Financial Report for
year end
December 31, 2022
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, 2022 and 2021
- Consolidated Statements of Operations for the years ended December 31, 2022,
2021 and 2020
- Consolidated Statements of Comprehensive Income (Loss) for the years ended
December 31, 2022, 2021 and 2020
- Consolidated Statements of Stockholders' Equity for the years ended December
31, 2022, 2021 and 2020
- Consolidated Statements of Cash Flows for the years ended December 31, 2022,
2021 and 2020
- Notes to Consolidated Financial Statements
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations (unaudited)
GRANT THORNTON LLP
Grant Thornton Tower
171 N. Clark St., Suite 200
Chicago, IL 60601-3370
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+1 312 856 0200
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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Viskase Companies, Inc.
Opinion
We have audited the consolidated financial statements of Viskase Companies, Inc. (a
Delaware corporation) and subsidiaries (the “Company”), which comprise the
consolidated balance sheets as of December 31, 2022 and 2021, and the related
consolidated statements of operations, comprehensive income (loss), changes in
stockholders’ equity, and cash flows for each of the three years in the period ended,
and the related notes to the financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2022
and 2021, and the results of its operations and its cash flows for each of the three
years in the period ended in accordance with accounting principles generally
accepted in the United States of America.
Basis for opinion
We conducted our audits of the consolidated financial statements in accordance with
auditing standards generally accepted in the United States of America (US GAAS).
Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Financial Statements section of our report. We are
required to be independent of the Company and to meet our other ethical
responsibilities in accordance with the relevant ethical requirements relating to our
audits. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our audit opinion.
Responsibilities of management for the financial statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America, and for 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.
In preparing the consolidated financial statements, management is required to
evaluate whether there are conditions or events, considered in the aggregate, that
raise substantial doubt about the Company’s ability to continue as a going concern for
one year after the date the financial statements are issued.
GT.COM
Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms
are separate legal entities and are not a worldwide partnership.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated
financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance but is not absolute assurance and therefore is
not a guarantee that an audit conducted in accordance with US GAAS will always
detect a material misstatement when it exists. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the
judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with US GAAS, we:
• Exercise professional judgment and maintain professional skepticism throughout
•
the audit.
Identify and assess the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error, and design and perform audit
procedures responsive to those risks. Such procedures include examining, on a
test basis, evidence regarding the amounts and disclosures in the financial
statements.
• Obtain an understanding of internal control relevant to the audit 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 Company’s internal
control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as
well as evaluate the overall presentation of the consolidated financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in
the aggregate, that raise substantial doubt about the Company’s ability to
continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the audit, significant audit
findings, and certain internal control-related matters that we identified during the audit.
Chicago, Illinois
March 28, 2023
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except for Number of Shares)
See notes to consolidated financial statements
December 31, 2022December 31, 2021ASSETS Current assets: Cash and cash equivalents$8,783$9,876 Receivables, net87,58481,645 Inventories103,17293,070 Other current assets40,15244,307Total current assets239,691228,898Property, plant and equipment416,628409,499Less accumulated depreciation(274,781)(262,372)Property, plant and equipment, net141,847147,127Right of use assets24,52027,964 Other assets, net23,25818,973Intangible assets16,80819,531Goodwill3,2073,373Deferred income taxes22,26125,235Total Assets$471,592$471,101LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Short-term debt$39,375$23,500 Accounts payable43,37735,045 Accrued liabilities31,49134,067 Short-term portion lease liabilities4,851 5,196 Total current liabilities119,09497,808Long-term debt, net of current maturities122,521 131,821Long-term liabilities7,3837,380Accrued employee benefits36,21154,616Deferred income taxes3,4052,081Long-term lease liabilities22,69325,919 Stockholders’ equity:Common stock, $0.01 par value; 103,995,935 shares issued and 103,190,665 outstanding 1,0401,040Paid in capital182,343182,343Retained earnings45,46742,938Less 805,270 treasury shares, at cost(298)(298)Accumulated other comprehensive loss(67,114)(73,639)Total Viskase stockholders' equity161,438152,384Deficit attributable to non-controlling interest(1,153)(908)Total stockholders' equity160,285151,476Total Liabilities and Stockholders' Equity$471,592$471,101
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
See notes to consolidated financial statements.
YearYearYearEndedEndedEndedDecemberDecemberDecember31, 202231, 202131, 2020 NET SALES$430,834$415,672$408,887Cost of sales356,701343,636327,850GROSS MARGIN74,13372,03681,037Selling, general and administrative50,28348,16949,812Amortization of intangibles1,5761,7551,657Asset impairment charge27 498 372 Restructuring expense- 507 398 OPERATING INCOME22,24721,10728,798Interest income5 - 19Interest expense, net8,4336,15711,396Loss on early extinguishment of debt- - 280 Other expense, net4,39613,7796,360INCOME BEFORE INCOME TAXES9,4231,17110,781Income tax provision 7,1394,5276,218NET INCOME (LOSS) $2,284($3,356)$4,563Less: net loss attributable to noncontrolling interests(245)(137)(179) Net income (loss) attributable to Viskase Companies, Inc$2,529($3,219)$4,742WEIGHTED AVERAGE COMMON SHARES- BASIC AND DILUTED103,190,665103,190,66564,697,514 PER SHARE AMOUNTS:EARNINGS PER SHARE- BASIC AND DILUTED$0.02($0.03)$0.07
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In Thousands)
See notes to consolidated financial statements.
YearYearYearEndedEndedEndedDecemberDecemberDecember31, 202231, 202131, 2020Net income (loss)$2,284($3,356)$4,563Other comprehensive income (loss), net of tax Pension liability adjustment11,3049,914(4,652) Foreign currency translation adjustment(4,779)(4,902)3,436Other comprehensive income (loss), net of tax6,5255,012(1,216)Comprehensive income $8,809$1,656$3,347Less: comprehensive loss attributable to noncontrolling interests(245)(137)(179) Net comprehensive income attributable to Viskase Companies, Inc$9,054$1,793$3,526
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
See notes to consolidated financial statements.
Accumulated otherTotal ViskaseTotalCommonPaid inTreasury Retained comprehensive stockholders’Non-controllingstockholders’stockcapitalstockearningslossequityInterest equityBalance December 31, 2019$540$82,843($298)$41,415($77,435)$47,065($592)$46,473Net income - - - 4,742- 4,742(179)4,563 Foreign currency translation adjustment- - - - 3,436 3,436- 3,436 Pension liability adjustment, net of tax- - - - (4,652) (4,652)- (4,652) Issuance of common stock500 99,500 - - - 100,000 - 100,000 Balance December 31, 2020$1,040$182,343($298)$46,157($78,651)$150,591($771)$149,820Net (loss)- - - ($3,219)- (3,219) (137) (3,356) Foreign currency translation adjustment- - - - (4,902) (4,902) - (4,902) Pension liability adjustment, net of tax- - - - 9,914 9,914 - 9,914 Balance December 31, 2021$1,040$182,343($298)$42,938($73,639)$152,384(908)$ $151,476Net income- - - 2,529 - 2,529 (245) 2,284 Foreign currency translation adjustment- - - - (4,779) (4,779) - (4,779) Pension liability adjustment, net of tax- - - - 11,304 11,304 - 11,304 Balance December 31, 2022$1,040$182,343($298)$45,467($67,114)$161,438($1,153)$160,285
VISKASE COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
See notes to consolidated financial statements.
YearYearYearEndedEndedEndedDecemberDecemberDecember31, 202231, 202131, 2020Cash flows from operating activities:Net income (loss) $2,284($3,356)$4,563 Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization27,30327,99427,829Amortization of deferred financing fees403572653Deferred income taxes(99)(803)2,163Loss on disposition/impairment of assets337505372Bad debt and accounts receivable provision187277(121)Non-cash interest on term loans- - 83Changes in operating assets and liabilities:Receivables(8,795)2,926(6,984)Inventories(13,019)(7,102)13,224Other current assets3,509850(1,981)Accounts payable9,1091,264(1,352)Accrued current liabilities(2,186)(6,859)(2,949)Accrued employee benefits(1,636)(8,844)(691)Other assets(4,349)(3,070)721Other(2,669)(1,140)(2,015)Total adjustments8,0956,57028,952Net cash provided by operating activities10,3793,21433,515Cash flows from investing activities:Capital expenditures(22,336)(17,234)(19,263)Proceeds from disposition of assets149959Net cash used in investing activities(22,187)(17,225)(19,204)Cash flows from financing activities: Issuance of common stock- - 100,000 Deferred financing costs(294)(605)(2,123)Proceeds from short-term debt14,00013,00020,200 Proceeds from long-term debt- 150,000 Repayment of long-term debt(7,500) (8,690) (285,550) Repayment of capital lease(12)(27)(510)Net cash provided by (used in) financing activities6,1943,678(17,983)Effect of currency exchange rate changes on cash4,5214,361(3,453)Net decrease in cash and equivalents(1,093)(5,972)(7,125)Cash and cash equivalents at beginning of period9,87615,84822,973Cash and cash equivalents at end of period$8,783$9,876$15,848Supplemental cash flow information:Interest paid less capitalized interest$7,427$5,217$10,366Income taxes paid $7,324$4,180$2,508
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands)
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 ten
manufacturing facilities 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.
Seasonality
Historically, our domestic sales and profits have been seasonal in nature, increasing
in the spring and summer months. Sales outside of the United States follow a
relatively stable pattern throughout the year.
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. Of the cash held on deposit
in the U.S., approximately $317 of the cash balance was in excess of amounts insured
by the Federal Deposit Insurance Corporation. 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, net
Trade accounts receivable are classified as current assets and are reported net of
allowance for doubtful accounts, which includes the evaluation of expected credit
losses following the adoption of ASC Topic 326. This estimated allowance is primarily
based upon our evaluation of the future expected loss for the asset. The Company
estimates this using the financial condition of each customer, each customer’s ability
to pay and the economic conditions of the country the customer resides in. For all
trade accounts receivable, the Company defines “past due” as any payment, that
is at least 15 days past the contractual due date. For the year ended December 31,
2022, there have been write offs of $373 related to expected credit losses.
Inventories
Inventories are valued at the lower of cost or net realizable value. Cost is determined
by using the first-in, first-out (“FIFO”) basis method.
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 presented in the balance sheet as a direct deduction
from the carrying amount of debt liability and 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.
Intangible Assets and Goodwill
The Company has recognized definite lived intangible assets for patents and
trademarks, customer relationships, technologies and in-place leases. The intangible
assets are amortized on the straight-line method over an estimated weighted
average useful life of 12 years for patents and trademarks, 20 years for customer
relationships, 13 years for technologies and 14 years for in-place leases.
Our estimates of the useful lives of finite-lived intangible assets consider judgments
regarding the future effects of obsolescence, demand, competition and other
economic factors. We conduct impairment tests when events or changes in
circumstances indicate that the carrying value of these finite-lived assets may not be
recoverable. Undiscounted cash flow analyses are used to determine if an
impairment exists. If an impairment is determined to exist, the loss is calculated based
on the estimated fair value of the assets.
Current accounting guidance provides entities an option of performing a qualitative
assessment (a "step-zero" test) before performing a quantitative analysis. If the entity
determines, on the basis of certain qualitative factors, that it is more-likely than- not
that the goodwill is not impaired, the entity would not need to proceed to the two
step impairment testing process (quantitative analysis) as prescribed in the guidance.
During fourth quarter 2022, the Company performed a “step zero” test of its goodwill
and concluded that there was no impairment based on this guidance.
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. No events or changes in circumstances
were identified in the current year that would indicate a change in carrying amount.
Shipping and Handling
The Company periodically bills customers for shipping charges. These amounts are
included in net sales, with the associated costs included in cost of sales.
Repairs and Maintenance
Routine
incurred.
repairs and maintenance are charged to operations as
Improvements and major repairs, which extend the useful life of an asset, are
capitalized and depreciated.
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, 2022 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 5.00% for
December 31, 2022. The Company is using a long-term rate of return on French
plan assets of 2.60% for 2022. 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 was using a discount rate of
5.55% for December 31, 2022. The Company is using a weighted average
discount rate of 4.11% on its non-U.S. pension plans for December 31, 2022.
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)
Other comprehensive income (loss) includes all other non-stockholder changes in
equity. Changes in other comprehensive income (loss) in 2022, 2021 and 2020 resulted
from changes in foreign currency translation and pension liability.
Revenue Recognition
The Company’s revenues are comprised of product sales. All revenue is recognized
when the Company satisfies its performance obligation(s) under the contract (either
implicit or explicit) by transferring the promised product to its customer when its
customer obtains control of the product. A performance obligation is a promise in a
contract to transfer a distinct product or service to a customer. A contract’s
transaction price is allocated to each distinct performance obligation. Substantially
all of the Company’s contracts have a single performance obligation, as the promise
to transfer products is not separately identifiable from other promises in the contract
and, therefore, not distinct.
Revenue is measured as the amount of consideration the Company expects to
receive in exchange for transferring products or providing services. The nature of the
Company’s contracts gives rise to several types of variable consideration. As such,
revenue is recorded net of estimated discounts, rebates and allowances. These
estimates are based on historical experience, anticipated performance and the
Company’s best judgment at the time. Because of the Company’s certainty in
estimating these amounts, they are included in the transaction price of its contracts.
Sales, value add, and other taxes collected from customers and remitted to
governmental authorities are accounted for on a net (excluded from revenues) basis.
Substantially all of the Company’s revenue is from products transferred to customers
at a point in time. The Company recognizes revenue at the point in time in which the
customer obtains control of the product, which is generally when product title passes
to the customer upon shipment. In certain cases, title does not transfer and revenue
is not recognized until the customer has received the products at its physical location
or at port.
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, 2022, future annual minimum purchases remaining under the
agreement are $3,426.
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
these
instruments. Management believes 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 loans is estimated by discounting the future cash flow using the
Company’s current borrowing rates for similar types and maturities of debt.
short maturities of
fair value due
the
to
Leases
The Company accounts for leases under FASB ASC Topic 842, Leases, which has
resulted in the company reporting a right of use (“ROU”) asset and lease liability
related to operating leases reported on our balance sheet. Financing leases under
current U.S. GAAP are classified and accounted for in substantially the same manner
as capital leases under prior U.S. GAAP and therefore, we do not distinguish between
financing leases and capital leases unless the context requires. The determination of
whether an arrangement is or contains a lease occurs at inception. We have elected
the practical expedient to include both the lease component and the non-lease
component as a single component when accounting for each lease and calculating
the resulting lease liability and ROU asset. The following is our accounting policy for
leases in which we are the lessee.
Leases are classified as either operating or financing by the lessee depending on
whether the lease terms provide for control of the underlying asset to be transferred
to the lessee. When control transfers to the lessee, we classify the lease as a financing
lease. All other leases are recorded as operating leases. For leases with an initial lease
term in excess of twelve months, we record a right-of-use asset with a corresponding
liability in our balance sheet. We have elected the practical expedient for all leases
less than 12 months to not record a ROU asset or corresponding lease liability. Right-
of-use assets represent our right to use an underlying asset for the lease term and lease
liabilities represent our obligation to make lease payments arising from the lease.
Right-of-use assets and lease liabilities are recognized at commencement of the lease
based on the present value of lease payments over the lease term. Right-of-use assets
are adjusted for any lease payments made on or before commencement of the
lease, less any lease incentives received.
The lease liability represents future lease payments for lease and non-lease
components discounted for present value. Lease payments that may be included in
the lease liability include fixed payments, variable lease payments that are based on
an index or rate and payments for penalties for terminating the lease if the lessee is
reasonably certain to utilize a termination option, among others. Certain of our leases
contain rent escalation clauses that are specifically stated in the lease and these are
included in the calculation of the lease liability. Variable lease payments for lease
and non-lease components which are not based on an index or rate are excluded
from the calculation of the lease liability and are recognized in the statement of
operations during the period incurred.
We utilize discount rates to determine the net present value of our gross lease
obligations when calculating the lease liability and related ROU asset. In cases in
which the rate implicit in the lease is readily determinable, we utilize that discount rate
for purposes of the net present value calculation. In most cases, our lease agreements
do not have a discount rate that is readily determinable and therefore we utilize an
estimate of our incremental borrowing rate. Our incremental borrowing rate is
determined at lease commencement or lease modification and represents the rate
of interest we would have to pay to borrow on a collateralized basis over a similar
term an amount equal to the lease payments in a similar economic environment. For
adoption of the new standard, the rate was determined at the adoption date.
The lease term is determined by taking into account the initial period as stated in the
lease contract and adjusted for any renewal options that the company is reasonably
certain to exercise as well as any period of time that the lessee has control of the
space before the stated initial term of the lease. If we determine that we are
reasonably certain to exercise a termination option, the lease term is then adjusted
to account for the expected termination date.
Operating lease expense is recorded as a single expense recognized on a straight-
line basis over the lease term. Financing lease expense consists of interest expense on
the financing lease liability and amortization of the right-of-use financing lease asset
on a straight-line basis over the lease term.
New Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for
Income Taxes, which amends FASB ASC Topic 740, Income Taxes. This ASU simplifies
the accounting for income taxes by removing certain exceptions to the general
principles in the standard and modifies other areas of the standard to clarify the
application of U.S. GAAP. This ASU is effective for fiscal years beginning after
interim periods within those fiscal years. Certain
December 15, 2020, and
amendments in this ASU should be applied using a retrospective approach and others
using the prospective approach. Adoption of this standard did not have a significant
impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference
Rate Reform on Financial Reporting, which amends FASB ASC Topic 848, Reference
Rate Reform. By June 30, 2023, banks will no longer be required to report information
that is used to determine London Interbank Offered Rate (“LIBOR”) which is used
globally by all types of entities for various types of transactions. As a result, LIBOR could
be discontinued, as well as other interest rates used globally. This ASU provides
companies with optional expedients for contract modifications under U.S GAAP,
excluded components of certain hedging relationships, fair value hedges, and cash
flow hedges, as well as certain exceptions, which are intended to help ease the
potential accounting burden associated with transitioning away from these reference
rates. Companies can apply this ASU immediately and will only be available for a
limited time (generally through December 31, 2022). Adoption of this standard did not
have a significant impact on our consolidated financial statements.
2. Cash and cash equivalents
As of December 31, 2022, and December 31, 2021, cash held in foreign banks was $9,134
and $8,083, respectively.
Letters of credit for $735 were outstanding under our New Senior Credit Facility.
3. Receivables, net
December 31, 2022December 31, 2021Cash and cash equivalents$8,783 $9,876 December 31, 2022December 31, 2021Accounts receivable, gross$91,431 $85,049 Less allowance for doubtful accounts (3,847)(3,404)$87,584 $81,645 December 31, 2022December 31, 2021December 31, 2020Beginning balance$3,404 $3,470 $3,614 Provision (recoveries) 187 277 (121) Write-offs 373 (306) - Other and translation(117)(37)(23)Ending balance$3,847 $3,404 $3,470
4. Inventories
5. Property, Plant and Equipment, Net
6. Other Assets
December 31, 2022December 31, 2021Raw materials$30,630 $28,900 Work in process46,210 38,212 Finished products 26,332 25,958 $103,172 $93,070 December 31, 2022December 31, 2021Land and improvements $1,920 $1,940 Buildings and improvements 48,883 46,848 Machinery and equipment354,544 352,928 Construction in progress 11,281 7,783 $416,628 $409,499 Accumulated depreciationDecember 31, 2022December 31, 2021 Land and improvements $472 $448 Buildings and improvements 23,662 21,958 Machinery and equipment250,647 239,966 $274,781 $262,372 December 31, 2022December 31, 2021Other taxes receivable$15,828 $11,324 Indemnification asset6,793 6,793 Other 637 856 $23,258 $18,973
7. Accrued Liabilities
8. Debt Obligations
Senior Credit Facility
On October 09, 2020, the Company entered into a Credit Agreement with Bank of
America, N.A. (“BofA”) as Administrative Agent, Swingline Lender and L/C Issuer, and
the other Lender parties thereto, providing for a $150,000 term loan (the “Term Loan”)
and a $30,000 revolving credit facility (the “Revolving Credit Facility” and together
with the Term Loan, the “Senior Credit Facility”).
On August 10, 2022, the Company entered into the Second Amendment to the New
Senior Credit Facility (the “Amended Senior Credit Facility”). The Amended Senior
Credit Facility increased the commitment of the New Revolving Credit Facility to
$37,000 and transitioned Term Loans on September 30, 2022 and Revolving Loans on
August 30,2022 from LIBOR Loans to SOFR Loans. Amended terms of the facility are
stated below.
The interest rates per annum applicable to the Amended Senior Credit Facility (other
than in respect of Swingline Loans) will be SOFR, but in any event, not less than 0.00%,
plus the Applicable Rate (as defined below), or, for U.S. dollar denominated loans
only, made to the Company at the option of the Company, the Base Rate, defined
as the highest of: (a) the Federal Funds Rate plus one-half percent (0.50%); (b) the
Bank of America prime rate; and (c) the one (1) month SOFR (adjusted daily) plus one
percent (1.00%), but in any case not less than 1.00%. plus the Applicable Rate.
Applicable Rate means, with respect to the Amended Senior Credit Facility, a
percentage per annum to be determined in accordance with the applicable pricing
December 31, 2022December 31, 2021Compensation and employee benefits$8,017 $7,633 Taxes payable16,124 22,483 Accrued volume and sales rebates3,410 1,924 Restructuring reserve - 127 Other3,940 1,900 $31,491 $34,067 December 31, 2022December 31, 2021Short-term debt: Senior credit facility$39,375$23,500Long-term debt: Senior credit facility, net $121,978$131,244 Other543577 Total long-term debt122,521131,821 Total debt$161,896$155,321
grid set forth in the Amended Senior Credit Facility based upon the Company’s
Consolidated Coverage Ratio as reflected in a quarterly Compliance Certificate.
Each Swingline Loan shall bear interest at the Base Rate plus the Applicable Rate for
Base Rate loans under the New Revolving Credit Facility. As of December 31, 2022,
our current interest rate is 6.15%.
The Amended Senior Credit Facility requires the Company to repay principal of the
New Term Loan at the rate of 5% of the original principal balance during each of the
first two years, 7.5% during the third and fourth years and 10% of the original principal
balance during the fifth year. The maturity date on the Amended Senior Credit Facility
is August 13, 2026.
The Company may prepay the Amended Senior Credit Facility, in whole or in part, at
any time without premium or penalty, subject to reimbursement of the Lenders’
breakage and redeployment costs in the case of prepayment of LIBOR borrowings
and foreign currency borrowings bearing interest at a rate other than LIBOR. Each
such prepayment of the New Term Facility shall be applied as directed by the
Company. The unutilized portion of the commitments under the Amended Senior
Credit Facility may be irrevocably reduced or terminated by the Company at any
time without penalty.
The Amended Senior Credit Facility is guaranteed by each existing and future direct
and indirect wholly owned material domestic Restricted Subsidiary and foreign
Restricted Subsidiary of the Company (other than any Brazilian subsidiary). The
Amended Senior Credit Facility is secured by substantially all assets of the Company
and its material domestic Restricted Subsidiaries, with the exception of real property.
The Amended Senior 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 Senior Credit
Facility also requires that we comply with certain financial covenants, including
meeting a consolidated leverage ratio and consolidated fixed charge coverage
ratio. The Company is in compliance with the Amended Senior Credit Facility
covenants as of December 31, 2022.
Foreign Lines of Credit
In its foreign operations, the Company has unsecured lines of credit with various banks
providing approximately $10,000 of availability. There were no borrowings under the
lines of credit at December 31, 2022 and 2021.
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. Leases
We have operating and finance (formerly capital) leases primarily for real estate,
equipment and vehicles. Our lease agreements do not contain any material residual
value guarantees or material restrictive covenants. Right-of-use assets and related
liabilities are recorded on the balance sheet for leases with an initial term in excess of
twelve months.
Right-of-use assets and lease liabilities are as follows:
The following is an analysis of leased property under financing leases by major classes as
of December 31, 2022 and December 31, 2021.
Additional information with respect to our operating and finance leases as of December
31, 2022 is presented below.
20232024202520262027ThereafterTerm Loan Facility $ 39,375 $ 11,250 $ 13,125 $ 99,375 $ - $ - Other - - - - - 858 $ 39,375 $ 11,250 $ 13,125 $ 99,375 $ - $ 858 December 31, 2022December 31, 2021Operating Leases: Right-of-use assets $ 24,520 $ 27,964 Lease liabilities 27,544 31,115 Financing Leases: Right-of-use assets (property, plant and equipment, net) 10 50 Lease liabilities 11 52 December 31,December 31,20222021Building and improvements$453$453Machinery and equipment3,5993,599Less: Accumulated depreciation(4,042)(4,002)$10$50
Lease expense consists of the following:
Cash flow information related to leases is as follows:
Maturities of operating and financing lease liabilities as of December 31, 2022 are as
follows:
10. Retirement Plans
The Company has contributed $75 to pension benefits in the U.S. during the year ended
December 31, 2022.
The Company and its subsidiaries have defined contribution and defined benefit plans
varying by country and subsidiary.
OperatingFinanceWeighted average remaining lease term (years)9.780.75Weighted average discount rate7.41%5.85%December 31, 2022December 31, 2021Operating lease rent expense5,182$ 5,557$ Financing Leases: Amortization of right-of-use assets20 35 Interest expense on lease liabilities3 9 23$ 44$ December 31, 2022December 31, 2021Cash Paid For Amounts Included in the Measurement of Lease Liabilities: Cash used in operating activities (operating leases)5,069$ 5,339$ Cash used in operating activities (financing leases)42 35 Supplemental Cash Flow Information: Right-of-use assets obtained in exchange for lease obligations (operating leases)755$ 364$ YearOperating LeasesFinancing Leases20234,851$ 11$ 20244,620 - 20254,416 - 20263,854 - 20273,755 - Thereafter17,951 - Total lease payments39,447 11 Less: discounted interest(11,903) - 27,544$ 11$
The Company’s operations in the United States, France, and Germany 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 is $(24,747) as of
December 31, 2022. The following amounts not yet recognized in net periodic benefit
cost:
Amounts included in other comprehensive income (loss) expected to be recognized as
a component of net periodic benefit cost for the year ending December 31, 2022 are:
The measurement date for all defined benefit plans is December 31. The year-end status
of the plans is as follows:
U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial loss Prior service credit ($24,172) 4,913 2 - U.S. Pension Benefits Non U.S. Pension BenefitsNet actuarial (loss) gain ($474)$308 U.S. Pension Benefits Non U.S. Pension Benefits2022202120222021 Change in benefit obligation:Projected benefit obligation at beginning of year$128,974$136,204$25,597$30,053Service cost- - 415456Interest cost3,6553,434300257Actuarial loss (gain) (27,697)(3,784)(6,375)(1,654)Benefits paid(7,194)(6,880)(684)(629)Currency translation- - (1,492)(2,886)Estimated benefit obligation at end of year$97,738$128,974$17,761$25,597Change in plan assets:Fair value of plan assets at beginning of year$104,774$92,107$1,418$1,498Actual return on plan assets(14,964)10,7163235Employer contribution768,831684 629 Benefits paid(7,193)(6,880)(384) (629) Currency translation- (383) (115)Fair value of plan assets at end of year$82,693$104,774$1,367$1,418Unfunded status of the plan($15,045)($24,200)($16,394)($24,179)
The funded status of these pension plans as a percentage of the projected benefit
obligation was 73% in 2022 compared to 69% in 2021.
In connection with our adoption of FASB issued ASU No. 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,
the components of net periodic benefit cost other than the service cost component are
included in the line item other expense in the income statement.
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:
U.S. Pension Benefits Non U.S. Pension Benefits2022202120222021Amounts recognized in statement of financial position:Current liabilities($73)($73)($592)($587)Noncurrent liabilities(14,972)(24,127)(15,802)(23,592)Net amount recognized($15,045)($24,200)($16,394)($24,179)Information for defined benefit plans with projected benefit obligations in excess of plan assets:U.S. Pension Benefits Non U.S. Pension Benefits2022202120222021Projected benefit obligation$97,738 $128,974 $17,761 $25,597 Fair value of plan assets$82,693$104,774$1,367$1,418Information for defined benefit plans with accumulated benefit obligations in excess of plan assets:U.S. Pension Benefits Non U.S. Pension Benefits2022202120222021Accumulated benefit obligation$97,738 $128,974 $17,761 $25,597 Fair value of plan assets$82,693$104,774$1,367$1,418Non U.S. Pension Benefits202220212020202220212020Component of net period benefit costService cost-$ -$ $412$479$400Interest cost3,6553,4344,217298270310Expected return on plan assets(5,029)(4,928)(5,179)(35)(37)(34)Amortization of prior service cost- - 10 1210Amortization of actuarial loss752 1,240 1,025 47 106 48 ($622)(254)$ 63$ $732$830$734U.S. Pension Benefits
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’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 65% equity securities, 2% hedge funds and 33%
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.
Plan management uses the following methods and significant assumptions to estimate
fair value of investments.
Money market – overnight bank deposits and money market mutual funds maintaining
at all times $1.00 Net Asset Value (“NAV”).
US Government and agency obligations – U.S. Treasury bonds, notes and other
government obligations.
Exchange traded funds – marketable securities tracking asset baskets traded on active
markets.
Mutual funds - Valued at the net asset value (“NAV”) of shares or units held by the Plan
at year-end which is obtained from an active market or at share or unit prices provided
by the fund manager with significant observable inputs.
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.
Common stocks - marketable corporate equity securities traded on active markets.
The fair values of the Company’s pension plan asset allocation at December 31, 2022
and 2021, by asset category are as follows:
U.S. Pension Benefits Non U.S. Pension Benefits2022202120222021Discount rate5.55%2.93%4.11%1.28%Expected return on plan assets5.00%5.00%2.60%2.60%Rate of compensation increaseN/AN/A3.18%2.56%
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.
Fair Value Measurement atDecember 31, 2022Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsTotal(Level 1)(Level 2)(Level 3)Money market$13,206$13,206-$ US Government and agency obligations15,142 2,336 12,806 - Exchange traded funds11,738 11,738 - Mutual funds19,564 19,564 - Common stocks24,410 24,410 - Total Assets in the fair value hierarchy84,060 $71,254$12,806- Investments measured at NAV (a)- Investments at fair value$84,060(a) Hedge funds are measured at fair value using the NAV per share practical expedient, and therefore have not been classified in the fair value hierarchy.Fair Value Measurement atDecember 31, 2021Quoted Prices in Active Markets for Identical AssetsSignificant Observable InputsSignificant Unobservable InputsTotal(Level 1)(Level 2)(Level 3)Money market$5,540$5,540-$ -$ US Government and agency obligations10,307 5,670 4,637 - Exchange traded funds24,332 24,332 - - Mutual funds39,402 39,402 - - Common stocks26,514 26,514 - - Total Assets in the fair value hierarchy106,095 $101,458$4,637- Investments measured at NAV (a)97 Investments at fair value$106,192(a) Hedge funds are measured at fair value using the NAV per share practical expedient, and therefore have not been classified in the fair value hierarchy.
The Company’s expected contribution for the 2023 fiscal year is $2,233 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 $1,160, $1,212 and $1,120 in 2022, 2021 and 2020,
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 2022, 2021, and 2020 was $(431), $379 and $157, 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 $5,547.
11. 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 150,000,000
shares, respectively. No preferred stock have been issued.
On October 9, 2020, the Company completed a private placement of 50,000,000 shares
of common stock at $2.00 per share. The Company used the net proceeds of the private
placement to complete a refinancing of its short term debt.
As a result of the private placement to complete an extinguishment of the Revolving
Credit Facility and Term Loan Facility in 2020 and subsequent purchases, Icahn Enterprises
L.P. currently owns approximately 90.0% of our outstanding common stock.
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.
Total Estimated Benefit PaymentsU.S.Non U.S 2023$7,877$6872024 8,0406702025 8,0278612026 7,9949612027 8,042935Thereafter 38,0765,965
12. 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:
202220212020CurrentDomestic$51 $1,097 $87 Foreign 7,187 4,233 3,968 Total current 7,238 5,330 4,055 Deferred Domestic (32) 1,379 2,458 Foreign (67) (2,182) (295)Total deferred (99) (803) 2,163 Total$7,139 $4,527 $6,218 Income (loss) before income taxes: 202220212020Domestic($6,297)($4,680)$6,921 Foreign 15,720 5,851 3,860 Total$9,423 $1,171 $10,781 Computed income tax provision (benefit) $1,979$246$2,264State and local taxes, net of federal tax341 48 763 Foreign taxes, net655 (103) (652) Valuation allowance(887) (1,866) 2,300 Uncertain tax positions - (benefit) expense 860 545 (44) Foreign exchange impact18 930 15 Permanent differences, net1,687 3,544 1,046 Revaluation of deferreds1,016 795 206 Other, net1,470 388 320 Total income tax provision$7,139 $4,527 $6,218
Temporary differences and net operating loss carryforwards that give rise to a significant
portion of deferred tax assets and liabilities for 2022 and 2021 are as follows:
The net deferred tax asset (liability) is classified in the balance sheet as follows:
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 Brazil and a portion
of the state loss in the US. The Company has a valuation allowance for Brazil December
31, 2022 and December 31, 2021 of $7,355 and $7,472, respectively. The Company had
a valuation allowance for Viskase Poland at December 31, 2021 of $59 and none at
December 31, 2022. The Company has a valuation allowance in the U.S. at December
Computed income tax (benefit) provision 21.0%21.0%21.0%State and local taxes, net of federal tax3.6%4.1%7.1%Foreign taxes, net6.9%-8.8%-6.0%Valuation allowance-9.4%-159.3%21.3%Uncertain tax positions - expense (benefit) 9.1%46.5%-0.4%Foreign exchange impact0.2%79.4%0.1%Permanent differences, net17.9%302.6%9.7%Revaluation of deferreds10.8%67.9%1.9%Other, net15.7%33.1%3.0%Effective income tax rate75.8%386.5%57.7%Statutory federal rate21.0%21.0%21.0%20222021Deferred tax asset Provisions not currently deductible$7,756$8,122 Inventory basis differences3,0312,700 Stock options42 39 Pension and healthcare 6,2818,781 Net operating loss carryforwards19,90325,866 Lease liability6,0036,133 Foreign exchange and other1,067- Valuation allowance(7,781) (8,032) Total deferred tax asset$36,302$43,609Deferred tax liability Property, plant, and equipment($6,631)($8,227) Intangible asset(4,912)(5,655) Right of use assets(5,903)(6,038) Foreign exchange and other- (535) Total deferred tax liability($17,446)($20,455)$18,856$23,15420222021Non-current deferred tax assets$22,261$25,235Non-current deferred tax liability(3,405) (2,081) Non-current deferred tax assets, net$18,856$23,154
31, 2022 and December 31, 2021 of $426 and $500, respectively. The Company has gross
U.S. federal net operating loss carryforwards at December 31, 2022 and December 31,
2021 of $50,829 and $61,500, respectively, with amounts beginning to expire in 2024. The
Company has gross net operating loss carryforwards in Brazil at December 31, 2022 and
December 31, 2021 of $6,015 and $9,025 respectively and has an unlimited carryforward
period. The Company has gross net operating loss carryforwards in Poland at December
31, 2022 and December 31, 2021 of $346 and $216, respectively and has a five year
carryforward period. The Company has gross net operating loss carryforwards in France
at December 31, 2022 and December 31, 2021 of $7,433 and $10,906, respectively and
has an unlimited carryforward period. The Company has gross net operating loss
carryforwards in Viskase Germany at December 31, 2022 and December 31, 2021 of
$7,704 and $4,557 for Income Tax and Trade Tax. The Company has gross net operating
loss carryforwards in CT Casings at December 31, 2022 and December 31, 2021 of $2,551
and $12,793 for Income Tax and Trade Tax. Germany has an unlimited carryforward
period on Trade Tax.
Following the Equity Private Placement, IELP became the beneficial owner of more than
80% of the shares of our common stock and the Company became a member of the
consolidated group of a corporate subsidiary of Icahn Enterprises for U.S. federal income
tax purposes (the “IEP Corporate Subsidiary”). As a result, the IEP Corporate Subsidiary
and the Company entered into a tax allocation agreement for the allocation of certain
income tax items. The Company and its subsidiaries consented to join the IEP Corporate
Subsidiary’s federal consolidated return and, if elected by the IEP Corporate Subsidiary,
certain state consolidated returns.
Uncertainty in Income Taxes
The uncertain tax positions as of December 31, 2022 totaled $15,983. The following table
summarizes the activity related to the unrecognized tax benefits.
In 2022, the Company recognized an approximate net decrease of $175 to the reserves
for uncertain tax positions.
Approximately $15,983 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 2016. Substantially all material state
and local and foreign income tax matters have been concluded for years through 2013.
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 $6,793.
(in thousands)20222021Unrecognized tax benefits as of January 1$16,158 $17,317Increases in positions taken in a prior period 26 - Decreases in positions taken in a prior period - - Decreases de to settlements- (623) Increases due to currency translation- - Decreases due to currency translation(201) (510) Decreases due to lapse of statute of limitations- (26) Unrecognized tax benefits as of December 31$15,983$16,158
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, 2022
and 2021, the Company recorded adjustments for interest of $835 and $536, respectively,
and for penalties of $10 and $(9), respectively related to these unrecognized tax benefits.
In total, as of December 31, 2022 and 2021, the Company has recorded a liability of
interest of $3,146 and $2,311, respectively, and $157 and $147, respectively, for potential
penalties.
13. Goodwill and Intangible Assets, net
The Company currently has $3,207 of goodwill with no impairment.
Goodwill consists of the following:
Intangible assets, net consists of the following:
Amortization expense associated with definite-lived intangible assets was $1,576, $1,755
and $1,657 for the years ended December 31, 2022, 2021 and 2020, respectively. We
December 31, 2022December 31, 2021Beginning balance$3,373 $3,620 Translation(166)(247)Gross carrying amount, December 31st $3,207 $3,373 Gross Carrying ValueAccumulated AmortizationNet Carrying ValueDefinite live intangible assets: Customer relationships$18,708 ($5,760)$12,948 Technologies2,234 (1,077)1,157 Patents/Trademarks9,681 (7,089)2,592 In-place leases194 (83)111 $30,817 ($14,009)$16,808 December 31, 2022Gross Carrying ValueAccumulated AmortizationNet Carrying ValueDefinite live intangible assets: Customer relationships$19,866 ($5,026)$14,840 Technologies2,373 (942)1,431 Patents/Trademarks9,864 (6,736)3,128 In-place leases206 (74)132 $32,309 ($12,778)$19,531 December 31, 2021
utilize the straight-line method of amortization, recognized over the estimated useful lives
of the assets.
The estimated future amortization expense for our definite-lived intangible assets is as
follows:
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. Stock-based compensation (Dollars in Thousands, except Per Share Amount)
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 $0 for the years ended December 31, 2022 and 2021.
The fair values of the options granted during 2013 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 are fully vested. The options for the Chief Administrative Officer were
forfeited on June 26, 2022.
2023$1,526 20241,526 20251,526 20261,526 20271,526 Total thereafter9,178 Total amortization$16,808 2013Expected term10 yearsExpected stock volatility17.33%Risk-free interest rate1.75%Expected forfeiture rate0.00%Fair value per option$0.51
The Company's outstanding options were:
Vested and exercisable options as of December 31, 2022 were zero.
16. Research and Development Costs
Research and development costs are expensed as incurred and totaled $5,267, $4,531
and $4,411 for 2022, 2021, and 2020, respectively.
17. Related-Party Transactions
As of December 31, 2022, and December 31, 2021, Icahn Enterprises L.P. owned
approximately 90.0% and 89.0% of our outstanding common stock, respectively.
Equity Private Placement of Common Stock & Change in Number of Authorized Shares
Beginning in the first quarter of 2020, the Company entered into discussions with a number
of banks, including BofA, regarding the terms of a new senior credit facility which would
replace both the Term Loan and the ABL Loan. Under the new senior credit facility
proposed by BofA, the Company was required to raise at least $100,000 in equity capital,
the proceeds of which were to be used, together with borrowings under the new senior
credit facility, to repay the Term Loan and the ABL Loan. The Company met this condition
through the issuance of 50,000,000 shares of common stock to an affiliate of IELP in a
private placement transaction at a purchase price of $2.00 per share (the “Equity Private
Placement”). In order to complete the offering of the Equity Private Placement, the
Company amended its Amended and Restated Certificate of Incorporation to increase
the number of authorized shares of the Company’s common stock by 50,000,000 shares.
Prior to the completion of the Equity Private Placement, IELP beneficially owned
approximately 78.6% of the Company’s outstanding common stock. As a result of the
Equity Private Placement, IELP is the beneficial owner of approximately 89.0% of the
Company’s outstanding common stock. The Equity Private Placement was approved by
a Special Committee of disinterested directors of the Company.
Weighted AverageWeighted AverageShares Under Weighted AverageRemainingGrant-DateOptionExercise PriceContractual LifeFair ValueOutstanding, December 31, 2020325,0008.00$ 41 months0.51$ Vested and exercisable at Dec. 31, 2020325,000 8.00$ 41 months0.51$ Granted- -$ - - Exercised- -$ - - Forfeited- -$ - - Outstanding, December 31, 2021325,0008.00$ 29 months0.51$ Vested and exercisable at Dec. 31, 2021325,000 8.00$ 29 months0.51$ Granted- -$ - - Exercised- -$ - - Forfeited(325,000) -$ - - Outstanding, December 31, 2022- -$ -$ Vested and exercisable at Dec. 31, 2022- -$ -$
Pension Liabilities
Applicable pension and tax laws make each member of a "controlled group" of entities,
generally defined as entities in which there is at least an 80% common ownership interest,
jointly and severally liable for certain pension plan obligations of any member of the
controlled group. These pension obligations include ongoing contributions to fund the
plan, as well as liability for any unfunded liabilities that may exist at the time the plan is
terminated. In addition, the failure to pay these pension obligations when due may result
in the creation of liens in favor of the pension plan or the Pension Benefit Guaranty
Corporation ("PBGC") against the assets of each member of the controlled group.
As a result of the Equity Private Placement, IELP became the beneficial owner of more
than 80% of the shares of our common stock and the Company became subject to the
pension liabilities of all entities in which Mr. Icahn has a direct or indirect ownership interest
of at least 80%. One such entity, ACF Industries LLC ("ACF"), is the sponsor of several
pension plans. All the minimum funding requirements of the Internal Revenue Code, as
amended, and the Employee Retirement Income Security Act of 1974, as amended, for
the ACF plans have been met as of December 31, 2021. If the plans were voluntarily
terminated,
they would be underfunded by approximately $16,600 as of
December 31, 2022. These results are based on the most recent information provided by
the plans’ actuary. These liabilities could increase or decrease, depending on a number
of factors, including future changes in benefits, investment returns, and the assumptions
used to calculate the liability. As members of the controlled group, we would be liable
for any failure of ACF to make ongoing pension contributions or to pay the unfunded
liabilities upon a termination of the ACF pension plans. In addition, other entities now or
in the future within the controlled group in which we are included may have pension plan
obligations that are, or may become, underfunded and we would be liable for any failure
of such entities to make ongoing pension contributions or to pay the unfunded liabilities
upon termination of such plans.
The current underfunded status of the ACF pension plans requires them to notify the
PBGC of certain “reportable events,” such as if we cease to be a member of the ACF
controlled group, or if we make certain extraordinary dividends or stock redemptions.
The obligation to report could cause us to seek to delay or reconsider the occurrence of
such reportable events.
In connection with the Equity Private Placement, the Company entered into an
agreement with Icahn Enterprises Holdings L.P. pursuant to which Icahn Enterprises
Holdings L.P. has agreed to indemnify us and our subsidiaries from losses resulting from
any imposition of certain pension funding or termination liabilities that may be imposed
on us and our subsidiaries or our assets as a result of being a member of the Icahn
controlled group.
Based on the contingent nature of potential exposure related to these affiliate pension
obligations and the indemnification from Icahn Enterprises Holdings L.P., no liability has
been recorded in the accompanying consolidated financial statements.
Tax Allocation
Following the Equity Private Placement, IELP became the beneficial owner of more than
80% of the shares of our common stock and the Company became a member of the
consolidated group IEP Corporate Subsidiary for U.S. federal income tax purposes. As a
result, the IEP Corporate Subsidiary and the Company entered into a tax allocation
agreement for the allocation of certain income tax items. The Company and its
subsidiaries consented to join the IEP Corporate Subsidiary’s federal consolidated return
and, if elected by the IEP Corporate Subsidiary, certain state consolidated returns. In
those jurisdictions where the Company and its subsidiaries will file consolidated returns
with the IEP Corporate Subsidiary, the Company will pay to the IEP Corporate Subsidiary
any tax it would have owed had it and its subsidiaries continued to file as a separate
consolidated group. To the extent that the IEP Corporate Subsidiary consolidated group
is able to reduce its tax liability as a result of including the Company and its subsidiaries
in its consolidated group, the IEP Corporate Subsidiary will pay the Company 20% of such
reduction on a current basis and the Company will be treated as if it would carry forward
for its own use under the tax allocation agreement, 80% of the items that caused the tax
reduction (the “Excess Tax Benefits”). Moreover, if the Company and its subsidiaries
should ever become deconsolidated from the IEP Corporate Subsidiary, the IEP
Corporate Subsidiary will reimburse the Company for any tax liability in post-consolidation
years that the Company and its subsidiaries would have avoided had they actually had
the Excess Tax Benefits for their own consolidated group use. The cumulative payments
to the Company by the IEP Corporate Subsidiary post-consolidation will not exceed the
cumulative reductions in tax to the IEP Corporate Subsidiary group resulting from the use
of the Excess Tax Benefits by the IEP Corporate Subsidiary group.
18. Business Segment Information and Geographic Area Information
The Company primarily manufactures and sells cellulosic food casings as its sole business
segment. The Company’s operations are viewed in geographic regions of 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:
202220212020Net salesNorth America$216,819$203,525$207,321South America50,62149,67447,832Europe187,401184,823170,777Asia48,94049,95145,000Other and eliminations(72,947)(72,301)(62,043)$430,834$415,672$408,887Operating income North America$269($1,290)$11,909South America6,3348,0745,345Europe7,7746,4454,481Asia7,8707,8787,063 $22,247$21,107$28,798
19. Interest Expense, Net
Net interest expense consisted of:
20. Changes in Accumulated Other Comprehensive Loss
21. Restructuring Charges
During the year ended December 31, 2021, the Company recognized a change in
estimate for our restructuring expense in our European segment of $507, which we
believe is our final approved restructuring plans. The costs relate to a restructuring of its
French and German subsidiary operations to safeguard the Company’s competitive
environment in the European market. The plan will involve the involuntary termination of
Net Sales by countryUnited States$134,885$121,114$123,365Brazil25,22628,80824,928Italy28,24928,09324,074Germany23,01429,74726,480France10,97612,94612,806Philippines31,64428,74118,994Poland9,32810,1548,982Other international167,512156,069169,258$430,834$415,672$408,887December 31, 2022December 31, 2021December 31, 2020Interest expense$8,433$6,319$11,974Less Capitalized interest- (162) (578) Interest expense, net$8,433$6,157$11,396 Accrued Employee BenefitsTranslation AdjustmentsTotalBalance at December 31, 2021($36,051)($37,588)($73,639)Other comprehensive income (loss) before reclassifications 10,505 (4,779)5,726 Reclassifications from accumulated other comprehensive loss to earnings799799Balance at December 31, 2022($24,747)($42,367)($67,114)Amounts Reclassified from Accumulated Other Comprehensive Loss Affected Line Items in the Consolidated Statement of Operations Accrued Employee Benefits Amortization of net actuarial loss 799Other Expense, net$799
approximately 150 employees, the closure of our European sales office and relocation of
part of our finishing operation. The Company has also opened a European shared
service center with the consolidation of corporate jobs in this market.
The following table provides details of our restructuring provisions.
22. Variable Interest Entity
The Company holds a variable interest in a joint venture for which the Company is the
primary beneficiary. The joint venture, VE Netting, LLC, is a manufacturing, marketing and
selling company of high-quality netting solutions for the meat and poultry industry. VE
Netting, LLC is a Delaware limited liability company with its principal place of business in
Lombard, IL. The netting product is manufactured under agreement by Viskase’s affiliate
located in Monterrey, Mexico.
As the primary beneficiary of the variable interest entity (VIE), the VIEs’ assets, liabilities,
and results of operations are included in the Company’s consolidated financial
statements as of, and for the period ended, December 31, 2022 and December 31, 2021.
The other equity holders’ interests are reflected in “Net loss attributable to noncontrolling
interests” in the Consolidated Statements of Operations and “Noncontrolling interests” in
the Consolidated Balance Sheets.
The following table summarizes the carrying amount of the VIEs’ assets and liabilities
included in the Company’s Consolidated Balance Sheets at December 31, 2022 and
December 31, 2021:
December 31, 2022December 31, 2021Beginning balance$128 $2,062 Provision - 507 Payments (128) (2,405) Translation (36)Ending balance - $128
All assets in the above table can only be used to settle obligations of the consolidated
VIE. Liabilities are nonrecourse obligations. Amounts presented in the table above are
adjusted for intercompany eliminations.
The following table summarizes the Statement of Operations of the VIE included in the
Company’s Consolidated Statement of Operations for the period ended December 31,
2022 and December 31, 2021.
December 31, 2022December 31, 2021ASSETS Current assets: Cash and cash equivalents$114$42 Receivables, net13179 Inventories682316 Other current assets5641Property, plant and equipment1,3091,285Less: Accumulated depreciation(631)(506) Property, plant and equipment,net678779Other assets2527Total Assets$1,686$1,284LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities1,059168Total Liabilites1,059168Paid in capital2,9312,931Retained earnings(2,304)(1,815)Total Stockholder Equity6271,116Total Liabilities and Stockholders' Equity$1,686$1,284December 31, 2022December 31, 2021December 31, 2020Net sales$1,197$974$627Cost of sales1,371981572Gross margin(174)(7)55Selling, general and administrative228206230Operating loss(402)(213)(175)Other expense 8760 67 Loss before income taxes(489)(273)(242) Income tax expense- - 115 Net loss($489)($273)($357)
23. Subsequent Events
Viskase evaluated its December 31, 2022 consolidated financial statements for
subsequent events through March 28, 2023, the date the consolidated financial
statements were available to be issued.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
AND RESULTS OF OPERATIONS (Unaudited)
FINANCIAL CONDITION
Company Overview
The Company operates in the casing product segment of the food industry. Viskase is a
worldwide leader in the production and sale of cellulosic, fibrous and plastic casings for
the processed meat and poultry industry. Viskase currently operates ten manufacturing
facilities throughout North America, Europe, South America and Asia. Viskase provides
value-added support services relating to these products for some of the world's largest
global consumer products companies. Viskase is one of the two largest worldwide
producers of non-edible cellulosic casings for processed meats and one of the three
largest manufacturers of non-edible fibrous casings.
Our net sales are driven by consumer demand for meat products and the level of
demand for casings by processed meat manufacturers, as well as the average selling
prices of our casings. Specifically, demand for our casings is dependent on population
growth, overall consumption of processed meats and the types of meat products
purchased by consumers. Average selling prices are dependent on overall supply and
demand for casings and our product mix.
Our cellulose, fibrous and plastic casing extrusion operations are capital-intensive and
are characterized by high fixed costs. Our finishing operations are labor intensive. The
industry’s operating results have historically been sensitive to the global balance of
capacity and demand. The industry’s extrusion facilities produce casings under a timed
chemical process and operate continuously.
Our contribution margin varies with changes in selling price, input material costs, labor
costs and manufacturing efficiencies. The total contribution margin increases as demand
for our casings increases. Our financial results benefit from increased volume because
we do not have to increase our fixed cost structure in proportion to increases in demand.
For certain products, we operate at near capacity in our existing facilities. We regularly
evaluate our capacity and projected market demand. We believe the current and
planned cellulosic production capacity in our industry is in balance with global demand.
Comparison of Results of Operations for Years Ended December 31, 2022, 2021 and 2020.
The following discussion compares the results of operations for the fiscal year ended
December 31, 2022 to the results of operations for the fiscal year ended December 31,
2021, and compares the results of operations for the fiscal year ended December 31,
2020 to the results of operations for the fiscal year ended December 31, 2020. We have
provided the table below in order to facilitate an understanding of this discussion. The
table shows our results of operations (in millions) for the 2022, 2021 and 2020 fiscal years.
NM= Not meaningful when comparing positive to negative numbers or to zero.
2022 Versus 2021
Net Sales. Our net sales for 2022 were $430.8 million, which represents an increase of
$15.1 million or 3.6% from the prior year. Net sales increased $60 million from price and
mix, offset by a decrease of $16 million due to foreign currency translation and $29 million
due to volume.
Cost of Sales. Cost of sales for 2022 increased 3.8% from the comparable prior year
period. The increase is mainly due to inflation of raw material cost and lower absorption
of manufacturing costs at our plants due to labor and raw material supply shortages.
Selling, General and Administrative Expenses. We increased selling, general and
administrative expenses from $48.2 million in 2021 to $50.3 million in 2022. The increase is
mainly due to higher costs for employee compensation plans.
Amortization of Intangibles. The Company incurred an expense of $1.6 million during 2022
on the amortization of intangibles recognized with the acquisitions compared to $1.8
million in 2021.
Asset Impairment Charge. The Company incurred an asset impairment charge of $0.5
million in 2021 related to a prepaid IP royalty.
Restructuring Expense. Restructuring expense of $0.5 million during 2021 resulted from the
planned partial relocation of our manufacturing operation in Thaon, France and a
downsizing of our facility in Bomlitz, Germany. The plan involved the involuntary
YearYearYearEndedEndedEndedDecDecDec31, 202231, 202131, 2020NET SALES$430.83.6%$415.71.7%$408.9Cost of sales356.73.8%343.64.8%327.9Selling, general and administrative50.34.4%48.2-3.2%49.8Amortization of intangibles1.6-11.1%1.85.9%1.7Asset impairment- NM0.525.0%0.4Restructing expense- NM0.525.0%0.4OPERATING INCOME22.25.2%21.1-26.7%28.8Interest expense, net of income8.435.5%6.2-45.6%11.4Other expense, net4.4-68.1%13.8115.6%6.4Loss on early extinguishment of debt- NM- NM0.3 Income tax provision 7.157.8%4.5-27.4%6.2NET INCOME (LOSS) $2.3NM($3.4)NM$4.6
termination of approximately 150 employees. The Company anticipates an annual
savings of $10.0 million per year when the plan is fully implemented.
Operating Income. Operating income for 2022 was $22.2 million, representing an
increase of $1.1 million from the prior year. The increase in operating income was primarily
due to higher gross profit.
Interest Expense. Interest expense, net of interest income, for 2022 was $8.4 million,
representing an increase of $2.2 million compared to 2021. The increase is a result of a
higher interest rate on our Term loan and increased borrowing.
Other Expense. Other expense for 2022 was approximately $4.4 million, representing an
decrease of $9.4 million over 2021. The decrease is primarily due to foreign currency
translation loss.
Income Tax Provision. During 2022, an income tax expense of $7.1 million was recognized
on the income before income taxes of $9.4 million compared to income tax expense of
$4.5 million in 2021. The 2022 effective income tax rate was 75.8% compared to 386.5%
for 2021.
Primarily as a result of the factors discussed above, net income for 2022 was $2.3 million
compared to net loss of $3.4 million for 2021.
2021 Versus 2020
Net Sales. Our net sales for 2021 were $415.7 million, which represents an increase of
$6.8 million or 1.7% from the prior year. Net sales increased $14 million from price and mix,
$6 million due to foreign currency translation and decrease $13 million due to volume.
Cost of Sales. Cost of sales for 2021 increased 4.8% from the comparable prior year
period. The increase is mainly due to inflation of raw material cost, higher distribution
expense and lower absorption of manufacturing costs at our plants due to labor and raw
material supply shortages.
Selling, General and Administrative Expenses. We decreased selling, general and
administrative expenses from $49.8 million in 2020 to $48.2 million in 2021. The decrease is
mainly due to lower costs for employee compensation plans.
Amortization of Intangibles. The Company incurred an expense of $1.8 million during 2021
on the amortization of intangibles recognized with the acquisitions compared to $1.7
million in 2020.
Asset Impairment Charge. The Company incurred an asset impairment charge of $0.5
million in 2021 related to a prepaid IP royalty compared to a charge of $0.4 million in 2020
related to the write down of capitalized software not placed in service.
Restructuring Expense. Restructuring expense of $0.5 million during 2021 and $0.4 million
in 2020 resulted from the planned partial relocation of our manufacturing operation in
Thaon, France and a downsizing of our facility in Bomlitz, Germany. The plan involved the
involuntary termination of approximately 150 employees. The Company anticipates an
annual savings of $10.0 million per year when the plan is fully implemented.
Operating Income. Operating income for 2021 was $21.1 million, representing a
decrease of $7.7 million from the prior year. The decrease in operating income was
primarily due to higher cost of sales discussed above.
Interest Expense. Interest expense, net of interest income, for 2021 was $6.2 million,
representing an decrease of $5.2 million compared to 2020. The decrease is a result of a
lower interest rate on our Term loan.
Other Expense. Other expense for 2021 was approximately $13.8 million, representing an
increase of $7.4 million over 2020. The increase is primarily due to foreign currency
translation loss.
Income Tax Provision. During 2021, an income tax expense of $4.5 million was recognized
on the income before income taxes of $1.2 million compared to income tax expense of
$6.2 million in 2020. The 2021 effective income tax rate was 386.5% compared to 57.7%
for 2020.
Primarily as a result of the factors discussed above, net loss for 2021 was $3.4 million
compared to net income of $4.6 million for 2020.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $1.1 million during 2022. Net cash provided by
operating activities was $10.4 million and net cash used in investing activities was $22.2
million. Net cash provided by financing activities was $6.2 million. Cash flows provided
by operating activities were principally attributable to results from operations. Our
inventory increased during 2022 due to increased raw material purchasing to mitigate
supply chain issues for our manufacturing plants. Cash flows used in investing activities
were principally attributable to capital expenditures. Cash flows provided by financing
activities principally consisted of short term borrowings.
Our cash held in foreign banks was $9.1 million (against a total cash balance of $8.7
million) and $8.1 million (against a total cash balance of $9.9 million) as of December 31,
2022 and December 31, 2021, respectively. Any cash held by our foreign subsidiaries does
not have a significant impact on our overall liquidity, but if we fail to generate sufficient
cash through our domestic operations, our foreign operations could be a potential
source of liquidity.
As of December 31, 2022 the Company had positive working capital of approximately
$120.6 million, with additional amounts of credit available under its New Senior Credit
Facility.
New Senior Credit Facility
On October 09, 2020, the Company entered into a Credit Agreement with Bank of
America, N.A. (“BofA”) as Administrative Agent, Swingline Lender and L/C Issuer, and the
other Lender parties thereto, providing for a $150,000 term loan (the “New Term Loan”)
and a $30,000 revolving credit facility (the “New Revolving Credit Facility” and together
with the New Term Loan, the “New Senior Credit Facility”).
On August 10, 2022, the Company entered into the Second Amendment to the New
Senior Credit Facility (the “Amended Senior Credit Facility”). The Amended Senior Credit
Facility increased the commitment of the New Revolving Credit Facility to $37,000 and
transitioned Term Loans on September 30, 2022 and Revolving Loans on August 30,2022
from LIBOR Loans to SOFR Loans. Amended terms of the facility are stated below.
The interest rates per annum applicable to the Amended Senior Credit Facility (other than
in respect of Swingline Loans) will be SOFR, but in any event, not less than 0.00%, plus the
Applicable Rate (as defined below), or, for U.S. dollar denominated loans only, made to
the Company at the option of the Company, the Base Rate, defined as the highest of:
(a) the Federal Funds Rate plus one-half percent (0.50%); (b) the Bank of America prime
rate; and (c) the one (1) month SOFR (adjusted daily) plus one percent (1.00%), but in
any case not less than 1.00%. plus the Applicable Rate. Applicable Rate means, with
respect to the Amended Senior Credit Facility, a percentage per annum to be
determined in accordance with the applicable pricing grid set forth in the Amended
Senior Credit Facility based upon the Company’s Consolidated Coverage Ratio as
reflected in a quarterly Compliance Certificate. Each Swingline Loan shall bear interest
at the Base Rate plus the Applicable Rate for Base Rate loans under the New Revolving
Credit Facility. As of December 31, 2022, our current interest rate is 6.15%.
The Amended Senior Credit Facility requires the Company to repay principal of the New
Term Loan at the rate of 5% of the original principal balance during each of the first two
years, 7.5% during the third and fourth years and 10% of the original principal balance
during the fifth year. The maturity date on the Amended Senior Credit Facility is August
13, 2026.
The Company may prepay the Amended Senior Credit Facility, in whole or in part, at any
time without premium or penalty, subject to reimbursement of the Lenders’ breakage
and redeployment costs in the case of prepayment of LIBOR borrowings and foreign
currency borrowings bearing interest at a rate other than LIBOR. Each such prepayment
of the New Term Facility shall be applied as directed by the Company. The unutilized
portion of the commitments under the Amended Senior Credit Facility may be
irrevocably reduced or terminated by the Company at any time without penalty.
The Amended Senior Credit Facility is guaranteed by each existing and future direct and
indirect wholly owned material domestic Restricted Subsidiary and foreign Restricted
Subsidiary of the Company (other than any Brazilian subsidiary). The Amended Senior
Credit Facility is secured by substantially all assets of the Company and its material
domestic Restricted Subsidiaries, with the exception of real property.
The Amended Senior 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 Senior Credit Facility also
requires that we comply with certain financial covenants, including meeting a
consolidated leverage ratio and consolidated fixed charge coverage ratio. The
Company is in compliance with the Amended Senior Credit Facility covenants as of
December 31, 2022.
Foreign Lines of Credit
In its foreign operations, the Company has unsecured lines of credit with various banks
providing approximately $10.0 million of availability. There were no borrowings under the
lines of credit at December 31, 2022 and 2021.
Pension and Postretirement Benefits
Our long-term pension and postretirement benefit liabilities totaled $36.2 million at
December 31, 2022.
Expected annual cash contributions for U.S. pension liabilities are expected to be (in
millions):
Contract Obligations
As of December 31, 2022, the aggregate maturities of debt(1), leases and purchase
commitments for each of the next five years are (in millions):
(1) The aggregate maturities of debt represent amounts to be paid at maturity and not
the current carrying value.
(2)
New Accounting Pronouncements
Please reference Footnote 1 in our Notes to Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
This report includes “forward-looking statements.” Forward-looking statements are those
that do not relate solely to historical fact. These statements relate to future events or our
future financial performance and implicate known and unknown risks, uncertainties and
other factors that may cause the actual results, performances or levels of activity of our
business or our industry to be materially different from that expressed or implied by any
such forward-looking statements. They include, but are not limited to, any statement that
may predict, forecast, indicate or imply future results, performance, achievements or
events. In some cases, you can identify forward-looking statements by use of words such
as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will,”
“would,” “could,” “predict,” “propose,” “potential,” “may” or words or phrases of similar
meaning. Statements concerning our financial position, business strategy and measures
to implement that strategy, including changes to operations, competitive strengths,
20232024202520262027Pension $ 2.2 $ 5.9 $ 6.0 $ 6.0 $ 6.1 20232024202520262027ThereafterTerm Loan Facility $ 39,375 $ 11,250 $ 13,125 $ 99,375 $ - $ - Other - - - - - 858 $ 39,375 $ 11,250 $ 13,125 $ 99,375 $ - $ 858
goals, plans, references to future success and other similar matters are forward-looking
statements. Forward-looking statements may relate to, among other things:
our ability to meet liquidity requirements and to fund necessary capital
expenditures;
the strength of demand for our products, prices for our products and changes in
overall demand;
assessment of market and industry conditions and changes in the relative market
shares of industry participants;
consumption patterns and consumer preferences;
the effects of competition and competitor responses to our products and services ;
our ability to realize operating improvements and anticipated cost savings;
pending or future legal proceedings and regulatory matters;
general economic conditions and their effect on our business;
changes in the cost or availability of raw materials and changes in energy prices or
other costs;
pricing pressures for our products;
the cost of and compliance with environmental laws and other governmental
regulations;
our results of operations for future periods;
our anticipated capital expenditures;
our ability to pay, and our intentions with respect to the payment of, dividends on
shares of our capital stock;
our ability to protect our intellectual property;
economic and industry conditions affecting our customers and suppliers
our ability to identify, complete and integration acquisitions; and
our strategy for the future, including opportunities that may be presented to and/or
pursued by us.
These forward-looking statements are not guarantees of future performance. Forward-
looking statements are based on management’s expectations that involve risks and
uncertainties.