VISKASE COMPANIES, INC.
ANNUAL REPORT 2015
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, 2015 and 2014
Consolidated Statements of Operations for the years ended December 31,
2015, 2014 and 2013
Consolidated Statements of Comprehensive (Loss) Income for the years ended
December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders' Equity for years ended
December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015,
2014 and 2013
2.
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Grant Thornton LLP
Grant Thornton Tower
171 N. Clark Street, Suite 200
Chicago, IL 60601-3370
T +1 312 856 0200
F +1 312 565 4719
grantthornton.com
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, 2015 and 2014, and the related consolidated statements of operations,
comprehensive (loss) income, 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
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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, 2015 and 2014, 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.
Emphasis of matter
As discussed in Note 1 to the consolidated financial statements, the Company adopted new
accounting guidance in 2015 related to the presentation of deferred income taxes. Our opinion
is not modified with respect to this matter.
Chicago, Illinois
March 30, 2016
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, 2015December 31, 2014ASSETS Current assets: Cash and cash equivalents$37,321$39,310 Restricted cash1,3641,364 Receivables, net60,25263,313 Inventories76,78877,117 Other current assets24,48927,088 Deferred income taxes- 11,868Total current assets200,214220,060Property, plant and equipment294,355282,124Less accumulated depreciation140,727126,228Property, plant and equipment, net153,628155,896Deferred financing costs2,3902,859Other assets, net8,8606,582Deferred income taxes48,84843,580Total Assets$413,940$428,977LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Short-term debt$3,160$3,357 Short-term portion of capital lease obligations174271 Accounts payable25,47227,997 Accrued liabilities34,80933,381 Deferred income taxes- 152 Total current liabilities63,61565,158Long-term debt, net of current maturities266,538269,660Capital lease obligations, net of current portion137321Accrued employee benefits50,49551,825Deferred income taxes- 3,123Stockholders’ equity:370370Paid in capital32,86132,801Retained earnings80,27278,975Less 805,270 treasury shares, at cost(298)(298)Accumulated other comprehensive loss(80,050)(72,958)Total stockholders' equity33,15538,890Total Liabilities and Stockholders' Equity$413,940$428,977Common stock, $0.01 par value; 36,989,711 shares issued and 36,184,441 outstanding at December 31, 2015 and 36,984,817 shares issued and 36,179,547 outstanding at December 31, 2014
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201531, 201431, 2013 NET SALES$343,583$365,203$370,986Cost of sales261,354273,938283,718GROSS MARGIN82,22991,26587,268Selling, general and administrative50,12844,97246,456Amortization of intangibles1618127Tax amnesty settlement- - 23,482Asset impairment charge44580- Restructuring expense2,672 217 - OPERATING INCOME28,96845,97817,203Interest income311951Interest expense, net12,45814,19122,476Loss on early extinguishment of debt- 15,739- Other expense, net5,3583,1791,554INCOME (LOSS) BEFORE INCOME TAXES11,18312,888(6,776)Income tax (benefit) provision 9,8863,058(51,459)NET INCOME $1,297$9,830$44,683WEIGHTED AVERAGE COMMON SHARES- BASIC 36,184,33436,131,79536,095,979PER SHARE AMOUNTS:EARNINGS PER SHARE- BASIC$0.04$0.27$1.24WEIGHTED AVERAGE COMMON SHARES- DILUTED37,189,12137,280,06437,224,532PER SHARE AMOUNTS:EARNINGS PER SHARE- DILUTED$0.03$0.26$1.20
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In Thousands)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201531, 201431, 2013Net income$1,297$9,830$44,683Other comprehensive (loss) income, net of tax Pension liability adjustment1,454(16,484)20,313 Foreign currency translation adjustment(8,546)(9,530)(993)Other comprehensive (loss) income, net of tax(7,092)(26,014)19,320Comprehensive (loss) income ($5,795)($16,184)$64,003
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
See notes to consolidated financial statements.
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Accumulated otherTotalCommonPaid inTreasuryRetained comprehensive stockholders’stockcapitalstockearningslossequity (deficit)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 tax20,31320,313Issuance of common stock4848Balance December 31, 2013$369$32,839($298)$69,145($46,944)$55,111Net income9,8309,830Foreign currency translation adjustment(9,530)(9,530)Pension liability adjustment, net of tax(16,484)(16,484)Stock option expense6060Stock option exercise1(98)(97)Balance December 31, 2014$370$32,801($298)$78,975($72,958)$38,890Net loss1,2971,297Foreign currency translation adjustment(8,546)(8,546)Pension liability adjustment, net of tax1,4541,454Stock option expense6060Balance December 31, 2015$370$32,861($298)$80,272($80,050)$33,155
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
See notes to consolidated financial statements.
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YearYearYearEndedEndedEndedDecemberDecemberDecember31, 201531, 201431, 2013Cash flows from operating activities:Net income $1,297$9,830$44,683 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation18,84320,10119,509Stock-based compensation60 60 48 Amortization of intangibles1618127Amortization of deferred financing fees5895341,017Deferred income taxes3,078466(57,194)Loss on disposition of assets1,375269202Bad debt and accounts receivable provision475403177Loss on early extinguishment of debt- 15,739- Non-cash interest on notes907993Changes in operating assets and liabilities:Receivables1,1641,459(3,172)Inventories(2,207)(8,209)(9,326)Other current assets1,9682,270(7,779)Accounts payable(1,297)(3,941)4,809Accrued liabilities2,788(12,181)5,012Accrued employee benefits347(4,556)386Other(3,677)(7,551)(5,081)Total adjustments23,6124,960(51,172)Net cash provided by (used in) operating activities24,90914,790(6,489)Cash flows from investing activities:Capital expenditures(21,991)(23,091)(19,119)Proceeds from disposition of assets402146Net cash used in investing activities(21,951)(23,089)(18,973)Cash flows from financing activities: Issuance of common stock- 1- Deferred financing costs(120)(3,228)(125)Proceeds from revolving loan- - 14,011Proceeds from long-term debt- 274,313- Repayment of short-term debt(3,310)(15,357)- Repayment of long-term debt- (225,617)(170)Repayment of capital lease(348)(375)(434)Restricted cash- (102)(204)Net cash provided by financing activities(3,778)29,63513,078Effect of currency exchange rate changes on cash(1,169)(1,105)351Net increase (decrease)in cash and equivalents(1,989)20,231(12,033)Cash and equivalents at beginning of period39,31019,07931,112Cash and equivalents at end of period$37,321$39,310$19,079Supplemental cash flow information:Interest paid less capitalized interest$13,761$10,834$21,457Income taxes paid $6,376$4,889$3,125
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
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. We were incorporated in Delaware in 1970. 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.
Reclassifications
Certain prior period financial statement balances have been reclassified to conform to the current
period presentation. Items include the reclassification of deferred costs from current assets to long-
term assets and the presentation of net loss applicable to common stock and net loss applicable to
common share on the face of the statement of operations.
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 $163 and $182 of short-term investments at December 31,
2015 and December 31, 2014, 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.
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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
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. Real property consists of manufacturing, distribution 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, trademarks 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, 2015 are as follows:
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• 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 7.50% for 2015. The Company is using a long-term rate of return on French plan
assets of 3.50% for 2015. 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
obligations. The Company is using a discount rate of 4.68% for 2015. The Company is using a
weighted average discount rate of 2.04% on its non-U.S. pension plans for 2015.
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 2015 and 2014 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
assured. 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.
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, 2015, future annual minimum purchases remaining under the agreement are
$2,088.
The Company’s financial instruments include cash and cash equivalents, accounts receivable and
accounts payable. 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 Term Loan 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
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In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred
Taxes, which amends FASB ASU Topic 740, Income Taxes. Current GAAP requires an entity to
separate income tax liabilities and assets into current and noncurrent amounts in a classified
statement of financial position. This ASU requires that deferred tax liabilities and assets be classified
as noncurrent in a classified statement of financial position. This ASU is effective for annual periods
beginning after December 15, 2016, and interim periods within those annual periods. Earlier
application is permitted as of the beginning of an interim or annual reporting period. We have elected
to early adopt this ASU for the year ended December 31, 2015 on a prospective basis. This ASU
will not have an impact on our consolidated financial position, results of operations, comprehensive
income, cash flows and disclosures.
In July 2015, the FASB issued ASU No. 2015-11, “Simplifying the Measurement of Inventory.” This
update provides that an entity should measure inventory with the scope of the update at the lower of
cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course
of business, less reasonably predictable costs of completion, disposal, and transportation. The
amendments in this update are effective for financial statements issued for fiscal years beginning
after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017.
The Company is currently assessing the impact that adopting this new accounting guidance will
have on the Company’s consolidated financial statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (“ASU 2014-09),
Revenue from Contracts with Customers, which supersedes most of the current revenue recognition
requirements. The underlying principle is that an entity will recognize revenue to depict the transfer
of goods or services to customers at an amount that the entity expects to be entitled to in exchange
for those goods or services. The guidance provides a five-step analysis of transactions to determine
when and how revenue is recognized. Other major provisions include capitalization of certain
contract costs, consideration of time value of money in the transaction price, and allowing estimates
in certain
of variable consideration
circumstances. The guidance also requires enhanced disclosures regarding the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers.
On July 9, 2015, the FASB board voted to defer the effective date to annual reporting periods
beginning after December 15, 2018 and interim periods within annual periods beginning after
December 15, 2019 (early adoption is permitted no earlier than the original effective date). The
guidance permits the use of either a retrospective or cumulative effect transition method. The
adoption of ASU 2014-09 is not expected to have a material impact on the Company’s consolidated
financial statements.
to be recognized before contingencies are resolved
In January 2015, the FASB issued ASU No. 2015-01, which amends FASB ASU Topic 220-20,
Income Statement - Extraordinary and Unusual Items. This ASU eliminates from GAAP the concept
of extraordinary items. Although the ASU will eliminate the requirements in Subtopic 225-20 for
reporting entities to consider whether an underlying event or transaction is extraordinary, the
presentation and disclosure guidance for items that are unusual in nature or occur infrequently will
be retained and will be expanded to include items that are both unusual in nature and infrequently
occurring. This ASU is effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A
reporting entity also may apply the amendments retrospectively to all prior periods presented in the
financial statements. Early adoption is permitted provided that the guidance is applied from the
beginning of the fiscal year of adoption. We adopted ASU No. 2015-01 and believe that the adoption
of this guidance will have no impact on our consolidated financial position, results of operations,
comprehensive income, cash flows and disclosures.
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs,
which amends FASB ASU Subtopic 835-30, Interest - Imputation of Interest. The new standard
requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction
from the carrying value of the debt. The standard is effective for interim and annual periods
beginning after December 31, 2015 and is required to be applied on a retrospective basis. Early
adoption is permitted. We expect that the adoption of this new guidance will result in a
reclassification of debt issuance costs on our consolidated balance sheets.
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In April 2015, the FASB issued ASU No. 2015-04, Compensation-Retirement Benefits: Practical
Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Assets,
which amends FAB ASU Topic 715, Compensation - Retirement Benefits. This ASU provides a
practical expedient that permits the entity to measure defined benefit plan assets and obligations
using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient
consistently from year to year. This ASU is effective for annual periods, including interim periods
within those annual periods, beginning after December 15, 2015 with early adoption permitted. We
anticipate that the adoption of this guidance will have minimal impact on our consolidated financial
position, results of operations, comprehensive income, cash flows and disclosures.
2. Cash and cash equivalents
As of December 31, 2015 and December 31, 2014, cash held in foreign banks was $17,407 and
$15,682, respectively. Foreign cash is not available for use by the US Company without the payment
of an incremental US tax. This incremental tax impact has not been recorded in the financial
statements because of the company’s permanent reinvestment assertion on its accumulated foreign
earnings.
Letters of credit in the amount of $1,364 as of December 31, 2015 and December 31, 2014 were
outstanding under facilities with a commercial bank, and were cash collateralized in a restricted
account.
3. Receivables, net
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December 31, 2015December 31, 2014Cash and cash equivalents$37,321 $39,310 Restricted cash1,3641,364$38,685 $40,674 December 31, 2015December 31, 2014Accounts receivable, gross$61,258 $64,434 Less allowance for doubtful accounts (583)(915)Less allowance for sales returns(423)(206) $60,252 $63,313 December 31, 2015December 31, 2014December 31, 2013Beginning balance$1,121 $1,264 $2,054 Provision (recoveries) 475 403 177 Write-offs(564)(524)(1,020) Foreign translation(26)(22)53 Ending balance$1,006 $1,121 $1,264
4. Inventory
Inventory consisted of:
5. Property, Plant and Equipment, Net
Accumulated depreciation consisted of:
6. Other Assets
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December 31, 2015December 31, 2014Raw materials$11,612 $11,684 Work in process31,496 32,509 Finished products 33,680 32,924 $76,788 $77,117 December 31, 2015December 31, 2014 Land and improvements $1,888 $2,080 Buildings and improvements 38,056 36,738 Machinery and equipment246,751 241,576 Construction in progress 7,660 1,730 $294,355 $282,124 December 31, 2015December 31, 2014 Land and improvements $304 $281 Buildings and improvements 10,877 9,754 Machinery and equipment129,546 116,193 $140,727 $126,228
7. Accrued Liabilities
8. Debt Obligations
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.
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December 31, 2015December 31, 2014Patents and Trademarks$4,782 $4,762 Less: Accumulated amortization(4,644)(4,628)Patents and trademarks, net 138 134 Other intangibles1,236 1,236 Less: Accumulated amortization(1,236)(1,236)Other intangibles, net0 0 Other taxes receivable8,347 6,103 Miscellaneous375 345 $8,860 $6,582 December 31, 2015December 31, 2014Compensation and employee benefits$12,471 $17,160 Taxes payable14,955 9,922 Accrued volume and sales rebates1,778 1,444 Accrued interest payable8 1,968 Other5,597 2,887 $34,809 $33,381 December 31, 2015December 31, 2014Short-term debt: Europe unsecured loan$410$607 Bank term loan2,7502,750 Revolving credit facility- - Total short-term debt3,1603,357Long-term debt: Bank term loan, net of discount266,231268,891 Europe unsecured loan- 458 Other307311 Total long-term debt266,538269,660 Total debt$269,698$273,017
On March 1, 2016, the Company entered into the Tenth Amendment to the Loan and Security
Agreement with Icahn Enterprises L.P., extending the maturity date of the Revolving Credit Facility
from January 30, 2017 to January 30, 2020. The amendment included a fee of $125 for the extension.
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 Company is
in compliance with the Revolving Credit Facility covenants as of December 31, 2015.
The amended Revolving Credit Facility had no borrowings as of December 31, 2015 and December
31, 2014.
In its foreign operations, the Company has unsecured lines of credit with various banks providing
approximately $8,000 of availability. There were borrowings of $410 under the lines of credit at
December 31, 2015. 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.
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%). As of December 31, 2015, the interest rate
was 4.25% on the Term Loan. 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.
Debt Maturity
The aggregate maturities of debt (1) for each of the next five years are:
17
(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 as of
December 31, 2015 and December 31, 2014.
The following is a schedule by years of minimum future lease payments as of December 31, 2015.
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.
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, 2015, are:
18
20162017201820192020ThereafterTerm Loan Facility $ 2,750 $ 2,750 $ 2,750 $ 2,750 $ 2,750 $ 255,750 Europe lines of credit410 - - - - - Other - - - - - 875 $ 3,160 $ 2,750 $ 2,750 $ 2,750 $ 2,750 $ 256,625 December 31,December 31,20152014Building and improvements$406$492Machinery and equipment2,2732,710Less: Accumulated depreciation(2,344)(2,528)$335$674Year ending December 31,2016$20120171042018462019142020- Thereafter- Total minimum payments required365Less amount representing interest(54)Present value of net minimum lease payments$311
Total rent expense during 2015, 2014 and 2013 amounted to $3,313, $3,525 and $4,617
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 (“Plan”) to their employees. Most of these benefits have been
terminated, resulting in various reductions in liabilities and curtailment gains.
Included in accumulated other comprehensive loss, net of tax, as of December 31, 2015 are the
following amounts not yet recognized in net periodic benefit cost:
Amounts included in other comprehensive loss expected to be recognized as a component of net
periodic benefit cost for the year ending December 31, 2016 are:
The measurement date for all defined benefit plans is December 31. The year end status of the
plans is as follows:
19
2016$2,574 20172,386 20182,722 20192,746 20202,074 Total thereafter12,324 Total minimum lease payments$24,826 U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial loss ($49,041)($3,184)U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial loss ($4,368)($162)
The funded status of these pension plans as a percentage of the projected benefit obligation was 70% in
2015 compared to 72% in 2014.
Components of net periodic benefit cost for the years ended December 31:
20
Non U.S. Pension Benefits2015201420152014 Change in benefit obligation:Projected benefit obligation at beginning of year$165,458$143,295$11,924$11,558Service cost- - 429426Interest cost6,8947,247218329Actuarial loss (gain) (7,726)22,963(244)1,484Benefits paid(8,191)(8,047)(499)(490)Liability (Gain)/Loss due to Curtailment- - (572)- Currency translation- - (1,233)(1,383)Estimated benefit obligation at end of year$156,435$165,458$10,023$11,924Change in plan assets:Fair value of plan assets at beginning of year$122,126$118,376$4,949$5,419Actual return on plan assets(2,310)6,763(464)176Employer contribution1,6965,034- - Benefits paid(8,191)(8,047)- - Currency translation- - (512)(646)Fair value of plan assets at end of year$113,321$122,126$3,973$4,949Unfunded status of the plan($43,114)($43,332)($6,050)($6,975)U.S. Pension Benefits U.S. Pension Benefits Non U.S. Pension Benefits2015201420152014Amounts recognized in statement of financial position:Current liabilities($76)($82)($150)($168)Noncurrent liabilities(43,038)(43,250)(5,901)(6,809)Net amount recognized($43,114)($43,332)($6,051)($6,977)U.S. Pension Benefits Non U.S. Pension Benefits2015201420152014Projected benefit obligation$156,435 $165,458 $10,023 $11,924
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 2.04% on its non U.S.
pension plans for 2015.
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 64% equity
securities, 17% hedge funds and 19% 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.
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, 2015 and 2014, by
asset category are as follows:
21
Non U.S. Pension Benefits201520142013201520142013Component of net period benefit costService cost-$ -$ -$ $441$471$415Interest cost6,8957,2056,625222364390Expected return on plan assets(8,953)(9,055)(7,877)(141)(178)(194)Amortization of prior service cost- - - - - - Amortization of actuarial loss4,0838634,240176 100 88 $2,025($987)$2,988$698$757$699U.S. Pension BenefitsU.S. Pension Benefits Non U.S. Pension Benefits2015201420152014Discount rate4.68%4.29%2.04%2.06%Expected return on plan assets7.50%7.75%3.20%3.20%
22
Fair Value Measurement atDecember 31, 2015Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsAsset Category Total(Level 1)(Level 2)(Level 3)Cash equivalents$4,861$4,861-$ -$ Equity securities: U.S. companies22,193 22,193 - - International companies 6,377 6,377 - - U.S-Large Cap Equity Growth 12,563 12,563 - - U.S-Mutual Funds 26,708 - 26,708 - Fixed income securities:- Government Treasuries2,115 - 2,115 - Mortgage-backed securities 1,581 - 1,581 - Corporate Bond7,533 7,533 - - High yield fund8,391 - 8,391 - Other types of investments: Hedge funds 20,906 - - 20,906 Real Estate93 93 - - Total $113,321$53,62038,795$ 20,906$ Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Combined Hedge Funds$21,336 Total realized earnings376 Change in unrealized depreciation(408) Cost of purchases428 Proceeds from sales(826) $20,906Beginning balance at January 1, 2015Ending balance at December 31, 2015
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.
Total Estimated Benefit
Payments
U.S.
Non U.S
2016
2017
2018
2019
2020
Thereafter
$8,998
9,141
9,279
9,492
9,688
49,844
$503
433
322
472
537
2,224
23
Fair Value Measurement atDecember 31, 2014Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsAsset Category Total(Level 1)(Level 2)(Level 3)Cash equivalents$5,094$5,094-$ -$ Equity securities: U.S. companies26,189 26,189 - - International companies 4,682 4,682 - - U.S-Large Cap Equity Growth 13,551 13,551 - - U.S-Mutual Funds 28,360 - 28,360 - Fixed income securities:- Government Treasuries1,999 - 1,999 - Mortgage-backed securities 499 - 499 - Corporate Bond5,942 5,942 - - High yield fund14,399 - 14,399 - Other types of investments: Hedge funds 21,336 - - 21,336 Real Estate75 75 - - Total $122,126$55,53345,257$ 21,336$ Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Combined Hedge Funds$20,626 Total realized earnings206 Change in unrealized depreciation1,182 Cost of purchases5,311 Proceeds from sales(5,989) $21,336Beginning balance at January 1, 2014Ending balance at December 31, 2014
The Company’s expected contribution for the 2016 fiscal year is $271 for the U.S. pension plan.
There is no funding requirement 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
$1,212, $1,230 and $1,120 in 2015, 2014 and 2013, 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 2015, 2014, and
2013 was $564, $787 and $854, 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 $1,559.
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 provision (benefit) 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:
24
201520142013CurrentDomestic$240 $52 $195 Foreign 6,568 2,540 5,540 Total current 6,808 2,592 5,735 Deferred Domestic 4,782 2,429 (51,498)Foreign (1,704) (1,963) (5,696)Total deferred 3,078 466 (57,194) Total$9,886 $3,058 ($51,459)
Temporary differences and net operating loss carryforwards that give rise to a significant portion of
deferred tax assets and liabilities for 2015 and 2014 are as follows:
25
(Loss) income before income taxes: 201520142013Domestic$9,006 ($1,338)$2,705 Foreign 2,177 14,226 (9,481) Total$11,183 $12,888 ($6,776)Computed income tax provision $3,914$4,508($2,304)State and local taxes, net of federal tax440 55 137 Foreign taxes, net940 (1,502) 1,137 Valuation allowance282 286 (52,675) Uncertain tax positions - (benefit) expense 1,138 (2,328) 395 Foreign exchange impact2,475 532 (74) Other, net697 1,507 1,925 Total income tax expense $9,886 $3,058 ($51,459)Computed income tax provision 35.0%35.0%34.0%State and local taxes, net of federal tax3.9%0.4%-2.0%Foreign taxes, net8.4%-11.7%-16.8%Valuation allowance2.5%2.2%777.4%Uncertain tax positions - expense (benefit) 10.2%-18.1%-5.8%Foreign exchange impact22.1%4.1%1.1%Other, net6.3%11.7%-28.4%Effective income tax rate88.4%23.6%759.4%20152014Deferred tax asset Provisions not currently deductible$4,429$4,810 Inventory basis differences4,1965,025 Foreign exchange and other12387 Stock options444754 Pension and healthcare 16,96316,948 Intangible asset6- Net operating loss carryforwards39,35241,685 Valuation allowance(504)- Total deferred tax asset$65,009$69,309Deferred tax liability Property, plant, and equipment($14,180)($13,841) Intangible asset- 4 Foreign exchange and other(1,981)(3,300)Total deferred tax liability($16,161)($17,137)$48,848$52,173
The net deferred tax asset (liability) is classified in the balance sheet as follows:
On October 1, 2015, we adopted FASB ASU No. 2015-17, Balance Sheet Classification of Deferred
Taxes (Topic 740) on a prospective basis. This ASU requires that the deferred tax assets and
liabilities be classified as non-current in a statement of financial position. Adoption of this ASU
resulted in a reclassification of our deferred tax assets and liabilities to the net non-current deferred
tax asset in our consolidated balance sheet as of December 31, 2015. No prior periods were
retrospectively adjusted.
A valuation allowance is provided when it is more likely than not that some portion or all of the net
deferred tax assets will not be realized. Management believes that is more likely than not that its net
deferred tax assets will be realized based on the weight of positive evidence and future income
except with respect to the loss in Poland. The Company has a valuation allowance in Poland at
December 31, 2015 and December 31, 2014 of $504 and $286, respectively. The Company has
gross U.S. federal net operating loss carryforwards at December 31, 2015 and December 31, 2014
of $92,632 and $100,179, respectively, with amounts beginning to expire in 2024. The Company has
gross net operating loss carryforwards in Brazil at December 31, 2015 and December 31, 2014 of
$13,601 and $13,423, respectively and has an unlimited carryforward period. The Company has
gross net operating loss carryforwards in Poland at December 31, 2015 and December 31, 2014 of
$2,080 million and $1,428, respectively and has a five year carryforward period.
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, 2015 totaled $6,969. The following table
summarizes the activity related to the unrecognized tax benefits.
26
20152014Current deferred tax assets- $11,868Current deferred tax liability- (152) Current deferred tax assets (liability), net- 11,716 Non-current deferred tax assets$48,84843,580 Non-current deferred tax liability- (3,123) Non-current deferred tax assets (liability), net48,848 40,457 Current deferred tax assets (liability), net- 11,716 Non-current deferred tax assets (liability), net48,848 40,457 Net deferred tax asset (liability)$48,848$52,173(in thousands)20152014Unrecognized tax benefits as of January 1$5,890 $7,937Increases in positions taken in a prior period - - Decreases in positions taken in a prior period (106)(507)Increases in positions taken in a current period 2,682 651 Decreases in positions taken in a current period - Decreases due to settlements (1,468)(100)Decreases due to lapse of statute of limitations(29) (2,091) Unrecognized tax benefits as of December 31$6,969$5,890
Effective January 1, 2007, the Company adopted ASC 740 10 05, formerly FIN 48. This
Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with ASC Statement No. 740, "Income Taxes." This
Interpretation prescribes a recognition threshold and measurement approach for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax
return.
This Interpretation also provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. In 2015, the Company recognized an
approximate net increase of $1,079 to increase the reserves for uncertain tax positions. The majority
of the increase in the reserve is due to uncertain tax positions with the foreign subsidiaries.
Approximately $6,969 of the total gross 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 years through 2010. Substantially all material state and local and foreign income tax matters
have been concluded for years through 2009.
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, 2015 and 2014, the Company
recorded adjustments for interest of $92 and $(167), respectively, and for penalties of $(21) and
$(434), respectively related to these unrecognized tax benefits. In total, as of December 31, 2015
and 2014, the Company has recorded a liability of interest of $209 and $117, respectively, and $331
and $352, respectively, for potential penalties.
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.
During the third quarter 2015, Viskase Companies, Inc. had been engaged in continuing negotiations
with the International Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge
2544 (“IAM”) affecting Viskase’s 188 hourly workers at its Loudon, TN extrusion facility. The IAM
membership voted to strike effective at noon on September 30, 2015.
On October 11, 2015, Viskase Companies, Inc. reached a five-year agreement with the International
Association of Machinists and Aerospace Workers, AFL-CIO, Local Lodge 2544 (IAM), ending the
strike. The strike did not impact any customers, nor did it cause any service issues. IAM union
employees returned to work and production resumed on Wednesday October 14, 2015.
The one time non-recurring charge for the strike was $2,077.
Litigation and associated motions filed by the Company as a result of the strike, seeking a temporary
restraining order, injunctive relief, and contempt findings, were filed, but dismissed with settlement of
the strike.
15. 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 non-cash compensation expense of $60 for the year ended
December 31, 2015, $60 for the year ended December 31, 2014 and $48 for the year ended
December 31, 2013.
The fair values of the options granted during 2013 and 2007 were estimated on the date of grant
using the binomial option pricing model. The assumptions used and the estimated fair values are as
follows:
27
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.
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 no outstanding non-qualified stock options that were granted to other members of
management in 2005. Options were granted at, or above, the fair market value at date of grant.
The Company's outstanding options were:
Vested and exercisable options as of December 31, 2015 were 1,825,000 with a weighted average
exercise price of $2.82.
16. Research and Development Costs
Research and development costs are expensed as incurred and totaled $4,977, $5,662 and $3,856
for 2015, 2014, and 2013, respectively.
17. Related-Party Transactions
As of December 31, 2015, Icahn Enterprises L.P. owned approximately 73.3% of our outstanding
common stock. There were no new shares of common stock purchased during the year ended
December 31, 2015.
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.
28
20132007Expected term5 years10 yearsExpected stock volatility17.33%23.04%Risk-free interest rate1.75%4.39%Expected forfeiture rate0.00%14.00%Fair value per option$0.51$0.77Weighted AverageWeighted AverageShares Under Weighted AverageRemainingGrant-DateOptionExercise PriceContractual LifeFair ValueOutstanding, December 31, 20132,005,0001.56$ 58 months0.59$ Vested and exercisable at Dec. 31, 20131,788,333 2.23$ 43 months0.66$ Granted- -$ - -$ Exercised170,000 2.90$ - - Forfeited- -$ - - Outstanding, December 31, 20141,835,0002.82$ 35 months0.63$ Vested and exercisable at Dec. 31, 20141,726,668 2.82$ 34 months0.64$ Granted- -$ - - Exercised10,000 2.90$ - - Forfeited- -$ - - Outstanding, December 31, 20151,825,0002.82$ 23 months0.63$ Vested and exercisable at Dec. 31, 20151,825,000 2.82$ 23 months0.63$
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 $193
in 2015 and $197 in 2014. 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 2016.
During the periods ended December 31, 2015 and December 31, 2014, the Company purchased
$45 and $44, respectively, in telecommunication services in the ordinary course of business from XO
Communications, Inc., an affiliate of Icahn Enterprises L.P.
Icahn Enterprises L.P. was the lender on the Company’s Revolving Credit Facility as of December
31, 2015. The Company paid Icahn Enterprises L.P. service, commitment fees, interest and
amendment fees of $107 and $223 during each of the years ended December 31, 2015 and 2014
18. 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:
29
201520142013Net salesNorth America$195,131$199,220$203,445South America46,40352,87953,189Europe118,484142,944146,682Asia33,39930,19923,475Other and eliminations(49,834)(60,039)(55,805)$343,583$365,203$370,986Operating income North America$23,361$28,386$23,552South America3,8482,819(21,664)Europe7439,00111,911Asia1,0165,7723,404$28,968$45,978$17,203Identifiable assetsNorth America$215,671$222,747South America54,48155,256Europe101,385113,189Asia42,40337,785$413,940$428,977
19. Interest Expense, Net
Net interest expense consisted of:
20. Changes in Accumulated Other Comprehensive Loss
30
201520142013Net Sales by market Emerging$175,008$184,376$191,407Mature168,575180,827179,579 $343,583$365,203$370,986Net Sales by countryUnited States$101,903$101,979$102,765Brazil24,51429,57227,805Italy26,36531,16131,211Germany10,41812,86012,661France12,81214,83414,639Philippines19,53114,34116,236Poland7,1448,82714,016Other international140,896151,629151,653$343,583$365,203$370,986December 31, 2015December 31, 2014December 31, 2013Interest expense$12,597$14,174$22,908Less Capitalized interest(139)17(432) Interest expense, net$12,458$14,191$22,476Accrued Employee BenefitsTranslation AdjustmentsTotalBalance at December 31, 2014($53,675)($19,283)($72,958)Other comprehensive loss before reclassifications(2,805)(8,546)(11,351)Reclassifications from accumulated other comprehensive loss to earnings4,259- 4,259Balance at December 31, 2015($52,221)($27,829)($80,050)
21. Restructuring Charges
During the fourth quarter of 2015, the Company recognized a restructuring expense of $2,312. The costs
relate to a Board-approved plan of restructuring of its French subsidiary operations to safeguard the
Company’s competitive environment in the European market. The Company estimates its total
restructuring expense will be $4,170 when the plan is completed. The Company will exit its French
plastics, printing, and MP coating operations, along with a targeted downsizing of its production and
overhead personnel. The plan will involve the involuntary termination or relocation/reutilization of 38
employees (Corporate: 3 - Production: 30 - Support: 5) and the implementation of a social plan at an
estimated expense of $2,980. The restructuring expense also includes an asset impairment of $672 and
other fees of $518.
The Company believes this will position us to be in an improved competitive position for the future in the
European market.
The Company also incurred a restructuring expense of $360 relating to the elimination of a shift in its
Brazilian operations. The plan involved the involuntary termination of 42 employees and was completed
in 2015.
The following table provides details of our restructuring provisions.
22. Subsequent Events
Viskase evaluated its December 31, 2015 consolidated financial statements for subsequent events
through March 30, 2016, the date the consolidated financial statements were available to be issued.
On March 1, 2016, the Company entered into the Tenth Amendment to Loan and Security Agreement
with Icahn Enterprises L.P., extending the maturity date of the Revolving Credit Facility from January 30,
2017 to January 30, 2020. The amendment included a fee of $125 for the extension.
31
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 $3,365Cost of sales Amortization of net actuarial loss 894Selling, general and administrative$4,259December 31, 2015December 31, 2014December 31, 2013Beginning balance$89 $148 $462 Provision2,672 217 0 Payments/Impairments(1,048)(276)(314)Ending balance$1,713 $89 $148