UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 1, 2016
LSB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-7677 | 73-1015226 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
16 South Pennsylvania Avenue,
Oklahoma City, Oklahoma 73107
Registrant’s telephone number, including area code: (405) 235-4546
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
On July 1, 2016, LSB Industries, Inc., a Delaware corporation (the “Company”), completed the previously announced sale of its climate control business to NIBE Energy Systems Inc., a Delaware corporation (the “Purchaser”), and an indirect wholly owned subsidiary of NIBE Industrier AB (publ), a Swedish corporation (“NIBE”), pursuant to the terms of the Stock Purchase Agreement (the “Stock Purchase Agreement”), dated May 11, 2016, by and among the Company, Consolidated Industries L.L.C., an Oklahoma limited liability company and a direct, wholly owned subsidiary of the Company (“Consolidated”), The Climate Control Group, Inc., an Oklahoma corporation and a direct, wholly owned subsidiary of Consolidated and an indirect subsidiary of the Company (the “Climate Control Group”), NIBE and the Purchaser.
The foregoing description of the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stock Purchase Agreement, which is filed as Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on May 13, 2016.
On July 1, 2016, the Company issued a press release announcing that it had completed the sale of its climate control business to the Purchaser pursuant to the Stock Purchase Agreement. The press release, filed as Exhibit 99.1 to this Current Report on Form 8-K, is incorporated herein by reference.
The unaudited pro forma financial statements of the Company giving effect to the foregoing transaction are attached hereto as Exhibit 99.2 and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(b) Pro Forma Financial Information
The LSB Industries, Inc. Unaudited Pro Forma Financial Information is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
(d) Exhibits:
| Exhibit |
Description | |||
| 99.1 | Press Release, dated as of July 1, 2016. | |||
| 99.2 | LSB Industries, Inc. Unaudited Pro Forma Financial Information. | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: July 8, 2016
| LSB INDUSTRIES, INC. | ||
| By: |
/s/ Mark T. Behrman | |
| Name: |
Mark T. Behrman | |
| Title: |
Executive Vice President and Chief Financial Officer | |
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release, dated as of July 1, 2016. | |
| 99.2 | LSB Industries, Inc. Unaudited Pro Forma Financial Information. | |
Exhibit 99.1
FOR IMMEDIATE RELEASE
LSB INDUSTRIES, INC. ANNOUNCES CLOSING OF SALE OF
CLIMATE CONTROL BUSINESS TO NIBE INDUSTRIER AB
OKLAHOMA CITY, Oklahoma — July 1, 2016 – LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced the closing of the previously disclosed sale of its Climate Control Business (“CCB”) to NIBE Industrier AB (publ) of Sweden (“NIBE”) for a total of $364 million. The Company plans to use the net proceeds of the sale to repay its outstanding debt, redeem its preferred stock, or a combination of the two.
Dan Greenwell, LSB’s President and CEO, stated, “We are pleased to have completed the divestiture of the Climate Control Business at an attractive valuation. This transaction transforms LSB into a pure-play chemical company, and enables us to improve our capital structure. We expect this, combined with the recent start-up of a new ammonia plant at our El Dorado Facility, and our progress on improving the on-stream rates at our other facilities to translate into improved value for our shareholders. Once again, I would like to thank the CCB employees for their hard work and dedication and wish them well in their future with NIBE.”
About LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma, manufactures and sells chemical products for the agricultural, mining, and industrial markets. The Company owns and operates facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operates a facility for Covestro AG in Baytown, Texas. LSB’s products are sold through distributors and directly to end customers throughout the United States. Additional information about the Company can be found on its website at www.lsbindustries.com.
Forward Looking Statement
This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identified by use of the words “will”, “believes”, “expects”, “estimates”, “intends”, “anticipates”, “plans to”, “should”, “estimates”, “projects”, or similar expressions, including, without limitation, LSB’s plans and expectations with respect to the divestiture of CCB; pay down of debt; improved financial flexibility, capital structure, and chemical plant on-stream rates; enhanced reliability, performance, profitability and generation of cash flow from our facilities; and continued investment in improvement of plants.
Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties. Though we believe that expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectation will prove to be correct. Actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to: general economic conditions; weather conditions; increased costs to complete the El Dorado project; ability to install necessary equipment and renovations at our Facilities in a timely manner; changes to federal legislation or adverse regulations; increased competitive pressures, domestic and foreign; ability to complete transactions to address our leveraged balance sheet and cash flow requirements; loss of significant customers; increased costs of raw materials; and other factors set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in our Form 10-K for the year ended December 31, 2015 and, if applicable, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, which contain a discussion of a variety of factors which could cause future outcomes to differ materially from the forward-looking statements contained in this release. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statement to reflect events, new information or circumstances occurring after the date of this press release except as required by applicable law.
| Company Contact: Mark Behrman, Chief Financial Officer (405) 235-4546 |
Investor Relations Contact: Fred Buonocore (212) 836-9607 Kevin Towle (212) 836-9620 The Equity Group Inc. |
2
Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Information
The following unaudited pro forma condensed consolidated financial statements (the “Unaudited Pro Forma Financial Statements”) are based upon the historical financial statements of LSB Industries, Inc. (the “Company”) and its consolidated subsidiaries (“LSB”) and give effect to the sale of Climate Control Group, Inc., (the “Climate Control Group”), an indirect subsidiary of the Company. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2016 and for the years ended December 31, 2015, 2014 and 2013 assume that the sale of the Climate Control Group occurred January 1, 2013. The unaudited pro forma condensed consolidated balance sheet as of March 31, 2016 assumes that the sale occurred on that date.
The Unaudited Pro Forma Financial Statements are presented based on currently available information and are intended for informational purposes only. These Unaudited Pro Forma Financial Statements are not necessarily indicative of what LSB’s results of operations or financial condition would have been had the sale been completed on the dates assumed. In addition, they are not necessarily indicative of LSB’s future results of operations or financial condition. Due to the fact that the unaudited pro forma condensed consolidated financial information has been prepared based upon preliminary estimates, the final amounts recorded for the sale of the Climate Control Group may differ materially from the pro forma condensed consolidated financial information presented. Beginning in the second quarter of 2016, the historical financial results of the Climate Control Group will be reflected in LSB’s condensed consolidated financial statements as discontinued operations.
The Unaudited Pro Forma Financial Statements should be read in conjunction with (i) the accompanying notes to the Unaudited Pro Forma Financial Statements, (ii) the audited consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016, and (iii) the unaudited financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” included in the Company’s Form 10-Q for the three months ended March 31, 2016 filed with the SEC on May 4, 2016.
LSB Industries, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operation
| Three Months Ended March 31, 2016 | ||||||||||||||
| As Reported |
Pro Forma Adjustments |
Note 1 | Pro Forma | |||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||
| Net sales |
$ | 165,599 | $ | (66,627 | ) | A | $ | 98,972 | ||||||
| Cost of sales (Note 2-P) |
150,590 | (45,454 | ) | A | 105,136 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Gross profit (loss) |
15,009 | (21,173 | ) | (6,164 | ) | |||||||||
| Selling, general and administrative expense |
26,862 | (15,968 | ) | B | 10,894 | |||||||||
| Other expense, net |
390 | (139 | ) | A | 251 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Operating loss |
(12,243 | ) | (5,066 | ) | (17,309 | ) | ||||||||
| Interest expense, net (Note 2-O) |
1,350 | — | 1,350 | |||||||||||
| Non-operating other expense, net |
1,956 | — | 1,956 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations before benefit for income taxes |
(15,549 | ) | (5,066 | ) | (20,615 | ) | ||||||||
| Benefit for income taxes |
(610 | ) | (4,240 | ) | C | (4,850 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations |
(14,939 | ) | (826 | ) | (15,765 | ) | ||||||||
|
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|
|
|
|
|
|||||||||
| Loss from continuing operations per common share: |
||||||||||||||
| Basic |
$ | (1.08 | ) | $ | (0.03 | ) | $ | (1.11 | ) | |||||
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | (1.08 | ) | $ | (0.03 | ) | $ | (1.11 | ) | |||||
|
|
|
|
|
|
|
|||||||||
| Weighted average shares outstanding: |
||||||||||||||
| Basic |
22,868 | — | 22,868 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Diluted |
22,868 | — | 22,868 | |||||||||||
|
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|
|
|
|
|
|||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
LSB Industries, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operation
| Year Ended December 31, 2015 | ||||||||||||||
| As Reported |
Pro Forma Adjustments |
Note 1 | Pro Forma | |||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||
| Net sales |
$ | 711,781 | $ | (274,086 | ) | A | $ | 437,695 | ||||||
| Cost of sales |
608,073 | (190,426 | ) | A | 417,647 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Gross profit |
103,708 | (83,660 | ) | 20,048 | ||||||||||
| Selling, general and administrative expense |
112,288 | (62,699 | ) | A | 49,589 | |||||||||
| Provision for losses on accounts receivable |
253 | (29 | ) | A | 224 | |||||||||
| Impairment of long-lived assets (Note 2-N) |
43,188 | — | 43,188 | |||||||||||
| Other income, net |
(1,269 | ) | (518 | ) | A | (1,787 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Operating loss |
(50,752 | ) | (20,414 | ) | (71,166 | ) | ||||||||
| Interest expense, net (Note 2-O) |
7,381 | (10 | ) | A | 7,371 | |||||||||
| Non-operating other expense, net |
124 | 5 | A | 129 | ||||||||||
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations before benefit for income taxes |
(58,257 | ) | (20,409 | ) | (78,666 | ) | ||||||||
| Benefit for income taxes |
(23,550 | ) | (8,970 | ) | C | (32,520 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations |
(34,707 | ) | (11,439 | ) | (46,146 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||
| Loss from continuing operations per common share: |
||||||||||||||
| Basic |
$ | (1.67 | ) | $ | (0.50 | ) | $ | (2.17 | ) | |||||
|
|
|
|
|
|
|
|||||||||
| Diluted |
$ | (1.67 | ) | $ | (0.50 | ) | $ | (2.17 | ) | |||||
|
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|
|
|
|
|
|||||||||
| Weighted average shares outstanding: |
||||||||||||||
| Basic |
22,759 | — | 22,759 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| Diluted |
22,759 | — | 22,759 | |||||||||||
|
|
|
|
|
|
|
|||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
LSB Industries, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operation
| Year Ended December 31, 2014 | ||||||||||||||
| As Reported |
Pro Forma Adjustments |
Note 1 | Pro Forma | |||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||
| Net sales |
$ | 761,246 | $ | (265,358 | ) | A | $ | 495,888 | ||||||
| Cost of sales (Note 2-L) |
613,372 | (182,949 | ) | A | 430,423 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Gross profit |
147,874 | (82,409 | ) | 65,465 | ||||||||||
| Selling, general and administrative expense |
98,405 | (59,565 | ) | A | 38,840 | |||||||||
| Provision for losses on accounts receivable |
134 | 17 | A | 151 | ||||||||||
| Property insurance recoveries in excess of losses incurred (Note 2-M) |
(5,147 | ) | — | (5,147 | ) | |||||||||
| Other expense, net |
1,120 | (76 | ) | A | 1,044 | |||||||||
|
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|
|
|
|
|
|||||||||
| Operating income |
53,362 | (22,785 | ) | 30,577 | ||||||||||
| Interest expense, net (Note 2-O) |
21,599 | — | 21,599 | |||||||||||
| Non-operating other income, net |
(281 | ) | — | (281 | ) | |||||||||
|
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|
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|
|||||||||
| Income from continuing operations before provision for income taxes and equity in earnings of affiliate |
32,044 | (22,785 | ) | 9,259 | ||||||||||
| Provision for income taxes |
12,400 | (8,149 | ) | C | 4,251 | |||||||||
| Equity in earnings of affiliate |
(79 | ) | — | (79 | ) | |||||||||
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|
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|
|||||||||
| Income from continuing operations |
19,723 | (14,636 | ) | 5,087 | ||||||||||
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|
|||||||||
| Income from continuing operations per common share: |
||||||||||||||
| Basic |
$ | 0.86 | $ | (0.65 | ) | $ | 0.21 | |||||||
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|||||||||
| Diluted |
$ | 0.83 | $ | (0.62 | ) | $ | 0.21 | |||||||
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|||||||||
| Weighted average shares outstanding: |
||||||||||||||
| Basic |
22,575 | — | 22,575 | |||||||||||
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|
|||||||||
| Diluted |
23,667 | — | 23,667 | |||||||||||
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|
|||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
LSB Industries, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Operation
| Year Ended December 31, 2013 | ||||||||||||||
| As Reported |
Pro Forma Adjustments |
Note 1 | Pro Forma | |||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||
| Net sales |
$ | 701,241 | $ | (285,018 | ) | A | $ | 416,223 | ||||||
| Cost of sales (Note 2-L) |
563,122 | (193,735 | ) | A | 369,387 | |||||||||
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|
|
|
|
|||||||||
| Gross profit |
138,119 | (91,283 | ) | 46,836 | ||||||||||
| Selling, general and administrative expense |
95,237 | (59,370 | ) | A | 35,867 | |||||||||
| Provision for losses (recovery of) on accounts receivable |
478 | (517 | ) | A | (39 | ) | ||||||||
| Property insurance recoveries in excess of losses incurred (Note 2-M) |
(66,255 | ) | — | (66,255 | ) | |||||||||
| Other expense, net |
3,351 | 173 | A | 3,524 | ||||||||||
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|
|
|||||||||
| Operating income |
105,308 | (31,569 | ) | 73,739 | ||||||||||
| Interest expense, net (Note 2-O) |
13,986 | (685 | ) | A | 13,301 | |||||||||
| Loss on extinguishment of debt |
1,296 | — | 1,296 | |||||||||||
| Non-operating other expense (income), net |
(100 | ) | 123 | A | 23 | |||||||||
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|||||||||
| Income from continuing operations before provision for income taxes and equity in earnings of affiliate |
90,126 | (31,007 | ) | 59,119 | ||||||||||
| Provision for income taxes |
35,421 | (11,466 | ) | C | 23,955 | |||||||||
| Equity in earnings of affiliate |
(436 | ) | — | (436 | ) | |||||||||
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|
|||||||||
| Income from continuing operations |
55,141 | (19,541 | ) | 35,600 | ||||||||||
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|||||||||
| Income from continuing operations per common share: |
||||||||||||||
| Basic |
$ | 2.44 | $ | (0.87 | ) | $ | 1.57 | |||||||
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| Diluted |
$ | 2.34 | $ | (0.83 | ) | $ | 1.51 | |||||||
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|||||||||
| Weighted average shares outstanding: |
||||||||||||||
| Basic |
22,465 | — | 22,465 | |||||||||||
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|
|||||||||
| Diluted |
23,597 | — | 23,597 | |||||||||||
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|||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
LSB Industries, Inc.
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2016
| As Reported |
Pro Forma Adjustments |
Note 1 | Pro Forma | |||||||||||
| Assets |
||||||||||||||
| Current assets: |
||||||||||||||
| Cash and cash equivalents |
$ | 39,529 | $ | 53,533 | D | $ | 93,062 | |||||||
| Restricted cash |
— | 300,000 | D | 300,000 | ||||||||||
| Accounts receivable, net |
87,496 | (43,728 | ) | E | 43,768 | |||||||||
| Inventories: |
||||||||||||||
| Finished goods |
26,433 | (5,379 | ) | F | 21,054 | |||||||||
| Work in progress |
1,893 | (1,893 | ) | F | — | |||||||||
| Raw materials |
20,313 | (17,830 | ) | F | 2,483 | |||||||||
|
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|
|
|
|
|
|||||||||
| Total inventories |
48,639 | (25,102 | ) | 23,537 | ||||||||||
| Supplies, prepaid items and other: |
||||||||||||||
| Prepaid insurance |
7,959 | (527 | ) | F | 7,432 | |||||||||
| Precious metals |
12,669 | — | 12,669 | |||||||||||
| Supplies |
20,003 | — | 20,003 | |||||||||||
| Prepaid and refundable income taxes |
5,954 | (5,097 | ) | G | 857 | |||||||||
| Other |
4,445 | (381 | ) | F | 4,064 | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total supplies, prepaid items and other |
51,030 | (6,005 | ) | 45,025 | ||||||||||
| Deferred income taxes |
4,588 | (4,588 | ) | G | — | |||||||||
|
|
|
|
|
|
|
|||||||||
| Total current assets |
231,282 | 274,110 | 505,392 | |||||||||||
| Property, plant and equipment, net |
1,087,954 | (25,536 | ) | F | 1,062,418 | |||||||||
| Other assets: |
||||||||||||||
| Intangible and other, net |
24,060 | (7,642 | ) | F | 16,418 | |||||||||
|
|
|
|
|
|
|
|||||||||
| $ | 1,343,296 | $ | 240,932 | $ | 1,584,228 | |||||||||
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|
|||||||||
| Liabilities and Stockholders’ Equity |
||||||||||||||
| Current liabilities: |
||||||||||||||
| Accounts payable |
$ | 106,853 | $ | (6,059 | ) | H | $ | 100,794 | ||||||
| Short-term financing |
6,399 | — | 6,399 | |||||||||||
| Accrued and other liabilities |
42,049 | (6,305 | ) | I | 35,744 | |||||||||
| Current portion of long-term debt |
16,836 | — | 16,836 | |||||||||||
|
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|
|
|
|
|
|||||||||
| Total current liabilities |
172,137 | (12,364 | ) | 159,773 | ||||||||||
| Long-term debt, net |
511,678 | — | 511,678 | |||||||||||
| Noncurrent accrued and other liabilities |
23,754 | (12,340 | ) | F | 11,414 | |||||||||
| Deferred income taxes |
50,715 | 74,026 | G | 124,741 | ||||||||||
| Commitments and contingencies |
||||||||||||||
| Redeemable preferred stocks: |
||||||||||||||
| Series E 14% cumulative, redeemable Class C preferred stock, no par value, 210,000 shares issued and outstanding; aggregate liquidation preference of $219,637,000 |
186,865 | — | 186,865 | |||||||||||
| Series F redeemable Class C preferred stock, no par value, 1 share issued and outstanding; aggregate liquidation preference of $100 |
— | — | — | |||||||||||
| Stockholders’ equity: |
||||||||||||||
| Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding |
2,000 | — | 2,000 | |||||||||||
| Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued and outstanding |
1,000 | — | 1,000 | |||||||||||
| Common stock, $.10 par value; 75,000,000 shares authorized, 27,137,599 shares issued |
2,714 | — | 2,714 | |||||||||||
| Capital in excess of par value |
190,378 | 206 | J | 190,584 | ||||||||||
| Retained earnings |
223,616 | 191,404 | K | 415,020 | ||||||||||
|
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|
|
|
|
|
|||||||||
| 419,708 | 191,610 | 611,318 | ||||||||||||
| Less treasury stock, at cost: |
||||||||||||||
| Common stock, 3,283,081 shares |
21,561 | — | 21,561 | |||||||||||
|
|
|
|
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|
|
|||||||||
| Total stockholders’ equity |
398,147 | 191,610 | 589,757 | |||||||||||
|
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|
|
|
|
|||||||||
| $ | 1,343,296 | $ | 240,932 | $ | 1,584,228 | |||||||||
|
|
|
|
|
|
|
|||||||||
See notes to unaudited pro forma condensed consolidated financial statements.
LSB Industries, Inc.
Notes to Unaudited Pro Forma Condensed Consolidated Pro Forma Financial Statements
Note 1 – The pro forma adjustments are as follows:
| A | Reflects primarily the elimination of historical revenues and expenses (which excludes intercompany charges such as corporate management fees and rent, when applicable) directly related to the Climate Control Group. |
| B | Reflects primarily the elimination of historical expenses (which excludes intercompany charges such as corporate management fees and rent, when applicable) directly related to the Climate Control Group plus professional fees of approximately $0.6 million directly relating to the sale of the Climate Control Group. |
| C | Reflects the income tax effect resulting from the pro forma effect of the sale of the Climate Control Group based on the statutory tax rates in effect. |
| D | Reflects primarily net cash proceeds of $353.7 million from the sale of the Climate Control Group (after estimated purchase price adjustments of approximately $5.6 million primarily relating net working capital and $4.7 million held in certain escrow accounts). The Company plans to use the net cash proceeds to repay its outstanding debt, redeem its preferred stock, or a combination of the two. |
| E | Reflects primarily the elimination of accounts receivables included in the sale of the Climate Control Group partially offset by a receivable of $4.7 million for funds held in certain escrow accounts discussed in D above. |
| F | Reflects primarily the elimination of assets and liabilities included in the sale of the Climate Control Group. |
| G | Reflects the sale of the Climate Control Group and the resulting tax effect based on the statutory rate for federal tax purposes and the estimated state tax calculations. The sale of the Climate Control Group results in a large taxable gain that will be offset by 2016 bonus and accelerated depreciation, resulting in no material cash taxes due. |
| H | Reflects primarily the elimination of accounts payables included in the sale of the Climate Control Group partially offset by payables of an estimated $9.1 million for expenses directly relating to the sale of the Climate Control Group. |
| I | Reflects primarily the elimination of accrued liabilities included in the sale of the Climate Control Group partially offset by liabilities of an estimated $8.0 million for expenses directly relating to the sale of the Climate Control Group |
| J | Reflects the effect from various equity awards relating to the sale of the Climate Control Group. |
| K | Reflects the effect from the estimated gain on the sale of the Climate Control Group, the estimated expenses directly relating to the sale of the Climate Control Group, and the related income tax effects, as if the transaction had been completed on March 31, 2016. The gain on the sale is estimated at $193.4 million, net of income taxes of $111.3 million (based on the statutory tax rates in effect). This gain is not considered in the unaudited pro forma condensed consolidated statements of operations. After the final purchase price adjustments are completed, the actual amount of the gain may differ materially from the pro forma gain amount. |
Note 2 – The following are unusual historically significant items included in continuing operations and the period in which they occurred:
| L | Business Interruption Insurance Recoveries - For 2014 and 2013, we recognized business interruption insurance recoveries of $22.9 million and $28.4 million, respectively, which were classified as reductions to cost of sales related to our El Dorado and Cherokee Facilities. |
| M | Property Insurance Recoveries - For 2014 and 2013, we recognized property insurance recoveries of $5.1 million and $66.3 million, respectively, which were classified as property insurance recoveries in excess of losses incurred related to our El Dorado and Cherokee Facilities. |
| N | Non-cash Impairment Charge - For 2015, we recognized a non-cash impairment charge of $39.7 million relating to our working interest in natural gas properties and a non-cash impairment charge of $3.5 million for certain equipment at our Pryor Facility. |
| O | Capitalized Interest - For 2015, 2014 and 2013, interest expense is net of capitalized interest of $30.6 million, $14.1 million and $4.0 million, respectively. For the three months ended March 31, 2016, interest expense is net of capitalized interest of $10.0 million. |
| P | Certain Consulting Services – For the three months ended March 31, 2016, we incurred a $12.1 million fee related to one-time consulting services associated with the reduction of assessed property tax values for the El Dorado projects real and personal property for both the nitric acid plant, nitric acid concentrator plant and the ammonia plant at our El Dorado Facility. |