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) May 4, 2000
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LSB INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-7677 73-1015226
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405)235-4546
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Not applicable
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(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
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On May 4, 2000, the sale of substantially all of the assets of
LSB Industries, Inc.'s (the "Company") Automotive Products Business
to DriveLine Technologies, Inc., an Oklahoma corporation (the
"Buyer") and a wholly owned subsidiary of MC Automotive Acquisition
Corp., an Oklahoma corporation (the "MC"), was concluded. Upon the
closing of the sale, the Company did not receive any cash but
received two promissory notes (together, the "Notes") in the
approximate amount of $8.7 million, such Notes being secured by a
second lien on the assets of the Buyer. In addition, to further
secure the Notes (i) MC pledged all of the stock of the Buyer, and
(ii) the owner of MC pledged all of the outstanding capital stock
of MC, both such pledges being junior to those granted to the
Buyer's primary lender. The Notes, and any payments of principal
and interest thereon, are subordinated to the Buyer's primary
lender (which is the same lender that was the primary lender to the
Automotive Products Business at the time of the sale) pursuant to
the terms of a subordination agreement. Interest will accrue at
the rate published in the Wall Street Journal Prime + 1.0% but will
not be paid until and if the Buyer's availability under its
revolving loan agreement with its primary lender reaches a level of
$1.0 million and certain other conditions are met. The Company
will receive no principal payments under the Notes for at least the
first two years following the sale of the Automotive Products
Business, subject to the terms of the subordination agreement. In
addition, the Buyer assumed substantially all of the Automotive
Products Business' debts and obligations, which at March 31, 2000,
totaled approximately $24.3 million. As of March 31, 2000, the
Automotive Products Business owed its primary lender approximately
$14.0 million. Upon completion of the sale, the Company was
released from its liability to the primary lender which was assumed
by the Buyer, except the Company continues to guaranty $1.0 million
of the revolving credit facility of the Buyer, as it did for its
Automotive Products Business, under a $1.0 million letter of
credit. In addition, the Company remains a guarantor on certain
equipment notes having an unpaid principal balance of approximately
$4.5 million as of March 31, 2000, originally incurred in
connection with the financing of certain equipment by the
Automotive Products Business. There are no assurances that the
Company will be able to collect on the Notes issued to the Company
as consideration for the purchase. If the Buyer is not able to
become and remain profitable, the Company anticipates that the
Buyer will be unable to make any payments on the Notes. During
1999 and prior to consummation of the sale of substantially all the
assets of the Automotive Products Business, the Company had
classified its investment in the Automotive Products Business as a
discontinued operation, reserving approximately $7.9 million as of
March 31, 2000. The loss on disposal (recognized as of December 31,
1999 as $10.0 million) does not include the loss, if any, which
may result if the Company is required to perform on its guaranties
or the $1.0 million letter of credit described above. For the
three month period ended March 31, 2000 and 1999, the Automotive
Products Business had revenues of $7.0 and $10.1 million,
respectively and a net loss of $1.1 million for the three month
period ended March 31, 1999.
Item 7. Financial Statements and Exhibits.
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(a) Since the historical financial statements of the Company
contained within the Company's Annual Report on Form 10-
K/A for the period ended December 31, 1999, filed June 1,
2000, and its Quarterly Report for the quarterly period
ended March 31, 2000, filed June 7, 2000, have presented
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the Automotive Products Business as a discontinued
operation, the pro forma financial information is already
reflected in such financial statements, thus, no
additional pro forma financial information is included in
this Report on Form 8-K.
(c) Exhibits.
2.1 Asset Purchase and Sale Agreement, dated May 4,
2000 by L&S Automotive Products Co., L&S Bearing
Co., LSB Extrusion Co., Rotex Corporation and
DriveLine Technologies, Inc., which is incorporated
from Exhibit 2.1 to the Company's Amendment No. 2
to its Form 10-K/A for the year ended December 31,
1999, as filed on June 1, 2000. This agreement
includes certain exhibits and schedules that are
not included with this exhibit, and will be
provided upon request by the Commission.
99.1 Subordination Agreement, dated May 4, 2000, by and
among Congress Financial Corporation (Southwest), a
Texas corporation (Lender), LSB Industries Inc.
(Subordinated Creditor), DriveLine Technologies,
Inc., (formerly known as Tribonetics
Corporation),an Oklahoma corporation and L&S
Manufacturing Corp, is incorporated by reference
from Exhibit 10.56 to the Company's Amendment No. 2
to its Form 10-K/A for the year ended December 31,
1999, as filed on June 1, 2000.
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: June 16, 2000.
LSB INDUSTRIES, INC.
By: /s/ Tony M. Shelby
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Tony M. Shelby
Senior Vice President and
Chief Financial Officer
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