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) August 2, 1999
__________________________
LSB INDUSTRIES, INC.
_____________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 1-7677 3-1015226
_______________ _______________ _________________
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107
_____________________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 235-4546
_________________
Not applicable
_____________________________________________________________
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
____________________________________
On August 2, 1999, LSB Industries, Inc. (the "Company")
consummated the sale by the Company's wholly owned subsidiaries,
Total Energy Systems, Ltd. ("TES"), TES Mining Services Pty Ltd.
("TES Mining"), Total Energy Systems (International) Pty Ltd. ("TES
International"), and Total Energy Systems (NZ) Limited ("TES NZ")
(collectively, the "TES Subsidiaries") of substantially all the
assets of the TES Subsidiaries to Quantum Explosives ("Quantum"),
a subsidiary of Thiess Contractors Pty Limited pursuant to the
terms of an Asset Purchase Agreement, dated as of May 7, 1999, and
amended June 30, 1999 (the "Asset Purchase Agreement"). The TES
Subsidiaries were engaged in the business of manufacturing and
supplying bulk and package explosives and blasting agents and other
products and services to the mining, quarrying, civil engineering
and other industries in Australia, New Zealand, and elsewhere. The
TES Subsidiaries are wholly owned subsidiaries of ClimaChem, Inc.
("ClimaChem"), and ClimaChem is a wholly owned subsidiary of the
Company.
Under the terms of the Asset Purchase Agreement, Quantum
purchased all of the plant, equipment, intellectual property,
inventory, material contracts, and leases relating to the TES
Subsidiaries' business. All of the TES Subsidiaries' accounts
receivables (approximately $2.6 million) and trade payables
(approximately $1.9 million) were retained by the TES Subsidiaries.
The purchase price paid by Quantum under the Asset Purchase Agreement
was $11.6 million. The purchase price was determined at closing
based on the following: the book value of the inventory and fixed
assets, less approximately $650,000 for certain environmental
contingencies. The purchase price was paid as follows: $9.8 million
in cash, debt assumed of $1.1 million, and an approximately $.7 million
holdback to be paid within 21 days following the date of the closing,
subject to the final determination of the book value of the TES Subsidiaries'
inventory. Approximately $6.4 million of the cash received was used by
TES to repay certain indebtedness to its primary lender, the Bank of
New Zealand, Australia.
The sale of the TES Subsidiaries' business pursuant to the
Asset Purchase Agreement resulted in a loss to the Company of
approximately $2 million. However, the sale of the TES
Subsidiaries will eliminate from the Company's future performance
the losses incurred by the TES Subsidiaries, which are currently
approximately $3 million per annum.
Item 7. Financial Statements and Exhibits. Page No.
_________________________________ ________
(a) Financial Statements not applicable.
(b) Pro Forma Financial Information. P-1
Pro Forma Consolidated Balance Sheet
(Unaudited) as of March 31, 1999 P-2
Pro Forma Consolidated Statement of
Operations (Unaudited) for the
three months ended March 31, 1999 P-4
Pro Forma Consolidated Statement of
Operations (Unaudited) for the year
ended December 31, 1998 P-5
Notes to Pro Forma Consolidated Financial
Statements (Unaudited) P-6
(c) Exhibits.
2.1 Asset Purchase Agreement, dated as of May 7, 1999,
between Quantum Explosives Pty Ltd., Total Energy
Systems, Ltd., TES Mining Services Pty Ltd., Total
Energy Systems (International) Pty. Ltd., and Total
Energy Systems (NZ) Ltd. The Asset Purchase
Agreement is attached as Exhibit 10.1 to the Form
10-Q for the quarter ended March 31, 1999, and is
incorporated herein by reference. CERTAIN
INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AS
IT IS THE SUBJECT OF COMMISSION ORDER CF #8161,
DATED JUNE 9, 1999, GRANTING A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER THE FREEDOM OF
INFORMATION ACT AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
2.2 Variation to Asset Purchase Agreement, dated
June 30, 1999, between Quantum Explosives Pty Ltd.,
Total Energy Systems, Ltd., TES Mining Services Pty
Ltd., Total Energy Systems (International) Pty.
Ltd., and Total Energy Systems (NZ) Ltd.
99.1 Press release, dated August 3, 1999.
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SIGNATURE
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: August 17, 1999.
LSB INDUSTRIES, INC.
By: /s/ Tony M. Shelby
__________________________________
Tony M. Shelby
Senior Vice President and
Chief Financial Officer
K-M\LSB\8K\899\8K0899.5
-3-
LSB INDUSTRIES, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
August 17, 1999
On May 7, 1999, Total Energy Systems Limited and its
subsidiaries ("TES") entered into an agreement to sell
substantially all the assets of TES. Under the agreement, TES
retains all of its liabilities, except liabilities for the
financing of certain property and equipment, and will liquidate
such liabilities retained from the proceeds of the sale and from
the collection of its accounts receivables which were retained by
TES (collectively, the "Transactions").
The accompanying unaudited pro forma consolidated balance
sheet as of March 31, 1999 gives effect to the Transactions
involving the Company's wholly owned Australian subsidiary, Total
Energy Systems, Limited, as if they had occurred on March 31, 1999.
The accompanying unaudited consolidated statements of
operations for the year ended December 31, 1998 and the three
months ended March 31, 1999 give effect to the sale and realization
of the assets of TES as if the Transactions had occurred as of
January 1, 1998. Such unaudited pro forma consolidated financial
information has been prepared based on estimates and assumptions
deemed by the Company to be appropriate and does not purport to be
indicative of the financial position or results of operations which
may actually be obtained in the future. Future results may vary
significantly from the results reflected in the unaudited pro forma
consolidated statements of operations of the Company and its other
retained subsidiaries due to general economic conditions and other
factors.
The pro forma consolidated financial information should be
read in conjunction with the Company's historical financial
statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report
on Form 10-K for the year ended December 31, 1998 and Quarterly
report on Form 10-Q for the three months ended March 31, 1999.
P-1
LSB INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1999
(In thousands)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
ASSETS
_______
CURRENT ASSETS
Cash and cash equivalents $ 1,240 $ 1,240
Trade accounts receivable, net 57,113 $(3,532) (5) 53,581
Inventories 63,349 (8,900) (1) 54,449
Supplies and prepaid items 9,503 (94) (5) 9,409
__________ __________ ________
Total current assets 131,205 (12,526) 118,679
Plant, property and equipment,
at cost 198,233 (8,254) 189,979
Less accumulated depreciation
and amortization 99,131 (3,564) 95,567
__________ __________ ________
99,102 (4,690) (1) 94,412
Other assets, net 21,120 21,120
__________ __________ ________
$251,427 ($17,216) $234,211
========== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Drafts payable $499 $499
Accounts payable 20,534 ($1,213) (5) 19,321
Accrued liabilities 19,490 (2,176) (5) 17,314
Current portion of long-term debt 14,559 (6,626) (1) 7,933
__________ __________ ________
Total current liabilities 55,082 (10,015) 45,067
Long-term debt 165,759 (6,301)(1)(2) 159,458
Redeemable, noncumulative, con-
vertible preferred stock 139 139
STOCKHOLDERS' EQUITY
Series B 12% cumulative, con-
vertible preferred, $100 par
value; 20,000 shares issued
and outstanding 2,000 2,000
P-2
Series 2 $3.25 convertible,
exchangeable able Class C pre-
ferred stock, $50 stated value;
920,000 shares issued 46,000 46,000
Common stock, $.10 par value;
75,000,000 shares authorized,
15,108,676 shares issued 1,511 1,511
Capital in excess of par value 38,329 38,329
Accumulated other comprehensive loss (1,337) 1,337 (3) 0
Accumulated deficit (39,794) (2,237)(3)(4) (42,031)
__________ __________ ________
46,709 (900) 45,809
Less treasury stock, at cost:
Series 2 preferred, 5,000 shares 200 200
Common stock, 3,273,290 shares 16,062 16,062
__________ __________ ________
Total stockholders' equity 30,447 (900) 29,547
__________ __________ ________
$251,427 ($17,216) $234,211
========== ========== ========
See accompanying notes.
P-3
LSB INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended March 31, 1999
(In Thousands, Except Per Share Amounts)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
REVENUES
Net sales $73,057 ($2,868) (6) $70,189
Other income (312) 102 (6) (210)
__________ ___________ _________
72,745 (2,766) 69,979
COSTS AND EXPENSES
Cost of sales 57,101 (3,026) (6) 54,075
Selling general and administrative 14,912 (585) (6) 14,327
Interest 4,492 (227) (6)(7) 4,265
__________ __________ _________
76,505 (3,838) 72,667
__________ ___________ _________
Loss before provision for income
taxes (3,760) 1,072 (2,688)
Provision for income taxes 50 50
__________ ___________ _________
Net loss (3,810) $1,072 (2,738)
===========
Preferred stock dividends 816 816
__________ _________
Net loss applicable to common
stock ($4,626) ($3,554)
========== =========
Net loss per common share -
basic and diluted ($0.39) ($0.30)
========== =========
Weighted average common shares
outstanding 11,881 11,881
========== ========
See accompanying notes.
P-4
LSB INDUSTRIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1998
(In Thousands, Except Per Share Amounts)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
REVENUES
Net sales $310,037 ($14,184) (6) $295,853
Other income 1,290 (11) (6) 1,279
Gain on sale of The Tower 12,993 12,993
__________ ___________ _________
324,320 (14,195) 310,125
COSTS AND EXPENSES
Cost of sales 247,084 (14,426) (6) 232,658
Selling general and administrative 61,729 (2,189) (6) 59,540
Interest 17,327 (954) (6)(7) 16,373
__________ ___________ _________
326,140 (17,569) 308,571
__________ ___________ _________
Income (loss) before provision for
income taxes (1,820) 3,374 1,554
Provision for income taxes 100 100
__________ ___________ _________
Net income (loss) (1,920) $3,374 1,454
===========
Preferred stock dividends 3,229 3,229
__________ _________
Net loss applicable to common
stock ($5,149) ($1,775)
========== ========
Net loss per common share -
basic and diluted ($0.42) ($0.14)
========== ========
Weighted average common shares
outstanding 12,373 12,373
========== ========
See accompanying notes.
P-5
LSB INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Pro Forma Consolidated Balance Sheet
______________________________________________
(1) To eliminate inventory and net property, plant and equipment
("PP&E") sold; the related PP&E debt financing assumed by the
purchaser; and, to apply cash proceeds to reduce the revolving
credit bank debt of the Australian subsidiaries.
(2) To apply cash proceeds from the sale and realization of the
Australian subsidiary's assets to reduce the indebtedness of
the Company.
(3) To eliminate the cumulative transaction adjustment.
(4) To recognize the loss on sale of the assets of the Australian
subsidiary including the recognition of the foreign currency
translation loss related thereto.
(5) To reflect the realization of assets and liquidation of
liabilities retained.
Unaudited Pro Forma Consolidated Statement of Operations
________________________________________________________
(6) To eliminate the results of operations of TES included in the
Company's consolidated financial statements.
(7) To recognize the interest reduction on debt required to be
retired with the net cash proceeds received by the Company.
P-6
VARIATION TO ASSET PURCHASE AGREEMENT DATED MAY 7, 1999
The Vendors and Purchaser under the abovementioned contract have
agreed to the following variations to the contract:
1 Clause 1.1.12 is amended to read "Completion Date" means 2
August 1999; and
2 Clause 1.1.20 is amended to read "Existing Environmental
Cost" means $1 million; and
3 Clause 1.1.44 is amended to read "Satisfaction Date" means
30 July 1999.
The Vendors and Purchaser acknowledge and agree for the purposes
of clause 2.1.7 of the contract that the Existing Environmental
Cost is $1 million which in accordance with clause 2.3.2 of the
contract the Vendors have elected to accept as a deduction from
the Purchase Price in accordance with clause 6.1.4 of the
contract.
Terms used in this document shall have the meanings given to them
under the Asset Purchase Agreement.
DATED this 30th day of June 1999.
SIGNED by TOTAL ENERGY SYSTEMS )
LIMITED ACN 010 876 150 by a )
duly authorised director in the )
presence of: )
________________________________
Witness
SIGNED by T.E.S. MINING SERVICES )
PTY LTD ACN 010 975 676 by a )
duly authorised director in the )
presence of: )
________________________________
Witness
SIGNED by TOTAL ENERGY SYSTEMS )
(INTERNATIONAL) PTY LTD. )
ACN 084 562 247 by a duly )
authorised director in the )
presence of: )
_________________________________
SIGNED by TOTAL ENERGY SYSTEMS )
(NZ) LIMITED D/N682396 by a )
duly authorised director in the )
presence of: )
________________________________
Witness
SIGNED by QUANTUM EXPLOSIVES PTY )
LIMITED ACN 087 119 515 by a duly )
authorised director in the )
presence of: )
________________________________
Witness
LSB
INDUSTRIES
NEWS: for immediate release
________________________________________________________________
POST OFFICE BOX 754 (73101)
16 SOUTH PENNSYLVANIA (73107)
OKLAHOMA CITY, OK U.S.A.
PHONE: 405-235-4546
TELEX: 203656 LSB UR
FAX: 405-235-5067
LSB Industries, Inc. Announces Completion of Sale of Its Australian
Subsidiary
OKLAHOMA CITY, Aug. 3 /PRNewswire/ LSB Industries, Inc.
(OTC Bulletin Board: LSBD) ("LSB") announced today that it has
completed the sale of its wholly-owned subsidiary, Total Energy
Systems Limited ("TES"), incorporated in Australia. The Asset
Purchase Agreement between LSB and Quantum Explosives ("Quantum"),
a subsidiary of Thiess Contractors Pty Limited ("Thiess") for the
assets of TES and its related subsidiaries in Australia and New
Zealand was closed in Brisbane, Australia on August 2.
Jack E. Golsen, Board Chairman, stated that proceeds from the
sale of approximately $14 million will be used to reduce debt. The
transaction will result in a loss on the sale of approximately $2.0
million. However, the sale will eliminate TES' current losses
which have been running approximately $3 million per annum.
LSB is a manufacturing, marketing, and engineering company
with activities on a worldwide basis. LSB's principal business
activities consist of the manufacture and sale of chemical products
for the mining, agricultural and industrial markets, the
manufacture and sale of commercial and residential climate control
products, the provision of specialized engineering services, and
other activities.
LSB's common shares are traded on the Over-the-Counter
Bulletin Board under the symbol of LSBD. Certain brokers have
filed with the NASD to become Market Makers in LSB's stock. Those
Market Makers are listed on LSB's website at www.lsb-okc.com.
SOURCE LSB Industries, Inc.
-0- 08/03/99
/CONTACT: Tony M. Shelby, Chief Financial Officer of LSB
Industries, Inc., 405-235-4546; or Leslie A. Schupak, ext. 205, or
Joe Mansi, ext. 207, both of KCSA, 212-682-6300, for LSB
Industries, Inc./
/Web site: http://www.lsb-okc.com
(LSBD)
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