VISKASE COMPANIES, INC.
ANNUAL REPORT 2013
This report has been prepared in accordance with Section 5.04 of the Credit
Agreement dated as of January 30, 2014 among Viskase Companies, Inc. (the
“Company”) and UBS AG, Stamford Branch as administrative agent and as collateral
agent (the “Agent”).
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CONSOLIDATED FINANCIAL STATEMENTS OF VISKASE COMPANIES, INC. AND
SUBSIDIARIES
1.
Financial Statements:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Income for the years ended December 31, 2013,
2012 and 2011
Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2013, 2012 and 2011
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 2013, 2012 and 2011
Consolidated Statements of Cash Flows for the years ended December 31, 2013,
2012 and 2011
2.
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Grant Thornton LLP
175 W Jackson Boulevard, 20th Floor
Chicago, IL 60604-2687
T 312.856.0200
F 312.565.4719
GrantThornton.com
linkd.in/GrantThorntonUS
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Board of Directors
Viskase Companies, Inc.
We have audited the accompanying consolidated financial statements of Viskase Companies, Inc.
(a Delaware corporation) and Subsidiaries, which comprise the consolidated balance sheets as of
December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive
income (loss), changes in stockholders’ equity (deficit), and cash flows for the years then ended,
and the related notes to the financial statements.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in the United
States of America; this includes the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We conducted our audits in accordance with auditing standards generally accepted in
the United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
auditor’s judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair
presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Viskase Companies, Inc. and Subsidiaries as of
December 31, 2013 and 2012, and the results of their operations and their cash flows for the
years then ended in accordance with accounting principles generally accepted in the United States
of America.
Chicago, Illinois
March 7, 2014
Grant Thornton LLP
U.S. member firm of Grant Thornton International Ltd
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Number of Shares)
See notes to consolidated financial statements.
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December 31, 2013December 31, 2012ASSETSCurrent assets: Cash and cash equivalents$19,079$31,112 Restricted cash1,2621,058 Receivables, net67,46461,664 Inventories72,13961,144 Other current assets30,13321,959 Deferred income taxes8,4803,846Total current assets198,557180,783Property, plant and equipment272,459252,542Less accumulated depreciation113,72495,757Property, plant and equipment, net158,735156,785Asset held for sale- 500Deferred financing costs, net4,7935,685Other assets, net3711,734Deferred income taxes39,572774Total Assets$402,028$346,261LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilities: Short-term debt$12,690- Short-term portion of capital lease obligations329382 Accounts payable33,51627,798 Accrued liabilities47,15841,390Total current liabilities93,69369,570Long-term debt, net of current maturities216,033214,692Capital lease obligations, net of current portion412396Accrued employee benefits32,81965,646Deferred income taxes3,9604,897Stockholders’ equity (deficit):Common stock, $0.01 par value; 36,901,249 shares issued and 36,095,979 shares outstanding at December 31, 2013 and December 31, 2012$369$369Paid in capital32,83932,791Retained earnings69,14524,462Less 805,270 treasury shares, at cost(298)(298)Accumulated other comprehensive loss(46,944)(66,264)Total stockholders' equity (deficit) 55,111(8,940)Total Liabilities and Stockholders' Equity (Deficit)$402,028$346,261
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except for Per Share Amounts)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201331, 201231, 2011 NET SALES$370,986$342,523$339,371Cost of sales283,718261,261261,079GROSS MARGIN87,26881,26278,292Selling, general and administrative46,45645,26542,565Amortization of intangibles127460460Tax amnesty settlement23,482- - Restructuring expense- 600 - OPERATING INCOME17,20334,93735,267Interest income5146222Interest expense22,47620,96621,206Other expense, net1,5541,396909(LOSS) INCOME BEFORE INCOME TAXES(6,776)12,62113,374Income tax (benefit) provision (51,459)4,7465,430NET INCOME $44,683$7,875$7,944WEIGHTED AVERAGE COMMON SHARES- BASIC 36,095,97936,024,29835,868,890PER SHARE AMOUNTS:EARNINGS PER SHARE- BASIC$1.24$0.22$0.22WEIGHTED AVERAGE COMMON SHARES- DILUTED37,224,53236,771,80137,010,141PER SHARE AMOUNTS:EARNINGS PER SHARE- DILUTED$1.20$0.21$0.21
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201331, 201231, 2011Net income$44,683$7,875$7,944Other comprehensive income (loss), net of tax Pension liability adjustment20,313(11,179)(17,709) Foreign currency translation adjustment(993)1,547(2,634)Other comprehensive income (loss), net of tax19,320(9,632)(20,343)Comprehensive income (loss) $64,003($1,757)($12,399)
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In Thousands)
See notes to consolidated financial statements.
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Accumulated otherTotalCommonPaid inTreasuryRetained comprehensive stockholders’stockcapitalstockearningslossequity (deficit)Balance December 31, 2010$366$32,798($298)$8,643($36,289)$5,220Net income7,9447,944Foreign currency translation adjustment(2,634)(2,634)Pension liability adjustment, net of tax(17,709)(17,709)Issuance of common stock1(1)Stock option expense9 9Balance December 31, 2011$367$32,806($298)$16,587($56,632)($7,170)Net income7,8757,875Foreign currency translation adjustment1,5471,547Pension liability adjustment, net of tax(11,179)(11,179)Issuance of common stock2(15)(13) Balance December 31, 2012$369$32,791($298)$24,462($66,264)($8,940)Net income44,68344,683Foreign currency translation adjustment (993)(993)Pension liability adjustment, net of tax20,31320,313Stock option expense4848Balance December 31, 2013$369$32,839($298)$69,145($46,944)$55,111
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201331, 201231, 2011Cash flows from operating activities:Net income $44,683$7,875$7,944 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation19,50916,17313,977Stock-based compensation48 1 9Amortization of intangibles127460460Amortization of deferred financing fees1,0171,024904Deferred income taxes(57,194)(1,400)29Loss on disposition of assets20211091Bad debt and accounts receivable provision177(390)448Non-cash interest on notes938483Changes in operating assets and liabilities:Receivables(3,172)(7,493)(6,179)Inventories(9,326)(7,308)884Other current assets(7,779)(4,169)(863)Accounts payable4,809(1,699)4,497Accrued liabilities5,0126182Accrued employee benefits386(1,501)(4,921)Other(5,081)405(414)Total adjustments(51,172)(5,085)9,007Net cash (used in) provided by operating activities(6,489)2,79016,951Cash flows from investing activities:Capital expenditures(19,119)(38,252)(37,195)Proceeds from disposition of assets14610667Net cash used in investing activities(18,973)(38,146)(37,128)Cash flows from financing activities:Deferred financing costs(125)(125)(141)Proceeds from revolving loan14,011- - Repayment of revolving loan(170)- - Repayment of capital lease(434)(615)(842)Restricted cash(204)1,06164Net cash provided by (used in) financing activities13,078321(919)Effect of currency exchange rate changes on cash351222(537)Net (decrease) increase in cash and equivalents(12,033)(34,813)(21,633)Cash and equivalents at beginning of period31,11265,92587,558Cash and equivalents at end of period$19,079$31,112$65,925Supplemental cash flow information:Interest paid less capitalized interest$21,457$20,035$20,349Income taxes paid $3,125$6,995$2,978
1. Summary of Significant Accounting Policy
Nature of Operations
Viskase Companies, Inc. together with its subsidiaries (“we” or the “Company”) is a producer of non-
edible cellulosic, fibrous and plastic casings used to prepare and package processed meat products,
and provides value-added support services relating to these products, for some of the largest global
consumer products companies. The Company operates nine manufacturing facilities, six distribution
centers and three service centers in North America, Europe, South America, and Asia and, as a
result, is able to sell its products in nearly one hundred countries throughout the world.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company. Intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The financial statements are prepared in accordance with generally accepted accounting principles
(“GAAP”) in the United States of America and include the use of estimates and assumptions that
affect a number of amounts included in the Company’s financial statements, including, among other
things, pensions and other postretirement benefits and related disclosures, reserves for excess and
obsolete inventory, allowance for doubtful accounts, and income taxes. Management bases its
estimates on historical experience and other assumptions that we believe are reasonable. If actual
amounts are ultimately different from previous estimates, the revisions are included in the
Company’s results for the period in which the actual amounts become known. Historically, the
aggregate differences, if any, between the Company’s estimates and actual amounts in any year
have not had a significant effect on the Company’s consolidated financial statements.
Cash and Cash Equivalents
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 $207 and $198 of short-term investments at December 31,
2013 and December 31, 2012, respectively. Of the cash held on deposit, essentially all of the cash
balance was in excess of amounts insured by the Federal Deposit Insurance Corporation or other
foreign provided bank insurance. The Company performs periodic evaluations of these institutions
for relative credit standing and has not experienced any losses as a result of its cash
concentration. Consequently, no significant concentrations of credit risk are considered to exist.
Receivables
Trade accounts receivable are classified as current assets and are reported net of allowance for
doubtful accounts and a reserve for returns. This estimated allowance is primarily based upon our
evaluation of the financial condition of each customer, each customer’s ability to pay and historical
write-offs.
Inventories
Inventories are valued at the lower of first-in, first-out (“FIFO”) cost or market.
Property, Plant and Equipment
The Company carries property, plant and equipment at cost less accumulated depreciation. Property
and equipment additions include acquisition of property and equipment and costs incurred for
computer software purchased for internal use including related external direct costs of materials and
services and payroll costs for employees directly associated with the project. 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. Depreciation is computed on the straight-line
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method using a half year convention over the estimated useful lives of the assets ranging from (i)
building and improvements - 10 to 32 years, (ii) machinery and equipment - 4 to 12 years, (iii)
furniture and fixtures - 3 to 12 years, (iv) auto and trucks - 2 to 5 years, (v) data processing – 3 to 7
years and (vi) leasehold improvements - shorter of lease or useful life.
In the ordinary course of business, we lease certain equipment, consisting mainly of autos, and
certain real property, consisting of manufacturing and distribution facilities and office facilities.
Deferred Financing Costs
Deferred financing costs are amortized as expense using the effective interest rate method over the
expected term of the related debt agreement. Amortization of deferred financing costs is classified
as interest expense.
Patents and Trademarks
Patents and trademarks are amortized on the straight-line method over an estimated average useful
life of 10 years.
Long-Lived Assets
The Company continues to evaluate the recoverability of long-lived assets including property, plant
and equipment and patents. Impairments are recognized when the expected undiscounted future
operating cash flows derived from long-lived assets are less than their 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 whenever events or
changes in circumstances indicate that the carrying amount of assets may not be recoverable.
Shipping and Handling
The Company periodically bills customers for shipping charges. These amounts are included in net
revenue, with the associated costs included in cost of sales.
Pensions and Other Postretirement Benefits
The Company uses appropriate actuarial methods and assumptions in accounting for its defined
benefit pension plans and non-pension postretirement benefits.
Actual results that differ from assumptions used are accumulated and amortized over future periods
and, accordingly, generally affect recognized expense and the recorded obligation in future periods.
Therefore, assumptions used to calculate benefit obligations as of the end of a fiscal year directly
impact the expense to be recognized in future periods. The primary assumptions affecting the
Company’s accounting for employee benefits as of December 31, 2013 are as follows:
• Long-term rate of return on plan assets: The required use of the expected long-term rate of
return on plan assets may result in recognized returns that are greater or less than the actual
returns on those plan assets in any given year. Over time, however, the expected long-term
rate of return on plan assets is designed to approximate actual earned long-term returns. The
Company uses long-term historical actual return information, the mix of investments that
comprise plan assets, and future estimates of long-term investment returns by reference to
external sources to develop an assumption of the expected long-term rate of return on plan
assets. The expected long-term rate of return is used to calculate net periodic pension cost. In
determining its pension obligations, the Company is using a long-term rate of return on U.S.
plan assets of 7.75% for 2013. The Company is using a long-term rate of return on French
plan assets of 3.50% for 2013. The German pension plan has no assets.
• Discount rate: The discount rate is used to calculate future pension and postretirement
obligations. The Company is using a Mercer Bond yield curve in determining its pension
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obligations. The Company is using a discount rate of 5.23% for 2013. The Company is using a
weighted average discount rate of 3.28% on its non-U.S. pension plans for 2013.
Income Taxes
Deferred tax assets and liabilities are measured using enacted tax laws and tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is
recognized in income in the period that includes the enactment date. In addition, the amounts of any
future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected
to be realized on a more likely than not basis. Interest and penalties related to unrecognized tax
benefits are included as a component of tax expense.
Other Comprehensive Income (Loss)
Comprehensive income (loss) includes all other non-stockholder changes in equity. Changes in
other comprehensive income (loss) in 2013 and 2012 resulted from changes in foreign currency
translation and minimum pension liability.
Revenue Recognition
Revenues are recognized at the time products are shipped to the customer, under F.O.B shipping
point or F.O.B port terms, which is the point at which title is transferred, the customer has the
assumed risk of loss, and when payment has been received or collection is reasonably
assumed. Revenues are net of discounts, rebates and allowances. Viskase records all labor, raw
materials, in-bound freight, plant receiving and purchasing, warehousing, handling and distribution
costs as a component of costs of sales.
Accounting for Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on fair value of the award and
is recognized as an expense on a straight-line basis over the requisite service period, which is the
vesting period.
Financial Instruments
The Company routinely enters into fixed price natural gas agreements which require us to purchase
a portion of our natural gas each month at fixed prices. These fixed price agreements qualify for the
“normal purchases” scope exception under derivative and hedging standards, therefore the natural
gas purchases under these contracts were expensed as incurred and included within cost of sales.
As of December 31, 2013, future annual minimum purchases remaining under the agreement are
$1,341.
The Company’s financial instruments include cash and cash equivalents, accounts receivable,
accounts payable and debt. The carrying amounts of these financial assets and liabilities
approximate fair value due to the short maturities of these instruments. The fair value of the
Company’s revolving loans approximate the carrying value due to credit risk or current market rates,
which approximate the effective interest rates on those instruments. The fair value of the
Company’s Senior Secured Notes is estimated by discounting the future cash flow using the
Company’s current borrowing rates for similar types and maturities of debt.
New Accounting Pronouncements
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220):
Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income. This ASU
requires an entity to provide information about amounts reclassified out of accumulated other
comprehensive income by component. The guidance is effective prospectively for interim and annual
periods beginning after December 15, 2012. We adopted these additional disclosure requirements
effective January 1, 2013.
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In July 2013, the FASB issued ASU No. 2013-11, which amends FASB ASC Topic 740, Income
Taxes. This ASU requires that unrecognized tax benefits, or a portion of an unrecognized tax
benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a
net operating loss carryforward, a similar tax loss or a tax credit carryforward, except in certain
cases. This ASU is effective for fiscal years (and interim reporting periods within those years)
beginning after December 15, 2013. Earlier adoption is permitted. The adoption of this ASU will not
have any impact on our consolidated financial position, results of operations or cash flows.
2. Cash and cash equivalents
As of December 31, 2013 and December 31, 2012, cash held in foreign banks was $11,028 and
$12,905, respectively.
Letters of credit in the amount of $1,262 as of December 31, 2013 were outstanding under facilities
with a commercial bank, and were cash collateralized in a restricted account.
3. Receivables, net
Receivables reserve activity:
4. Inventory
Inventory consisted of:
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December 31, 2013December 31, 2012Cash and cash equivalents$19,079 $31,112 Restricted cash1,2621,058$20,341 $32,170 December 31, 2013December 31, 2012Accounts receivable, gross$68,728 $63,718 Less allowance for doubtful accounts (1,071)(1,970)Less allowance for sales returns(193)(84) $67,464 $61,664 December 31, 2013December 31, 2012December 31, 2011Beginning balance$2,054 $2,442 $2,203 (Recoveries) provision177 (390)448 Write-offs(1,020)(19)(124) Foreign translation53 21 (85)Ending balance$1,264 $2,054 $2,442 December 31, 2013December 31, 2012Raw materials$12,126 $11,688 Work in process31,119 27,071 Finished products 28,894 22,385 $72,139 $61,144
5. Property, Plant and Equipment, Net
Accumulated depreciation consisted of:
Capitalized interest for 2013, 2012, and 2011 totaled $432, $1,902, and $1,580, respectively.
Maintenance and repairs charged to costs and expenses for 2013, 2012, and 2011 aggregated
$21,366, $19,428 and $19,222, respectively.
6. Other Assets
Amortization of patents for fiscal years 2014 and 2015 will be approximately $12 and $12,
respectively.
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December 31, 2013December 31, 2012 Land and improvements $2,122 $2,237 Buildings and improvements 37,267 36,084 Machinery and equipment227,684 207,800 Construction in progress 5,386 6,421 $272,459 $252,542 December 31, 2013December 31, 2012 Land and improvements $257 $233 Buildings and improvements 9,125 7,349 Machinery and equipment104,342 88,175 $113,724 $95,757 December 31, 2013December 31, 2012Patents and Trademarks$4,762 $4,720 Less: Accumulated amortization(4,610)(4,484)Patents and trademarks, net 152 236 Miscellaneous219 1,498 $371 $1,734
7. Accrued Liabilities
Accrued liabilities consisted of:
8. Debt Obligations
Outstanding long-term debt consisted of:
Revolving Credit Facility
The Company is a party to a $25,000 secured revolving credit facility (“Revolving Credit Facility”) with
Icahn Enterprises L.P. Borrowings under the loan and security agreement governing the Revolving
Credit Facility are subject to a borrowing base formula based on percentages of eligible domestic
receivables and eligible domestic inventory. Under the Revolving Credit Facility, the interest rate
option is LIBOR plus a margin of 2.00% currently (which margin will be subject to performance based
increases up to 2.50%); provided that the minimum interest rate shall be at least equal to 3.00%. The
Company is paying interest at a rate of 3.00% at December 31, 2013. The Revolving Credit Facility
also provides for an unused line fee of 0.375% per annum. On April 8, 2013, the Company entered
into the Seventh Amendment to Loan and Security Agreement with Icahn Enterprises L.P., extending
the maturity date of the Revolving Credit Facility from January 31, 2014 to July 31, 2015. The
amendment included a fee of $125 for the extension.
There was $12,000 borrowed under the Revolving Credit Facility at December 31, 2013.
Indebtedness under the Revolving Credit Facility is secured by liens on substantially all of the
Company’s domestic and Mexican assets, with liens on (i) inventory, accounts receivable, lockboxes,
and deposit accounts (the “RCF Priority Collateral’) to be contractually senior to the liens securing the
9.875% Senior Secured Notes and the related guarantees pursuant to an intercreditor agreement, (ii)
real property, fixtures and improvements thereon, equipment and proceeds thereof (the “Notes
Priority Collateral”), to be contractually subordinate to the liens securing the 9.875% Senior Secured
Notes and such guarantees pursuant to such intercreditor agreement, and (iii) all other assets, to be
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December 31, 2013December 31, 2012Compensation and employee benefits$18,295 $16,259 Taxes payable13,765 8,572 Accrued volume and sales rebates1,852 2,435 Accrued interest payable9,825 9,798 Other3,422 4,326 $47,159 $41,390 December 31, 2013December 31, 2012Short-term debt: Europe unsecured loan$690- Revolving credit facility12,000- Total short-term debt$12,690- Long-term debt: 9.875% Senior secured notes, net of discount$214,505$214,412 Europe unsecured loan1,207- Other321280Total long-term debt$216,033$214,692
contractually pari passu with the liens securing the 9.875% Senior Secured Notes and such
guarantees pursuant to such intercreditor agreement.
The Revolving Credit Facility contains various covenants which restrict the Company’s ability to,
among other things, incur indebtedness, enter into mergers or consolidation transactions, dispose of
assets (other than in the ordinary course of business), acquire assets, make certain restricted
payments, create liens on our assets, make investments, create guarantee obligations and enter into
sale and leaseback transactions and transactions with affiliates, in each case subject to permitted
exceptions. The Revolving Credit Facility also requires that we comply with various financial
covenants, including meeting a minimum EBITDA requirement and limitations on capital expenditures
in the event our usage of the Revolving Credit Facility exceeds 30% of the facility amount. The
Company is in compliance with the Revolving Credit Facility covenants as of December 31, 2013.
In its foreign operations, the Company has unsecured lines of credit with various banks providing
approximately $8,000 of availability. There were borrowings of $1,897 under an unsecured term loan
at December 31, 2013. The borrowing has an interest rate of 3 month EUR LIBOR plus a margin of
2.16% with quarterly installments due through July 15, 2016. The Company is paying interest at a
rate of 2.42% at December 31, 2013.
9.875% Senior Secured Notes due 2018
The Company has $215,000 principal amount of 9.875% Senior Secured Notes due 2018 (“9.875%
Senior Secured Notes”) outstanding. The 9.875% Senior Secured Notes bear interest at a rate of
9.875% per annum, payable semi-annually in cash on January 15 and July 15. On January 15, 2014,
the Company filed a notice of redemption effectively discharging the entire aggregate principal
amount outstanding of its 9.875% Senior Secured Notes plus accrued interest. The 9.875% Senior
Secured Notes had a maturity date of January 15, 2018.
The 9.875% Senior Secured Notes and related guarantees by any of our future domestic restricted
subsidiaries will be secured by substantially all of our and those domestic restricted subsidiaries’
current and future tangible and intangible assets, including all or a portion of the stock of our and their
subsidiaries (except that no more than 65% of the voting stock of any foreign subsidiary will constitute
collateral). The liens on our assets and the assets of those domestic restricted subsidiaries that
secure the 9.875% Senior Secured Notes and any such guarantees will (i) in the case of the RCF
Priority Collateral be contractually subordinated, pursuant to an intercreditor agreement, to the liens
thereon securing the Revolving Credit Facility, (ii) in the case of Notes Priority Collateral be
contractually senior, pursuant to such intercreditor agreement, to the liens thereon securing the
Revolving Credit Facility, (iii) in the case of all other assets, be contractually pari passu, pursuant to
such intercreditor agreement, with the liens securing the Revolving Credit Facility, and (iv) in each
such case, be subject to certain prior liens. The indenture governing the 9.875% Senior Secured
Notes permits us to incur other senior secured indebtedness and to grant liens on our assets under
certain circumstances.
Prior to January 15, 2014, we may redeem, at our option, up to 35% of the aggregate principal
amount of the 9.875% Senior Secured Notes issued under the indenture with the net proceeds of any
equity offering, at 109.875% of their principal amount, plus accrued and unpaid interest to the date of
redemption, provided that at least 65% of the aggregate principal amount of the 9.875% Senior
Secured Notes issued under the indenture agreement governing the 9.875% Senior Secured Notes
remains outstanding immediately following the redemption.
Letter of Credit Facility
Letters of credit in the amount of $1,262 were outstanding under facilities with a commercial bank,
and were cash collateralized at December 31, 2013.
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Debt Maturity
The aggregate maturities of debt (1) for each of the next five years are:
(1) The aggregate maturities of debt represent amounts to be paid at maturity and not
the current carrying value of the debt.
9. Capital Lease Obligations
The Company has entered into capital lease obligations to acquire certain equipment and building
improvements for its manufacturing facilities. The equipment leases have a term of 3 to 5 years and
the building improvement lease has a term of 5 years. The Company has determined that
automobiles leased by the Company are capital leases with an average term of 4 years. The
depreciation of capital leases is included in depreciation expense.
The following is an analysis of leased property under capital leases by major classes.
The following is a schedule by years of minimum future lease payments as of December 31, 2013.
10. Operating Leases
The Company has operating lease agreements for machinery, equipment and facilities. The majority
of the facility leases require the Company to pay maintenance, insurance and real estate taxes.
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20142015201620172018ThereafterRevolving Credit Facility$12,000 $ - $ - $ - $ - $ - Europe line of credit690 690 517 - - - 9.875% Senior Secured Notes - - - - - 215,000 Other - - - - - 1,109 $12,690 $ 690 $ 517 $ - $ - $216,109 20132012Building and improvements$543$518Machinery and equipment2,8322,896Less: Accumulated depreciation(2,514)(2,492)$861$922Year ending December 31,2014$382201525320161282017662018- Thereafter- Total minimum payments required829Less amount representing interest(88)Present value of net minimum lease payments$741
Certain of these leases contain escalation clauses and renewal options.
Future minimum lease payments for operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of December 31, 2013, are:
Total rent expense during 2013, 2012 and 2011 amounted to $4,617, $4,343 and $3,245
respectively.
11. Retirement Plans
The Company and its subsidiaries have defined contribution and defined benefit plans varying by
country and subsidiary.
The Company’s operations in the United States, France, Germany and Canada historically offered
defined benefit retirement plans and postretirement health care and life insurance benefits to their
employees. Most of these benefits have been terminated, resulting in various reductions in liabilities
and curtailment gains.
Included in accumulated other comprehensive income, net of tax, as of December 31, 2013 are the
following amounts not yet recognized in net periodic benefit cost:
Amounts included in other comprehensive income expected to be recognized as a component of net
periodic benefit cost for the year ending December 31, 2013 are:
16
2014$3,497 20153,487 20163,142 20172,448 20181,537 Total thereafter10,984 Total minimum lease payments$25,095 U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial loss Prior service credit ($22,178)($1,353)$5 $63 U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial loss $1,030 $103
The measurement date for all defined benefit plans is December 31. The year end status of the
plans is as follows:
The funded status of these pension plans as a percentage of the projected benefit obligation was 82% in
2013 compared to 59% in 2012.
17
Non U.S. Pension Benefits2013201220132012Change in benefit obligation:Projected benefit obligation at beginning of year$163,156$147,023$10,570$8,751Service cost- - 430331Interest cost6,6256,965404434Actuarial (gain) loss (18,533)17,0414221,476Benefits paid(7,953)(7,873)(747)(594)Currency translation- - 479172Estimated benefit obligation at end of year$143,295$163,156$11,558$10,570Change in plan assets:Fair value of plan assets at beginning of year$104,114$95,685$5,692$5,407Actual return on plan assets18,00811,285200$178Employer contribution4,2065,0170$0Benefits paid(7,952)(7,873)(730)$0Currency translation- - 257$107Fair value of plan assets at end of year$118,376$104,114$5,419$5,692Unfunded status of the plan($24,919)($59,042)($6,138)($4,878)U.S. Pension Benefits U.S. Pension Benefits Non U.S. Pension Benefits2013201220132012Net amount recognizedAmounts recognized in statement of financial position:Current liabilities($82)($82)($175)($166)Noncurrent liabilities(24,837)(58,960)(5,963)(4,713)Net amount recognized($24,919)($59,042)($6,138)($4,879)U.S. Pension Benefits Non U.S. Pension Benefits2013201220132012Projected benefit obligation$143,295 $163,156 $11,558 $10,570 Accumulated benefit obligation$143,295 $163,156 $9,055 $8,387 Fair value of plan assets$118,376$104,114$5,419$5,692
Components of net periodic benefit cost for the years ended December 31:
Weighted average assumptions used to determine the benefit obligation and net periodic benefit cost as
of December 31:
The Company evaluates its discount rate assumption annually as of December 31 for each of its
retirement-related benefit plans. The Company is using a Mercer bond model for determining its
U.S. pension benefits. The Company is using a weighted average discount rate of 3.28% on its non
U.S. pension plans for 2013.
The Company’s expected return on plan assets is evaluated annually based upon a study which
includes a review of anticipated future long-term performance of individual asset classes, and
consideration of the appropriate asset allocation strategy to provide for the timing and amount of
benefits included in the projected benefit obligation. While the study gives appropriate consideration
to recent fund performance and historical returns, the assumption is primarily a long-term
prospective rate.
The Company’s overall investment strategy is to achieve growth through a mix of approximately 75%
of investments for long-term growth and 25% for near-term benefit payments with a wide
diversification of asset types, fund strategies, and fund managers. The target allocations for plan
assets are 47% equity securities, 28% hedge funds and 25% to fixed income investments. Equity
securities primarily include investments in large-cap, mid-cap and small-cap companies primarily
located in the United States and international developed markets. Fixed income securities include
corporate bonds of companies from diversified industries, mortgage-backed securities, and U.S.
Treasuries. Other types of investments include investments in hedge funds that follow several
different strategies.
In accordance with FASB guidance, Plan management uses the following methods and significant
assumptions to estimate fair value of investments.
Mutual funds - Valued at the net asset value (“NAV”) of shares held by the Plan at year-end, which is
obtained from an active market.
18
Non U.S. Pension Benefits201320122011201320122011Component of net period benefit costService cost-$ -$ -$ $415$323$338Interest cost6,6256,9657,320390423470Expected return on plan assets(7,877)(7,321)(7,742)(194)(178)(191)Amortization of prior service cost- (1) - - - - Amortization of actuarial loss4,2403,4291,66788 12 37 $2,988$3,072$1,245$699$580$654U.S. Pension BenefitsU.S. Pension Benefits Non U.S. Pension Benefits2013201220132012Discount rate5.23%4.18%3.28%3.69%Expected return on plan assets7.75%7.75%3.50%3.50%Rate of compensation increaseN/AN/A3.00%3.00%
Collective trust funds - Value provided by the administrator of the fund. The NAV is based on the
value of the underlying assets owned by the fund, minus its liabilities, and then divided by the
number of shares outstanding. The NAV's unit price is quoted on a private market that is not active.
Hedge funds - Value provided by the administrator of the fund. The pricing for these funds is
provided monthly by the fund to determine the quoted price.
The fair values of the Company’s pension plan asset allocation at December 31, 2013 and 2012, by
asset category are as follows:
19
Fair Value Measurement atDecember 31, 2013Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsAsset Category Total(Level 1)(Level 2)(Level 3)Cash equivalents$4,211$4,211-$ -$ Equity securities: U.S. companies37,660 37,660 - - International companies 5,355 5,355 - - U.S-Large Cap Equity Growth 12,991 12,991 - - U.S-Mutual Funds 14,875 - 14,875 - Fixed income securities:- Government Treasuries1,763 1,763 - - Mortgage-backed securities 1,062 - 1,062 - Aggregate bond fund- - - - Corporate Bond5,704 5,704 - - High yield fund14,011 14,011 - - Other types of investments: Hedge funds 20,626 - - 20,626 Real Estate84 84 - - Preferred Stock34 - 34 - Total $118,376$81,77915,971$ 20,626$ Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Combined Hedge Funds$29,520 Total realized loss(270) Change in unrealized depreciation3,141 Cost of purchases32,198 Proceeds from sales(43,963) $20,626Beginning balance at January 1, 2013Ending balance at December 31, 2013
The following table provides a summary of the estimated benefit payments for the postretirement
plans for the next five fiscal years individually and for the following five fiscal years in the aggregate.
20
Fair Value Measurement atDecember 31, 2012Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsAsset Category Total(Level 1)(Level 2)(Level 3)Cash equivalents$5,671$5,671-$ -$ Equity securities: U.S. companies13,797 13,797 - - International companies 3,813 3,813 - - U.S-Small Cap Growth- - - - U.S-Large Cap Enhanced Core10,077 - 10,077 - U.S-Large Cap Equity Growth 8,215 - 8,215 - U.S-Mutual Funds 7,646 - 7,646 - Fixed income securities: Government Treasuries7,383 7,383 - - Mortgage-backed securities 3,315 - 3,315 - Aggregate bond fund10,098 - 10,098 - High yield fund10,200 10,200 - - Other types of investments: Hedge funds 29,520 - - 29,520 Real Estate71 71 - Total $109,806$40,935$39,351$29,520Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Combined Hedge Funds$26,568 Total realized loss(32) Change in unrealized depreciation2,984 Cost of purchases(294) Proceeds from sales294 $29,520Beginning balance at January 1, 2012Ending balance at December 31, 2012
The Company’s expected contribution for the 2014 fiscal year is $6,116 for the U.S. and $175 for
non-U.S. pension plans.
Savings Plans
The Company also has defined contribution savings and similar plans for eligible employees, which
vary by subsidiary. 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
$1,120, $875 and $1,049 in 2013, 2012 and 2011, respectively.
International Plans
The Company maintains various pension and statutory separation pay plans for its European
employees. The expense, not including the French and German pension plan, in 2013, 2012, and
2011 was $854, $825 and $864, respectively. As of their most recent valuation dates, for those plans
where vested benefits exceeded plan assets, the actuarially computed value of vested benefits
exceeded those plans’ assets by approximately $1,925.
12. Capital Stock, Treasury Stock and Paid in Capital
Authorized shares of preferred stock ($0.01 par value per share) and common stock ($0.01 par
value per share) for the Company are 50,000,000 shares and 50,000,000 shares, respectively.
In 2004, the Company purchased 805,270 shares of its common stock from the underwriter for a
purchase price of $298. The common stock has been accounted for as treasury stock.
13. Income Taxes
Income tax (benefit) provision consisted of:
The reconciliation of income tax provision (benefit) attributable to earnings differed from the amounts
computed by applying the U.S. Federal statutory income tax rate to earnings by the following
amounts:
21
Total Estimated Benefit PaymentsTotal Estimated Company ContributionsU.S.Non-U.S U.S.Non-U.S 2014$8,725$756$6,116$1752015 8,8774992016 9,0953972017 9,1874922018 9,3069582019-2023 48,7633,656201320122011CurrentDomestic$195 $123 ($136)Foreign 5,540 6,023 5,537 Total current 5,735 6,146 5,401 Deferred Domestic (51,498) - - Foreign (5,696) (1,400) 29 Total deferred (57,194) (1,400) 29 Total($51,459)$4,746 $5,430
Temporary differences and net operating loss carryforwards that give rise to a significant portion of
deferred tax assets and liabilities for 2013 and 2012 are as follows:
In the consolidated balance sheets, these deferred tax assets and liabilities are classified as either
current or non-current based on the classification of the related liability or asset for financial
reporting. A deferred tax asset or liability that is not related to an asset or liability for financial
reporting, including deferred taxes related to carryforwards, is classified according to the expected
reversal date of the temporary differences as of the end of the year.
A valuation allowance is provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. A U.S. based valuation allowance of $51,000 and a foreign
based valuation allowance of approxiamtley $100 have been recorded at December 31, 2012. In
assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The ultimate
22
201320122011Domestic$2,705 $5,738 ($335)Foreign (9,481) 6,886 13,709 Total($6,776)$12,624 $13,374 Computed income tax provision ($2,304)$4,292$4,681State and local taxes, net of federal tax137 244 (3) Foreign taxes, net1,137 1,246 344 Valuation allowance(52,675) (2,630) 528 Uncertain tax positions - expense (benefit) 395 1,317 64 Other, net1,851 277 (184) Total income tax expense ($51,459)$4,746 $5,430 Computed income tax provision 34.0%34.0%35.0%State and local taxes, net of federal tax-2.0%1.9%0.0%Foreign taxes, net-16.8%9.9%2.6%Valuation allowance777.4%-20.8%3.9%Uncertain tax positions - expense (benefit) -5.8%10.4%0.5%Other, net-27.3%2.2%-1.4%Effective income tax rate759.4%37.6%40.6%20132012Deferred tax asset Provisions not currently deductible$4,266$3,942 Inventory basis differences3,6223,320 Foreign exchange and other15834 Stock options847841 Pension and healthcare 10,47722,532 Net operating loss carryforwards41,62036,572 Valuation allowance- (51,102)Total deferred tax asset$60,990$16,139Deferred tax liability Property, plant, and equipment($13,287)($12,737) Intangible asset- (89) Foreign exchange and other(3,611)(3,590)Total deferred tax liability($16,898)($16,416)$44,092($277)
realization of deferred tax assets is dependent upon the generation of future taxable income during
the periods in which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income and tax-planning
strategies in making this assessment. To the extent management believes the realization of future
income tax assets does not meet the more likely than not realization criterion, a valuation allowance
is recorded. As of December 31, 2013, management has concluded that a valuation allowance is not
deemed necessary.
There were gross U.S. federal net operating loss carryforwards at December 31, 2013 and
December 31, 2012 of $95,112 and $96,897, respectively, with amounts beginning to expire in the
year 2024. The Company has gross foreign net operating loss carryforwards at December 31, 2013
and December 31, 2012 of $15,300 and $926, respectively and has an unlimited carryforward
period. Viskase did not record taxes on its undistributed earnings from foreign subsidiaries since
these earnings are considered to be permanently reinvested. If at some future date, these earnings
cease to be permanently reinvested, Viskase may be subject to U.S. income taxes and foreign
withholding taxes on such amounts. Determining the unrecognized deferred tax liability on the
potential distribution of these earnings is not practicable as such liability, if any, is dependent on
circumstances existing when remittance occurs.
The Company joins in filing a United States consolidated Federal income tax return including all of
its domestic subsidiaries.
Uncertainty in Income Taxes
The uncertain tax positions as of December 31, 2013 totaled $7,937. The following table
summarizes the activity related to the unrecognized tax benefits.
The Company's continuing practice is to recognize interest and/or penalties related to income tax
matters in income tax expense. During the years ended December 31, 2013 and 2012, the Company
recorded adjustments for interest of $119,000 and $41,000, respectively, and for penalties of
$71,000 and $240,000 respectively related to these unrecognized tax benefits. In total, as of
December 31, 2013 and 2012, the Company has recorded a liability of interest of $283,000 and
$164,000, respectively, and $784,000 and $714,000, respectively, for potential penalties.
Approximately $4,100 of the total unrecognized tax benefits represents the amount that, if
recognized, would affect the effective income tax rate in future periods. The Company and its
subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and
foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters
for the years through 2010. The Company will continue to utilize net operating loss carryforwards
from periods prior to 2010. Substantially all material state and local and foreign income tax matters
have been concluded for years through 2009. U.S. federal income tax returns for 2011 and 2012 are
currently open for examination. Based on the expiration of the statute of limitations for certain
jurisdictions, it is reasonably possible that the unrecognized tax benefits will decrease in the next
twelve months by approximately $2,100.
23
(in thousands)20132012Unrecognized tax benefits as of January 1$7,770 $9,555Increases in positions taken in a prior period 329 539 Decreases in positions taken in a prior period (60)(2,780)Increases in positions taken in a current period 578 1,131 Decreases in positions taken in a current period - - Decreases due to settlements (200)(150)Decreases due to lapse of statute of limitations(480) (525) Unrecognized tax benefits as of December 31$7,937$7,770
14. Contingencies
The Company from time to time is involved in various other legal proceedings, none of which are
expected to have a material adverse effect upon results of operations, cash flows or financial
condition.
15. Earnings Per Share
Following are the reconciliations of the numerators and denominators of the basic and
diluted EPS (in thousands, except for number of shares and per share amounts):
Common stock equivalents, consisting of granted employee stock options are dilutive and the effect
of these dilutive securities has been included in weighted average shares for diluted EPS using the
treasury method for the Company.
16. Stock-Based Compensation (Dollars in Thousands, Except Per Share Amounts)
Stock-based compensation cost is measured at the grant date based on fair value of the award and
is recognized as an expense on a straight-line basis over the requisite service period, which is the
vesting period. Included in net income is a non-cash compensation expense of $48 for the year
ended December 31, 2013, $1 for the year ended December 31, 2012 and $9 for the year ended
December 31, 2011.
The fair values of the options granted during 2013, 2009, 2007 and 2005 were estimated on the date
of grant using the binomial option pricing model. The assumptions used and the estimated fair
values are as follows:
In April 2013, the Company granted non-qualified stock options to its current chief administrative
officer for the purchase of 325,000 shares of its common stock under an employment agreement.
Options were granted at the fair market value at date of grant and will vest one third each on
December 31, 2013, December 31, 2014 and December 31, 2015. The options for the chief
administrative officer expire on April 16, 2018.
24
DecemberDecemberDecember31, 201331, 201231, 2011 NUMERATOR:Net income $44,683$7,875$7,944Net income for basic and diluted EPS$44,683$7,875$7,944 DENOMINATOR:Weighted average shares outstanding for basic EPS 36,095,979 36,024,298 35,869,890 Effect of dilutive securities1,128,553 747,503 1,140,251Weighted average shares outstandingfor diluted EPS37,224,53236,771,80137,010,141201320072005Expected term5 years10 years10 yearsExpected stock volatility17.33%23.04%14.88%Risk-free interest rate1.75%4.39%4.17%Expected forfeiture rate0.00%14.00%35.00%Fair value per share$0.51$0.77$1.09
In October 2007, the Company granted non-qualified stock options to its current chief executive
officer for the purchase of 1,500,000 shares of its common stock under an employment agreement.
Options were granted at the fair market value at date of grant and are fully vested. The options for
the chief executive officer expire on October 29, 2017.
The Company has outstanding non-qualified stock options granted to other members of
management for the purchase of 180,000 shares of its common stock. Options were granted at, or
above, the fair market value at date of grant and are fully vested. The options granted to other
members of management expire ten years from the date of grant.
The Company's outstanding options were:
17. Research and Development Costs
Research and development costs are expensed as incurred and totaled $3,856, $3,845 and $3,718
for 2013, 2012, and 2011, respectively.
18. Related-Party Transactions
As of December 31, 2013, Icahn Enterprises L.P. owns approximately 73.5% of our outstanding
common stock.
Insight Portfolio Group LLC (“Insight Portfolio Group”) is an entity formed and controlled by Mr. Icahn
in order to maximize the potential buying power of a group of entities with which Mr. Icahn has a
relationship in negotiating with a wide range of suppliers of goods, services and tangible and
intangible property at negotiated rates.
On January 1, 2013, Viskase acquired a minority equity interest in Insight Portfolio Group and
agreed to pay a portion of Insight Portfolio Group’s operating expenses, which is approximately $189
in 2013. A number of other entities with which Mr. Icahn has a relationship also acquired equity
interests in Insight Portfolio Group and also agreed to pay certain of Insight Portfolio Group’s
operating expenses in 2013.
During the periods ended December 31, 2013 and December 31 2012, the Company purchased $46
and $60, respectively, in telecommunication services in the ordinary course of business from XO
Communications, Inc., an affiliate of Icahn Enterprises L.P. The Company believes that the
purchase of the telecommunications services were on terms at least as favorable as those that the
Company would expect to negotiate with an unaffiliated party.
Icahn Enterprises L.P. was the lender on the Company’s Revolving Credit Facility as of December
31, 2013. The Company paid Icahn Enterprises L.P. service, commitment fees, interest and
25
Weighted AverageWeighted AverageShares Under Weighted AverageRemainingGrant-DateOptionExercise PriceContractual LifeFair ValueOutstanding, December 31, 20112,055,0001.85$ 68 months0.61$ Vested and exercisable at Dec. 31, 20111,955,000 1.86$ 67 months0.64$ Granted- - - - Exercised350,000 1.87$ - - Forfeited5,000 2.90$ - - Outstanding, December 31, 20121,700,0001.84$ 54 months0.70$ Vested and exercisable at Dec. 31, 20121,700,000 1.84$ 54 months0.70$ Granted325,000 8.00$ 60 months0.51$ Exercised- -$ - Forfeited20,000 2.90$ - - Outstanding, December 31, 20132,005,0001.56$ 58 months0.59$ Vested and exercisable at Dec. 31, 20131,788,333 2.23$ 43 months0.66$
amendment fees of $403 and $225 during each of the periods ended December 31, 2013 and 2012.
The Company believes that the terms of the Revolving Credit Facility are at least as favorable as
those that the Company would expect to negotiate with an unaffiliated party.
19. Business Segment Information and Geographic Area Information
The Company primarily manufactures and sells cellulosic food casings. The Company’s operations
are primarily in North America, South America, Europe and Asia. Intercompany sales and charges
(including royalties) have been reflected as appropriate in the following information. Certain items
are maintained at the Company’s corporate headquarters and are not allocated geographically. They
include most of the Company’s debt and related interest expense and income tax benefits.
Reporting Segment Information:
26
201320122011Net salesNorth America$203,445$188,514$173,680South America53,18947,05944,750Europe146,682140,891149,200Asia23,4757,122449 Other and eliminations(55,805)(41,063)(28,708)$370,986$342,523$339,371Operating income North America$23,552$23,532$18,007South America(21,664)1,4203,948Europe11,9119,55013,918Asia3,404435(606) $17,203$34,937$35,267Identifiable assetsNorth America$213,278$177,862$203,208South America46,61936,75727,306Europe114,014108,383101,992Asia28,11723,2597,312$402,028$346,261$339,818201320122011Net Sales by market Emerging$191,407$158,477$149,557Mature179,579184,046190,174 $370,986$342,523$339,731Net Sales by countryUnited States$102,765$101,632$99,023Brazil27,80528,11533,068Italy31,21130,99633,667Germany12,66112,31814,482France14,63913,07813,884Other international181,905156,384145,247$370,986$342,523$339,371
20. Interest Expense, Net
Net interest expense consisted of:
21. Changes in Accumulated Other Comprehensive Loss
22. Subsequent Events
Viskase evaluated its December 31, 2013 consolidated financial statements for subsequent events
through March 7, 2014, the date the consolidated financial statements were available to be issued.
There were no events during the period that required recognition or disclosure, except as noted
below.
On January 30, 2014, the Company completed refinancing transactions which (1) satisfied its
existing indebtedness under the 9.875% Senior Secured Notes, (2) amended the Revolving Credit
Facility and repaid outstanding drawings thereunder, and (3) funded cash to the Company’s balance
sheet for general corporate purposes. Each of the transactions is outlined below.
Amended Revolving Credit Facility
On January 30, 2014, the Company entered into an Amendment Agreement to the $25,000
Revolving Credit Facility, together with an amended Loan Agreement, with Icahn Enterprises
Holdings L.P. Drawings under the amended Revolving Credit Facility bear interest at Daily Three
Month LIBOR plus 2.0%. The amended Revolving Credit Facility also provides for an unused line
fee of 0.375% per annum.
27
December 31, 2013December 31, 2012December 31, 2011Interest expense$22,908$22,868$22,786Less Capitalized interest(432)(1,902)(1,580) Interest expense, net$22,476$20,966$21,206Accrued Employee BenefitsTranslation AdjustmentsTotalBalance at December 31, 2012($57,504)($8,760)($66,264)Other comprehensive loss before reclassifications - (993)(993)Reclassifications from accumulated other comprehensive loss to earnings20,313- 20,313Balance at December 31, 2013($37,191)($9,753)($46,944)Amounts Reclassified from Accumulated Other Comprehensive Loss Affected Line Items in the Consolidation Statement of Operations and Comprehensive LossAccrued Employee Benefits Amortization of net actuarial loss $16,047Cost of Sales Amortization of net actuarial loss 4,266 S,G & A expense$20,313
Indebtedness under the amended Revolving Credit Facility is secured by liens on substantially all of
the Company’s domestic and Mexican assets, with liens on (i) accounts, inventory, lockboxes,
deposit accounts and investment property (the “ABL Priority Collateral’) to be contractually senior to
the liens securing the Term Loan (as hereafter defined) pursuant to an intercreditor agreement, (ii)
real property, fixtures and improvements thereon, equipment and proceeds thereof (the “Fixed Asset
Priority Collateral”), to be contractually subordinate to the liens securing the Term Loan pursuant to
such intercreditor agreement, and (iii) all other assets, to be contractually pari passu with the liens
securing the Term Loan pursuant to such intercreditor agreement. Our future direct or indirect
material domestic subsidiaries are required to guarantee the obligations under the amended
Revolving Credit Agreement, and to provide security by liens on their assets as described above.
The amended Revolving Credit Facility contains various covenants which restrict the Company’s
ability to, among other things, incur indebtedness, create liens on our assets, make investments,
enter into merger, consolidation or acquisition transactions, dispose of assets (other than in the
ordinary course of business), make certain restricted payments, enter into sale and leaseback
transactions and transactions with affiliates, in each case subject to permitted exceptions. The
amended Revolving Credit Facility also requires that we comply with certain financial covenants,
including meeting a minimum EBITDA requirement and limitations on capital expenditures, in the
event our usage of the Revolving Credit Facility exceeds 90% of the facility amount. The amended
Revolving Credit Facility had no borrowings as of the January 30, 2014 closing.
Term Loan Facility
On January 30, 2014, the Company entered into a Credit Agreement with UBS AG, Stamford Branch
(“UBS”), as Administrative Agent and Collateral Agent, and the Lenders parties thereto, providing for
a $275,000 senior secured covenant lite term loan facility (“Term Loan”). The Term Loan bears
interest at a LIBOR Rate plus 3.25% (with the LIBOR Rate carrying a 1.00% floor), or at a Base Rate
equal to the sum of (1) the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus
0.50%, (c) one-month LIBOR plus 1.0%, or (d) 2.0%, plus (2) 2.25%. The Term Loan has a 1% per
annum amortization with a maturity date of January 30, 2021. The Term Loan is subject to certain
additional mandatory prepayments upon asset sales, incurrence of indebtedness not otherwise
permitted, and based upon a percentage of excess cash flow. Prepayments on the Term Loan may
be made at any time, subject to a prepayment premium of 1% for certain prepayments during the
first six months of the term.
Indebtedness under the Term Loan is secured by liens on substantially all of the Company’s
domestic and Mexican assets, with liens on (i) the Fixed Asset Priority Collateral, to be contractually
senior to the liens securing the Revolving Credit Facility pursuant to the intercreditor agreement, (ii)
the ABL Priority Collateral, to be contractually subordinate to the liens securing the Revolving Credit
Facility pursuant to the intercreditor agreement, and (iii) all other assets, to be contractually pari
passu with the liens securing the Revolving Credit Facility pursuant to the intercreditor agreement.
Our future direct or indirect material domestic subsidiaries are required to guarantee the obligations
under the Term Loan, and to provide security by liens on their assets as described above.
28