== The pro forma information reflects the changes in interest cost and depreciation and amortization due to the implementation of the Plan of Reorganization and Fresh Start Reporting. 2. NATURE OF BUSINESS Envirodyne manufactures food packaging products and foodservice supplies through three primary operating subsidiaries - Viskase, Sandusky and Clear Shield. The operations of these subsidiaries are primarily in North and South America and Europe. Viskase is a leading producer of cellulosic casings used in preparing and packaging processed meat products and is a major producer of heat shrinkable plastic bags and specialty films for packaging and preserving fresh and processed meat products, poultry and cheeses. The Company is also a leading domestic and international manufacturer of plasticized polyvinyl chloride (PVC) films, primarily for use in packaging food items. Through Sandusky, the Company is a producer of thermoformed and injection molded plastic containers, used in the packaging of cultured dairy and delicatessen products, and of horticultural trays and inserts. Finally, through Clear Shield, the Company is a major domestic producer of disposable plastic cutlery, drinking straws, custom dining kits and related products. International Operations Viskase has seven manufacturing facilities located outside the continental United States, in Beauvais, France; Thaon, France; Lindsay, Ontario, Canada; Sedgefield, England (Great Britain); Swansea, Wales (Great Britain); Guarulhos, Brazil and Nuevo Laredo, Mexico. The aggregate of domestic exports and net sales of foreign operations represents approximately 56% of Viskase's total net sales. International sales and operations may be subject to various risks including, but not limited to, possible unfavorable exchange rate fluctuations, political instability, governmental regulations (including import and export controls), restrictions on currency repatriation, embargoes, labor relations laws and the possibility of governmental expropriation. Viskase's foreign operations generally are subject to taxes on the repatriation of funds. International operations in certain parts of the world may be subject to international balance of payments difficulties which may raise the possibility of delay or loss in the collection of accounts receivable from sales to customers in those countries. Viskase believes that its allowance for doubtful accounts makes adequate provision for the collectibility of its receivables. Management believes that growth potential exists for many of Viskase's products outside the United States and that Viskase is well positioned to participate in these markets. All of Sandusky's and Clear Shield's operations are located in the United States. Sales and Distribution Viskase sells its products in virtually every country in the world with principal markets in North America, Europe, Latin America and Asia Pacific. In the United States, Viskase has a staff of technical sales representatives responsible for sales to fresh meat, processed meat and poultry producers. Approximately 50 distributors market Viskase products to customers in Europe, Africa, Asia, and Latin America. Its products are marketed through its own subsidiaries in the United Kingdom, Germany, France, Italy, Russia, Brazil, Mexico and Australia. In the United States, Viskase sells its PVC film products primarily to the retail grocery industry through packaging material distributors, food wholesalers and a direct sales force. Additionally the sales organization is supported by a technical service group. The United Kingdom operation sells directly and through distributors, primarily to the retail grocery and foodservice industries in Europe. In the United States, Viskase operates casings service centers in Atlanta, Georgia, and Bensalem, Pennsylvania, as well as service centers within the Chicago, Illinois, and Pauls Valley, Oklahoma, plants. In Europe, Viskase operates casings service centers in Milan, Italy, Pulheim, Germany, and Moscow, Russia. Viskase also operates a service center in Brisbane, Australia. These service centers provide finishing, inventory and delivery services to Viskase customers. Sandusky's and Clear Shield's sales are predominantly in the United States. Competition Viskase is one of the world's leading producers of cellulosic casings and a major producer of films. From time to time, Viskase experiences reduced market share or reduced profits due to price competition; however, management believes that such market conditions will not result in any long-term material loss of business. The dairy and delicatessen containers industry is highly fragmented. Sandusky competes in the manufacture and sale of dairy and delicatessen containers with several domestic manufacturers of thermoformed and injection molded plastic containers. Major competitive factors in the dairy and delicatessen container business are price, quality and customer service. Major competitive factors in the specialized thermoformed container business are price and technical and customer service capabilities. Clear Shield's primary competitors include several major corporations, some of which are larger and better capitalized than Clear Shield and, in some cases, offer a wider product line than Clear Shield. Clear Shield's competitors periodically engage in aggressive price discounting to gain business. Clear Shield management believes, however, that such market conditions will not result in any long-term material loss of business for Clear Shield, although its profit margins may be affected from time to time. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Basis of presentation Effective in 1990 Envirodyne adopted a 52/53 week fiscal year ending on the last Thursday of December. The 1993 financial statements include December 31, 1993 in order to present the effect of the consummation of the Plan of Reorganization. (B) Principles of consolidation The consolidated financial statements include the accounts of Envirodyne Industries, Inc. and its subsidiaries (the Company). Reclassifications have been made to the prior years' financial statements to conform to the 1995 presentation. (C) Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. (D) Cash equivalents (dollars in thousands) For purposes of the statement of cash flows, the Company considers cash equivalents to consist of all highly liquid debt investments purchased with an initial maturity of approximately three months or less. Due to the short-term nature of these instruments, the carrying values approximate the fair market value. Cash equivalents include $24,536 and $821 of short-term investments at December 28, 1995 and December 29, 1994, respectively. (E) Inventories Domestic inventories are valued primarily at the lower of last-in, first-out (LIFO) cost or market. Remaining amounts, primarily foreign, are valued at the lower of first-in, first-out (FIFO) cost or market. (F) Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 32 years. Upon retirement or other disposition, cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in results of operations. Effective December 31, 1993 and in conjunction with the Fresh Start Reporting, property, plant and equipment was reported at the estimated fair value (refer to Note 1). (G) Deferred financing costs Deferred financing costs are amortized on a straight-line basis over the expected term of the related debt agreement. Amortization of deferred financing costs is classified as interest expense. (H) Patents Patents are amortized on the straight-line method over an estimated average useful life of ten years. The carrying value of patents is periodically reviewed by the Company and impairments are recognized when the expected undiscounted future operating cash flows derived from such patents is less than the carrying value. If impairment is identified, valuation techniques deemed appropriate under the particular circumstances will be used to determine the asset's fair value. The loss will be measured based on the excess of carrying value over the determined fair value. The review for impairment is performed at least on a quarterly basis. (I) Excess reorganization value and excess investment over net assets acquired, net Excess reorganization value is amortized on the straight-line method over 15 years. Accumulated amortization of excess reorganization value totaled $20 million and $10 million at December 28, 1995, and December 29, 1994, respectively. Cost in excess of net assets acquired, net was amortized on a straight-line method over 40 years in fiscal 1993. The Company continues to evaluate the recoverability of excess reorganization value based on operating performance and undiscounted cash flows of the operating business units. Impairment will be recognized when the expected undiscounted future operating cash flows derived from such intangible is less than its carrying value. If impairment is identified, valuation techniques deemed appropriate under the particular circumstances will be used to determine the intangible's fair value. The loss will be measured based on the excess of carrying value over the determined fair value. The review for impairment is performed at least on a quarterly basis. (J) Pensions The North American operations of Viskase and the Company's operations in Europe have defined benefit retirement plans covering substantially all salaried and full time hourly employees. Pension cost is computed using the projected unit credit method. The Company's funding policy is consistent with funding requirements of the applicable federal and foreign laws and regulations. (K) Postretirement benefits other than pensions The North American operations of Viskase have postretirement health care and life insurance benefits. Effective January 1, 1993, postretirement benefits other than pensions are accounted for in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." (L) Postemployment benefits Effective December 31, 1993 and in conjunction with the Fresh Start Reporting, the Company adopted SFAS No. 112 "Employers Accounting for Postemployment Benefits." The impact of adopting SFAS No. 112 was not material. (M) Income taxes Income taxes are accounted for in accordance with SFAS No. 109. Tax provisions and benefits are recorded at statutory rates for taxable items included in the consolidated statements of operations regardless of the period for which such items are reported for tax purposes. Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities for which income tax benefits will be realized in future years. (N) Net income (loss) per share Net income (loss) per share of common stock is based upon the weighted average number of shares of common stock outstanding during the year. No effect has been given to options outstanding under the Company's stock option plans and warrants issued pursuant to the Plan of Reorganization as their effect is anti-dilutive. (O) Revenue recognition Sales to customers are recorded at the time of shipment net of discounts and allowances. (P) Foreign currency contracts The Company maintains a hedging program to partially hedge its forecasted foreign currency revenue cash flows. The hedging program principally addresses revenue cash flows within its European operations. The foreign exchange contracts are denominated predominantly in the major European currencies and have varying maturities up to eighteen months. The effect of this practice is to minimize the effect of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to additional exchange rate risk because gains and losses on these contracts offset losses and gains on the transactions being hedged. The cash flows from forward contracts accounted for as hedges of identifiable transactions or events are classified consistent with the cash flows from the transactions or events being hedged. (Q) Stock-based compensation Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on new fair value acounting rules. Although expense recognition for employee stock- based compensation is not mandatory, SFAS 123 requires companies that choose not to adopt the new fair value accounting to disclose pro forma net income and earnings per share under the new method. This new accounting principle is effective for the Company's fiscal year ending December 26, 1996. The Company believes that adoption is not expected to have a material impact on its financial condition as the Company will not adopt the fair value accounting, but will instead comply with the disclosure requirements. 4. RECEIVABLES (dollars in thousands) Receivables consisted primarily of trade accounts receivable and were net of allowances for doubtful accounts of $3,224 and $2,136 at December 28, 1995, and at December 29, 1994, respectively. Envirodyne has a broad base of customers, with no single customer accounting for more than 5% of sales. 5. INVENTORIES (dollars in thousands) Inventories consisted of: December 28, December 29, 1995 1994 ----------- ----------- Raw materials $17,150 $20,358 Work in process 32,800 37,613 Finished products 49,524 52,512 ------- -------- $99,474 $110,483 ======= ======== Approximately 54% and 55% of the Company's inventories at December 28, 1995, and December 29, 1994, respectively, were valued at LIFO. These LIFO values exceeded current manufacturing cost by approximately $4,000 and $7,000 at December 28, 1995, and December 29, 1994, respectively. Inventories were net of reserves for obsolete and slow moving inventory of $3,818 and $5,353 at December 28, 1995, and December 29, 1994, respectively. Raw materials used by Viskase include cellulose (from wood pulp), fibrous paper, petroleum based resins, plasticizers and various other chemicals. Viskase generally purchases its raw materials from a single or small number of suppliers with whom it maintains good relations. Certain primary and alternative sources of supply are located outside the United States. Viskase believes, but there can be no assurance, that adequate alternative sources of supply currently exist for all of Viskase's raw materials or raw material substitutes that Viskase could modify its processes to utilize. The principal raw materials used by Sandusky and Clear Shield are thermoplastic resins, which are readily available from several domestic sources. 6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands) December 28, December 29, 1995 1994 ----------- ----------- Property, plant and equipment: Land and improvements $ 16,369 $ 15,930 Buildings and improvements 81,767 76,202 Machinery and equipment 292,176 256,621 Construction in progress 15,938 20,178 Capital leases: Machinery and equipment 139,241 137,168 -------- -------- $545,491 $506,099 ======== ======== Maintenance and repairs charged to costs and expenses for 1995, 1994, and 1993 aggregated $33,227, $33,045 and $32,636, respectively. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 32 years. 7. OTHER ASSETS (dollars in thousands) Other assets were comprised of: December 28, December 29, 1995 1994 ----------- ----------- Patents $50,000 $50,000 Less accumulated amortization 10,000 5,000 ------- ------- Patents, net 40,000 45,000 Other 5,589 2,181 ------- ------- $45,589 $47,181 ======= ======= Patents are amortized on the straight-line method over an estimated average useful life of ten years. 8. ACCRUED LIABILITIES (dollars in thousands) Accrued liabilities were comprised of: December 28, December 29, 1995 1994 ----------- ----------- Compensation and employee benefits $31,997 $33,521 Taxes, other than on income 6,535 6,454 Accrued interest 2,535 3,630 Accrued volume and sales discounts 13,218 11,958 Accrued reorganization fees and expenses 2,027 3,167 Other 11,241 13,516 ------- ------- $67,553 $72,246 ======= ======= 9. DEBT OBLIGATIONS (dollars in thousands) On June 20, 1995, Envirodyne completed the sale of $160,000 aggregate principal amount of senior secured notes (Senior Secured Notes) to certain institutional investors in a private placement. The senior secured notes were issued pursuant to an indenture dated June 20, 1995 (Indenture) and consist of (i) $151,500 of 12% Senior Secured Notes due 2000 and (ii) $8,500 of Floating Rate Senior Secured Notes due 2000 (collectively, the Senior Secured Notes). Envirodyne used the net proceeds of the offering primarily to (i) repay the Company's $86,125 domestic term loan, (ii) repay the $68,316 of obligations under the Company's domestic and foreign revolving loans and (iii) pay transaction fees and expenses. Concurrently with the June 20, 1995 placement, Envirodyne entered into a new $20,000 domestic revolving credit facility (Revolving Credit Facility) and a new $28,000 letter of credit facility (Letter of Credit Facility). The Senior Secured Notes and the obligations under the Revolving Credit Facility and the Letter of Credit Facility are guaranteed by Envirodyne's significant domestic subsidiaries and secured by a collateral pool (Collateral Pool) comprised of: (i) all domestic accounts receivable (including intercompany receivables) and inventory; (ii) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements); (iii) substantially all domestic fixed assets (other than assets subject to a lease agreement with General Electric Capital Corporation); and (iv) a senior pledge of 100% of the capital stock of Envirodyne's significant domestic subsidiaries and 65% of the capital stock of Viskase S.A. Such guarantees and security are shared by the holders of the Senior Secured Notes and the holders of the obligations under the Revolving Credit Facility on a pari passu basis pursuant to an intercreditor agreement. Pursuant to such intercreditor agreement, the security interest of the holders of the obligations under the Letter of Credit Facility has priority over all other liens on the Collateral Pool. The Company finances its working capital needs through a combination of cash generated through operations and borrowings under the Revolving Credit Facility. The availability of funds under the Revolving Credit Facility is subject to the Company's compliance with certain covenants (which are substantially similar to those included in the Indenture), borrowing base limitations measured by accounts receivable and inventory of the Company and reserves which may be established at the discretion of the lenders. Currently, there are no drawings under the Revolving Credit Facility. The available borrowing capacity under the Revolving Credit Facility was $20 million at December 28, 1995. The Company recognized an extraordinary loss of $6,778 representing the write-off of deferred financing fees related to the June 20, 1995 debt refinancing. The extraordinary loss, net of applicable income taxes of $2,582, was included in the Company's Statement of Operations for the quarter ended June 29, 1995. The $151,500 tranche of Senior Secured Notes bears interest at a rate of 12% per annum and the $8,500 tranche bears interest at a rate equal to the six month London Interbank Offered Rate (LIBOR) plus 575 basis points. The current interest rate on the floating rate tranche is approximately 11.4%. The interest rate on the floating rate tranche is reset semi-annually on June 15 and December 15. Interest on the Senior Secured Notes is payable each June 15 and December 15. On June 15, 1999, $80,000 of the aggregate principal amount of the Senior Secured Notes is subject to a mandatory redemption. The remaining principal amount outstanding will mature on June 15, 2000. In the event the Company has Excess Cash Flow (as defined) in excess of $5,000 in any fiscal year, beginning with fiscal 1995, Envirodyne will be required to make an offer to purchase Senior Secured Notes together with any borrowed money obligations outstanding under the Revolving Credit Facility, on a pro rata basis, in an amount equal to the Excess Cash Flow at a purchase price of 100% plus any accrued interest to the date of purchase. There was no Excess Cash Flow for fiscal 1995. The Senior Secured Notes are redeemable, in whole or from time to time in part, at Envirodyne's option, at the greater of (i) the outstanding principal amount or (ii) the present value of the expected future cash flows from the Senior Secured Notes discounted at a rate equal to the Treasury Note yield corresponding closest to the remaining average life of the Senior Secured Notes at the time of prepayment plus 100 basis points; plus accrued interest thereon ---- to the date of purchase. Upon the occurrence of a Change of Control (which includes the acquisition by any person of more than 50% of Envirodyne's Common Stock), each holder of the Senior Secured Notes has the right to require the Company to repurchase such holder's Senior Secured Notes at a price equal to the greater of (i) the outstanding principal amount or (ii) the present value of the expected cash flows from the Senior Secured Notes discounted at a rate equal to the Treasury Note yield corresponding closest to the remaining average life of the Senior Secured Notes at the time of prepayment plus 100 basis points; plus accrued interest thereon to the date of purchase. - ---- The Indenture contains covenants with respect to Envirodyne and its subsidiaries limiting (subject to a number of important qualifications), among other things, (i) the ability to pay dividends or redeem or repurchase common stock, (ii) the incurrence of indebtedness, (iii) the creation of liens, (iv) certain affiliate transactions and (v) the ability to consolidate with or merge into another entity and to dispose of assets. Borrowings under the Revolving Credit Facility bear interest at a rate per annum equal to the three month London Interbank Offered Rate (LIBOR) on the first day of each calendar quarter plus 300 basis points. The Revolving Credit Facility expires on June 20, 1998. Envirodyne has entered into interest rate agreements that cap $50 million of interest rate exposure at an average LIBOR rate of 6.50% until January 1997. These interest rate cap agreements were entered into under terms of the senior bank financing that was repaid on June 20, 1995. Interest expense includes $613 of amortization of the interest rate cap premium during fiscal 1995. Envirodyne has not received any payments under the interest rate protection agreements. The Letter of Credit Facility expires on June 20, 1998. Fees on the outstanding amount of letters of credit are 2.0% per annum, with an issuance fee of 0.5% on the face amount of the letter of credit. There is a commitment fee of 0.5% per annum on the unused portion of the Letter of Credit Facility. Had the refinancing taken place at the beginning of 1995, the pro forma Envirodyne consolidated statement of operations would have been: (in thousands, except for number of shares and per share amounts) Pro forma December 30, 1994 to December 28, 1995 --------------------------- Net sales $650,212 Cost of sales 485,048 Selling, general and administrative 111,230 Amortization of intangibles and excess reorganization cost 15,799 -------- Operating income 38,135 Interest income 670 Interest expense 60,213 Other expense (income), net 1,710 -------- (Loss) before income taxes (23,118) Income tax (benefit) (4,040) --------- Net (loss) $ (19,078) ========= Weighted average common shares 13,516,771 Net (loss) per share $(1.41) ====== The pro forma information reflects the change in interest expense and related tax effect due to the issuance of $160 million principal amount of Senior Secured Notes and the refinancing of the Company's bank debt. The $219,262 principal amount of 10-1/4% Notes were issued pursuant to an Indenture dated as of December 31, 1993 (10-1/4% Note Indenture) between Envirodyne and Bankers Trust Company, as Trustee. The 10-1/4% Notes are the unsecured senior obligations of Envirodyne, bear interest at the rate of 10-1/4% per annum, payable on each June 1 and December 1, and mature on December 1, 2001. The 10-1/4% Notes are redeemable, in whole or from time to time in part, at the option of Envirodyne, at the percentages of principal amount specified below plus accrued and unpaid interest to the redemption date, if the 10- 1/4% Notes are redeemed during the twelve-month period commencing on January 1 of the following years: Year Percentage - ------ ---------- 1996 104% 1997 103% 1998 102% 1999 101% 2000 and thereafter 100% The 10-1/4% Note Indenture contains covenants with respect to Envirodyne and its subsidiaries limiting (subject to a number of important qualifications), among other things, (i) the ability to pay dividends on or redeem or repurchase capital stock, (ii) the incurrence of indebtedness, (iii) certain affiliate transactions and (iv) the ability of the Company to consolidate with or merge with or into another entity or to dispose of substantially all its assets. Outstanding short-term and long-term debt consisted of: December December 28, 1995 29, 1994 ---------- --------- Short-term debt, current maturity of long-term debt and capital lease obligations: Current maturity of Bank Term Loan $11,100 Current maturity of Viskase Capital Lease Obligation $ 6,012 5,450 Current maturity of Viskase Limited Term Loan (4.7%) 2,033 1,882 Other 4,459 7,366 ------- ------- Total short-term debt $12,504 $25,798 ======= ======= Long-term debt: Bank Credit Agreement: Term Loan due 1999 $ 80,575 Revolving Loan due 1999 32,524 12% Senior Secured Notes due 2000 $160,000 10.25% Senior Notes due 2001 219,262 219,262 Viskase Capital Lease Obligation 141,182 147,194 Viskase Limited Term Loan (4.7%) 7,115 8,466 Other 2,622 1,337 -------- -------- Total long-term debt $530,181 $489,358 ======== ======== The fair value of the Company's debt obligation (excluding capital lease obligations) is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for the debt of the same remaining maturities. At December 28, 1995, the carrying amount and estimated fair value of debt obligations (excluding capital lease obligations) were $393,432 and $318,053, respectively. The average interest rate on short-term borrowing during 1995 was 10.1%. On December 28, 1990, Viskase and GECC entered into a sale and leaseback transaction. The sale and leaseback of assets included the production and finishing equipment at Viskase's four domestic casing production and finishing facilities. The facilities are located in Chicago, Illinois; Loudon, Tennessee; Osceola, Arkansas and Kentland, Indiana. Viskase, as the Lessee under the relevant agreements, will continue to operate all of the facilities. Sales proceeds on the sale-leaseback transaction were $171.5 million; proceeds were used to repay approximately $154 million of bank debt and a $15 million convertible note outstanding at the time. The lease has been accounted for as a capital lease. The principal terms of the sale and leaseback transaction include: (a) a 15 year basic lease term (plus selected renewals at Viskase's option); (b) annual rent payments in advance beginning in February 1991; and (c) a fixed price purchase option at the end of the basic 15 year term and fair market purchase options at the end of the basic term and each renewal term. Further, the Lease Documents contain covenants requiring maintenance by the Company of certain financial ratios and restricting the Company's ability to pay dividends, make payments to affiliates, make investments and incur indebtedness. Annual rental payments under the Lease will be approximately $19.2 million through 1997, $21.4 million in 1998 and $23.5 million through the end of the basic 15-year term. Viskase is required to provide credit support consisting of a standby letter of credit in an amount up to one year's rent through at least 1997. This credit support can be reduced up to $4 million currently if the Company achieves and maintains certain financial ratios. As of December 28, 1995, the Company had met the required financial ratios and the letter of credit has been reduced by $4 million. The letter can be further reduced in 1997 or eliminated after 1998 if the Company achieves and maintains certain financial ratios. Envirodyne and its other principal subsidiaries guaranteed the obligations of Viskase under the Lease. The 1996 GECC lease payment of $19,227 was paid on February 28, 1996. Principal payments under the capital lease obligations for the years ended 1996 through 2000 range from approximately $6 million to $14 million. The following is a schedule of minimum future lease payments under the capital lease obligations together with the present value of the net minimum lease payments as of December 28, 1995: Year ending December 1996 $ 19,714 1997 19,658 1998 21,636 1999 23,766 2000 23,766 Thereafter 118,028 -------- Net minimum lease payments 226,568 Less: Amount representing interest (77,315) -------- $149,253 ======== Aggregate maturities of remaining long-term debt for each of the next five fiscal years are: Total ------- 1996 $ 9,019 1997 9,418 1998 12,313 1999 95,477 2000 95,669 10. OPERATING LEASES (dollars in thousands) The Company has operating lease agreements for machinery, equipment and facilities. The majority of the facilities leases require the Company to pay maintenance, insurance and real estate taxes. Future minimum lease payments for operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 28, 1995, are: 1996 $3,033 1997 2,291 1998 1,708 1999 588 2000 375 Total thereafter ------ Total minimum lease payments $7,995 ====== Total rent expense during 1995, 1994 and 1993 amounted to $6,749, $5,982 and $5,401, respectively. 11. RETIREMENT PLANS The Company and its subsidiaries have defined contribution and defined benefit plans varying by country and subsidiary. At December 28, 1995, the North American operations of Viskase maintained several non-contributory defined benefit retirement plans. The Viskase plans cover substantially all salaried and full-time hourly employees, and benefits are based on final average compensation and years of credited service. The Company's policy is to fund the minimum actuarially computed annual contribution required under the Employee Retirement Income Security Act of 1974 (ERISA). As of the Viskase acquisition date, the former owner assumed the liability for the accumulated benefit obligation under its plans. The effect of expected future compensation increases on benefits accrued is recorded as a liability on the Company's consolidated balance sheet. PENSIONS -- NORTH AMERICA (dollars in thousands): Net pension cost for the Viskase North American plans consisted of: December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- Service cost -- benefits earned during the year $3,238 $ 3,662 $ 3,186 Interest cost on projected benefit obligation 4,794 4,249 4,000 Actual (gain) loss on plan assets (7,012) 874 (2,306) Net amortization and deferral 4,086 (3,696) (74) ------ ------- ------- Net pension cost $5,106 $ 5,089 $ 4,806 ====== ======= ======= The amounts included in the consolidated balance sheet for the North American plans of Viskase were: December 28, December 29, 1995 1994 ----------- ----------- Actuarial present value of benefit obligation: Vested benefits $45,208 $39,165 Nonvested benefits 4,435 4,316 ------- ------- Accumulated benefit obligation 49,643 43,481 Effect of projected future compensation increases 16,566 16,651 ------- ------- Projected benefit obligation 66,209 60,132 Plan assets at fair value, primarily listed stocks and investment grade corporate bonds 43,190 33,678 ------- ------- Amount underfunded 23,019 26,454 Unrecognized gain (loss) 7,578 3,778 Unrecognized prior service costs 63 71 ------- ------- Accrued liability included in consolidated balance sheet $30,660 $30,303 ======= ======= Assumed discount rate 7.5% 8.0% Assumed long-term compensation factor 4.5% 5.0% Assumed long-term return on plan assets 8.5% 8.5% SAVINGS PLANS (dollars in thousands): The Company also has defined contribution savings and similar plans, which vary by subsidiary, and, accordingly, are available to substantially all full-time U.S. employees not covered by collective bargaining agreements. The Company's aggregate contributions to these plans are based on eligible employee contributions and certain other factors. The Company expense for these plans was $2,134, $2,109 and $2,026 in 1995, 1994, and 1993, respectively. INTERNATIONAL PLANS (dollars in thousands): The Company maintains various pension and statutory separation pay plans for its European employees. The expense for these plans in 1995, 1994 and 1993 was $1,383, $1,043 and $864, respectively. As of their most recent valuation dates, in plans where vested benefits exceeded plan assets, the actuarially computed value of vested benefits exceeded those plans' assets by approximately $2,856; conversely, plan assets exceeded the vested benefits in certain other plans by approximately $2,346. OTHER POSTRETIREMENT BENEFITS (dollars in thousands): The Company provides postretirement health care and life insurance benefits to Viskase's North American employees. The Company does not fund postretirement health care and life benefits in advance, and has the right to modify these plans in the future. Effective January 1, 1993, the company adopted the provisions of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires that the expected cost of these benefits must be charged to expense during the years that the employee renders service. In connection with the 1989 acquisition of the Company, an accrual of $15,000 had been recorded for the estimated postretirement benefits liability at the acquisition date. On January 1, 1993, an additional liability and transition obligation was recorded on a prospective basis for $6,500. The transaction obligation was to be amortized over 20 years. Subsequently, Fresh Start Reporting resulted in the write-off of the transition obligation and statement of the liability for postretirement health care and life insurance benefits at fair value. Net periodic postretirement benefit cost for 1995 and 1994 includes the following components:
Medical Life Total -------------------- ------------------- -------------------- 1995 1994 1995 1994 1995 1994 ------- -------- ------- -------- ------ -------- Components of net periodic postretirement benefit cost: Service cost -- benefits earned during the current year $413 $ 511 $ 162 $ 176 $ 575 $ 687 Interest cost -- on accumulated post- retirement benefit obligation 1,182 1,208 472 442 1,654 1,650 Amortization of unrecognized transition benefit (73) (17) (90) ------- -------- -------- ------- ------- -------- Net periodic benefit cost $1,522 $ 1,719 $ 617 $ 618 $2,139 $ 2,337 ======= ======== ======== ======= ======= ======== Actuarial present value of benefit obligations: Retirees $6,937 $ 6,836 $ 2,745 $2,184 $ 9,682 $ 9,020 Fully eligible active participants 2,309 2,238 2,409 2,435 4,718 4,673 Other active participants 7,411 7,660 1,624 1,612 9,035 9,272 ------- -------- -------- ------- ------- -------- Total 16,657 16,734 6,778 6,231 23,435 22,965 Unrecognized gains 1,616 979 622 581 2,238 1,560 Unrecognized prior service costs (109) (109) ------- -------- -------- ------- ------- -------- Accumulated postretirement benefit obligation $18,164 $17,713 $ 7,400 $6,812 $25,564 $24,525 ======= ======== ======== ======= ======= ======== Assumed discount rate 7.50% Assumed medical trend rate 11.00% in 1995 decreasing to 6.50% in 2004 Assumed long-term compensation factor 4.50% (/TABLE> The postretirement benefit obligation was determined by application of the terms of the various plans, together with relevant actuarial assumptions. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at December 28, 1995 and December 29, 1994 by $178 and $198, respectively, and the service and interest cost components for 1995 and 1994 by a total of $16 and $22, respectively. EMPLOYEE RELATIONS The Company generally maintains productive and amicable relationships with its 4,900 employees worldwide. One of Viskase's domestic plants, located in Loudon, Tennessee, is unionized, and all of its Canadian and European plants have unions. Employees at the Company's European plants are unionized with negotiations occurring at both local and national levels. Contracts have recently been reached with certain of the European unions. Based on past experience and current conditions, the Company does not expect a protracted work stoppage to occur; however, national events outside of the Company's control may give rise to such risk. From time to time union organization efforts have occurred at other individual plant locations. Unions represent a total of approximately 1,500 of Viskase's 4,000 employees. None of Clear Shield's approximate 514 employees are represented by unions. Certain of the hourly production personnel at Sandusky's Ohio thermoforming facility are members of a union. As of December 28, 1995, approximately 1,675 of the Company's employees are covered by collective bargaining agreements that will expire within one year. 12. INCOME TAXES (dollars in thousands) The provision (benefit) for income taxes consisted of: December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ------------- Current: Federal $ 200 Foreign $ 950 4,652 $ 2,453 State and local ------ ------ ------- $ 950 4,852 2,453 ------ ------ ------- Deferred: Federal (7,219) (194) 17,188 Foreign 2,098 128 (1,434) State and local (1,329) 14 2,093 ------- ------ ------- (6,450) (52) 17,847 ------- ------ ------- $(5,500) $4,800 $20,300 ======= ====== ======= The income tax benefit for the 1995 period was allocated between loss before extraordinary loss for $2,918 and to the extraordinary loss for $2,582. The income tax expense for the 1993 period was allocated between loss before extraordinary gain for $12,000 and to the extraordinary gain for $8,300. A reconciliation from the statutory federal tax rate to the consolidated effective tax rate follows: December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ------------- Statutory federal tax rate (35.0)% 35.0% 35.0% Increase (decrease) in tax rate due to: State and local taxes net of related federal tax benefit (3.2) .8 1.3 Net effect of taxes relating to foreign operations .8 140.3 1.5 Intangibles amortization 9.4 214.1 2.3 Non-taxable debt discharge income, fresh start accounting and other bankruptcy related expenses (22.9) Other 7.6 13.8 2.0 ---- ----- ----- Consolidated effective tax rate (20.4)% 404.0% 19.2% ===== ===== ===== Temporary differences and carryforwards which give rise to a significant portion of deferred tax assets and liabilities for 1995 are as follows:
Temporary Difference Tax Effected -------------------------- --------------------------- Deferred Tax Deferred Tax Deferred Tax Deferred Tax Assets Liabilities Assets Liabilities ------------ ------------ ------------ ------------ Depreciation basis differences $296,263 $113,094 Inventory basis differences 28,097 10,976 Intangible basis differences 37,603 14,665 Lease transaction $147,194 $57,406 Pension and healthcare 56,545 22,067 Employee benefits accruals 13,544 5,282 Valuation allowances 3,209 1,252 Other accruals and reserves 6,673 2,602 Foreign exchange and other 648 70,720 216 27,580 -------- -------- ------- -------- $227,813 $432,683 $88,825 $166,315 -------- -------- ------- --------
At December 28, 1995, the Company had $11,136 of undistributed earnings of foreign subsidiaries considered permanently invested for which deferred taxes have not been provided. At December 28, 1995, the Company had federal income tax net operating loss carryforwards of approximately $28 million. Such losses will expire in the year 2009, if not previously utilized. In addition the Company has alternative minimum tax credit carryforwards of $3.5 million. Alternative minimum tax credits have an indefinite carryforward period. Significant limitations on the utilization of the net operating loss carryforwards and the alternative minimum tax credit carryforwards exist under federal income tax rules. Domestic earnings or (losses) after extraordinary gain or loss and before income taxes were approximately $(30,138), $(7,705) and $107,622 in 1995, 1994 and 1993, respectively. Foreign earnings or (losses) before income taxes were approximately $3,118, $8,893 and $(1,733) in 1995, 1994 and 1993, respectively. The Company joins in filing a U.S. consolidated federal income tax return including all of its domestic subsidiaries. 13. COMMITMENTS As of December 28, 1995, the Company had capital expediture commitments outstanding of approximately $3.7 million. 14. CONTINGENCIES (dollars in thousands) A class action lawsuit by former employees of subsidiary corporations comprising most of the Company's former steel and mining division (SMD) was pending as of the commencement of the bankruptcy case in which the plaintiffs were seeking substantial damages. In March 1996, Envirodyne completed a settlement of the lawsuit under which Envirodyne was released and discharged from all claims in exchange for 900,000 shares of Envirodyne common stock without any admission or finding of liability or wrongdoing. Litigation has been initiated with respect to events arising out of the bankruptcy cases and the 1989 acquisition of Envirodyne by 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 Rifkind and Michael Zimmerman, Case - ------------------------------------------------------ No. 93 A 1616, United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (Bankruptcy Court), ARTRA Group Incorporated (ARTRA) alleges breach of fiduciary duty and tortious inference in connection with the negotiation and consummation of the Plan of Reorganization. In ARTRA Group ----------- Incorporated v. Salomon Brothers Holding Company Inc, Salomon - ------------------------------------------------------------- Brothers Inc, D.P. Kelly & Associates, L.P., Donald P. Kelly, - ------------------------------------------------------------ Charles K. Bobrinskoy and Michael Zimmerman, Case No. 93 L 2198, - ------------------------------------------- Circuit Court of the Eighteenth Judicial Circuit, County of DuPage, State of Illinois, ARTRA alleges breach of fiduciary duty, fraudulent and negligent misrepresentation and breach of contract in connection with the 1989 acquisition of Envirodyne by Emerald. The plaintiff seeks damages in the total amount of $136.2 million plus interest and punitive damages of $408.6 million. D.P. Kelly & Associates, L.P. and Messrs. Kelly, Bobrinskoy, Massey, Rifkind 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 the undertaking of D.P. Kelly & Associates, L.P. to repay such funds in the event it is ultimately determined that there is no right to indemnity, Envirodyne is advancing funds to D.P. Kelly & Associates, L.P. and Mr. Kelly for the payment of legal fees in the case pending before the Bankruptcy Court. Although the Company is not a party to either case, the Company believes that the plaintiff's claims raise similar factual issues to those raised in the bankruptcy cases which, if adjudicated in a manner similar to that in the bankruptcy cases, would render it difficult for the plaintiff to establish liability. Accordingly, the Company believes that the indemnification claims would not have a material adverse effect upon the business or financial position of the Company, even if the claimants were ultimately successful in establishing their right to indemnification. Certain of Envirodyne's stockholders prior to the acquisition of Envirodyne by Emerald failed to exchange their certificates representing old Envirodyne common stock for the $40 per share cash merger consideration specified by the applicable acquisition agreement. In the Envirodyne bankruptcy case, Envirodyne sought to equitably subordinate the claims of the holders of untendered shares, so that such holders would not receive a distribution under the Plan of Reorganization. The Bankruptcy Court granted Envirodyne's motion for summary judgment and equitably subordinated the claims of the holders of untendered shares to the claims of other general unsecured creditors. Certain of the affected holders appealed and both the U.S. District Court and the U.S. Seventh Circuit Court of Appeals affirmed the Bankruptcy Court decision. The time period for further appeal has not passed. Envirodyne believes that, even in the event of further appeal, if any, and reversal of the prior decisions, the maximum number of shares of common stock that it would be required to issue to such claimants is approximately 106,000. Clear Shield National, Inc. and some of its employees have received subpoenas from the Antitrust Division of the United States Department of Justice relating to a grand jury investigation of the disposable plastic cutlery industry. The U.S. Department of Justice has advised a former officer and an existing employee that they are targets of the investigation. Both individuals were invited to appear and testify before the grand jury but both declined. Clear Shield National is cooperating fully with the investigation. 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 has informed the plaintiffs that such claims as they relate to Clear Shield were discharged by the order of the Bankruptcy Court and Plan of Reorganization and that the plaintiffs are permanently enjoined from pursuing legal action to collect discharged claims. On February 27, 1996, the plaintiff in the St. Cloud case --------- voluntarily dismissed the action without prejudice and refiled its action in the U.S. 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. filed a motion in Clear Shield National's Bankruptcy proceeding in the U.S. Bankruptcy Court for the Northern District of Illinois, Eastern Division. Eisenberg Brothers Inc.'s motion contends that the Bankruptcy Court's order did not discharge the plaintiff's claim. The Company and its subsidiaries are involved in various legal proceedings arising out of its business and other environmental matters, none of which is expected to have a material adverse effect upon its results of operations, cash flows or financial position. 15. CAPITAL STOCK, PAID IN CAPITAL, AND WARRANTS Authorized shares of preferred stock ($.01 par value per share) and common stock ($.01 par value per share) for the reorganized Envirodyne are 25,000,000 shares and 50,000,000 shares, respectively. 13,579,460 shares of common stock were issued and outstanding as of December 28, 1995. In accordance with the Plan of Reorganization, an additional 64,460 shares of common stock and 15,000 shares of common stock were issued to the general unsecured creditors of Envirodyne during 1995 and 1994, respectively. (Refer to Note 1.) Prior to the December 31, 1993 reorganization, the authorized shares of preferred stock and common stock were 1,000 shares and 320 shares, respectively. Envirodyne issued 1,500,000 warrants pursuant to the Plan of Reorganization, exercisable at any time until December 31, 1998. Each warrant was initially exercisable for one share of common stock at an initial exercise price of $17.25 per share. The exercise price and the number of shares of common stock for which a warrant is exercisable were adjusted as a result of the issuance of certain shares of Envirodyne after the consummation of the Plan of Reorganization, including the issuance of shares in settlement of the SMD lawsuit discussed in Note 14. Under terms of the warrant agreement, the exercise price has been adjusted from $17.25 to $16.08 per share and the number of common shares for which each warrant is exercisable has been adjusted from 1.000 share to 1.073 shares. 16. STOCK OPTIONS At December 28, 1995, the Company had outstanding options under the 1993 Stock Option Plan. Options were issued to certain employees to purchase shares at not less than the fair market value of the shares on the grant date. The plan options generally vest in three equal annual amounts beginning one year from the grant date and expire ten years from the grant date, subject to the acceleration of exercisability upon the occurrence of certain events. Such an acceleration event occurred in both November 1994 and August 1995. During 1995, each non-employee director of the Company received options to purchase 2,000 shares of stock at not less than the fair market value of the shares on the date of grant. The non-employee director options are fully exercisable upon issuance. Pursuant to the 1993 Stock Option Plan, on the date of each subsequent annual meeting of stockholders, non-employee directors will automatically be granted non-qualified options to purchase 1,000 shares of Common Stock at an option exercise price equal to the fair market value of a share of Common Stock on the date of grant. Stock option activity for the years ended December 28, 1995 and December 29, 1994 were: Number of Option Option Price Shares Per Share --------- ------------ Outstanding, December 31, 1993 Granted 402,020 $5.06 Exercised Terminated (13,100) 5.06 ------- Outstanding, December 29, 1994 388,920 5.06 Granted 97,200 5.06 Exercised Terminated (61,890) 5.06 ------- Outstanding, December 28, 1995 424,230 5.06 ======= 17. FAIR VALUE OF FINANCIAL INSTRUMENTS (dollars in thousands) The following table presents the carrying value and estimated fair value as of December 28, 1995 of the Company's financial instruments. (Refer to Notes 3 and 9.) Carrying Estimated Value Fair Value -------- ----------- Assets: Cash and equivalents $ 30,325 $ 30,325 Foreign currency contracts 3,397 3,377 Interest rate agreements 561 3 Liabilities: Long-term debt (excluding capital leases) 393,432 318,053 18. PATENT LITIGATION SETTLEMENT (dollars in thousands) In 1989 certain competitors of Viskase filed a declaratory action challenging the validity and enforceability of a Viskase patent relating to casings used in the manufacture of food products. In May 1994, the trial court upheld the validity and enforceability of the Viskase patent and found infringement of the patent. Before the trial on damages was conducted, Viskase entered into agreements to settle the claims and grant licenses to the competitors. Under the terms of these agreements Viskase received $9,457 for past infringement and advance royalties and established royalty rates for future patent use. 19. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands) Research and development costs are expensed as incurred and totaled $11,034, $16,852 and $15,216, for 1995, 1994, and 1993, respectively. 20. RELATED PARTY TRANSACTIONS (dollars in thousands) During fiscal 1995, 1994 and 1993, the Company paid DPK $770 for management services. In fiscal 1995, 1994 and 1993, the Company made payments of approximately $156, $560 and $354, respectively, to an affiliate of DPK for the use of a jet aircraft on an as-needed basis. During fiscal 1995, 1994, and 1993, the Company purchased product and services from affiliates of DPK in the amounts of approximately $1,537, $1,367 and $941, respectively. During fiscal 1995, 1994, and 1993, the Company sublet office space from DPK for which it paid approximately $151, $151 and $150, respectively, in rent. During fiscal 1995, the Company reimbursed a non-affiliated medical plan in the aggregate amount of $79,344 for medical claims of Messrs. Kelly, Gustafson and Corcoran. During fiscal 1995 and 1994, the Company advanced funds to and made payments on behalf of DPK and Donald P. Kelly in the amounts of approximately $52 and $118, respectively, for legal fees related to the litigation involving ARTRA Group Incorporated (refer to Note 14). 21. BUSINESS SEGMENT INFORMATION AND GEOGRAPHIC AREA INFORMATION (dollars in thousands) Envirodyne primarily manufactures and sells polymeric food casings and plastic packaging films and containers (food packaging products) and disposable foodservice supplies. The Company's operations are primarily in North/South America and Europe. Intercompany sales and charges (including royalties) have been reflected as appropriate in the following information. Other income for 1995, 1994, and 1993 includes net foreign exchange transaction gains (losses) of approximately $(61), $2,707, and $(4,631), respectively. Business Segment Information
December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- Net sales: Food packaging products $574,266 $530,179 $522,363 Disposable foodservice supplies 76,138 68,996 66,383 Other and eliminations (192) (146) (1,361) -------- -------- -------- $650,212 $599,029 $587,385 ======== ======== ======== Earnings before income taxes: Operating income: Food packaging products $39,183 $ 48,145 $ 53,432 Disposable foodservice supplies 4,959 6,514 5,223 Unallocated expenses, net -- primarily corporate (6,007) (5,982) (5,023) -------- -------- -------- 38,135 48,677 53,632 Interest expense, net 56,666 49,207 30,259 Other expense (income), net 1,710 (1,668) 5,540 Minority interest in loss of subsidiary 50 717 -------- -------- -------- $(20,241) $ 1,188 $ 18,550 ======== ======== ======== Identifiable assets: Food packaging products $796,655 $814,731 $790,125 Disposable foodservice supplies 69,812 71,530 64,879 Corporate and other, primarily cash equivalents 33,100 10,375 12,676 -------- -------- -------- $899,567 $896,636 $867,680 ======== ======== ======== Depreciation and amortization under capital lease and amortization of intangibles expense: Food packaging products $51,404 $ 47,207 $ 46,715 Disposable foodservice supplies 4,581 4,125 5,624 Corporate and other 76 55 59 -------- -------- -------- $56,061 $ 51,387 $ 52,398 ======== ======== ======== Capital expenditures: Food packaging products $30,744 $ 28,534 $ 37,673 Disposable foodservice supplies 3,687 4,012 3,100 Corporate and other 34 20 114 -------- -------- -------- $34,465 $ 32,566 $ 40,887 ======== ======== ========
Geographic Area Information
December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ----------- ----------- Net sales: North/South American operations $440,539 $423,049 $426,644 European operations 213,618 184,395 164,717 Other and eliminations (3,945) (8,415) (3,976) -------- -------- -------- $650,212 $599,029 $587,385 ======== ======== ======== Operating profit: North/South American operations $23,028 $ 28,124 $ 37,495 European operations 15,373 20,553 16,137 Other and eliminations (266) -------- -------- -------- $38,135 $ 48,677 $ 53,632 ======== ======== ======== Identifiable assets: North/South American operations $677,377 $667,358 $669,240 European operations 219,802 229,278 198,440 Other and eliminations 2,388 ======== ======== ======== $899,567 $896,636 $867,680 ======== ======== ======== The total assets and net assets of foreign businesses were approximately $282,383 and $107,023 at December 28, 1995.
22. QUARTERLY DATA (unaudited) Quarterly financial information for 1995 and 1994 is as follows (in thousands, except for per share amounts): First Second Third Fourth Fiscal 1995 Quarter Quarter Quarter Quarter Annual - ---------------- -------- -------- -------- -------- -------- Net Sales $155,824 $165,184 $166,688 $162,516 $650,212 Operating Income 8,689 10,089 8,653 10,704 38,135 Net income (loss) (3,895) (7,513) (4,475) (5,636) (21,519) Net income (loss) per share (0.29) (0.56) (0.33) (0.42) (1.59) The second quarter net (loss) includes an extraordinary loss of $(4.2) million on debt extinguishment. Net income (loss) per share amounts are computed independently for each of the quarters presented using weighted average shares outstanding during each quarter. The sum of the quarterly per share amounts in 1995 do not equal the total for the year because of rounding and 1995 stock issuances, as shown on the Consolidated Statement of Stockholders' Equity. First Second Third Fourth Fiscal 1994 Quarter Quarter Quarter Quarter Annual - -------------- -------- -------- -------- -------- -------- Net Sales $142,593 $150,788 $151,883 $153,765 $599,029 Operating Income 9,710 18,739 9,755 10,473 48,677 Net income (loss) (2,507) 3,448 (3,261) (1,292) (3,612) Net income (loss) per share (0.19) 0.26 (0.24) (0.10) (0.27) The 1994 second quarter operating income benefitted from a $9.5 million settlement of a patent infringement suit. Net income (loss) per share amounts are computed independently for each of the quarters presented using weighted average shares outstanding during each quarter. 23. SUBSEQUENT EVENTS (dollars in thousands) On February 23, 1996, the United States Bankruptcy Court for the Northern District of Illinois, Eastern District entered an order approving a settlement agreement resolving all claims of the former union employees of Wisconsin Steel Company which shut down in March 1980. Under terms of the approved settlement of Frank Lumpkin, et ----------------- al. v. Envirodyne Industries, Inc. (Lumpkin) and without any - --------------------------------- ------- admission or finding of liability or wrongdoing, Envirodyne was released and discharged from all claims in exchange for 900,000 shares of common stock. The distribution is in accordance with the terms of Envirodyne's Plan of Reorganization under which common stock was distributed to Envirodyne's general unsecured creditors in satisfaction of their allowed claims (Refer to Note 1). The Company issued additional shares of common stock for the Lumpkin settlement and to the holders of general unsecured claims - ------- of Envirodyne (as opposed to the subsidiaries of Envirodyne) under terms of the Plan of Reorganization. The total number of shares outstanding after issuance of common stock for the Lumpkin ------- settlement and for additional distribution to holders of general unsecured claims of Envirodyne is 14,479,721. Under terms of the Plan of Reorganization, Envirodyne issued warrants to purchase 10% of the fully diluted common stock. The issuance of common stock pursuant to the Lumpkin settlement, ------- together with other issuances of common stock since the consummation of the Plan of Reorganization, caused an adjustment to the exercise price of the warrants and the number of shares of common stock for which a warrant is exercisable. The exercise price was adjusted from $17.25 to $16.08 per share and the number of common shares for which each warrant is exercisable was adjusted from 1.000 share to 1.073 shares. On March 15, 1996 the United States Court of Appeals for the Seventh Circuit affirmed the decisions of the U.S. District Court and the Bankruptcy Court to equitably subordinate the claims of holders of untendered shares to claims of the other general unsecured creditors (refer to Note 14). The time period for further appeal has not passed. Envirodyne believes that even in the event of further appeal, if any, and reversal of the prior decisions, the maximum number of shares of common stock that it would be required to issue to such claimants is approximately 106,000. 24. 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 audited financial statements of Viskase Holding Corporation are being filed within. 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 DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total ------------- ------------- ------------- ---------------- ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 18,013 $ 486 $ 11,826 $ 30,325 Receivables and advances, net 52,462 70,458 57,082 $ (90,548) 89,454 Inventories 63,355 38,233 (2,114) 99,474 Other current assets 176 12,364 9,106 21,646 -------- -------- -------- --------- -------- Total current assets 70,651 146,663 116,247 (92,662) 240,899 Property, plant and equipment including those under capital lease 261 394,813 150,417 545,491 Less accumulated depreciation and amortization 150 55,620 20,217 75,987 -------- -------- -------- --------- -------- Property, plant and equipment, net 111 339,193 130,200 469,504 Deferred financing costs 7,048 1,042 8,090 Other assets 43,720 1,869 45,589 Investment in subsidiaries 77,766 133,634 (211,400) Excess reorganization value 94,968 40,517 135,485 -------- -------- -------- --------- -------- $155,576 $758,178 $289,875 $(304,062) $899,567 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital lease $6,407 $6,097 $ 12,504 Accounts payable and advances $ 80 78,848 50,737 $ (90,548) 39,117 Accrued liabilities 8,126 37,488 21,939 67,553 -------- -------- -------- --------- -------- Total current liabilities 8,206 122,743 78,773 (90,548) 119,174 Long-term debt including obligation under capital lease 379,262 143,198 7,721 530,181 Accrued employee benefits 51,345 4,281 55,626 Deferred and noncurrent income taxes 34,088 17,507 25,895 77,490 Intercompany loans (383,076) 340,000 43,083 (7) Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 13,579,460 shares issued and outstanding 136 3 32,738 (32,741) 136 Paid in capital 134,864 103,955 87,871 (191,826) 134,864 Accumulated earnings (deficit) (25,131) (27,752) 2,334 25,418 (25,131) Cumulative foreign currency translation adjustments 7,227 7,179 7,179 (14,358) 7,227 -------- -------- -------- --------- -------- Total stockholders' equity 117,096 83,385 130,122 (213,507) 117,096 -------- -------- -------- --------- -------- $155,576 $758,178 $289,875 $(304,062) $899,567 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING BALANCE SHEETS DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations (1) Total (in thousands) ----------- ------------ ------------ ------------- -------------- ASSETS Current assets: Cash and equivalents $ 555 $ 1,853 $ 4,881 $ 7,289 Receivables and advances, net 33,508 63,949 49,378 $ (59,967) 86,868 Inventories 68,719 43,725 (1,961) 110,483 Other current assets 181 12,999 6,286 19,466 -------- -------- -------- --------- -------- Total current assets 34,244 147,520 104,270 (61,928) 224,106 Property, plant and equipment including those under capital lease 189 367,880 138,030 506,099 Less accumulated depreciation and amortization 55 26,739 8,967 35,761 -------- -------- -------- --------- -------- Property, plant and equipment, net 134 341,141 129,063 470,338 Deferred financing costs 8,062 1,081 9,143 Other assets 45,757 1,424 47,181 Investment in subsidiaries 91,576 116,360 (207,936) Excess reorganization value 102,230 43,638 145,868 -------- -------- -------- --------- -------- $134,016 $753,008 $279,476 $(269,864) $896,636 ======== ======== ======== ========= ======== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt and obligation under capital lease $ 11,100 $ 7,720 $6,978 $ 25,798 Accounts payable and advances 726 53,193 40,383 $ (59,967) 34,335 Accrued liabilities 10,254 36,634 25,358 72,246 -------- -------- -------- --------- -------- Total current liabilities 22,080 97,547 72,719 (59,967) 132,379 Long-term debt including obligation under capital lease 327,437 147,898 14,023 489,358 Accrued employee benefits 52,248 3,969 56,217 Deferred and noncurrent income taxes 29,006 31,927 22,400 83,333 Intercompany loans (379,856) 340,000 39,856 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; none outstanding Common stock, $.01 par value; 13,515,000 shares issued and outstanding 135 4 32,608 (32,612) 135 Paid in capital 134,865 87,805 87,440 (175,245) 134,865 Accumulated earnings (deficit) (3,612) (8,333) 2,549 5,784 (3,612) Cumulative foreign currency translation adjustments 3,961 3,912 3,912 (7,824) 3,961 -------- -------- -------- --------- -------- Total stockholders' equity 135,349 83,388 126,509 (209,897) 135,349 -------- -------- -------- --------- -------- $134,016 $753,008 $279,476 $(269,864) $896,636 ======== ======== ======== ========= ======== (1) Elimination of intercompany receivables, payables and investment accounts.
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ---------- ------------ ----------- ------------ ------------- (in thousands) NET SALES $417,756 $267,212 $(34,756) $650,212 COSTS AND EXPENSES Cost of sales 312,419 207,232 (34,603) 485,048 Selling, general and administrative $6,004 65,318 39,908 111,230 Amortization of intangibles and excess reorganization value 12,466 3,333 15,799 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (6,004) 27,553 16,739 (153) 38,135 Interest income 203 12 455 670 Interest expense 40,081 13,902 3,353 57,336 Intercompany interest expense (income) (38,218) 34,007 4,211 Management fees (income) (8,086) 6,377 1,709 Other expense (income), net (2,400) 52 4,058 1,710 Equity Loss (income) in subsidiary 19,571 216 (19,787) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (16,749) (26,989) 3,863 19,634 (20,241) Income tax provision (benefit) 1,264 (7,570) 3,388 (2,918) -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (18,013) (19,419) 475 19,634 (17,323) Extraordinary loss, net of tax 3,506 690 4,196 -------- -------- -------- --------- -------- NET (LOSS) $(21,519) $ (19,419) $ (215) $ 19,634 $(21,519) ======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED DECEMBER 28, 1995
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ----------- ------------- --------------- -------------- --------------- (in thousands) Net cash provided by (used in) operating activities $ (13,276) $ 32,242 $20,001 $ 38,967 Cash flows from investing activities: Capital expenditures (34) (27,842) (6,589) (34,465) Proceeds from sale of property, plant and equipment 39 47 86 -------- -------- -------- --------- -------- Net cash (used in) investing activities (34) (27,803) (6,542) (34,379) Cash flows from financing activities: Proceeds from revolving loan and long term borrowings 164,000 1,706 42,216 207,922 Deferred financing costs (6,721) (1,166) (7,887) Repayment of revolving loan, long-term borrowings and capital lease obligations (123,275) (7,512) (50,588) (181,375) Increase (decrease) in Envirodyne loan (3,236) 3,236 -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities 30,768 (5,806) (6,302) 18,660 Effect of currency exchange rate changes on cash (212) (212) -------- -------- -------- --------- -------- Net increase (decrease) in cash and equivalents 17,458 (1,367) 6,945 23,036 Cash and equivalents at beginning of period 555 1,853 4,881 7,289 -------- -------- -------- --------- -------- Cash and equivalents at end of period $18,013 $ 486 $11,826 $30,325 ======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ----------- ------------ ------------- -------------- --------------- (in thousands) NET SALES $406,988 $220,787 $(28,746) $599,029 Patent infringement settlement income 9,457 9,457 COSTS AND EXPENSES Cost of sales 295,356 168,891 (28,487) 435,760 Selling, general and administrative $6,015 71,092 31,330 108,437 Amortization of intangibles and excess reorganization value 12,266 3,346 15,612 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (6,015) 37,731 17,220 (259) 48,677 Interest income 13 46 248 307 Interest expense 31,937 14,124 3,453 49,514 Intercompany interest expense (income) (35,077) 31,170 3,907 Management fees (income) (7,400) 6,544 856 Other expense (income), net (3,448) 7 1,923 (150) (1,668) Equity loss (income) in subsidiary 8,392 (2,549) (5,843) Minority interest in loss of subsidiary 50 50 -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES (406) (11,519) 7,329 5,784 1,188 Income tax provision 3,206 (3,186) 4,780 4,800 -------- -------- -------- --------- -------- NET INCOME (LOSS) $(3,612) $ (8,333) $2,549 $ 5,784 $ (3,612) ======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED DECEMBER 29, 1994
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ----------- ------------ ------------- -------------- --------------- (in thousands) Net cash provided by (used in) operating activities $(1,414) $13,575 $11,125 $23,286 Cash flows from investing activities: Capital expenditures (20) (21,666) (10,880) (32,566) Proceeds from sales of property, plant and equipment 239 120 359 Purchase of minority interest in subsidiary (4,200) (4,200) -------- -------- -------- --------- -------- Net cash (used in) investing activities (20) (25,627) (10,760) (36,407) Cash flows from financing activities: Proceeds from revolving loan and long term borrowings 27,600 10,068 37,668 Deferred financing costs (1,608) (1,608) Repayment of revolving loan, long-term borrowings and capital lease obligations (8,325) (5,180) (9,112) (22,617) Increase (decrease) in Envirodyne loan (16,608) 17,163 (555) -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities 1,059 11,983 401 13,443 Effect of currency exchange rate changes on cash (776) (776) -------- -------- -------- --------- -------- Net (decrease) in cash and equivalents (375) (69) (10) (454) Cash and equivalents at beginning of period 930 1,922 4,891 7,743 -------- -------- -------- --------- -------- Cash and equivalents at end of period $ 555 $ 1,853 $4,881 $7,289 ======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1993
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ----------- ------------ ------------- -------------- --------------- (in thousands) NET SALES $408,872 $195,291 $(16,778) $587,385 COSTS AND EXPENSES Cost of sales 283,743 151,694 (16,745) 418,692 Selling, general and administrative $5,021 65,992 28,337 99,350 Amortization of intangibles and excess reorganization value 13,170 2,541 15,711 -------- -------- -------- --------- -------- OPERATING INCOME (LOSS) (5,021) 45,967 12,719 (33) 53,632 Interest income 1 20 910 931 Interest expense 10,388 14,589 6,213 31,190 Intercompany interest expense (income) (21,970) 61,416 (39,446) Management fees (income) (7,600) 6,748 852 Other expense (income), net 3,432 (86) 2,194 5,540 Minority interest in subsidiary 717 717 -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES, REORGANI- ZATION ITEMS AND EXTRAORDINARY ITEM 10,730 (35,963) 43,816 (33) 18,550 Reorganization items, net 92,745 12,000 104,745 -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (82,015) (47,963) 43,816 (33) (86,195) Income tax provision (benefit) (1,430) (4,442) 17,872 12,000 -------- -------- -------- --------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (80,585) (43,521) 25,944 (33) (98,195) Extraordinary gain, net of tax 183,784 183,784 -------- -------- -------- --------- -------- NET INCOME (LOSS) $103,199 $ (43,521) $ 25,944 $ (33) $ 85,589 ======== ======== ======== ========= ========
ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATING CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1993
Guarantor Nonguarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total ----------- ------------ ------------- -------------- --------------- (in thousands) Net cash provided by operating activities before reorganization expense $24,623 $ 33,840 $33,738 $ 92,201 Net cash used for reorganization items (2,929) (12,000) (14,929) -------- -------- -------- --------- -------- Net cash provided by operating activities 21,694 21,840 33,738 77,272 Cash flows from investing activities: Capital expenditures (114) (27,289) (13,484) (40,887) Proceeds from sale of property, plant and equipment 4 120 124 -------- -------- -------- --------- -------- Net cash (used in) investing activities (114) (27,285) (13,364) (40,763) Cash flows from financing activities: Proceeds from revolving loan and long term borrowings 100,000 6,003 106,003 Deferred financing costs (8,659) (1,120) (9,779) Repayment of revolving loan, long-term borrowings and capital lease obligations (103,100) (4,698) (30,938) (138,736) Increase (decrease) in Envirodyne loan (8,891) 10,519 (1,628) -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities (20,650) 5,821 (27,683) (42,512) Effect of currency exchange rate changes on cash (316) (316) -------- -------- -------- --------- -------- Net increase (decrease) in cash and equivalents 930 376 (7,625) (6,319) Cash and equivalents at beginning of period 1,546 12,516 14,062 -------- -------- -------- --------- -------- Cash and equivalents at end of period $ 930 $ 1,922 $ 4,891 $ 7,743 ======== ======== ======== ========= ========
Financial Statement Schedules Required by Regulation S-X - -------------------------------------------------------- VISKASE HOLDING CORPORATION AND SUBSIDIARIES Consolidated Financial Statements: - --------------------------------- Report of independent accountants Consolidated balance sheets, December 28, 1995 and December 29, 1994 Consolidated statements of operations, for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Consolidated statements of stockholders' equity (deficit), for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Consolidated statements of cash flows, for December 30, 1994 to December 28, 1995 (Post-consummation); January 1 to December 29, 1994 (Post-consummation); and January 1 to December 31, 1993 (Pre-consummation); Notes to consolidated financial statements REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors Viskase Holding Corporation We have audited the consolidated financial statements and the financial statement schedules of Viskase Holding Corporation and Subsidiaries. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note 1 to the consolidated financial statements, on December 31, 1993, Envirodyne Industries, Inc. and its domestic subsidiaries completed a comprehensive financial restructuring through the implementation of reorganization under Chapter 11 of the United States Bankruptcy Code and applied fresh start reporting. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Viskase Holding Corporation and Subsidiaries as of December 28, 1995 and December 29, 1994, and the consolidated results of their operations and their cash flows for the period December 30, 1994 to December 28, 1995 and January 1 to December 29, 1994 (Post-consummation) and January 1 to December 31, 1993 (Pre-consummation), in conformity with generally accepted accounting principles. In addition, in our opinion the schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Coopers & Lybrand L.L.P. Chicago, Illinois March 26, 1996 VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 28, December 29, 1995 1994 --------------- ------------- (in thousands) ASSETS Current assets: Cash and equivalents $ 11,826 $ 6,201 Receivables, net 53,022 46,834 Receivables, affiliates 51,829 48,138 Inventories 38,233 43,725 Other current assets 9,106 6,515 -------- -------- Total current assets 164,016 151,413 Property, plant and equipment 150,417 138,030 Less accumulated depreciation 20,217 8,967 -------- -------- Property, plant and equipment, net 130,200 129,063 Deferred financing costs 1,042 1,081 Other assets 1,869 1,424 Excess reorganization value 40,517 43,638 -------- -------- $337,644 $326,619 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt including current portion of long-term debt $ 6,097 $ 6,978 Accounts payable 13,720 15,479 Accounts payable and advances, affiliates 54,152 43,233 Accrued liabilities 21,942 25,358 -------- -------- Total current liabilities 95,911 91,048 Long-term debt 7,721 14,023 Accrued employee benefits 4,281 3,969 Deferred and noncurrent income taxes 25,895 22,400 Intercompany loans 81,094 77,866 Commitments and contingencies Stockholders' equity: Common stock, $1.00 par value, 1,000 shares authorized; 100 shares issued and outstanding Paid in capital 103,463 103,463 Retained earnings 12,100 9,938 Cumulative foreign currency translation adjustments 7,179 3,912 -------- -------- Total stockholders' equity 122,742 117,313 -------- -------- $337,644 $326,619 ======== ======== The accompanying notes are an integral part of the consolidated financial statements. VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
52 weeks 52 weeks 52 weeks December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ------------ ----------- ----------- (in thousands, except for number of shares and per share amounts) NET SALES $267,212 $220,787 $195,291 Patent infringement settlement income 9,457 COSTS AND EXPENSES Cost of sales 207,232 168,891 151,694 Selling, general and administrative 36,288 27,654 25,171 Amortization of intangibles and excess reorganization value 3,333 3,346 2,541 -------- -------- -------- OPERATING INCOME 20,359 30,353 15,885 Interest income 455 248 910 Interest expense 3,353 3,453 6,213 Intercompany interest expense 4,199 3,861 6,084 Management fees 1,709 856 852 Other expense (income), net 3,754 2,518 1,723 Minority interest in loss of subsidiary 50 717 -------- -------- -------- INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM 7,799 19,963 2,640 Income tax provision 4,947 10,025 2,645 -------- -------- -------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2,852 9,938 (5) Extraordinary loss, net of tax 690 -------- -------- -------- NET INCOME (LOSS) $2,162 $ 9,938 $ (5) ======== ======== ======== WEIGHTED AVERAGE COMMON SHARES 100 100 100 === === === PER SHARE AMOUNTS: NET INCOME (LOSS) $ 21,620 $ 99,380 $ (50) ======== ======== ======== Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the consolidated statement of operations for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) The accompanying notes are an integral part of the consolidated financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Cumulative Foreign Currency Total Common Paid in Retained Translation Stockholder's Stock Capital Earnings Adjustments Equity ------ --------- ----------- ----------- ------------- (in thousands) Balance December 31, 1992 $20,119 $79,458 $(2,356) $97,221 Net (loss) (5) (5) Capital contributions 4,295 4,295 Fresh start revaluation adjustments 58,272 58,272 Translation adjustments (2,044) (2,044) Elimination of Viskase Holding Corporation accumulated earnings (79,453) 4,400 (75,053) ========================================================================================================== Balance December 31, 1993 $82,686 $ 0 $ 0 $82,686 Net income 9,938 9,938 Capital contributions 16,056 16,056 Fresh start revaluation adjustments 4,721 4,721 Translation adjustments 3,912 3,912 -------- ------- ------- -------- Balance December 29, 1994 $103,463 $ 9,938 $3,912 $117,313 Net income 2,162 2,162 Translation adjustments 3,267 3,267 -------- ------- ------- -------- Balance December 28, 1995 $103,463 $12,100 $ 7,179 $122,742 ======== ======= ======= ======== Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the stockholders' equity for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) The accompanying notes are an integral part of the consolidated financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
December 30, January 1, January 1, 1994 to to to December 28, December 29, December 31, 1995 1994 1993 ----------- ------------ ----------- (in thousands) Cash flows from operating activities: Income (loss) before extraordinary item $ 2,852 $ 9,938 $ (5) Extraordinary loss 690 ------- ------- -------- Net income (loss) 2,162 9,938 (5) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 11,202 9,018 11,024 Amortization of intangibles and excess reorganization value 3,333 3,346 2,541 Amortization of deferred financing fees and discount 208 210 935 Increase (decrease) in deferred and noncurrent income taxes 2,098 128 (1,436) Loss on debt extinguishment 1,030 Foreign currency transaction loss (gain) 159 (68) Loss (gain) on sales of property, plant and equipment 30 32 424 Changes in operating assets and liabilities: Accounts receivable (4,441) (9,076) (3,055) Accounts receivable, affiliates (5,183) (18,214) 9,373 Inventories 7,224 (8,895) (1,467) Other current assets (2,144) (1,462) (461) Accounts payable and accrued liabilities (6,926) 8,314 3,219 Accounts payable, affiliates 10,719 21,739 13,359 Other (790) 288 (908) ------- ------- -------- Total adjustments 16,519 5,428 33,480 ------- ------- -------- Net cash provided by operating activities 18,681 15,366 33,475 Cash flows from investing activities: Capital expenditures (6,589) (10,880) (13,484) Proceeds from sale of property, plant and equipment 47 120 120 Investments and advances to affiliated companies Purchase of minority interest in subsidiary (4,200) ------- ------- -------- Net cash (used in) investing activities (6,542) (14,960) (13,364) Cash flows from financing activities: Proceeds from revolving loan and long-term borrowings 42,216 10,068 6,003 Deferred financing costs (1,166) (1,120) Repayment of revolving loan and long-term borrowings (50,588) (9,112) (30,938) Increase (decrease) in Envirodyne loan and advances 3,236 (555) (1,628) ------- ------- -------- Net cash provided by (used in) financing activities (6,302) 401 (27,683) Effect of currency exchange rate changes on cash (212) (776) (316) ------- ------- -------- Net increase (decrease) in cash and equivalents 5,625 31 (7,888) Cash and equivalents at beginning of period 6,201 6,170 14,058 ------- ------- -------- Cash and equivalents at end of period $ 11,826 $ 6,201 $ 6,170 ======== ======== ======== - ------------------------------------------------------------------------------------------------------------------ Supplemental cash flow information: Interest paid $1,919 $ 1,808 $ 4,403 Income taxes paid $4,255 $ 3,548 $ 1,063 Due to the implementation of the Plan of Reorganization and Fresh Start Reporting, the consolidated statement of cash flows for the fiscal years ended December 28, 1995 and December 29, 1994 are not comparable to the fiscal year ended December 31, 1993. (Refer to Note 1 of Notes to Consolidated Financial Statements.) Supplemental schedule of noncash investing and financing activities: Fiscal 1993 - ------------ Viskase Holding Corporation's capital increased by $4.3 million due to the forgiveness of an Envirodyne loan. Viskase Holding Corporation contributed capital consisting of $160 thousand of equipment to Viskase Brasil Embalagens Ltda. Fiscal 1994 - ------------ Viskase S.A. and its subsidiary Viskase Canada Inc.'s capital increased by $16 million due to the forgiveness of an Envirodyne loan. Viskase Corporation transferred equipment totaling $1.5 million, $174 thousand and $2.1 million to Viskase S.A., Viskase de Mexico S.A. de C.V., and Viskase Brasil Embalagens Ltda, respectively. Fiscal 1995 - ----------- Viskase Corporation transferred equipment totaling $497 thousand to Viskase S.A. Viskase Holding Corporation contributed capital consisting of $250 thousand of equipment to Viskase de Mexico S.A. de C.V. The accompanying notes are an integral part of the consolidated financial statements.
VISKASE HOLDING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL Viskase Holding Corporation is a wholly owned subsidiary of Viskase Corporation. Viskase Corporation, in turn, is a wholly owned subsidiary of Envirodyne Industries, Inc. Viskase Holding Corporation serves as the direct or indirect parent company for the majority of Viskase Corporation's non-domestic operations. These subsidiaries are as follows:
Name of Subsidiary Parent of Subsidiary Country of Business - ------------------------------ --------------------------- --------------------- Viskase Brasil Embalagens Ltda. Viskase Holding Corporation Brazil Viskase Australia Limited Viskase Holding Corporation Australia Viskase de Mexico S.A. de C.V. Viskase Holding Corporation Mexico Viskase S.A. Viskase Holding Corporation France Viskase Gmbh Viskase S.A. Germany Viskase SPA Viskase S.A. Italy Viskase Canada Inc. Viskase S.A. Canada Viskase ZAO Viskase S.A. Russia Viskase Holdings Limited Viskase S.A. United Kingdom Filmco International Limited Viskase Holdings Limited United Kingdom Viskase Limited Viskase Holdings Limited United Kingdom Viskase (UK) Limited Viskase Limited United Kingdom Envirodyne S.A.R.L. Viskase (UK) Limited France
Viskase Holding Corporation conducts its operations through its subsidiaries and, for the most part, has no assets or liabilities other than its investments, accounts receivable and payable with affiliates, and intercompany loan and advances. On January 6, 1993, a group of bondholders filed an involuntary petition for reorganization of Envirodyne Industries, Inc. under Chapter 11 of the U.S. Bankruptcy Code. On January 7, 1993, several of the subsidiaries of Envirodyne Industries, Inc., including Viskase Holding Corporation, each filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division (the Bankruptcy Court). None of the subsidiaries of Viskase Holding Corporation entered into Chapter 11. On December 17, 1993, the Bankruptcy Court confirmed the First Amended Joint Plan of Reorganization as twice modified (Plan of Reorganization) with respect to Envirodyne Industries, Inc. (Envirodyne) and certain of its subsidiaries, including Viskase Holding Corporation. The Plan of Reorganization was consummated and Envirodyne and certain of its subsidiaries emerged from Chapter 11 on December 31, 1993 (Effective Date). For accounting purposes, the Plan of Reorganization was deemed to be effective as of December 31, 1993. The Chapter 11 filing was related only to the Company's domestic operations and did not include the foreign subsidiaries and various inactive domestic subsidiaries. The Company accounted for the reorganization using the principles of fresh start reporting in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." Accordingly, all assets and liabilities have been restated to reflect their reorganization value, which approximates fair value. The reorganization value of the Company's equity of $135,000 was based on the consideration of many factors and various valuation methods, including discounted cash flows and comparable multiples of earnings valuation techniques believed by management and its financial advisors to be representative of the Company's business and industry. Factors considered by the Company included the following: . Forecasted operating and cash flow results which gave effect to the estimated impact of debt restructuring and other operational reorganization. . Discounted residual value at the end of the forecasted period based on the capitalized cash flows for the last year of that period. . Competition and general economic considerations. . Projected sales growth. . Potential profitability. . Seasonality and working capital requirements. The excess of the reorganization value over the fair value of net assets and liabilities is reported as excess reorganization value and is being amortized over a fifteen-year period. The Company continues to evaluate the recoverability of excess reorganization value based on the operating performance and expected future undiscounted cash flows of the operating business units. The reorganization and the adoption of Fresh Start Reporting resulted in no material adjustments to the Company's Consolidated Statement of Operations for the period January 1 to December 31, 1993. 2. NATURE OF BUSINESS Viskase Holding Corporation's subsidiaries manufacture food packaging products. The operations of these subsidiaries are primarily in Europe and South and North America. Through its subsidiaries, the Company is a leading producer of cellulosic casings used in preparing and packaging processed meat products and is a major producer of heat shrinkable plastic bags and specialty films for packaging and preserving fresh and processed meat products, poultry and cheeses. The Company is also a leading international manufacturer of plasticized polyvinyl chloride (PVC) films, primarily for use in packaging food items. International Operations Viskase Holding Corporation's subsidiaries have seven manufacturing facilities located outside the continental United States, in Beauvais, France; Thaon, France; Lindsay, Ontario, Canada; Sedgefield, England (Great Britain); Swansea, Wales (Great Britain); Guarulhos, Brazil and Nuevo Laredo, Mexico. International sales and operations may be subject to various risks including, but not limited to, possible unfavorable exchange rate fluctuations, political instability, governmental regulations (including import and export controls), restrictions on currency repatriation, embargoes, labor relations laws and the possibility of governmental expropriation. Viskase Holding Corporation's foreign operations generally are subject to taxes on the repatriation of funds. International operations in certain parts of the world may be subject to international balance of payments difficulties which may raise the possibility of delay or loss in the collection of accounts receivable from sales to customers in those countries. Viskase Holding Corporation believes that its subsidiaries' allow- ance for doubtful accounts makes adequate provision for the collectibility of its receivables. Management believes that growth potential exists for many of Viskase's products outside the United States and that Viskase is well positioned to participate in these markets. Sales and Distribution Viskase Holding Corporation's subsidiaries' principal markets are in Europe, Latin America, North America and Asia Pacific. The United Kingdom operation sells its PVC films directly and through distributors, primarily to the retail grocery and foodservice industries in Europe. In Europe, Viskase Holding Corporation's subsidiaries operate casings service centers in Milan, Italy, Pulheim, Germany, and Moscow, Russia. The Company also operates a service center in Brisbane, Australia. These service centers provide finishing, inventory and delivery services to customers. The subsidiaries also use outside distributors to market their products to customers in Europe, Africa, Asia and Latin America. Competition From time to time, Viskase Holding Corporation's subsidiaries experience reduced market share or reduced profits due to price competition; however, management believes that such market conditions will not result in any long-term material loss of business. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (A) Basis of presentation Effective in 1990 Envirodyne Industries, Inc. adopted a 52/53 week fiscal year ending on the last Thursday of December. Viskase Holding Corporation's 1993 financial statements include December 31, 1993 in order to present the effect of the consummation of the Plan of Reorganization. (B) Principles of consolidation The consolidated financial statements reflect the accounts of Viskase Holding Corporation and its subsidiaries. All significant intercompany transactions and balances between and among Viskase Holding Corporation and its subsidiaries have been eliminated in the consolidation. Reclassifications have been made to the prior years' financial statements to conform to the 1995 presentation. (C) Use of estimates in the preparation of financial statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. (D) Cash equivalents (dollars in thousands) For purposes of the statement of cash flows, the Company considers cash equivalents to consist of all highly liquid debt investments purchased with an initial maturity of approximately three months or less. Due to the short-term nature of these instruments, the carrying values approximate the fair market value. Cash equivalents include $8,074 and $821 of short-term investments at December 28, 1995 and December 29, 1994, respectively. (E) Inventories Inventories, primarily foreign, are valued at the lower of first-in, first-out (FIFO) cost or market. (F) Property, plant and equipment Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 32 years. Upon retirement or other disposition, cost and related accumulated depreciation are removed from the accounts, and any gain or loss is included in results of operations. Effective December 31, 1993 and in conjunction with the Fresh Start Reporting, property, plant and equipment was reported at the estimated fair value. (G) Deferred financing costs Deferred financing costs are amortized on a straight-line basis over the expected term of the related debt agreement. Amortization of deferred financing costs is classified as interest expense. (H) Excess reorganization value and excess investment over net assets acquired, net Excess reorganization value is amortized on the straight-line method over 15 years. Cost in excess of net assets acquired, net was amortized on a straight-line method over 40 years in fiscal 1993. The Company continues to evaluate the recoverability of excess reorganization value based on operating performance and undiscounted cash flows of the operating business units. Impairment will be recognized when the expected undiscounted future operating cash flows derived from such intangible is less than its carrying value. If impairment is identified, valuation techniques deemed appropriate under the particular circumstances will be used to determine the intangible's fair value. The loss will be measured based on the excess of carrying value over the determined fair value. The review for impairment is performed at least on a quarterly basis. (I) Pensions The Company's operations in Europe have defined benefit retirement plans covering substantially all salaried and full time hourly employees. Pension cost is computed using the projected unit credit method. The Company's funding policy is consistent with funding requirements of the applicable foreign laws and regulations. (J) Postemployment benefits Effective December 31, 1993 and in conjunction with the Fresh Start Reporting, the Company adopted SFAS No. 112 "Employers Accounting for Postemployment Benefits." The impact of adopting SFAS No. 112 was not material. (K) Income taxes Income taxes are accounted for in accordance with SFAS No. 109. Tax provisions and benefits are recorded at statutory rates for taxable items included in the consolidated statements of operations regardless of the period for which such items are reported for tax purposes. Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities for which income tax benefits will be realized in future years. (L) Net income (loss) per share Net income (loss) per share of common stock is based upon the weighted average number of shares of common stock outstanding during the year. (M) Revenue recognition Sales to customers are recorded at the time of shipment net of discounts and allowances. (N) Foreign currency contracts The Company maintains a hedging program to partially hedge its forecasted foreign currency revenue cash flows. The hedging program principally addresses revenue cash flows within its European operations. The foreign exchange contracts are denominated predominantly in the major European currencies and have varying maturities up to eighteen months. The effect of this practice is to minimize the effect of foreign exchange rate movements on the Company's operating results. The Company's hedging activities do not subject the Company to additional exchange rate risk because gains and losses on these contracts offset losses and gains on the transactions being hedged. The cash flows from forward contracts accounted for as hedges of identifiable transactions or events are classified consistent with the cash flows from the transactions or events being hedged. (O) Stock-based compensation Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" encourages, but does not require, companies to recognize compensation expense for grants of stock, stock options and other equity instruments to employees based on new fair value acounting rules. Although expense recognition for employee stock-based compensation is not mandatory, SFAS 123 requires companies that choose not to adopt the new fair value accounting to disclose pro forma net income and earnings per share under the new method. This new accounting principle is effective for the Company's fiscal year ending December 26, 1996. The Company believes that adoption is not expected to have a material impact on its financial condition as the Company will not adopt the fair value accounting, but will instead comply with the disclosure requirements. 4. RECEIVABLES (dollars in thousands) Receivables consisted primarily of trade accounts receivable and were net of allowances for doubtful accounts of $2,256 and $1,364 at December 28, 1995, and at December 29, 1994, respectively. 5. INVENTORIES (dollars in thousands) Inventories consisted of: December 28, December 29, 1995 1994 ----------- ----------- Raw materials $ 5,299 $ 5,778 Work in process 13,342 13,975 Finished products 19,592 23,972 ------- ------- $38,233 $43,725 ======= ======= Inventories were net of reserves for obsolete and slow moving inventory of $1,331 and $1,686 at December 28, 1995 and December 29, 1994, respectively. 6. PROPERTY, PLANT AND EQUIPMENT (dollars in thousands) December 28, December 29, 1995 1994 ----------- ----------- Property, plant and equipment: Land and improvements $ 5,319 $ 4,982 Buildings and improvements 30,236 28,588 Machinery and equipment 114,212 103,293 Construction in progress 283 1,167 Capital Leases: Machinery and equipment 367 -------- -------- $150,417 $138,030 ======== ======== Maintenance and repairs charged to costs and expenses for 1995, 1994, and 1993 aggregated $10,288, $10,748 and $9,782, respectively. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 32 years. 7. ACCRUED LIABILITIES (dollars in thousands) Accrued liabilities were comprised of: December 28, December 29, 1995 1994 ----------- ----------- Compensation and employee benefits $ 9,446 $10,408 Taxes, other than on income 1,585 2,006 Accrued volume and sales discounts 5,320 5,445 Other 5,591 7,499 ------- ------- $21,942 $25,358 ======= ======= 8. DEBT OBLIGATIONS (dollars in thousands) As described in Note 1, Chapter ll Reorganization Proceedings, Envirodyne and certain of its domestic Subsidiaries (including Viskase Holding Corporation) emerged from Chapter 11 on December 31, 1993. On June 20, 1995, Envirodyne completed the sale of $160,000 aggregate principal amount of senior secured notes to certain institutional investors in a private placement. The senior secured notes were issued pursuant to an indenture dated June 20, 1995 (Indenture) and consist of (i) $151,500 of 12% Senior Secured Notes due 2000 and (ii) $8,500 of Floating Rate Senior Secured Notes due 2000 (collectively, the Senior Secured Notes). Envirodyne used the net proceeds of the offering primarily to (i) repay the Company's $86,125 domestic term loan, (ii) repay the $68,316 of obligations under the Company's domestic and foreign revolving loans and (iii) pay transaction fees and expenses. Concurrently with the June 20, 1995 placement, Envirodyne entered into a new $20,000 domestic revolving credit facility (Revolving Credit Facility) and a new $28,000 letter of credit facility (Letter of Credit Facility). The Senior Secured Notes and the obligations under the Revolving Credit Facility and the Letter of Credit Facility are guaranteed by Envirodyne's significant domestic subsidiaries and secured by a collateral pool (Collateral Pool) comprised of: (i) all domestic accounts receivable (including intercompany receivables) and inventory; (ii) all patents, trademarks and other intellectual property (subject to non-exclusive licensing agreements); (iii) substantially all domestic fixed assets (other than assets subject to a lease agreement with General Electric Capital Corporation); and (iv) a senior pledge of 100% of the capital stock of Envirodyne's significant domestic subsidiaries and 65% of the capital stock of Viskase S.A. Such guarantees and security are shared by the holders of the Senior Secured Notes and the holders of the obligations under the Revolving Credit Facility on a pari passu basis pursuant to an intercreditor agreement. Pursuant to such intercreditor agreement, the security interest of the holders of the obligations under the Letter of Credit Facility has priority over all other liens on the Collateral Pool. The Company finances its working capital needs through a combination of cash generated through operations and borrowings local unsecured credit facilities and intercompany loans. The Company recognized an extraordinary loss of $1,030 representing the write-off of deferred financing fees related to the June 20, 1995 debt refinancing. The extraordinary loss, net of applicable income taxes of $340, was included in the Company's Statement of Operations for the quarter ended June 29, 1995. The Viskase Limited term facility is with a foreign financial institution. The term facility, which is collateralized by substantially all of the assets of Viskase Limited, bears a variable interest rate and is payable in 16 equal semiannual installments that began in December 1992. Outstanding short-term and long-term debt consisted of: December 28, December 29, 1995 1994 ----------- ----------- Short-term debt and current maturity of long-term debt: Current maturity of Viskase Limited Term Loan (4.7%) $2,033 $ 1,882 Other 4,064 5,096 ------ ------- Total short-term debt $6,097 $ 6,978 ====== ======= Long-term debt: Bank Credit Agreement: Multicurrency Loan due 1999 (8.9%) 4,924 Viskase Limited Term Loan (4.7%) 7,115 8,466 Other 606 633 ====== ======= Total long-term debt $7,721 $14,023 ====== ======= The fair value of the Company's debt obligation is estimated based upon the quoted market prices for the same or similar issues or on the current rates offered to the Company for the debt of the same remaining maturities. At December 29, 1994, the fair value of debt obligations approximated their carrying value. Aggregate maturities of remaining long-term debt for each of the next five fiscal years are: Total ------ 1996 $2,612 1997 2,383 1998 2,233 1999 2,033 2000 1,016 9. OPERATING LEASES (dollars in thousands) The Company has operating lease agreements for machinery, equipment and facilities. The majority of the facilities leases require the Company to pay maintenance, insurance and real estate taxes. Future minimum lease payments for operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 28, 1995, are: 1996 $1,357 1997 1,092 1998 886 1999 450 2000 372 Total thereafter ------ Total minimum lease payments $4,157 ====== Total rent expense during 1995, 1994 and 1993 amounted to $3,750, $2,350 and $2,140, respectively. 10. RETIREMENT PLANS (dollars in thousands) The Company maintains various pension and statutory separation pay plans for its European employees. The expense for these plans in 1995, 1994 and 1993 was $1,383, $1,043 and $864, respectively. As of their most recent valuation dates, in plans where vested benefits exceeded plan assets, the actuarially computed value of vested benefits exceeded those plans' assets by approximately $2,856; conversely, plan assets exceeded the vested benefits in certain other plans by approximately $2,346. The Company's postretirement benefits are not material. 11. CONTINGENCIES (dollars in thousands) The Company and its subsidiaries are involved in various legal proceedings arising out of its business and other environmental matters, none of which is expected to have a material adverse effect upon its results of operations, cash flows or financial position. 12. INCOME TAXES (dollars in thousands) The provision (benefit) for income taxes consisted of: December 30, January 1, January 1, 1994 to to to December 29, December 29, December 31, 1995 1994 1993 ------------ ----------- ----------- Current: Federal $1,316 $4,479 $ 1,368 Foreign 950 4,652 2,453 State and local 243 766 258 ------ ------ ------- 2,509 9,897 4,079 ------ ------ ------- Deferred: Federal Foreign 2,098 128 (1,434) State and local ------ ----- ------- 2,908 128 (1,434) ------- ------- ------ $ 4,607 $10,025 $2,645 ======= ======= ====== A reconciliation from the statutory federal tax rate to the consolidated effective tax rate follows: December 30, January 1, January 1, 1994 to to to December 29, December 29, December 31, 1995 1994 1993 ------------ ----------- ----------- Statutory federal tax rate 35.0% 35.0% 35.0% Increase (decrease) in tax rate due to: State and local taxes net of related federal tax benefit 2.3 2.5 6.4 Net effect of taxes relating to foreign operations 30.4 11.1 61.6 Other .4 1.6 (2.8) ----- ---- ----- Consolidated effective tax rate 68.1% 50.2% 100.2% ==== ==== ===== Temporary differences and carryforwards which give rise to a significant portion of deferred tax assets and liabilities for 1995 are as follows: Temporary Difference Tax Effected --------------------- --------------------- Deferred Deferred Deferred Deferred Tax Tax Tax Tax Assets Liabilities Assets Liabilities ------- ----------- ------ ----------- Depreciation basis differences $72,219 $25,717 Pension and healthcare 600 220 Other accruals, reserves, and other $ 648 399 $ 216 174 ----- ------- ----- ------- $ 648 $73,218 $ 216 $26,111 ===== ======= ===== ======= At December 28, 1995, the Company had $11,136 of undistributed earnings of foreign subsidiaries considered permanently invested for which deferred taxes have not been provided. Domestic earnings or (losses) after extraordinary gain or loss and before income taxes were approximately $3,937, $12,634 and $4,373 in 1995, 1994 and 1993, respectively. Foreign earnings or (losses) before income taxes were approximately $2,832, $7,329 and $(1,733) in 1995, 1994 and 1993, respectively. 13. RESEARCH AND DEVELOPMENT COSTS (dollars in thousands) Research and development costs are expensed as incurred and totaled $1,106, $1,562 and $1,180, for 1995, 1994, and 1993, respectively. 14. RELATED PARTY TRANSACTIONS (dollars in thousands) Intercompany loans and advances: - ------------------------------- December 28, December 29, 1995 1994 ----------- ----------- Viskase S.A. 12% promissory note due to Envirodyne $25,142 Viskase S.A. promissory note due to Envirodyne 17,440 $35,249 Accrued interest on Viskase S.A. promissory note 83 1,688 Viskase United Kingdom Limited promissory note due to Envirodyne, including accrued interest 419 2,919 Advances: Envirodyne to Viskase S.A. Viskase Corporation to Viskase Holding Corporation 38,010 38,010 ------- ------- $81,094 $77,866 ======= ======= The Viskase S.A. 12% promissory note due to Envirodyne is payable on demand. Interest is payable semiannually on June 30 and December 31. The Viskase S.A. promissory note due to Envirodyne is payable on demand and bears interest at a rate of 10.00%. Interest is payable semiannually on June 30 and December 31. The $2.5 million Viskase United Kingdom Limited promissory note due to Envirodyne is payable on demand and bears interest at a rate of 8.00%. The promissory note was repaid in 1995. The Viskase Corporation advance to Viskase Holding Corporation is payable on demand. License Agreements - ------------------ Viskase Holding Corporation has been granted the right to license Viskase Corporation's patents and technology pursuant to a license agreement between Viskase Corporation and Viskase Holding Corporation. Intercompany transactions: - ------------------------- In 1995, 1994 and 1993, the Company paid $1,022, $756 and $752, respectively, to Viskase Corporation for management services. During 1995, 1994 and 1993, the Company accrued $687, $100 and $100, respectively, payable to Envirodyne for management services. During 1995, 1994 and 1993, the Company purchased semi-finished and finished inventory from Viskase Sales Corporation in the amount of $26,953, $23,114 and $15,439, respectively. In addition, during 1995, 1994 and 1993, the Company had sales of inventory to Viskase Sales Corporation in the amount of $7,329, $5,632 and $1,338, respectively. 15. FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying value and estimated fair value as of December 28, 1995 of the Company's financial instruments. (Refer to Notes 3 and 8.) Carrying Estimated Value Fair Value -------- ----------- Assets: Cash and equivalents $11,826 $11,826 Foreign currency contracts 3,397 3,377 Liabilities: Long-term debt 7,721 7,721 ENVIRODYNE INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Balance at Provision Balance Beginning Charged to at End Description of Period Expense Write-offs Recoveries Other(1) of Period 1995 for the year ended December 28 Allowance for doubtful accounts $2,136 $1,403 $ (472) $ 6 $151 $3,224 1994 for the year ended December 29 Allowance for doubtful accounts 2,872 939 (1,824) 21 128 2,136 1993 for the year ended December 31 Allowance for doubtful accounts 2,175 1,166 (334) 70 (205) 2,872 1995 for the year ended December 28 Reserve for obsolete and slow moving inventory 5,353 1,264 (2,868) 69 3,818 1994 for the year ended December 29 Reserve for obsolete and slow moving inventory 5,425 2,936 (3,123) 115 5,353 1993 for the year ended December 31 Reserve for obsolete and slow moving inventory 3,178 4,973 (2,660) (66) 5,425 (1) Foreign currency translation.
EX-11.1 2 EXHIBIT 11.1 ENVIRODYNE INDUSTRIES, INC. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS December 30, 1994 January January to 1 to 1 to December December December 28, 1995 29, 1994 31, 1993 ----------- --------- --------- (in thousands except for number of shares and per share amounts) Average shares outstanding 13,516,771 13,500,703 320 Assuming exercise of options reduced by the number of shares which could have been purchased with the proceeds from exercise of such options ---------- ---------- ----- Weighted average shares outstanding as adjusted 13,516,771 13,500,703 320 ========== ========== === (Loss) before extraordinary loss $(17,323) $(3,612) $(98,195) ======== ======== ======== Net Income (Loss) $(21,519) $(3,612) $85,589 ======== ======= ======= Per share amounts assuming full dilution: (Loss) before extraordinary loss $(1.28) $(.27) $(306,859) ====== ===== ========= Net Income (Loss) $(1.59) $(.27) $267,466 ====== ===== ======== Note: This calculation is submitted in accordance with Regulation S-K Item 601(b)11 although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. EX-21.1 3 EXHIBIT 21.1 -------------- SUBSIDIARIES OF THE REGISTRANT ------------------------------ The Company has the following subsidiaries, each of which is wholly owned by the Company or by a wholly-owned subsidiary of the Company. Indented names are subsidiaries of the company under which they are indented. Clear Shield National, Inc. (California) Carnival Brands, Inc. (Illinois) Envirosonics, Inc. (California) Sandusky Plastics, Inc. (Delaware) Envirodyne Subsidiary, Inc. (Delaware) Sandusky Plastics of Delaware, Inc. (Delaware) Viskase Corporation (Pennsylvania) Viskase Holding Corporation (Delaware) Viskase Australia Limited (Delaware) Viskase Brasil Embalagens Ltda. (Brazil) Viskase de Mexico, S.A. de C.V. (Mexico) Viskase S.A. (France) Viskase GMBH (Germany) Viskase S.p.A. (Italy) Viskase Canada Inc. (Ontario) Viskase Holdings Limited (United Kingdom) Filmco International Limited (United Kingdom) Viskase Limited (United Kingdom) Viskase (U.K.) Limited (United Kingdom) Envirodyne S.A.R.L. (France) Viskase ZAO (Russia) Viskase de Nuevo Laredo, S.A. de C.V. (Mexico) Viskase Sales Corporation (Delaware) Viskase Puerto Rico Corporation (Delaware) WSC Corp. (Delaware) EX-27 4
5 12-MOS DEC-28-1995 DEC-28-1995 30,325,000 0 92,678,000 (3,224,000) 99,474,000 240,899,000 545,491,000 75,987,000 899,567,000 119,174,000 530,181,000 136,000 0 0 109,733,000 899,567,000 650,212,000 650,212,000 485,048,000 485,048,000 0 1,403,000 57,336,000 (20,241,000) (2,918,000) (17,323,000) 0 (4,196,000) 0 (21,519,000) (1.28) (1.28)
EX-10.9 5 ENVIRODYNE INDUSTRIES, INC. CORPORATE OFFICE MANAGEMENT INCENTIVE PLAN Fiscal Year 1995 I. Purpose ------- The Envirodyne Industries, Inc. Management Incentive Plan (MIP) has been established for Fiscal Year 1995 for those covered employees defined under Section III below. The purpose of this Management Incentive Plan is to provide additional compensation to participants for their contribution to the achievement of the objectives of the Company including: - Assisting in attracting and retaining highly qualified key employees. - Encouraging and stimulating superior performance by such personnel. II. Definitions ----------- A. Base Salary equals the salary earnings for the portion ----------- of the Fiscal Year during which the participant was an active employee in the particular level of management for which the computation is being made. Salary earnings do not include Plan awards, long-term incentive awards, imputed income from such programs as executive life insurance or non-recurring earnings such as moving expenses and is based on salary earnings before reductions for such items as contributions under Section 401-(K) of the Internal Revenue Code of 1986 as amended. B. Company means Envirodyne Industries, Inc., its ------- successors and assigns. C. Fiscal Year means the Company's Fiscal Year beginning ----------- January 1 and ending the last day of December. D. Plan means the Envirodyne Industries, Inc. Management ---- Incentive Plan as from time to time amended. E. Executive Vice President and Chief Operating Officer ---------------------------------------------------- means the Executive Vice President and Chief Operating Officer of D.P. Kelly & Associates. F. Financial Targets are the financial goal(s) ----------------- appropriate to the company for the Fiscal Year. These goals are identified in Exhibit B and are specifically identified by participant in Exhibit C. G. Discretionary Goals refer to the personal goals and ------------------- objectives set by each participant and his/her supervisor at the beginning of each Fiscal Year against which performance is measured. III. EMPLOYEES COVERED BY THIS PLAN ------------------------------ The Plan is applicable to those management employees and other key personnel in the management levels specified in the attached Exhibit C. IV. FINANCIAL AWARD --------------- A participant in the Plan shall be entitled to a Financial Award computed in accordance with the following formula: Base Financial Bonus Financial Salary x Performance x Percent = Performance Incentive Allocated Award Earned To Financial Targets Where: - "Base Salary" is as defined in Section II A. - "Financial Performance Incentive Earned" is determined by the relationship of actual achievement to targeted goals and can range from target to maximum, with full attainment of the financial goals equating to the target for each measure as set forth in the business plan. The target/maximum range for each participant is a function of management level slotting (See Exhibit C). The relationship of actual achievement to the performance range will be determined by using straight-line interpolation for achievement between the target and the maximum of the payout range as applicable (see Exhibit B). Actual performance below target will result in no award being paid on that particular financial measure. - "Bonus Percent Allocated To Financial Targets" shall range from 0% to 100%. If a participant was in more than one management level during a Fiscal Year, a separate computation shall be made for each level applicable to the participant during such Fiscal Year; the sum of the separate computations shall be the participant's Financial Performance Award. V. Personal Performance Award -------------------------- Goals for each participant are to be developed jointly by the participant and his/her supervisor at the beginning of a Fiscal Year. It is anticipated that both quantifiable and non-quantifiable goals will be developed in the process. Each goal should be weighted from 0% to 100%, with the sum of the weights equal to 100%. A participant in the Plan shall be entitled to a Personal Performance Award computed in accordance with the following formula: Base Personal Bonus Personal Salary x Performance x Percent = Performance Incentive Allocated Award Earned To Personal Objectives Where: - "Base Salary" is as defined in Section II A. - "Percent of Personal Objectives Achieved" ranges from 0% to 100% and is determined by the agreed upon performance of the individual against pre-established individual goals. - "Percent of Bonus Allocated to Personal Objectives" shall range from 0% to 100%. It is intended that the participant and his/her supervisor will agree on meaningful individual goals. The following is a partial list of the type of goals or objectives that may be developed: - Achievement of income goals - Development of subordinates - Successful development of new accounts/products - Improvement in product merchandising programs - Attainment of self-development objectives - Control or reduction of operating expenses At the end of a Fiscal Year, each participant will review and evaluate his/her accomplishment of personal goals and objectives. The participant and his/her supervisor will then review the preliminary rating. Thereafter, the supervisor will assign a Personal Performance %, from 0% to 100%, reflecting the participant's achievement of his/her goals during such Fiscal Year. The Personal Performance % recommendation of the supervisor shall be reviewed by the President of the Company, who shall recommend an appropriate Personal Performance % to the Executive Vice President and Chief Operating Officer who shall approve the final Personal Performance % for each participant. VI. Performance Measures, Targets and Payout Ranges ----------------------------------------------- The financial performance measures, targets and payout ranges used for incentive purposes shall be established by the Company based on the annual business plan. Those measures, targets and payout ranges, as appropriate, shall be approved by the Executive Vice President and Chief Operating Officer. The performance measures, targets and payout ranges are defined in Exhibit B. VII. Participant Bonus Composition ----------------------------- The composition of each participant's bonus shall be determined by the President of the Company or his designee(s). The composition may have a Discretionary portion and a Financial portion. The composition of the bonuses are established in Exhibit C. VIII. Computation and Disbursement of Funds ------------------------------------- As soon as possible after the close of the Fiscal Year, the President of the Company will recommend a final personal goal achievement percentage and incentive award payment to the Executive Vice President and Chief Operating Officer. Once approved, payment of the awards shall be made within sixty (60) days after the end of the Fiscal Year. If the participant dies before receiving his/her award, the amount due will be paid to the designated beneficiaries on file with the Company and, in the absence of such designation, to the participant's estate. All payment awards shall be reduced by amounts required to be withheld for taxes at the time payments are made. IX. Changes to Target ----------------- The President of the Company may recommend to the Executive Vice President and Chief Operating Officer, at any time prior to the final determination of awards, changes to the performance measures, targets, and payout ranges used for incentive purposes. If, in the judgment of the Executive Vice President and Chief Operating Officer, such change(s) is/are desirable in the interests of equitable treatment of the participants and the Company as a result of extraordinary or non-recurring events, changes in applicable accounting rules or principles, changes in the Company's methods of accounting, changes in applicable law, changes due to consolidation, acquisitions, or reorganization, the Executive Vice President and Chief Operating Officer shall authorize and approve such change(s) for immediate incorporation into the Plan. Further, should actual performance on any one or all of the financial measure(s) be less than or greater than target by twenty-five percent (25%) or more, the award actually earned under that measure(s) will be at the sole discretion of the Chief Executive Officer subject to approval by the Compensation Committee of the Board. X. Partial Awards -------------- A participant shall be entitled to payment of a partial Financial Award and a partial Personal Objectives Award, computed in accordance with Sections IV and V, and based on Base Salary in a Fiscal Year, if prior to the end of such Fiscal Year, a participant: - Dies, - Retires (is eligible to immediately receive retirement benefits under a Company sponsored retirement plan), - Becomes permanently disabled, - Transfers to a position with a salary grade not eligible for participation in the Plan, - Enters military service, - Takes an approved leave of absence, - Is appointed or elected to public office, - Is terminated due to position elimination, provided that the participant was an active employee for a minimum of 30 consecutive calendar days during such Fiscal Year. Such partial awards shall be paid when payments of non-deferred awards for such Fiscal Year are made. Participants hired during the course of a Fiscal Year and who are employed through the end of such Fiscal Year shall be eligible for an award based on their Base Salary during such Fiscal Year, provided that such employees begin active service prior to February 1 of such Fiscal Year. XI. Forfeiture of Bonus ------------------- Except as provided in Section X, no participant who ceases to be an employee of the Company prior to the end of a Fiscal Year shall be entitled to any amounts under this Plan for such Fiscal Year unless the Executive Vice President and Chief Operating Officer decides otherwise. Participants who cease to be an employee of the Company between the end of a Fiscal Year and the payment date of awards for such Fiscal Year shall be entitled to awards earned during such Fiscal Year. XII. Administration -------------- This Plan shall be administered by the Vice President, Human Resources of D.P. Kelly & Associates, subject to the control and supervision of the Executive Vice President and Chief Operating Officer and the Compensation Committee of the Board of Directors of Envirodyne Industries. Any changes to the context of the Plan, the performance ranges, Plan adjustments and actual payouts will be reviewed with and approved by the Compensation Committee of the Board of Directors. In the event of a claim or dispute brought forth by a participant, the decision of the Executive Vice President and Chief Operating Officer as to the facts in the case and the meaning and intent of any provision of the Plan, or its application, shall be final and conclusive. XIII. No Employment Contract; Future Plans ------------------------------------ Participation in this Plan shall not confer upon any participant any right to continue in the employ of the Company nor interfere in any way with the right of the Company to terminate any participant's employment at any time. The company is under no obligation to continue the Plan in future Fiscal Years. XIV. Amendment or Termination ------------------------ The Company may at any time, or from time to time, (a) amend, alter or modify the provisions of this Plan, (b) terminate this Plan, or (c) terminate the participation of an employee or group of employees in this Plan; provided, however, that in the event of the termination of this Plan or a termination of participation, the Company shall provide the partial awards to the affected participant(s) for the portion of the Fiscal Year during which such employee(s) were participants in this Plan, in a manner in which the Company, in its sole judgment, determines to be equitable to such participants and the Company. XV. General Provisions ------------------ (a) No right under the Plan shall be assignable, either voluntarily or involuntarily by way of encumbrance, pledge, attachment, level or charge of any nature (except as may be required by state or federal law). (b) Nothing in the Plan shall require the Company to segregate or set aside any funds or other property for the purpose of paying any portion of an award. No participant, beneficiary or other person shall have any right, title or interest in any amount awarded under the Plan prior to the close of the Fiscal Year, or in any property of the Company or its subsidiaries. _____________________ ____________________________ Final Approval Date Executive Vice President and Chief Operating Officer ____________________________ Vice President Human Resources EX-23 6 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Envirodyne Industries, Inc. and subsidiaries on Form S-8 (File Nos. 33-63807 and 33- 64025) of our report dated March 26, 1996 on our audits of the consolidated financial statements and financial statement schedules of Envirodyne Industries, Inc. and Subsidiaries as of December 28, 1995 and December 29, 1994, and for the period December 30, 1994 to December 28, 1995 and January 1 to December 29, 1994 (Post- consummation) and January 1 to December 31, 1993 (Pre- consummation), which report is included in the annual report on Form 10-K. COOPERS & LYBRAND L.L.P. Chicago, Illinois March 26, 1996 -----END PRIVACY-ENHANCED MESSAGE-----