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
________________
CLIMACHEM, INC.
_____________________________________________________
(Exact name of registrant as specified in its charter)
Oklahoma 73-1528549
________________ ________________ _____________
(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)
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Item 2. Acquisition or Disposition of Assets.
____________________________________
On August 2, 1999, ClimaChem, 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
Company is a wholly owned subsidiary of LSB Industries, Inc.
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.
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(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 LSB
Industries, Inc.'s 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 #8162, 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., which is
attached as Exhibit 2.2 to LSB Industries, Inc.'s
Current Report on Form 8-K, dated August 2, 1999,
and is incorporated herein by reference.
99.1 Press release, dated August 3, 1999, which is
attached as Exhibit 2.3 to LSB Industries, Inc.'s
Current Report on Form 8-K, dated August 2, 1999,
and is incorporated herein by reference.
-2-
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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.
CLIMACHEM, INC.
By: /s/ Tony M. Shelby
__________________________________
Tony M. Shelby
Senior Vice President and
Chief Financial Officer
A-C\CLIMACHEM\8K\8K0899
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<PAGE>
<PAGE>
CLIMACHEM, 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
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<TABLE>
<CAPTION>
CLIMACHEM, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1999
(In thousands)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
<S> <C> <C> <C>
ASSETS
_______
CURRENT ASSETS
Cash and cash equivalents $ 289 $ 289
Trade accounts receivable, net 44,076 ($3,532) (5) 40,544
Inventories 38,550 (8,900) (1) 29,650
Supplies and prepaid items 7,982 (94) (5) 7,888
Income tax receivable 2,100 2,100
Current deferred income taxes 1,338 1,338
Due from LSB and affiliates, net 2,234 2,234
__________ __________ ________
Total current assets 96,569 (12,526) 84,043
Plant, property and equipment,
at cost 147,958 (8,254) 139,704
Less accumulated depreciation
and amortization 63,620 (3,564) 60,056
__________ __________ ________
84,338 (4,690) (1) 79,648
Notes receivable from LSB and
affiliates 13,443 13,443
Other assets, net 11,267 11,267
__________ __________ ________
$205,617 ($17,216) $188,401
========== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,865 ($1,213) (5) $14,652
Accrued liabilities 11,691 (2,176) (5) 9,515
Current portion of long-term debt 10,926 (6,626) (1) 4,300
__________ __________ ________
Total current liabilities 38,482 (10,015) 28,467
Long-term debt 134,626 (6,301)(1)(2) 128,325
Deferred income taxes 9,680 9,680
STOCKHOLDERS' EQUITY
Common stock, $.10 par value;
500,000 shares authorized,
10,000 shares issued 1 1
P-2
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Capital in excess of par value 12,652 12,652
Accumulated other comprehensive loss (1,337) 1,337 (3) 0
Retained earnings 11,513 (2,237)(3)(4) 9,276
__________ __________ ________
Total stockholders' equity 22,829 (900) 21,929
__________ __________ ________
$205,617 ($17,216) $188,401
========== ========== ========
</TABLE>
See accompanying notes.
P-3
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<TABLE>
<CAPTION>
CLIMACHEM, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Three Months ended March 31, 1999
(In Thousands)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
<S> <C> <C> <C>
REVENUES
Net sales $60,229 ($2,868) (6) $57,361
Other income (278) 102 (6) (176)
_________ ___________ _________
59,951 (2,766) 57,185
COSTS AND EXPENSES
Cost of sales 47,171 (3,026) (6) 44,145
Selling general and administrative 10,602 (585) (6) 10,017
Interest 3,279 (227) (6)(7) 3,052
__________ ___________ _________
61,052 (3,838) 57,214
__________ ___________ _________
Loss before provision for income
taxes (1,101) 1,072 (29)
Provision for income taxes 50 50
__________ ___________ _________
Net loss ($1,151) $1,072 ($79)
========== =========== =========
</TABLE>
See accompanying notes.
P-4
<PAGE>
<TABLE>
<CAPTION>
CLIMACHEM, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1998
(In Thousands)
Pro Forma
Historical Adjustments Pro Forma
__________ ___________ _________
<S> <C> <C> <C>
REVENUES
Net sales $255,730 ($14,184) (6) $241,546
Other income 1,468 (11) (6) 1,457
__________ ___________ _________
257,198 (14,195) 243,003
COSTS AND EXPENSES
Cost of sales 205,148 (14,426) (6) 190,722
Selling general and administrative 40,283 (2,189) (6) 38,094
Interest 13,944 (954) (6)(7) 12,990
__________ ___________ _________
259,375 (17,569) 241,806
__________ ___________ _________
Income (loss) before provision for
income taxes (2,177) 3,374 1,197
Provision for income taxes 392 392
__________ ___________ _________
Net income (loss) ($2,569) $3,374 $805
========== =========== =========
</TABLE>
See accompanying notes.
P-5
<PAGE>
CLIMACHEM, 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
