FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly period ended March 31, 1995
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OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The transition period from to
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Commission file number 1-7677
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LSB INDUSTRIES, INC.
----------------------------------------------------
Exact name of Registrant as specified in its charter
DELAWARE 73-1015226
- ------------------------------ ---------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
16 South Pennsylvania, Oklahoma City, Oklahoma 73107
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Address of principal executive offices (Zip Code)
(405) 235-4546
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Registrant's telephone number, including area code
None
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Former name, former address and former fiscal year, if
changed since last report.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
--- ---
The number of shares outstanding of the Registrant's voting Common Stock, as
of May 10, 1995 is 12,938,097 shares excluding 1,810,419 shares held as
treasury stock.
PART I
FINANCIAL INFORMATION
Company or group of companies for which report is filed: LSB Industries, Inc.
and all of its wholly-owned subsidiaries.
The accompanying condensed consolidated balance sheet of LSB Industries, Inc.
at March 31, 1995 and the condensed consolidated statements of income and cash
flows for the three month periods ended March 31, 1995 and 1994 have been
subjected to a review, in accordance with standards established by the
American Institute of Certified Public Accountants, by Ernst & Young LLP,
independent auditors, whose report with respect thereto appears elsewhere in
this Form 10-Q. The financial statements mentioned above are unaudited and
reflect all adjustments, consisting primarily of adjustments of a normal
recurring nature, which are, in the opinion of management, necessary for a
fair presentation of the interim periods. The results of operations for the
three months ended March 31, 1995 are not necessarily indicative of the
results to be expected for the full year. The condensed consolidated balance
sheet at December 31, 1994, was derived from audited financial statements as
of that date.
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Information at March 31, 1995 is unaudited)
(Dollars in thousands)
March 31, December 31,
ASSETS 1995 1994
_________________________________________ __________ __________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,534 $ 2,610
Trade accounts receivable, net of allowance 48,459 42,720
Inventories:
Finished goods 38,873 33,926
Work in process 12,185 9,796
Raw materials 17,917 15,611
__________ __________
Total inventory 68,975 59,333
Supplies and prepaid items 7,077 6,386
__________ __________
Total current assets 129,045 111,049
Property, plant and equipment, net 76,614 73,684
Investments and other assets:
Loan receivable, secured by real estate 16,702 17,243
Other assets, net of allowance 20,072 19,305
__________ __________
$ 242,433 $ 221,281
========== ==========
</TABLE>
(Continued on following page)
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
(Information at March 31, 1995 is unaudited)
(Dollars in thousands)
LIABILITIES, PREFERRED AND COMMON STOCKS March 31, December 31,
AND OTHER STOCKHOLDERS' EQUITY 1995 1994
________________________________________ __________ __________
<S> <C> <C>
Current liabilities:
Drafts payable $ 371 $ 1,291
Accounts payable 33,455 29,496
Accrued liabilities 8,861 8,062
Current portion of long-term debt 11,809 9,716
__________ __________
Total current liabilities 54,496 48,565
Long-term debt 96,647 81,965
Contingencies (Note 7)
Redeemable, noncumulative convertible
preferred stock, $100 par value; 1,588 shares
issued and outstanding (1,597 in 1994) 151 152
Non-redeemable preferred stock, common stock and
other stockholders' equity (Note 6):
Series B 12% cumulative, convertible
preferred stock, $100 par value;
20,000 shares issued and outstanding 2,000 2,000
Series 2 $3.25 convertible, exchangeable
Class C preferred stock, $50 stated
value; 920,000 shares issued and outstanding 46,000 46,000
Common stock, $.10 par value; 75,000,000
shares authorized, 14,620,516 shares
issued (14,620,156 in 1994) 1,462 1,462
Capital in excess of par value 37,370 37,369
Retained Earnings 13,515 12,883
__________ __________
100,347 99,714
Less treasury stock, at cost:
Series 2 Preferred, 5,000 shares 200 200
Common stock, 1,574,604 shares
(1,559,590 in 1994) 9,008 8,915
__________ __________
Total non-redeemable preferred stock, common
stock and other stockholders' equity 91,139 90,599
__________ __________
$ 242,433 $ 221,281
========== ==========
</TABLE>
See accompanying notes
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31, 1995 and 1994
(Dollars in thousands, except per share amounts)
1995 1994
__________ __________
<S> <C> <C>
Revenues:
Net sales $ 65,269 $ 63,851
Other income 662 501
__________ __________
65,931 64,352
Costs and expenses:
Cost of sales 49,127 49,493
Selling, general and administrative 12,869 11,168
Interest 2,388 1,681
__________ __________
64,384 62,342
__________ __________
Income from continuing operations
before provision for income taxes 1,547 2,010
Provision for income taxes 99 152
__________ __________
Income from continuing operations 1,448 1,858
Income from discontinued operations, net
of income taxes (Note 2) - 346
__________ __________
Net income $ 1,448 $ 2,204
========== ==========
Net income applicable to common stock (Note 4) $ 629 $ 1,380
========== ==========
Average common shares outstanding (Note 4):
Primary 13,552,256 14,413,581
Fully diluted 13,573,199 15,084,247
Earnings per common share (Note 4):
Primary:
Income from:
Continuing operations $ .05 $ .08
Discontinued operations - .02
__________ __________
Net income $ .05 $ .10
========== ==========
Fully diluted:
Income from:
Continuing operations $ .05 $ .08
Discontinued operations - .02
__________ __________
Net income $ .05 $ .10
========== ==========
</TABLE>
See accompanying notes
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31, 1995 and 1994
(Dollars in thousands)
1995 1994
__________ __________
<S> <C> <C>
Cash flows from continuing operations:
Income from continuing operations $ 1,448 $ 1,858
Adjustments to reconcile income from
continuing operations to cash flows
provided (used) by continuing operations:
Depreciation, depletion and amortization:
Property, plant and equipment 1,667 1,671
Other 256 237
Provision for bad debts 180 367
Gain on sale of assets (105) (161)
Cash provided (used) by changes in assets
and liabilities:
Trade accounts receivable (7,061) (8,358)
Inventories (8,625) (717)
Supplies and prepaid items (669) 2,831
Accounts payable 4,046 12,687
Accrued liabilities 878 (897)
__________ __________
Net cash provided (used) by continuing operations (7,985) 9,518
Cash flows from investing activities of
continuing operations:
Capital expenditures (4,563) (3,975)
Principal payments on notes receivable 542 -
Proceeds from sales of equipment and
real estate properties 456 780
Increase in other assets (1,472) (577)
__________ __________
Net cash used by investing activities of
continuing operations (5,037) (3,772)
</TABLE>
(Continued on following page)
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
(Unaudited)
Three Months Ended March 31, 1995 and 1994
(Dollars in thousands)
1995 1994
__________ __________
<S> <C> <C>
Cash flows from financing activities of
continuing operations:
Payments on long-term and other debt $ (666) $ (688)
Long-term and other borrowings 3,662 -
Net change in revolving debt facilities 13,779 23,910
Net change in drafts payable (920) (628)
Dividends paid on preferred stocks (Note 6) (816) (824)
Purchases of treasury stock (Note 6) (93) (343)
Net proceeds from issuance of
common stock (Note 6) - 46
Net decrease in receivables sold to
discontinued operations - (20,087)
__________ __________
Net cash provided by financing
activities of continuing operations 14,946 1,386
__________ __________
Net increase in cash and cash equivalents
from continuing operations 1,924 7,132
Net decrease in cash and cash equivalents
from discontinued operations - (2,222)
__________ __________
Net increase in cash and cash equivalents from
all activities 1,924 4,910
Cash and cash equivalents at beginning of period 2,610 2,781
__________ __________
Cash and cash equivalents at end of period $ 4,534 $ 7,691
========== ==========
</TABLE>
See accompanying notes
Note 1:
- ------
The accompanying financial statements include the accounts of LSB
Industries, Inc. (the "Company") and its subsidiaries. The Company's
financial services subsidiary, Equity Bank for Savings, F.A. ("Equity Bank")
was sold on May 25, 1994. The condensed consolidated statement of income for
the three months ended March 31, 1994 presents the operation of Equity Bank as
income from discontinued operations. The condensed consolidated statement of
cash flows for the three months ended March 31, 1994 has been restated for
changes in balance sheet classification adopted at December 31, 1994, as a
result of reclassification due to discontinued operations of the Company's
Financial Services Business.
Note 2:
- ------
On May 25, 1994, pursuant to a Stock Purchase Agreement, dated as of
February 9, 1994, (the "Acquisition Agreement"), the Company sold its wholly-
owned subsidiary, Equity Bank, which constituted the Financial Services
Business of the Company, to Fourth Financial Corporation (the "Purchaser") for
approximately $92 million. The Purchaser acquired all of the outstanding
shares of capital stock of Equity Bank.
Under the Acquisition Agreement and using the proceeds from sale of Equity
Bank, the Company acquired from Equity Bank, prior to closing, certain
subsidiaries of Equity Bank ("Retained Corporations") that own the real and
personal property and other assets contributed by the Company to Equity Bank
at the time of the acquisition of the predecessor of Equity Bank by the
Company for Equity Bank s carrying value of the assets contributed of
approximately $67.4 million, which approximated fair value. The carrying
value of the assets in the consolidated financial statements of the Company
continues to be historical cost. At the time of closing of the sale of Equity
Bank, the Company also acquired: (A) the loan and mortgage on and an option
to purchase Equity Tower located in Oklahoma City, Oklahoma ("Equity Tower
Loan"), for an amount equal to Equity Bank's carrying value of approximately
$13.9 million; (B) other real estate owned by Equity Bank that was acquired by
Equity Bank through foreclosure for an amount equal to Equity Bank s carrying
value of approximately $3.6 million (the Equity Tower Loan and other real
estate owned are collectively called the "Retained Assets"); and (C) certain
other loans for $3.1 million previously owned by Equity Bank. In addition,
the Company acquired the outstanding accounts receivable sold to Equity Bank
by the Company and its subsidiaries under various purchase agreements, dated
March 8, 1988 (the "Receivables") for $6.9 million, which approximated fair
value.
Note 3:
- ------
At March 31, 1995, the Company had net operating loss ("NOL") carryforwards
for tax purposes of approximately $42 million. Such amounts expire beginning
in 1999. The Company also has investment tax credit carryforwards of
approximately $630,000, which expire beginning in 1995.
The Company's provision for income taxes for the three months ended March 31,
1995 of $.1 million is for current state income taxes and federal alternative
minimum tax.
Note 4:
- ------
Primary earnings per common share are based upon the weighted average number
of common shares and dilutive common equivalent shares outstanding during each
period, after giving appropriate effect to preferred stock dividends.
Fully diluted earnings per share are based on the weighted average number of
common shares and dilutive common equivalent shares outstanding and the
assumed conversion of dilutive convertible securities outstanding after
appropriate adjustment for interest and related income tax effects on
convertible notes payable.
Net income applicable to common stock is computed by adjusting net income by
the amount of preferred stock dividends, including undeclared or unpaid
dividends, if cumulative.
Note 5:
- ------
In 1992, a subsidiary of the Company signed an agreement to supply a foreign
customer with equipment, technology and technical assistance to manufacture
certain types of automotive products. Payments scheduled under the contract
totaled $44 million, $17 million of which has been billed with $13.9 million
collected by the Company as of March 31, 1995. In addition, the subsidiary
agreed to use its best efforts to purchase approximately $6 million of bearing
products each year over the next five (5) years.
In May 1995, the subsidiary negotiated an amendment to the Agreement with the
foreign customer and an agreement with a syndication of foreign lenders
whereby the lenders acquired, without recourse to the Company or such
subsidiary, approximately $24 million of the unpaid contract amount billable
by the Company. Under the amendment with the foreign customer and the
agreement with the foreign lenders, the Company received approximately $5
million, net of fees, and a commitment from the foreign customer to provide
approximately $21 million of bearing products. The Company is to receive such
bearing products, without charge when and if the foreign customer repays the
debt of the foreign customer discussed above which the foreign lenders
acquired from the subsidiary. The commitment of the foreign customer to
provide the Company $21 million in bearing products, at no additional cost, is
to be further increased to include interest at 7 1/2% per annum until such
commitment has been fulfilled by the delivery of bearing products to the
Company, which delivery is not expected to begin prior to the year 2000. In
connection with the amendment with the foreign customer, the Company has
modified its purchase commitment from a best efforts arrangement to a firm
commitment to purchase approximately $6 million of bearing products over each
of the next five years, at predetermined prices, not in excess of market
prices, subject to the customer s ability to deliver product to the Company
meeting defined quality standards.
Revenues, costs and profits related to the contract are being recognized in
two separate phases. The first phase involves the purchase, modification,
development and delivery of the machinery, tooling, designs, and other
technical information and services. Sales recognized during this phase have
been limited to cash receipts and approximately $3.1 million originally
expected to have been received in 1993 through 1995 which $3.1 million is
included in other assets in the accompanying condensed consolidated balance
sheet at March 31, 1995.
Contract revenues related to bearing products to be received under the $21
million delivery commitment discussed above, will be deferred until such
products are received.
Note 6:
- ------
The table below provides detail of activity in the Stockholders' Equity
accounts for the three months ended March 31, 1995:
<TABLE>
<CAPTION>
Common Stock Non- Capital Treasury
______________ redeemable in excess Treasury Stock
Par Preferred of par Retained Stock- Prefer-
Shares Value Stock Value Earnings Common red Total
______ ______ _________ ________ ________ _______ _______ _______
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 14,620 $1,462 $48,000 $37,369 $12,883 $(8,915) $(200) $90,599
Net Income 1,448 1,448
Conversion of 9 shares of
redeemable preferred stock
to common stock 1 1 1
Dividends declared:
Series B 12% preferred
stock ($3.00 per share) (60) (60)
Redeemable preferred
stock ($10.00 per share) (16) (16)
Series 2 preferred
stock ($.81 per share) (743) (743)
Dividend received on Common
treasury stock 3 3
Purchase of treasury stock (93) (93)
______ ______ _________ ________ ________ _______ _______ _______
(1)
Balance at March 31, 1994 14,621 $1,462 $48,000 $37,370 $13,515 $(9,008) $(200) $91,139
====== ====== ========= ======== ======== ======= ====== =======
</TABLE>
(1)
Includes 1,574,604 shares of the Company's Common Stock held in
treasury. Excluding the 1,574,604 shares held in treasury, the outstanding
shares of the Company's Common Stock at March 31, 1995 were 13,045,912.
Note 7:
- ------
The Company s Chemical Business is in the process of completing the
installation of an additional nitric acid plant in Arkansas. The Company
anticipates the total expenditures to complete the installation will be
approximately $17.8 million, of which $15.4 million had been incurred at March
31, 1995.
Following is a summary of certain legal actions involving the Company:
A. In 1987, the U.S. Government notified one of the Company s subsidiaries,
along with numerous other companies, of potential responsibility for
clean-up of a waste disposal site in Oklahoma. No legal action has yet
been filed. The amount of the Company's cost associated with the clean-
up of the site is unknown due to continuing changes in (i) the estimated
total cost of clean-up of the site and (ii) the percentage of the total
waste which was alleged to have been contributed to the site by the
Company, accordingly, no provision for any liability for the clean-up of
this site which may result has been made in the accompanying financial
statements. The subsidiary's insurance carriers have been notified of
this matter; however, the amount of possible coverage, if any, is not
yet determinable.
B. As a result of a preliminary environmental assessment report prepared by
the State of Arkansas, the primary manufacturing facility of the
Company's Chemical Business has been placed in the Environmental
Protection Agency's ("EPA") tracking system of sites which are known or
suspected to be a site of a release of hazardous waste (the "System").
Inclusion in the System does not represent a determination of liability
or a finding that any response action is necessary. As a result of
being placed in the System, the State of Arkansas performed a
preliminary assessment and advised the Company that the site has had
certain releases of contaminants. On July 18, 1994, the Company
received a report from the State of Arkansas which contained findings of
alleged violations of certain environmental laws and requested the
Company to conduct further investigations to better determine the
compliance status of the Company and releases of contaminants at the
site. On May 2, 1995, the Company signed a Consent Administrative
Agreement ("Agreement") with the State of Arkansas. The Agreement
provides for the Company to remediate and close a certain landfill,
monitor groundwater for certain contaminants and depending on the
results of the monitoring program to submit a remediation plan, upgrade
certain equipment to reduce wastewater effluent, and pay a civil penalty
of $25,000. While the Company is at this time unable to determine the
ultimate cost of compliance with the Agreement, the Company has
determined the subsidiary s cost to be at least $450,000; therefore, the
Company included a provision for environmental costs of $450,000 in the
1994 results of operations. Based on information presently available,
the Company does not believe that compliance with the Agreement, or the
facility being placed in the System, should have a material adverse
effect on the Company or the Company's financial condition.
C. A subsidiary of the Company was named in April 1989 as a third party
defendant in a lawsuit alleging defects in fan coil units installed in a
commercial building. The amount of damages sought by the owner against
the general contractor and the subsidiary's customer are substantial.
The subsidiary s customer alleges that to the extent defects exist in
the fan coil units, it is entitled to recovery from the subsidiary. The
Company s subsidiary generally denies their customer's allegations and
that any failures in the fan coil units were a result of improper design
by the customer, improper installation, or other causes beyond the
subsidiary's control. The subsidiary has in turn filed claims against
the suppliers of certain materials used to manufacture the fan coil
units to the extent any failures in the fan coil units were caused by
such materials. Discovery in these proceedings and settlement
discussions are continuing. The Company does not believe resolution of
the matter will have a material adverse effect on the Company or the
Company's financial condition.
The Company, including its subsidiaries, is a party to various other claims,
legal actions, and complaints arising in the ordinary course of business. In
the opinion of management after consultation with counsel, all claims, legal
actions (including those described above) and complaints are adequately
covered by insurance, or if not so covered, are without merit or are of such
kind, or involve such amounts that unfavorable disposition would not have a
material effect on the financial position or results of operations of the
Company.
In 1994, the Company guaranteed approximately $2 million of debt of a start-up
aviation company in exchange for a 20% ownership interest, to which no value
has been assigned as of March 31, 1995. This debt requires interest only
payments until September 1996 at which time the outstanding principal and
interest are due in full.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations should be read in conjunction with a
review of the Company's March 31, 1995 Condensed Consolidated Financial
Statements.
OVERVIEW
The Company is a diversified holding company which is engaged, through
its subsidiaries, in the Chemical Business, the Environmental Control
Business, the Automotive Products Business and the Industrial Products
Business.
Information about the Company's continuing operations in different
industry segments for the three months ended March 31, 1995 and 1994 is
detailed below.
<TABLE>
<CAPTION>
Three Months Ended March 31,
1995 1994
__________ __________
(In thousands)
(Unaudited)
<S> <C> <C>
Sales:
Chemical $ 31,939 $ 30,952
Environmental Control 21,622 20,252
Automotive Products 7,879 8,564
Industrial Products 3,829 4,083
__________ __________
$ 65,269 $ 63,851
========== ==========
Gross profit:
Chemical $ 6,246 $ 6,088
Environmental Control 6,685 5,387
Automotive Products 2,087 2,012
Industrial Products 1,124 871
__________ __________
$ 16,142 $ 14,358
========== ==========
Operating profit (loss):
Chemical $ 2,927 $ 2,889
Environmental Control 2,976 2,093
Automotive Products 48 (115)
Industrial Products (350) (217)
__________ __________
5,601 4,650
General corporate expenses (1,666) (959)
Interest expense (2,388) (1,681)
__________ __________
Income from continuing operations before
provision for income taxes $ 1,547 $ 2,010
========== ==========
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
Three months ended March 31, 1995 vs. Three months ended March 31, 1994.
- -----------------------------------------------------------------------
Revenues
--------
Total revenues for the three months ended March 31, 1995 and 1994 were
$65.9 million and $64.4 million, respectively (an increase of $1.5 million).
Sales increased $1.4 million.
Net Sales
---------
Consolidated net sales included in total revenues for the three months
ended March 31, 1995 were $65.3 million, compared to $63.9 million for the
first three months of 1994, an increase of $1.4 million. This increase in
sales resulted principally from: (i) increased sales in the Chemical Business
of $1 million, primarily due to the higher price of ammonia being partially
passed through to customers in the form of price increases, (ii) increased
sales in the Environmental Control Business of $1.4 primarily due to increased
heat pump sales to a customer which is retrofitting certain of the air
conditioning and heating systems on a US military base, offset by decreased
fan coil sales resulting from filling excess backlog orders in the first
quarter of 1994 which had been created by the effects of a strike in 1992,
(iii) decreased sales in the Automotive Products Business of $.7 million due
to a reduced customer base, and (iv) decreased sales in the Industrial
Products Business of $.3 million, primarily due to decreased sales to a
foreign customer offset by increases in sales of machine tools.
Gross Profit
------------
Gross profit was 24.7% for the first three months of 1995, compared to
22.5% for the first three months of 1994. The improvement in the gross profit
percentage was due primarily to (i) higher prices and improved absorption of
costs due to increased production volumes in the Environmental Control
Business, (ii) higher prices in the Industrial Products Business, and (iii)
discontinued sales to some low margin/high volume customers in the Automotive
Products Business.
Selling, General and Administrative Expense
-------------------------------------------
Selling, general and administrative ("SG&A") expenses as a percent of
net sales were 19.7% in the three months ended March 31, 1995 and 17.5% in the
first three months of 1994. This increase in SG&A as a percent of sales was
primarily due to: (i) decreased sales to a foreign customer in the Industrial
Products Business with a less than equivalent corresponding reduction in SG&A
costs, (ii) costs incurred on abandoned acquisitions and certain long-term
projects, (iii) higher sales commissions expense in the Environmental Control
Business and (iv) increased insurance costs in 1995 versus 1994. These
factors were offset in part by sales increases due to higher ammonia prices in
the Chemical Business with no corresponding increase in SG&A costs.
Interest Expense
----------------
Interest expense for the Company was approximately $2.4 million during
the three months ended March 31, 1995 compared to approximately $1.7 million
during the three months ended March 31, 1994. The increase primarily resulted
from higher interest rates and higher average balances of borrowed funds.
Income Before Taxes
-------------------
The Company had income from continuing operations before income taxes of
$1.5 million in the first quarter of 1995 compared to $2 million in the three
months ended March 31, 1994. The decreased profitability of $.5 million was
primarily due to higher SG&A costs and interest expense offset by improved
gross profit as previously discussed.
Provision For Income Taxes
--------------------------
As a result of the Company's net operating loss carryforward for income
tax purposes as discussed elsewhere herein and in Note 3 of Notes to Condensed
Consolidated Financial Statements, the Company's provisions for income taxes
for the three months ended March 31, 1995 and the three months ended March 31,
1994 are for current state income taxes and federal alternative minimum taxes.
Income From Discontinued Operations
-----------------------------------
Income from discontinued operations reflects the results of operations
of the Financial Services Business sold in May 1994. Income from discontinued
operations, net of expenses, was $.3 million in the first quarter of 1994.
Liquidity and Capital Resources
- -------------------------------
The Company is a diversified holding company and its liquidity is
dependent, in large part, on the operations of its subsidiaries and credit
agreements with lenders.
Sources of Funds
----------------
In December 1994, the Company and certain of its subsidiaries finalized
a new working capital line of credit. This line of credit consolidated
substantially all of the Company's working capital lines of credit into one
comprehensive funding source. This working capital line of credit is
evidenced by six separate loan agreements ("Agreements") with an unrelated
lender ("Lender") collateralized by receivables, inventory and proprietary
rights of the Company and the subsidiaries that are parties to the Agreements.
The Agreements provide for revolving credit facilities ("Revolver") for total
direct borrowings up to $65 million, including the issuance of letters of
credit. The Revolver provides for advances at varying percentages of eligible
inventory and trade receivables and bears interest at the Lender's prime
lending rate plus one-half percent (.5%). The rate in effect at March 31,
1995 was 9.5%. The initial term of the Agreements is through December 31,
1997, and is renewable thereafter for successive thirteen month terms. The
Lender or the Company may terminate the Agreements at the end of the initial
term or at the end of any renewal term without penalty, except that the
Company may terminate the Agreements after the second anniversary of the
Agreements without penalty. At March 31, 1995, the available borrowings,
based on eligible collateral, approximated $5.2 million. Borrowings under the
Revolver outstanding at March 31, 1995, were $57.8 million. The Agreements
require the Company to maintain certain financial ratios and contain other
financial covenants, including tangible net worth requirements and capital
expenditure limitations. The annual interest on the outstanding debt under
the Revolver at March 31, 1995 at the rate then in effect would be
approximately $5.5 million.
In addition to the Agreements discussed above, the Company has the
following term loans in place:
(1) The Company's wholly-owned subsidiaries, El Dorado Chemical Company and
Slurry Explosive Corporation ("Chemical"), which substantially comprise
the Company's Chemical Business, are parties to a loan agreement ("Loan
Agreement") with two institutional lenders ("Lenders"). This Loan
Agreement, as amended, provides for a seven year term loan of $28.5
million ("Term Loan"). The balance of the Term Loan at March 31, 1995
was $15.8 million. Annual principal payments on the Term Loan are $5.1
million in 1995, $5.2 million in 1996 and a final payment of $5.5
million on March 31, 1997. The Loan Agreement also provides for a
revolving credit facility which provides for a maximum available credit
line of approximately $5.6 million at March 31, 1995, all of which was
borrowed at March 31, 1995. The availability under this revolving
credit facility decreases by $1.8 million annually in 1995 and 1996 with
the remainder due in March 1997. Annual interest at the agreed to
interest rates, if calculated on the aggregate $21.4 million outstanding
balance at March 31, 1995 would be approximately $2.6 million. The Term
Loan is secured by substantially all of the assets not otherwise pledged
under the credit facility previously discussed and capital stock of
Chemical. The Loan Agreement requires Chemical to maintain certain
financial ratios and contains other financial covenants, including
tangible net worth requirements and capital expenditures limitations.
As of the date of this report, Chemical is in compliance with all
financial covenants. Under the terms of the Loan Agreement, Chemical
cannot transfer funds to the Company in the form of cash dividends or
other advances, except for (i) the amount of taxes that Chemical would
be required to pay if it was not consolidated with the Company; (ii) an
amount equal to fifty percent (50%) of Chemical's cumulative adjusted
net income as long as Chemical's Total Capitalization Ratio, as defined,
is .65:1 or below.
(2) The Company's wholly-owned subsidiary, DSN Corporation ("DSN") is a
party to several loan agreements with a financing company (the
"Financing Company") for two (2) projects which DSN will complete during
1995. These loan agreements are for a construction loan (the
"Construction Loan") which provides for $16.5 million to be used to
construct, equip, reerect, and refurbish a nitric acid plant (the "DSN
Plant") being placed into service by the Chemical Business at it's El
Dorado, Arkansas facility, a loan for approximately $1.2 million to
purchase additional railcars to support the DSN Plant (the "Railcar
Loan"), and a loan for approximately $1.1 million to finance the
construction of a mixed acid plant (the "Mixed Acid Plant") in North
Carolina (the "Mixed Acid Loan"). At March 31, 1995, DSN had
outstanding borrowings of $12.8 million under the Construction Loan and
no outstanding borrowings under the Railcar Loan or the Mixed Acid Loan.
The Construction Loan will be repaid upon the completion of construction
and acceptance of the DSN Plant as capable of production, with proceeds
of a permanent loan ("DSN Permanent Loan"). Completion of construction,
funding of the remaining $3.7 million and conversion to the DSN
Permanent Loan are expected to occur during late May or early June 1995.
The DSN Permanent Loan will have a repayment schedule of eighty-four
(84) equal consecutive monthly installments of principal and interest,
payable in arrears. The interest rate per annum will fix for the entire
loan term at the rate per annum for a five year United States Treasury
Security ("Treasury Rate") as determined at the close of business on the
third business day prior to the making of the DSN Permanent Loan plus
2.70%. As of May 1, 1995, the Treasury Rate was 6.87%, which would
result in an interest rate of 9.57%. The Railcar Loan and the Mixed
Acid Loan will be repaid under the same terms as the Construction Loan.
Upon the earlier of completion of construction of the Mixed Acid Plant
or August 1, 1995, the Mixed Acid Loan will have a repayment schedule of
eighty-four (84) equal consecutive monthly installments of principal and
interest, payable in arrears. The rate of interest on the Mixed Acid
Loan will be the Treasury Rate, as defined above, plus 2.70%.
(3) A subsidiary of the Company ("Borrower") entered into a loan agreement
("Agreement"), effective as of May 4, 1995, with Bank IV Oklahoma, N.A.
("Bank"). Pursuant to the Agreement, the Bank loaned $9 million to the
Borrower, evidenced by a Promissory Note ("Note"). The Note bears
interest per annum at a rate equal to one percent (1%) above the prime
rate in effect from day to day as published in the Wall Street Journal.
The outstanding principal balance of the Note is payable in sixty (60)
monthly payments of principal and interest commencing on May 31, 1995.
Payment of the Note is secured by a first and priority lien and security
interest in and to the Borrower s right, title, and interest in the loan
documents relating to the real property and office building known as the
Bank IV Tower located in Oklahoma City, Oklahoma (the "Tower"), the
Management Agreement relating to the Tower, and the Option to Purchase
Agreement covering the real property on which the Tower is located.
Foreign Subsidiary Financing
----------------------------
On March 7, 1995 the Company guaranteed a revolving credit facility (the
"Facility") between its wholly-owned Australian subsidiary Total Energy
Systems, Ltd. ("TES") and Bank of New Zealand. The Facility is intended to
assist TES in meeting its working capital and trade finance requirements. The
Facility allows for borrowings up to an aggregate of approximately $3.7
million based on specific percentages of qualified eligible assets. Such debt
is secured by substantially all the assets of TES, plus an unlimited guarantee
from the Company. The interest rate on this debt is the Bank of New Zealand
Corporate Base Lending Rate plus .5% (11.5% at May 1, 1995). The Facility is
subject to renewal at the discretion of Bank of New Zealand based upon annual
review. The next annual review is due on March 31, 1996.
Cash Flows
----------
Net cash used by operating activities of continuing operations in the
first three months of 1995, after adjustment for net non-cash expenses of $2
million, was $8 million. This cash usage included the following changes in
assets and liabilities: (i) increases in accounts receivable of $7.1 million,
(ii) inventory increases of $8.6 million, (iii) increases in supplies and
prepaid items of $.7 million, and (iv) increases in accounts payable and
accrued liabilities of $4.9 million. The increase in accounts receivable was
due primarily to increased sales by approximately $10 million over the fourth
quarter of 1994 in all businesses, including seasonal sales increases in the
Chemical Business. The increase in inventories was due primarily to higher
sales levels in all businesses, stocking up in the Chemical Business for the
spring fertilizer season and increases in the Automotive Products Business due
to purchases of new products in excess of the sales demand for those products.
The increase in supplies and prepaid items resulted primarily from increased
repair supplies in the Chemical Business. The increase in accounts payable
and accrued liabilities was due primarily to increased inventory purchases.
Investing activities during the first three months of 1995 included (i)
capital expenditures of $4.6 million, relating primarily to the construction
of a new nitric acid production facility in the Chemical Business, (ii)
principal payments received on certain loans receivable of $.5 million, (iii)
proceeds of $.5 million from the sale of assets, primarily real estate, and
(iv) an increase in other assets of $1.5 million due primarily to deferred
costs of certain long-term projects. Cash flows provided by financing
activities included net borrowings of $15.9 million, offset by dividends paid
of $.8 million and treasury stock purchases of $.1 million.
In summary, during the three months ended March 31, 1995, recurring cash
requirements for required debt service payments, dividends on Company stocks,
and purchases of treasury stock approximated $1.5 million. In addition, the
Company spent approximately $4.6 million for capital improvements, primarily
in connection with the DSN Plant being constructed by the Chemical Business.
The expenditures noted above, plus the cash used by operations of $8 million,
resulted in a borrowing requirement of approximately $14.1 million against the
Company s revolving credit facilities.
Future cash requirements include working capital requirements for
anticipated sales increases in all businesses, and funding for future capital
expenditures, primarily in the Chemical Business and the Environmental Control
Business. Funding for the higher accounts receivable resulting from
anticipated sales increases will be provided by the revolving credit
facilities previously discussed. Inventory requirements for the higher
anticipated sales activity should be met by scheduled reductions in the
inventories of the Environmental Control and Automotive Products Businesses,
both of which have increased their inventories beyond required levels. In the
first quarter of 1995, the Chemical Business incurred additional costs of $2.9
million to continue installation of the DSN Plant. The Company anticipates
incurring $2.4 million in the second quarter to complete this project, which
is expected to begin full production by June 1995. As previously noted, the
Company expects to borrow an additional $3.7 million during the second quarter
related to the DSN Plant. During the first quarter of 1995, the Chemical
Business spent $.4 million in connection with the Mixed Acid Plant. An
additional $1.1 million is expected to be incurred on the Mixed Acid Plant in
1995. The Company also has planned capital expenditures for the Environmental
Control Business to acquire certain machinery and equipment for approximately
$3 million in 1995.
Management believes that cash flows from operations, the Company's
revolving credit facilities, and other sources will be adequate to meet its
presently anticipated capital expenditure, working capital, debt service, and
dividend requirements. The Company currently has no material commitment for
capital expenditures, other than those related to the Chemical Business
completion of an additional concentrated nitric acid plant and a mixed acid
plant as discussed above.
In May 1995, the Company purchased 226,926 shares of treasury stock for
an aggregate purchase price, including commissions, of approximately $1.2
million.
During the first quarter of 1995, the Company declared and paid the
following aggregate dividends: (1) $12.00 per share on each of the outstanding
shares of its Series B 12% Cumulative Convertible Preferred Stock, which is
the annual dividend on this series of preferred stock for 1995; (2) $.81 per
share on each outstanding share of its $3.25 Convertible Exchangeable Class C
Preferred Stock, Series 2; and (3) $10.00 per share on each outstanding share
of its Convertible Noncumulative Preferred Stock, which is the annual dividend
on this series of preferred stock for 1995. The Company expects to continue
the payment of an annual cash dividend on its common stock equal to $.06 per
share in the future in accordance with the policy adopted by the Board of
Directors and the cash dividends on the Company's outstanding series of
preferred stock pursuant to the terms of such preferred stock.
Foreign Sales Contract
----------------------
In 1992, a subsidiary of the Company signed an agreement to supply a
foreign customer with equipment, technology and technical assistance to
manufacture certain types of automotive products. Payments scheduled under
the contract totaled $44 million, $17 million of which has been billed with
$13.9 million collected by the Company as of March 31, 1995. In addition, the
subsidiary agreed to use its best efforts to purchase approximately $6
million of bearing products each year over the next five (5) years.
In May 1995, the subsidiary negotiated an amendment to the Agreement
with the foreign customer and an agreement with a syndication of foreign
lenders whereby the lenders acquired, without recourse to the Company or such
subsidiary, approximately $24 million of the unpaid contract amount billable
by the Company. Under the amendment with the foreign customer and the
agreement with the foreign lenders, the Company received approximately $5
million, net of fees, and a commitment from the foreign customer to provide
approximately $21 million of bearing products, without charge. The Company is
to receive such bearing products when and if the foreign customer repays the
debt of the foreign customer discussed above which the foreign lenders
acquired from the subsidiary. The commitment of the foreign customer to
provide the Company $21 million in bearing products, at no additional cost, is
to be further increased to include interest at 7 1/2% per annum until such
commitment has been fulfilled by the delivery of bearing products to the
Company, which delivery is not expected to begin prior to the year 2000. In
connection with the amendment with the foreign customer, the Company has
modified its purchase commitment from a best efforts arrangement to a firm
commitment to purchase approximately $6 million of bearing products over each
of the next five years, at predetermined prices, not in excess of market
prices, subject to the customer s ability to deliver product to the Company
meeting defined quality standards.
Revenues, costs and profits related to the contract are being recognized
in two separate phases. The first phase involves the purchase, modification,
development and delivery of the machinery, tooling, designs, and other
technical information and services. Sales recognized during this phase have
been limited to cash receipts and approximately $3.1 million originally
expected to have been received in 1993 through 1995 which $3.1 million is
included in other assets in the accompanying condensed consolidated balance
sheet at March 31, 1995.
Contract revenues related to bearing products to be received under the
$21 million delivery commitment discussed above, will be deferred until such
products are received.
Potential Business Acquisitions
-------------------------------
During 1994 the Company, through a subsidiary, loaned $2.1 million to a
French manufacturer of HVAC equipment. Under the loan agreement, the Company
has the option to exchange its rights under the loan for 80% of the borrower's
outstanding common stock. The Company obtained a security interest in the
stock of the French manufacturer to secure its $2.1 million loan. At this
time the decision has not been made to exercise such option and the $2.1
million loan net of a $650,000 reserve is carried on the books as a note
receivable in other assets.
The Company is presently negotiating a stock option agreement to acquire
eighty percent (80%) of the stock of a specialty sales organization to enhance
the marketing of the Company's air conditioning products. The Company
anticipates that the stock option will have a four (4) year term, and a total
option granting price of $1 million payable in installments during the first
year of the stock option, with an option fee of $.5 million payable upon
signing of the option and annual $.1 million payments for yearly extensions of
the stock option thereafter for up to three (3) years. Upon exercise of the
stock option by the Company, or upon the occurrence of certain performance
criteria which would give the grantors of the stock option the right to
accelerate the date on which the Company must elect whether to exercise, the
Company shall pay certain cash and issue promissory notes for the balance of
the exercise price of the subject shares. The total exercise price of the
subject shares is $4 million, less the amounts paid for the granting and any
extensions of the stock option. The Company expects to obtain the stock option
in 1995, however, there are no assurances that such stock option will be
obtained or that it will ultimately be exercised.
A subsidiary of the Company invested approximately $2.8 million during
May 1995 to purchase a fifty percent (50%) equity interest in an energy
conservation joint venture (the "Project"). The Project has been awarded a
contract to retrofit residential housing units at a US Army base. The
contract calls for installation of energy-efficient equipment (including air
conditioning and heating equipment), which will reduce utility consumption.
For the installation and management, the Project will receive an average of
seventy-seven percent (77%) of all energy and maintenance savings during the
twenty (20) year contract term. The Project estimates that the cost to
retrofit the residential housing units at the US Army base will be
approximately $17.9 million. The Project has received a loan from a lender to
finance up to approximately $14 million of the cost of the Project. The
Company is not guaranteeing any of the obligations of the Project.
The Company believes it will be able to finance the cash requirements
associated with the stock option agreement and the Project from existing cash
reserves and cashflow from Company operations in the event the Company elects
to consummate the stock option agreement discussed above.
Additionally, the Company is performing due diligence on some other
small companies that might result in acquisitions in 1995 or later. Any such
acquisitions consummated will require additional financing which the Company
believes can be obtained.
Availability of Company's Loss Carryovers
-----------------------------------------
The Company anticipates that its cash flow in future years will benefit to
some extent from its ability to use net operating loss ("NOL") carryovers from
prior periods to reduce the federal income tax payments which it would
otherwise be required to make with respect to income generated in such future
years. As of March 31, 1995, the Company had available NOL carryovers of
approximately $42 million, based on its federal income tax returns as filed
with the Internal Revenue Service for taxable years through 1993, and on the
Company's estimates for 1994. These NOL carryovers will expire beginning in
the year 1999.
The amount of these NOL carryovers has not been audited or approved by
the Internal Revenue Service and, accordingly, no assurance can be given that
such NOL carryovers will not be reduced as a result of audits in the future.
In addition, the ability of the Company to utilize these NOL carryovers in the
future will be subject to a variety of limitations applicable to corporate
taxpayers generally under both the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations. These include, in particular, limitations
imposed by Code Section 382 and the consolidated return regulations.
Contingencies
-------------
As discussed in Note 7 of Notes to Consolidated Financial Statements,
the Company has several contingencies that could impact its liquidity in the
event that the Company is unsuccessful in defending against the claimants.
Although management does not anticipate that these claims will result in
substantial adverse impacts on its liquidity, it is not possible to determine
the outcome.
ERNST & YOUNG LLP 1700 Liberty Tower
100 North Broadway
Oklahoma City, OK 73102
Phone: 405 278 6800
Fax: 405 278 6823
Independent Accountants' Review Report
Board of Directors
LSB Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of LSB
Industries, Inc. and subsidiaries as of March 31, 1995, and the related
condensed consolidated statements of income and cash flows for the three-month
periods ended March 31, 1995 and 1994. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which will
be performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of LSB Industries, Inc. as of
December 31, 1994, and the related consolidated statements of operations, non-
redeemable preferred stock, common stock and other stockholders' equity and
cash flows for the year then ended (not presented herein); and in our report
dated March 21, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1994, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
May 11, 1995 /s/ ERNST & YOUNG LLP
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
- ------ -----------------
There are no additional material legal proceedings pending against the
Company and/or its subsidiaries not previously reported by the Company in Item
3 of its Form 10-K for the fiscal period ended December 31, 1994, which Item 3
is incorporated by reference herein.
Item 2. Changes in Securities
- ------ ---------------------
Not applicable.
Item 3. Defaults upon Senior Securities
- ------ -------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
Not applicable.
Item 5. Other Information
- ------ -----------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(A) Exhibits.
--------
The Company has included the following exhibits in this report:
4.1 Loan Agreement dated as of May 4, 1995, by and among Prime
Financial Corporation, as borrower, LSB Industries, Inc, Summit
Machine Tool Manufacturing Corp., L&S Bearing Co., International
Environmental Corporation, El Dorado Chemical Company, Climate
Master, Inc., as the guarantors, and Bank IV Oklahoma, N.A. The
total amount of long-term debt represented by this loan agreement
does not exceed ten percent of the total assets of the registrant
and its subsidiaries on a consolidated basis; therefore, no copy
of such loan agreement has been filed herewith. Rather, the
Company agrees to furnish a copy of such loan agreement to the
Commission upon request.
4.2 First Amendment to Preferred Share Purchase Rights Plan,
dated as of May 24, 1994, between the Company and Liberty National
Bank and Trust Company of Oklahoma City.
10.1 First Amendment to Non-Qualified Stock Option Agreement,
dated March 2, 1994, and Second Amendment to Stock Option
Agreement, dated April 3, 1995, each between the Company and Jack
E. Golsen.
10.2 Pre-payment Agreement, dated April 20, 1995, and Supply
Agreement, dated May 8, 1995, each by and between L&S Automotive
Products Company, Inc. and ZVL-LSA A.S. and each pertaining to the
Technical License, Technology Assistance, Engineering and
Manufacturing Plant Sales Agreement, dated July 6, 1992, between
L&S Automotive Products Company, Inc. and ZVL-ZKL A.S., which the
Company hereby incorporates by reference from Exhibit 28.1 to the
Company s Form 10-Q for the quarter ended September, 30, 1992.
11.1 Statement Re: Computation of Per Share Earnings.
15.1 Letter Re: Unaudited Interim Financial Information.
27.1 Financial Data Schedule
(B) Reports of Form 8-K.
-------------------
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1995.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has caused the undersigned, duly-authorized, to sign this
report on its behalf on this 19th day of May, 1995.
LSB INDUSTRIES, INC.
By: /s/ Tony M. Shelby
---------------------------------
Tony M. Shelby,
Senior Vice President of Finance
(Principal Financial Officer)
By: /s/ Jim D. Jones
---------------------------------
Jim D. Jones
Vice President, Controller and
Treasurer (Principal Accounting Officer)
Exhibit 4.2
FIRST AMENDMENT TO PREFERRED SHARE PURCHASE RIGHTS PLAN
RIGHTS AGREEMENT BETWEEN LSB INDUSTRIES, INC. AND
THE LIBERTY NATIONAL BANK AND TRUST COMPANY
OF OKLAHOMA CITY, N.A. (RIGHTS AGENT)
DATED AS OF FEBRUARY 16, 1989
THIS FIRST AMENDMENT TO PREFERRED SHARE PURCHASE RIGHTS PLAN
("Amendment") is hereby entered into between LSB Industries, Inc. (the
"Company") and THE LIBERTY NATIONAL BANK AND TRUST COMPANY OF OKLAHOMA CITY
("Liberty") and shall be deemed effective as of the 24th day of May, 1994.
W I T N E S S E T H:
WHEREAS, the Company and Liberty, as Rights Agent, entered into a Rights
Agreement dated as of February 16, 1989 (the "Rights Agreement"); and
WHEREAS, Section 27 of the Rights Agreement permits the Company to amend
or supplement the Rights Agreement without the approval of the holders of the
Rights (as defined in the Rights Agreement) or the Rights Certificates (as
defined in the Rights Agreement) in order to cure any ambiguity, to correct or
supplement any provision of the Rights Agreement which may be defective or
inconsistent with any other provisions in the Rights Agreement, or to make any
other changes or amendments to any of the provisions contained in the Rights
Agreement or with respect to the Rights which the Company may deem necessary
or desirable, and with any such amendment or supplement to be evidenced by a
writing signed by the Company and Liberty as the Rights Agent; and
WHEREAS, neither as of the date hereof nor as of the date that the
Company sold, directly or indirectly, all of the outstanding shares of stock
of Equity Bank for Savings, F.A. ("Equity Bank") has (i) any person become an
Acquiring Person under the terms of the Rights Agreement or (ii) there
occurred a Distribution Date under the terms of the Rights Agreement; and
WHEREAS, the Company and Liberty desire to amend the Rights Agreement to
eliminate from the provisions of clause (c) of Section 13 of the Rights
Agreement the sale or transfer of the outstanding stock or the assets of
Equity Bank by the Company or the earning power attributable to Equity.
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. Clause (c) of Section 13 of the Rights Agreement is hereby amended
by adding after the end of the parenthetical and before the word "to" in the
12th line on page 38 of the Rights Agreement the following words:
". . . , except for the sale of Equity Bank for Savings, F.A. ("Equity
Bank") or any or all of the assets of Equity Bank or the earning power
attributable to Equity Bank,. . ."
2. This Amendment amends and modifies the Rights Agreement only to
the extent specifically amended or modified herein and no other terms,
conditions or provisions of the Rights Agreement are amended or modified by
this Amendment.
3. The Rights Agreement, as amended and modified by this Amendment,
remains in full force and effect pursuant to its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested on April 26, 1995, effective as of the 24th day of
May, 1994.
LSB INDUSTRIES, INC.
By:___________________________
Title: President
ATTEST:
______________________________
Secretary
[SEAL]
LIBERTY NATIONAL BANK & TRUST
COMPANY OF OKLAHOMA CITY, N.A.
("Rights Agent")
By:___________________________
Title:________________________
ATTEST:
______________________________
_____ Secretary
[SEAL]
sec\10q\tq395x42.wpe
Exhibit 10.1
EXTENSION OF NON-QUALIFIED STOCK OPTION AGREEMENT
BETWEEN LSB INDUSTRIES, INC AND JACK E. GOLSEN
__________________________________________________________
Pursuant to the authorization of the LSB Industries, Inc. Board of
Directors at a meeting held on February 10, 1994, the Non-Qualified Stock
Option Agreement originally made the 1st day of June 1989 between LSB
Industries, Inc. and Jack E. Golsen (the "Agreement") is hereby amended as set
forth below. This amendment shall be effective immediately upon execution by
the parties.
1. The last sentence of Section 1. of the Agreement is amended to read:
The Board of Directors of the Company originally adopted and
granted this option on June 1, 1989 and extends this option on February
10, 1994 for an additional five (5) year period beginning on June 1,
1994 and terminating on June 1, 1999.
2. Section 3. of the Agreement is amended to read:
Grant of Option and Option Price. Subject to the terms and conditions
hereof, the Company hereby grants to Optionee as of the close of
business on the first day of June, 1989 through June 1, 1994 and the
Company hereby extends the option effective June 1, 1994 through June 1,
1999, the right, privilege and option to purchase 165,00 shares of the
Company's common stock, par value $.10, at an option price of $2.6256
shares.
3. Section 6.(b) is hereby amended to read as follows:
(b) On June 1, 1999.
Except as amended hereby the terms and conditions of the Agreement,
attached hereto as Exhibit 1, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereunto have caused this Agreement to
be executed this 2nd day of March, 1994.
LSB Industries, Inc.
By: /s/ Tony M. Shelby
____________________________
Tony M. Shelby
Senior Vice President
Attest:
/s/ David Shear
_____________________________
Secretary
"OPTIONEE"
/s/ Jack E. Golsen
____________________________________
Jack E. Golsen
AMENDMENT TO NON-QUALIFIED STOCK OPTION AGREEMENT
BETWEEN LSB INDUSTRIES, INC. AND JACK E. GOLSEN
__________________________________________________________
Pursuant to the authorization of the LSB Industries, Inc. ("LSB") Board
of Directors, as set forth in a unanimous consent by the Board of Directors of
LSB dated April 3, 1995, the Non-Qualified Stock Option Agreement originally
made the 1st day of June, 1989 between LSB Industries, Inc. and Jack E. Golsen
(the "Agreement") is hereby amended as set forth below. This amendment shall
be effective immediately upon execution by the parties.
1. Section 4. of the Agreement is amended to read:
Time of Exercise of Option.
(a) If this Option Agreement has not been terminated pursuant to
Section 6 hereof, subject to the terms and conditions contained herein,
the option herein granted may be exercised by Optionee, in whole or in
part, in the following manner during a four (4) year period commencing
on June 1, 1995, unless waived by the Board of Directors of the Company
or a Committee thereof: For three (3) calendar years, commencing on
June 1, 1995, there shall be a limit on the number of shares covered by
this Option that may be exercised, in whole or in part, by the Optionee
in a calendar year to Thirty Three Thousand (33,000) shares or twenty
percent (20%) of the total number of option shares and for the fourth
(4th) calendar year, commencing on June 1, 1998, the number of shares
that may be exercised, in whole or in part, by the Optionee shall be
Sixty-Six Thousand (66,000) shares or forty percent (40%) of the total
number of option shares; provided however, that the right to exercise
the option shall be cumulative.
(b) Upon the death of Optionee or a change in control of the
Company, this Option shall become immediately exercisable in full,
notwithstanding the four (4) year vesting schedule provided herein. A
"change in control" shall be deemed to have occurred upon any of the
following events: (i) consummation of any of the following
transactions: any merger, recapitalization, or other business
combination of the Company pursuant to which the Company is the non-
surviving corporation, unless the majority of the holders of Common
Stock immediately prior to such transaction will own at least fifty
percent (50%) of the total voting power of the then outstanding
securities of the surviving corporation immediately after such
transaction; (ii) a transaction in which any person, corporation or
other entity (A) shall purchase any Common Stock pursuant to a tender
offer or exchange offer, without the prior consent of the Board of
Directors of (B) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) of securities of the Company representing fifty percent (50%)
or more of the total voting power of the then outstanding securities of
the Company; or (iii) if, during any period of two (2) consecutive
years, individuals who, at the beginning of such period, constituted the
entire Board of Directors and any new director whose election by the
Board of Directors, or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election by
the stockholders was previously so approved, cease for any reason to
constitute a majority thereof.
(c) The Board of Directors may, in its sole discretion,
accelerate the vesting of all or any part of this Option and/or waive
any limitations or restrictions, if any, for all or any part of this
Option.
Except as amended hereby the terms and conditions of the Agreement and
amendments thereto, attached hereto as Exhibit 1, shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties hereunto have caused this Agreement to
be executed this 7th day of April, 1995.
LSB Industries, Inc.
By: /s/ Tony M. Shelby
__________________________
Tony M. Shelby
Senior Vice President
Attest:
/s/ David Shear
_________________________
Secretary
"OPTIONEE"
/s/ Jack E. Golsen
________________________________
Jack E. Golsen
sec\10q\tq395xt1.wpe
Exhibit 10.2
PRE-PAYMENT AGREEMENT
THIS AGREEMENT, dated the 20th day of April, 1995, by and
between ZVL-LSA, a.s., a corporation organized and existing under the laws of
the Slovak Republic and having its principal place of business at Nadrazna,
SK-909 01 Skalica, Slovak Republic (hereinafter referred to as "Seller"); and
L&S Automotive Products Co., a corporation organized and existing under the
laws of the State of Oklahoma and having its principal place of business at 16
South Pennsylvania, Oklahoma City, OK 73101, U.S.A. (hereinafter referred to
as "Purchaser");
W I T N E S S E T H:
WHEREAS Purchaser desires to acquire tapered automotive roller
bearings, as more specifically defined herein, from Seller, and Seller desires
to deliver such products on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
ARTICLE I. Definitions.
1.1 As used herein, the term "Products" shall mean tapered
automotive roller bearings with the specifications as described in Exhibit A.
1.2 As used herein, the term "Minimum Volume" shall mean,
Products in the aggregate ordered by Purchaser for delivery and shipped from
Seller's plant during each semi-annual (or other) period identified on Exhibit
B and having a value as further set forth on such exhibit. The Purchaser also
agrees to comply with the provisions of the Technical License, Technology
Assistance, Engineering and Manufacturing Plant Sales Agreement dated July 6,
1992 between Seller and Purchaser (along with any amendments and addendums
thereto especially the provisions concerning the obligatory purchase of
products (the "L&S Agreement")).
ARTICLE II. Sale and Purchase of the Products
2.1 Subject to the terms and conditions set forth herein,
Purchaser agrees to acquire from Seller and Seller agrees to deliver to
Purchaser during the term of this Agreement Products in an amount equal to the
Minimum Volume for each semi-annual period identified on Exhibit B.
2.2 For each period identified on Exhibit B during the
term of this Agreement, Purchaser agrees to place orders or have orders placed
with Seller, for delivery from Seller of Products in an amount equal to or
greater than the Minimum Volume, as calculated in accordance with Section 1.2
hereof. Purchaser shall place such orders prior to the commencement of the
semi-annual period in which delivery is to be made by Seller.
ARTICLE III. Product Specifications
3.1 Except as otherwise agreed upon by the parties, it is
the intent of the parties hereto that the Products shall be manufactured in
the same manner and will contain the same specifications as equivalent
products which Seller previously supplied to Purchaser which meet the
acceptance standards under Article IV below.
ARTICLE IV. Acceptance Standards
4.1 Exhibit A contains quality specifications, mutually
agreed upon by the parties hereto, which shall govern acceptance of the
Products sold hereunder by Purchaser. Such specifications may be modified as
agreed to in writing by the parties.
ARTICLE V. Quality Control
5.1 Seller shall be solely responsible for assuring the
quality of the Products and their conformity to the standards set forth in
Exhibit A.
5.2 In the event Purchaser shall receive Products from
Seller that do not comply with this warranty, Purchaser shall immediately
notify Seller of such nonconformity and shall instruct Seller to suspend
future shipments of the Product. A third party independently qualified
inspection company (the "Company") must visit the Seller's production
facilities in Skalica within 10 days of Purchaser notifying Seller of receipt
of nonconforming Products. Seller agrees to provide such Company's employees
and/or agents full access to Seller's production facilities including access
to all materials used in connection with the Products, the energy sources
utilized in connection with the Products, the energy sources utilized in
connection with manufacture of the products and books and records relating to
the specifications used in the manufacture of the Products. Within 10 days of
the arrival of such Company's employees or agents at Seller's facility in
Skalica, the employees and/or agents of such Company shall submit a written
report to Seller and Purchaser stating whether Seller's Products conform to
the specifications set forth in Exhibit A. Upon receipt of a report
specifying that Seller's Products meet the specifications in Exhibit A, Seller
may resume and continue delivery of Products and Purchaser must accept such
immediate and future deliveries, and Purchaser agrees to absorb the Company's
costs for the investigation. If the report states that the Seller's Products
do not meet the specifications in Exhibit A, Seller agrees to absorb the
Company's costs for the investigation and Seller shall have two options: (i)
make sure changes that are necessary to insure that the Products meet the
specifications in Exhibit A within 20 days, and deliver conforming replacement
Products to Purchaser within 30 days of implementing such changes or (ii)
purchase products made by other parties which meet the specifications set
forth in Exhibit A and deliver such substitute products to Purchaser within
180 days. Seller shall have the right and obligation to arrange for the dis-
position of the affected product at its sole cost and expense. Seller and
Purchaser agree to abide by the decision of the Company and comply with the
provisions of this Section 5.2.
5.3 Notwithstanding the sole responsibility of Seller with
regard to quality control, Purchaser shall have access to Seller's production
facilities during normal business hours with reasonable notice to Seller, in
order to verify that the Products conform to the specifications set forth in
Exhibit A.
5.4 Seller shall maintain appropriate records of the
specifications used in the manufacture of all Products. These records shall
be made available to Purchaser upon reasonable request or during a visit by
Purchaser described in Section 5.3.
ARTICLE VI. Price
6.1 The total contract price for the Products shall be as
set forth in Exhibit B. The selling price for the Products at the time of
each purchase order shall be agreed to by the parties; provided, however, in
no event shall the selling prices be increased or decreased more than the
percentage (%) determined by the following from one year to the next:
1) the inflation or deflation rate in the U.S.A. as
measured by the Wholesale Price Index as
published by the U.S. Department of Commerce;
and provided, however, that
2) prices will not increase or decrease beyond the
increases or decreases announced and published
by major competitive bearing companies within
the U.S. such as Federal Mogul, SKF and Chicago
Rawhide during the period year and the Purchaser
agrees to provide, upon written request,
information as to the pricing by those
companies, to the extent available.
6.2(a)(1) If Purchaser stops issuing delivery orders because
of issues relating to quality of the Products under that Supply Agreement
dated as of even date herewith between Purchaser and Seller and, as a result
thereof, certain parties who are holders of drafts ("Drafts") and creditors to
Seller claim under a guarantee or aval issued by Vseobecna Uverova Banka, a.s.
("VUB"), dated as of even date herewith, then the Basic Amount under this
Agreement shall be automatically reduced by the amount of any payment by VUB,
and Exhibit B shall be recalculated.
(2) If thereafter, the Company states in its report
delivered under Section 5.2, that the Products meet the specifications in
Exhibit A, then any reduction of Minimum Volume under this Agreement shall
become "permanent" and the amounts due under Exhibit B shall be recalculated.
(3) If the Company states in its report that the
Products do not meet the specifications in Exhibit A then any reduction in
Minimum Volume is reinstated.
(b) If there exists sufficient funds in the escrow account
established pursuant to that Escrow Agreement of even date herewith at any
time to pay the drafts (and as a result, there is no demand under the
guarantees or avals), then there shall be no reduction in the Minimum Volume
under this Agreement due.
ARTICLE VII. Payment
7.1 The Seller acknowledges as of the date of this
Agreement, it is obligated to deliver Products, limited exclusively to the
Products in Exhibit A, to the Purchaser, at no additional cost to the
Purchaser, the Products equal to the amount set forth on Exhibit B.
ARTICLE VIII. Delivery
8.1 Delivery of the Products by Seller to Purchaser shall
be made FOB Hamburg or other European port, such other location as the parties
may, upon mutual agreement, from time to time designate, which agreement of
Purchaser shall not be unreasonably withheld. Any freight and insurance
expense from Skalica, Slovak Republic, to such port shall be borne solely by
Seller.
8.2 Delivery shall be deemed complete when Seller gives
Purchaser notice that a shipment of Products ordered by Purchaser is available
for pick-up at Hamburg or such other European Port or such other location as
the parties may, upon mutual agreement, designate.
ARTICLE IX. Title/Risk of Loss
9.1 Title and risk of loss or damage to the Products sold
hereunder shall pass to Purchaser when Seller, pursuant to an order placed by
Purchaser, delivers the Products in accordance with Section 8.2.
ARTICLE X. Warranty, Indemnity
10.1 IN LIEU OF ALL OTHER WARRANTIES (INCLUDING
MERCHANTABILITY AND FITNESS FOR PURPOSE), SELLER WARRANTS TO PURCHASER THAT
ALL PRODUCTS MANUFACTURED FOR PURCHASER UNDER THIS AGREEMENT SHALL MEET
PURCHASER'S PRODUCT SPECIFICATIONS AS SET FORTH IN EXHIBIT A, AND ARE FREE
FROM DEFECTS EXCEPT DEFECTS WHICH MAY BE INHERENT IN THE SAID SPECIFICATIONS
SET FORTH IN EXHIBIT A.
Subject to the last paragraph of this Article X, Seller shall
indemnify and hold Purchaser harmless from and against any and all liability,
loss or damage, and all direct out-of-pocket cost or expense, arising out of
the breach of the above warranty.
Subject to the last paragraph of this Article X, in the event
of complaints, demands, claims, or legal actions alleging illness, injury,
death or damage as a result of the use of any goods manufactured by Seller
hereunder, Seller shall indemnify and hold Purchaser harmless from and against
any and all liability, loss or damage, and all direct out-of-pocket cost or
expense, of whatsoever nature and by whomsoever asserted arising out of,
resulting from or in any way connected with such complaint, demand, claim or
legal action, except that Seller shall not be responsible for, and shall not
be required to indemnify Purchaser against, any liability for injury, death or
damage attributable to defects in Products which independent investigation
discloses originated after the goods left the custody and control of Seller or
were not attributable to any act of omission of Seller prior to shipment.
PURCHASER SHALL BE ENTITLED TO RECOVER CONSEQUENTIAL OR SPECIAL
DAMAGES (COLLECTIVELY "PURCHASER'S SPECIAL DAMAGES") INCURRED BY PURCHASER DUE
TO ACTS OR OMISSIONS OF SELLER'S SUPPLIERS OR OTHERS ARISING OUT OF OR
RELATING TO ANY BREACH OF THIS WARRANTY TO THE EXTENT AND SOLELY TO THE EXTENT
THAT SELLER RECOVERS AND COLLECTS PURCHASER'S SPECIAL DAMAGES FROM ITS
SUPPLIERS OR OTHERS, AND SELLER IS OBLIGATED TO PROMPTLY TAKE ALL REASONABLE
ACTION, INCLUDING BUT NOT LIMITED TO THE INSTITUTION OF LEGAL PROCEEDINGS, IN
ORDER TO RECOVER PURCHASER'S DAMAGES FROM ITS SUPPLIERS OR OTHERS, AND SELLER
SHALL BEAR THE COST OF SUCH ACTION (PROVIDED THAT SUCH COSTS MAY BE OFFSET
AGAINST ANY RECOVERY PURSUANT TO A JUDGMENT OR SETTLEMENT AGREED TO BY
PURCHASER FROM SELLER'S SUPPLIERS OR OTHERS), WHICH ACTION SHALL BE TAKEN IN
CONSULTATION WITH PURCHASER. EXCEPT AS SPECIFICALLY SET FORTH IN THE
PRECEDING SENTENCE, PURCHASER WAIVES ANY AND ALL RIGHT OR CLAIM TO RECOVER
PURCHASER'S SPECIAL DAMAGES FROM SELLER PROVIDED THAT THIS WAIVER SHALL NOT
APPLY TO LIABILITY FOR COMMISSION BY SELLER OF (I) AN INTENTIONAL TORT OR (II)
GROSS NEGLIGENCE. Anything in this Article to the contrary notwithstanding,
Purchaser must assert any claim of breach under this warranty, if at all,
within one (1) year after the due date of the invoice in regard to the goods
in question by written notice specifying the grounds for such claim. In any
and all actions, proceedings and investigations in regard to any claim by any
third person arising from an alleged breach of this warranty, seller shall pay
any damages which must be paid as a result of any judgment or settlement and
all costs of the defense thereof (including reasonable counsel fees) on the
following conditions: (i) Purchaser shall promptly notify Seller of any such
complaint, demand, claim or legal action; (ii) Purchaser shall have control of
said defense, but Seller shall have the right and opportunity to participate
therein; (iii) Purchaser shall select defense counsel subject to Seller's
consent; and (iv) Purchaser shall have the right to accept any settlement in
compromise subject to the consent of Seller, which shall not be unreasonably
withheld, and Seller shall have the right to demand that Purchaser accept any
settlement or compromise of the claim which does not otherwise adversely
affect Seller and, if Purchaser refuses such acceptance, Seller may elect to
pay Purchaser the amount of such proposed settlement in full satisfaction of
Seller's further obligations hereunder with respect to such claim.
ARTICLE XI. Term and Termination
11.1 This Agreement shall commence on April 20, 1995 and
become effective after the Escrow Account referred to in the Escrow Agreement
dated as of even date herewith itself has become effective and shall end after
fulfillment of the obligations under this Agreement referred to in Exhibit B
or at a date agreed to by all parties hereto.
ARTICLE XII. Force Majeure
12.1 Any failure or delay in the performance by either
party hereto of its obligations hereunder shall not constitute a breach of
this Agreement only if such failure or delay arises out of or results
primarily from fire, storm, flood, lightening, earthquakes, or other acts of
God, or explosion, insurrections, strikes, unavailability of fuel, utilities
or raw materials, epidemics or quarantine restrictions, partial or entire
failure of production facilities, inability to obtain transportation,
government restrictions or any other cause not within the control of the party
affected which by the exercise of reasonable diligence such party is unable to
prevent or overcome ("Force Majeure").
12.2 The occurrence of Force Majeure, as described in
Section 12.1 hereof, shall not excuse either party from the performance of its
obligations or duties hereunder, but shall merely suspend such performance
during the continuance of Force Majeure. The party prevented from performing
its obligations or duties because of Force Majeure shall immediately notify
the other party to this Agreement of the occurrence and particulars of such
Force Majeure and shall provide the other party, from time to time, with its
best estimate of the duration of such Force Majeure and with notice of the
termination thereof. If the Force Majeure, as described in Section 12.1
hereof, occurs and continues for more than one year, the party who is not
prevented or delayed from performing by an occurrence of Force Majeure shall
have the right to terminate this Agreement without penalty upon thirty (30)
days written notice. Upon such termination of this Agreement the value of the
undelivered portion of the pre-paid purchase amount as set forth on Exhibit B
shall be immediately paid to Purchaser.
ARTICLE XIII. Legal Relationship of the Parties
13.1 The relationship between the parties hereto is that of
independent contractors and not of principal-agent or employer-employee.
Neither party is in any way the legal representative of the other and has no
right or authority to assume or undertake any obligation or make any
representation on behalf of the other party.
ARTICLE XIV. General Conditions
14.1 This Agreement, and the rights and obligations of the
parties herein set forth, shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto and may not be assigned, transferred or subcontracted except to
parents, subsidiaries, or otherwise related corporations of either party, with
prior written notice to the other party, provided the parties hereto remain
liable under this Agreement. This Agreement is not subject to voluntary or
involuntary alienation except as provided herein.
14.2 The parties' remedies herein set forth shall be
cumulative, and in addition to any other or further remedies available to it
at law or in equity. The exercise by a party of any of its remedies
specifically enumerated herein shall not preclude that party from exercising
such other or further remedies.
14.3 The failure or omission of either party hereto to
insist, in any instance, upon strict performance by the other party of any
term or provision of this Agreement or to exercise any of its rights hereunder
shall not be deemed to be a modification of any term hereof or a waiver or
relinquishment of the future performance of any such term or provision by such
party, nor shall such failure or omission constitute a waiver of the right of
such party to insist upon future performance by the other party of any such
term or provision.
14.4 In the event that individual provisions of this
Agreement are or are held to be invalid, the validity of the remainder of this
Agreement shall not be affected thereby and shall remain in full force and
effect. The parties agree to negotiate in good faith in order to replace the
invalid provisions with valid provisions that conform as closely as possible
to the economic and commercial intent of the invalid provisions.
14.5 Unless otherwise provided, all notices and other
communications which are required or permitted to be given under this
Agreement shall be in writing and shall be deemed given if delivered by hand,
by mail (three (3) business days after being sent by certified mail, return
receipt requested) or when received if delivered by commercial express
delivery service or by telex or telefax (if a confirmatory mailing is made) to
a party at its address set forth below:
If to Seller:
ZVL-LSA, a.s.
909 Skalica
Slovakia
Attention: Dipl. Ing. Zdenko Hosek
If to Purchaser:
L&S Automotive Products Co.
16 South Pennsylvania
Oklahoma City, OK 73101
Attention: Mr. David Goss
Either party may change its address for the receipt of such notices by giving
written notice to the other party in the manner herein provided.
14.6 This Agreement shall be governed by, and shall be
construed and interpreted in accordance with, the law of the Republic of
Austria.
14.7 This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof, and all other prior or
contemporaneous agreements of the parties with respect to such subject matter
are hereby merged into this Agreement. This Agreement shall not be changed,
modified or amended otherwise than by a further written agreement signed by
the parties hereto. In the event of any conflict between the terms of this
Agreement and of any purchase order, the terms of this Agreement shall be
controlling.
14.8 Any controversy or claim arising out of or relating to
this Agreement, or the negotiation or breach thereof, shall be settled by
arbitration with the Vienna rules of the International Arbitral Tribunal of
Bundeswirtschaftskammer Osterreich in Vienna and judgment upon an award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. According to Sec. 598 Sec. 2 ZPO (Zivilprozessordnung, Austrian Code
of Civil Procedure) Section 595 Sec. 1 Line 7 ZPO shall not apply. The
arbitration shall be held in the English language in Vienna and shall be
conducted before three (3) arbitrators, with each party appointing an
arbitrator, who will jointly agree upon a third arbitrator, Chairman of the
Arbitration Panel. The arbitrators are empowered to award reimbursement of
attorneys' fees, taxes and other costs of arbitration in accordance with
Vienna rules of the International Arbitral Tribunal of the
Bundeswirtschaftskammer Osterreich in Vienna. The provisions of this section
shall not be deemed to preclude any party hereto from seeking preliminary
injunctive relief to protect or enforce its rights thereunder within the
competence of the competent court of the Slovak Republic or the Republic of
Austria or State or Federal courts located in the State of Oklahoma, USA, or
(not) to prohibit any (universal) such court from making preliminary findings
of fact in connection with granting or denying such preliminary injunctive
relief pending arbitration, or to preclude any party thereto from seeking
permanent injunctive or other equitable relief after and in accordance with
the decisions of the arbitrators, if those taking part require the court for
such proceeding.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Agreement to be executed by their respective duly
authorized officers as of the day and year first above written.
ZVL-LSA, a.s.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
L&S AUTOMOTIVE PRODUCTS CO.
By:___________________________
Name: David Goss
Title: Senior Vice President
- Operations
SUPPLY AGREEMENT
THIS AGREEMENT, dated the 8th day of May, 1995, by and between
ZVL-LSA, a.s., a corporation organized and existing under the laws of the
Slovak Republic and having its principal place of business at Nadrazna 909 01
Skalica, Slovak Republic (hereinafter referred to as "Seller"); and L & S
Automotive Products Co., a corporation organized and existing under the laws
of the State of Oklahoma and having its principal place of business at 16
South Pennsylvania, Oklahoma City, OK 73101, U.S.A. (hereinafter referred to
as "Purchaser");
W I T N E S S E T H:
WHEREAS Purchaser desires to acquire tapered automotive roller
bearings, as more specifically defined herein, from Seller, and Seller desires
to deliver such products on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
ARTICLE I. Definitions.
1.1 As used herein, the term "Products" shall mean tapered
automotive roller bearings with the specifications as described in Exhibit A.
1.2 As used herein, the term "Minimum Volume" shall mean
the Products in the aggregate ordered by Purchaser for delivery and shipped
from Seller's plant during each semi-annual (or other) period identified on
Exhibit B and in an amount which when multiplied by the relevant price shall
equal the U.S. Dollar amount set forth on such exhibit according to the
relevant time period identified thereon. The Purchaser shall also agree to
comply with that Technical License, Technology Assistance, Engineering and
Manufacturing Plant Sales Agreement dated July 6, 1992 between Seller and
Purchaser, along with any amendments and addendums thereto especially the
provisions concerning the obligatory purchase of products (the "L&S
Agreement").
ARTICLE II. Sale and Purchase of the Products
2.1 Subject to the terms and conditions set forth herein,
Purchaser agrees to acquire from Seller and Seller agrees to deliver to
Purchaser during the term of this Agreement Products in an amount equal to the
Minimum Volume for each period identified on Exhibit B.
2.2 For each period identified on Exhibit B during the
term of this Agreement, the Purchaser agrees to place orders (or already has
placed orders prior to the date of this Agreement), for delivery from Seller
of Products in an amount equal to or greater than the Minimum Volume, as
calculated in accordance with Section 1.2 hereof. If the Minimum Volume of
such orders are not placed in regard to delivery in any one calendar year, the
Purchaser agrees that such failure will cause irreparable injury to the
Seller. The Purchaser further acknowledges the impossibility of ascertaining
the amount of damages that would be suffered by Seller, especially as it
relates to Seller's obligations with respect to certain drafts executed by it
and sold by Purchaser to certain financial institutions. The Purchaser
thereby agrees that if Seller shall sue for such failure and Seller shall not
be in breach of this Agreement, Purchaser shall pay as liquidated damages, and
not as a penalty, the amount equal to the value of shipments required to be
shipped after the date of breach as set forth on Exhibit B. Notwithstanding
any term of this Section 2.2, Purchaser shall not be obligated to receive or
pay for any Product that does not comply with the acceptance standards under
Article IV hereof.
ARTICLE III. Product Specifications
3.1 It is the intent of the parties hereto that the
Products shall be manufactured in the same manner and will contain the same
specifications as equivalent products which Seller supplied to Purchaser
during the months prior to the date hereof which meet the acceptance standards
set forth under Article IV hereof.
ARTICLE IV. Acceptance Standards
4.1 Exhibit A contains quality specifications, mutually
agreed upon by the parties hereto, which shall govern acceptance of the
Products sold hereunder by Purchaser. Such specifications may be modified as
agreed to in writing by the parties.
ARTICLE V. Quality Control
5.1 Seller shall be solely responsible for assuring the
quality of the Products and their conformity to the standards set forth in
Exhibit A.
5.2 In the event Purchaser shall receive Products from
Seller that do not comply with this warranty, Purchaser shall immediately
notify Seller of such nonconformity and shall instruct Seller to suspend
future shipments of the Product. A third party independent qualified
inspection company (the "Company") must visit the Seller's production
facilities in Skalica within 10 days of Purchaser notifying Seller of receipt
of nonconforming Products. Seller agrees to provide such Company's employees
and/or agents full access to Seller's production facilities including access
to all materials used in connection with the Products, the energy sources
utilized in connection with the manufacture of the products and books and
records relating to the specifications used in the manufacture of the
Products. Within 10 days of the arrival of such Company's employees or agents
at Seller's facility in Skalica, the employees and/or agents of such Company
shall submit a written report to Seller and Purchaser stating whether Seller's
Products conform to the specifications set forth in Exhibit A. Upon receipt
of a report specifying that Seller's Products meet the specifications in
Exhibit A, Seller may resume and continue delivery of Products and Purchaser
must accept such immediate and future deliveries, and Purchaser agrees to
absorb the Company's costs for the investigation. If the report states that
the Seller's Products do not meet the specifications in Exhibit A, Seller
agrees to absorb the Company's costs for the investigation and Seller shall
have two options: (i) make such changes that are necessary to insure that the
Products meet the specifications in Exhibit A within 20 days, and deliver
conforming replacement Products to Purchaser within 30 days of implementing
such changes or (ii) purchase products made by other parties which meet the
specifications set forth in Exhibit A and deliver such substitute Products to
Purchaser within 180 days.
5.3 Notwithstanding the sole responsibility of Seller with
regard to quality control, Purchaser shall have access to Seller's production
facilities during normal business hours with reasonable notice to Seller, in
order to verify that the Products conform to the specifications set forth in
Exhibit A.
5.4 Seller shall maintain appropriate records of the
specifications used in the manufacture of all Products. These records shall
be made available to Purchaser upon reasonable request or during a visit by
Purchaser described in Section 5.3 or Article XI.
ARTICLE VI. Price
6.1 Pricing for the first year's order will be that of the
"Sample Bearing Order" Exhibit "B", Revised Purchase Price, page #3. Pricing
after the first year's shipment will be as follows:
A) The selling prices shall be negotiated annually
with prices set four (4) months prior to the end
of each calendar year for the succeeding
calendar year;
B) In no event shall the selling prices be
increased or decreased more than the percentage (%) determined by the
following from one year to the next:
1) the inflation or deflation rate in the
U.S.A. as measured by the Wholesale Price
Index as published by the U.S. Department
of Commerce; and provided, however, that
2) prices will not increase or decrease
beyond the increases or decreases
announced and published by major
competitive bearing companies within the
U.S. such as Federal Mogul, SKF and
Chicago Rawhide during the prior year and
Purchaser agrees to provide upon written
request, information as to pricing by
those companies, to the extent available.
ARTICLE VII. Payment
7.1 The terms of payment for the Products sold hereunder
shall be net cash due within five (5) days after Purchaser's receipt of a copy
of Seller's invoice and a copy of an Ocean Bill of Lading relating to the
shipment.
7.2 Payment by Purchaser for the Products sold hereunder
shall be made in favor of Seller to an account established by Vseobecna
Uverova Banka with Bank Austria Aktiengesellschaft, New York Branch (the
"Bank"). Payment instructions are as follows: Credit Morgan Guaranty Trust
Co., New York, NY, ABA number 021-000-238 for the account of Bank Austria AG,
account number 63-000-260 for further credit to Vscobecna Uverova Banka,
account number 199350, Attention: Mr. David Darling. Payment shall be made in
U.S. Dollars, the lawful currency of the United States of America. Purchaser
shall pay the invoice price of the Products in full and without any deduction
or set-off of any kind whatsoever. Any dispute, including any dispute
regarding the amount of such invoice price shall be the subject of good faith
negotiation between the parties. In the event of any dispute regarding
quality specifications, orders under this Agreement may be suspended until
such dispute is resolved.
7.3 Interest will be charged daily on any sum not paid on
the due date, or the payment of which is deferred for any reason, except if
such deferral occurs due to an act or omission of the Seller, at a varying
rate of two (2) percentage points per annum above the rate of interest per
annum ("Prime Rate") announced by Morgan Guaranty Trust Co., New York, to be
in effect from time to time for prime domestic commercial loans of ninety (90)
day maturities, adjusted as of the date of each such variance in the Prime
Rate, from the due date to the date of Seller's receipt of full payment,
provided, however, that such rate of interest shall in no event exceed the
maximum rate of interest permissible under applicable law.
ARTICLE VIII. Delivery
8.1 Delivery of the Products by Seller to Purchaser shall
be made at FOB Hamburg or other European port, or such other location as the
parties may, upon mutual agreement, from time to time designate, which
agreement of Purchaser shall not be unreasonably withheld. Any freight and
insurance expense from Skalica, Slovak Republic, to such port, shall be borne
solely by Seller.
8.2 Delivery shall be deemed complete when Seller gives
Purchaser notice that a shipment of Products ordered by Purchaser is available
for pick-up at Hamburg, or such other European port or such other location as
the parties may, upon mutual agreement, designate.
ARTICLE IX. Title/Risk of Loss
9.1 Title and risk of loss or damage to the Products sold
hereunder shall pass to Purchaser when Seller, pursuant to an order placed by
Purchaser, delivers the Products in accordance with Section 8.2.
ARTICLE X. Cash Against Documents
10.1 All original (and negotiable forms of) ocean bills of
lading and other title documents from Purchaser with respect to each shipment
of the Products during the terms of this Agreement shall be delivered solely
to the Bank. The Seller shall courier to the Bank in connection with each
shipment of the Products, such bills of lading and title documents, in each
case endorsed in blank, along with invoices of Seller. The Bank shall
promptly notify the Purchaser of receipt of such documents and deliver a
photocopy of such documents to Purchaser by telefax. At the time of receipt
of payment in full of the invoice made by Purchaser through payment into the
escrow account referred to in Section 7.2, the Bank shall promptly send by
courier the bills of lading and other title documents to Purchaser. The Bank
shall bear no responsibility in connection with any failure of such courier to
deliver such documents. In the event that Purchaser fails to make payment
timely, the Bank shall have the right to retain the bills of lading and other
title documents and, take any remedy permitted by law in connection with such
non-payment.
10.2 The Bank shall charge fees for handling documents
equal to 1/8th of 1% of the invoice amount ($75.00 minimum) which fee shall be
paid by Purchaser.
10.3 Purchaser and Seller jointly and severally agree to
hold the Bank harmless, and indemnify the Bank from and against, any and all
claims, losses, liabilities, damages, costs or expenses whatsoever, including
attorneys' fees and disbursements, howsoever arising from or in connection
with any handling, transfer, delivery, surrender or endorsement of any
document at any time(s) held by the Bank, or arising out of any action for
injunctive or other judicial or administrative relief and affecting, directly
or indirectly, the Bank.
ARTICLE XI. Warranty, Indemnity
11.1 IN LIEU OF ALL OTHER WARRANTIES (INCLUDING
MERCHANTABILITY AND FITNESS FOR PURPOSE), SELLER WARRANTS TO PURCHASER THAT
ALL PRODUCTS MANUFACTURED FOR PURCHASER UNDER THIS AGREEMENT SHALL MEET
PURCHASER'S PRODUCT SPECIFICATIONS AS SET FORTH IN EXHIBIT A, AND ARE FREE
FROM DEFECTS EXCEPT DEFECTS WHICH MAY BE INHERENT IN THE SAID SPECIFICATIONS
SET FORTH IN EXHIBIT A.
Subject to the last paragraph of this Article XI, Seller shall
indemnify and hold Purchaser harmless from and against any and all liability,
loss or damage, and all direct out-of-pocket cost or expense, arising out of
the breach of the above warranty.
Subject to the last paragraph of this Article XI, in the event
of complaints, demands, claims or legal actions alleging illness, injury,
death or damage as a result of the use of any goods manufactured by Seller
hereunder, Seller shall indemnify and hold Purchaser harmless from and against
any and all liability, loss or damage, and all direct out-of-pocket cost or
expense, of whatsoever nature and by whomsoever asserted arising out of,
resulting from or in any way connected with such complaint, demand, claim or
legal action, except that Seller shall not be responsible for, and shall not
be required to indemnify Purchaser against, any liability for injury, death or
damage attributable to defects in Products which independent investigation
discloses originated after the goods left the custody and control of Seller or
were not attributable to any act of omission of Seller prior to shipment.
PURCHASER SHALL BE ENTITLED TO RECOVER CONSEQUENTIAL OR SPECIAL
DAMAGES (COLLECTIVELY "PURCHASER'S SPECIAL DAMAGES") INCURRED BY PURCHASER DUE
TO ACTS OR OMISSIONS OF SELLER'S SUPPLIERS OR OTHERS ARISING OUT OF OR
RELATING TO ANY BREACH OF THIS WARRANTY TO THE EXTENT AND SOLELY TO THE EXTENT
THAT SELLER RECOVERS AND COLLECTS PURCHASER'S SPECIAL DAMAGES FROM ITS
SUPPLIERS OR OTHERS, AND SELLER IS OBLIGATED TO PROMPTLY TAKE ALL REASONABLE
ACTION, INCLUDING BUT NOT LIMITED TO THE INSTITUTION OF LEGAL PROCEEDINGS, IN
ORDER TO RECOVER PURCHASER'S DAMAGES FROM ITS SUPPLIERS OR OTHERS, AND SELLER
SHALL BEAR THE COST OF SUCH ACTION (PROVIDED THAT SUCH COSTS MAY BE OFFSET
AGAINST ANY RECOVERY PURSUANT TO A JUDGMENT OR SETTLEMENT AGREED TO BY
PURCHASER FROM SELLER'S SUPPLIERS OR OTHERS), WHICH ACTION SHALL BE TAKEN IN
CONSULTATION WITH PURCHASER. EXCEPT AS SPECIFICALLY SET FORTH IN THE
PRECEDING SENTENCE, PURCHASER WAIVES ANY AND ALL RIGHT OR CLAIM TO RECOVER
PURCHASER'S SPECIAL DAMAGES FROM SELLER PROVIDED THAT THIS WAIVER SHALL NOT
APPLY TO LIABILITY FOR COMMISSION BY SELLER OF (I) AN INTENTIONAL TORT OR (II)
GROSS NEGLIGENCE. Anything in this Article to the contrary notwithstanding,
Purchaser must assert any claim of breach under this warranty, if at all,
within one (1) year after the due date of the invoice in regard to the goods
in question by written notice specifying the grounds for such claim. In any
and all actions, proceedings and investigations in regard to any claim by any
third person arising from an alleged breach of this warranty, seller shall pay
any damages which must be paid as a result of any judgment or settlement and
all costs of the defense thereof (including reasonable counsel fees) on the
following conditions: (i) Purchaser shall promptly notify Seller of any such
complaint, demand, claim or legal action; (ii) Purchaser shall have control of
said defense, but Seller shall have the right and opportunity to participate
therein; (iii) Purchaser shall select defense counsel subject to Seller's
consent; and (iv) Purchaser shall have the right to accept any settlement in
compromise subject to the consent of Seller, which shall not be unreasonably
withheld, and Seller shall have the right to demand that Purchaser accept any
settlement or compromise of the claim which does not otherwise adversely
affect Seller and, if Purchaser refuses such acceptance, Seller may elect to
pay Purchaser the amount of such proposed settlement in full satisfaction of
Seller's further obligations hereunder with respect to such claim.
ARTICLE XII. Term and Termination
12.1 This Agreement shall commence on April 20, 1995 and
become effective after the Escrow Agreement dated as of even date herewith
itself has become effective and shall terminate once the Minimum Volume to be
purchased as set forth in Exhibit B has been made or thereafter with the
consent of the parties.
ARTICLE XIII. Force Majeure
13.1 Any failure or delay in the performance by either
party hereto of its obligations hereunder shall not constitute a breach of
this Agreement only if such failure or delay arises out of or results
primarily from fire, storm, flood, lightening, earthquakes, or other acts of
God, or explosion, insurrections, strikes, unavailability of fuel, utilities
or raw materials, epidemics or quarantine restrictions, partial or entire
failure of production facilities, inability to obtain transportation,
government restrictions or any other cause not within the control of the party
affected which by the exercise of reasonable diligence such party is unable to
prevent or overcome ("Force Majeure").
13.2 The occurrence of Force Majeure, as described in
Section 13.1 hereof, shall not excuse either party from the performance of its
obligations or duties hereunder, but shall merely suspend such performance
during the continuance of Force Majeure. The party prevented from performing
its obligations or duties because of Force Majeure shall immediately notify
the other party to this Agreement of the occurrence and particulars of such
Force Majeure and shall provide the other party, from time to time, with its
best estimate of the duration of such Force Majeure and with notice of the
termination thereof. If the Force Majeure, as described in Section 13.1
hereof, occurs and continues for more than one year, Purchaser shall have the
right to seek alternative suppliers and enter into supply agreements with such
parties as long as such agreements do not extend for more than one year. If,
at any time thereafter, a Force Majeure ceases to exist, Purchaser and Seller
shall then be obligated to continue performance under this Agreement, provided
that Purchaser shall not be required to place orders until after termination
of any supply agreement entered into during the Force Majeure as provided
above.
ARTICLE XIV. Legal Relationship of the Parties
14.1 The relationship between the parties hereto is that of
independent contractors and not of principal-agent or employer-employee.
Neither party is in any way the legal representative of the other and has no
right or authority to assume or undertake any obligation or make any
representation on behalf of the other party.
ARTICLE XV. Third Party Beneficiary.
15.1 The Bank, acting as agent for the purchasers of the
Drafts initially issued to Purchaser, shall be a third party beneficiary of
Seller's rights under this Agreement and the parties agree that the Bank, as
agent, shall have a direct right of action against Purchaser or Seller for its
breach of any of the provisions of this Agreement.
ARTICLE XVI. General Conditions
16.1 This Agreement, and the rights and obligations of the
parties herein set forth, shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto and may not be assigned, transferred or subcontracted except to
parents, subsidiaries, or otherwise related corporations of either party, with
prior written notice to the other party, provided the parties hereto remain
liable under this Agreement. This Agreement is not subject to voluntary or
involuntary alienation except as provided herein.
16.2 The parties' remedies herein set forth shall be
cumulative, and in addition to any other or further remedies available to it
at law or in equity. The exercise by a party of any of its remedies
specifically enumerated herein shall not preclude that party from exercising
such other or further remedies.
16.3 The failure or omission of either party hereto to
insist, in any instance, upon strict performance by the other party of any
term or provision of this Agreement or to exercise any of its rights hereunder
shall not be deemed to be a modification of any term hereof or a waiver or
relinquishment of the future performance of any such term or provision by such
party, nor shall such failure or omission constitute a waiver of the right of
such party to insist upon future performance by the other party of any such
term or provision.
16.4 In the event that individual provisions of this
Agreement are or are held to be invalid, the validity of the remainder of this
Agreement shall not be affected thereby and shall remain in full force and
effect. The parties agree to negotiate in good faith in order to replace the
invalid provisions with valid provisions that conform as closely as possible
to the economic and commercial intent of the invalid provisions.
16.5 Unless otherwise provided, all notices and other
communications which are required or permitted to be given under this
Agreement shall be in writing and shall be deemed given if delivered by hand,
by mail (three (3) business days after being sent by certified mail, return
receipt requested) or when received if delivered by commercial express
delivery service or by telex or telefax (if a confirmatory mailing is made) to
a party at its address set forth below:
If to Seller:
ZVL-LSA, a.s.
Nadrazna
SK-909 01 Skalica
Slovak Republic
Attention: Dip. Ing. Zdenko Hosek
If to Purchaser:
L&S Automotive Products Co.
16 South Pennsylvania
Oklahoma City, OK 73101
Attention: Mr. David Goss
Either party may change its address for the receipt of such notices by giving
written notice to the other party in the manner herein provided.
16.6 This Agreement shall be governed by, and shall be
construed and interpreted in accordance with, the law of the Republic of
Austria.
16.7 This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof, and all other prior or
contemporaneous agreements of the parties with respect to such subject matter
are hereby merged into this Agreement. This Agreement shall not be changed,
modified or amended otherwise than by a further written agreement signed by
the parties hereto. In the event of any conflict between the terms of this
Agreement and of any purchase order, the terms of this Agreement shall be
controlling.
16.8 Any controversy or claim arising out of or relating to
this Agreement, or the negotiation or breach thereof, shall be settled by
arbitration with the Vienna rules of the International Arbitral Tribunal of
Bundeswirtschaftskammer Osterreich in Vienna and judgment upon an award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. According to Sec. 598 Sec. 2 ZPO (Zivilprozessordnung, Austrian Code
of Civil Procedure) Section 595 Sec. 1 Line 7 ZPO shall not apply. The
arbitration shall be held in the English language in Vienna and shall be
conducted before three (3) arbitrators, with each party appointing an
arbitrator, who will jointly agree upon a third arbitrator, Chairman of the
Arbitration Panel. The arbitrators are empowered to award reimbursement of
attorneys' fees, taxes and other costs of arbitration in accordance with
Vienna rules of the International Arbitral Tribunal of the
Bundeswirtschaftskammer Osterreich in Vienna. The provisions of this section
shall not be deemed to preclude any party hereto from seeking preliminary
injunctive relief to protect or enforce its rights thereunder within the
competence of the competent court of the Slovak Republic or the Republic of
Austria or State or Federal courts located in the State of Oklahoma, USA, or
(not) to prohibit any (universal) such court from making preliminary findings
of fact in connection with granting or denying such preliminary injunctive
relief pending arbitration, or to preclude any party thereto from seeking
permanent injunctive or other equitable relief after and in accordance with
the decisions of the arbitrators, if those taking part require the court for
such proceeding.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Agreement to be executed by their respective duly
authorized officers as of the day and year first above written.
ZVL-LSA, a.s.
By:___________________________
Name: Zdenko Hosek
Title: General Manager
By:___________________________
Name: Maria Florkova
Title: Financial Director
L&S AUTOMOTIVE PRODUCTS CO.
By:___________________________
Name: David Goss
Title: Senior Vice President
- Operations
ACKNOWLEDGED AND AGREED
AS TO ARTICLE X.
BANK AUSTRIA AKTIENGESELLSCHAFT
By:____________________________
Name:
Title:
By:_____________________________
Name:
Title:
sec\10q\tq395xt2.wpe
LSB INDUSTRIES, INC. Exhibit 11.1
Page 1 of 2
PRIMARY EARNINGS PER SHARE COMPUTATION
<TABLE>
<CAPTION>
Quarter ended March 31,
--------------------------
1995 1994
<S> <C> <C>
Shares for primary earnings per share:
Weighted average shares:
Common shares outstanding from beginning
of period 13,060,566 13,673,971
Common shares issued on conversion
of redeemable preferred stock;
calculated on weighted average
basis 180 360
Common shares issued upon exercise
of employee or director stock
options; calculated on weighted
average basis - 6,833
Purchases of treasury stock;
calculated on weighted average
basis (13,950) (20,000)
---------- ----------
13,046,796 13,661,164
Common Stock equivalents:
Shares issuable upon exercise of
options and warrants (including
the weighted average for shares
subject to options and warrants
granted during the period) 823,140 934,807
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on average market price for
the period) (317,680) (247,510)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above
on actual conversion - 66,560
----------- ----------
505,460 753,857
----------- ----------
13,552,256 14,415,021
Earnings for primary earnings per share:
Net earnings $1,548,092 $2,203,665
Dividends on cumulative preferred stocks (75,880) ( 76,145)
Dividends on convertible, exchangeable
Class C preferred stock (6.5% annually) (743,437) (747,500)
----------- ----------
Earnings applicable to common stock $ 728,775 $1,380,020
Earnings per share $.05 $.10
==== ====
</TABLE>
<TABLE>
<CAPTION>
LSB INDUSTRIES, INC. Exhibit 11.1
Page 2 of 2
FULLY DILUTED EARNINGS PER SHARE COMPUTATION
Quarter ended March 31,
---------------------------
1995 1994
----------- ---------
<S> <C> <C>
Shares for fully diluted earnings per
share:
Weighted average shares outstanding
for primary earnings per share 13,046,796 13,661,164
Shares issuable upon exercise of
options and warrants 823,140 934,807
Assumed repurchase of outstanding
shares up to the 20% limitation
(based on ending market price
for the quarter if greater than
the average) (300,737) (247,510)
Common shares issuable on conversion
of redeemable preferred stock,
excluding shares included above on
actual conversion - 66,560
Common shares issuable upon conversion
of convertible note payable 4,000 4,000
Common shares issuable upon conversion
of convertible preferred stock, if
dilutive, from date of issue:
Series B - 666,666
----------- ----------
13,573,199 15,085,687
Earnings for fully diluted earnings
per share:
Net earnings $1,548,092 $2,203,665
Interest on convertible note 180 180
Dividends on cumulative convertible preferred
stocks:
Series B (75,880) -
Series 2 Class C (743,437) (747,500)
----------- ----------
Earnings applicable to common stock $ 728,955 $1,456,345
=========== ==========
Earnings per share $.05 $.10
==== ====
</TABLE>
Exhibit 15.1
ERNST & YOUNG LLP 100 North Broadway Phone: 405 278 6800
Oklahoma City, OK 73102 Fax: 405 278 6823
Fax: 405 278 6834
May 11, 1995
The Board of Directors
LSB Industries, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-8 No. 33-8302) and the Registration Statement (Form S-3 No. 33-69800)
of LSB Industries, Inc. and in the related Prospectus of our report dated May
11, 1995 relating to the unaudited condensed consolidated interim financial
statements of LSB Industries, Inc. which are included in its Form 10-Q for the
quarter ended March 31, 1995.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Very truly yours,
/s/ Ernst & Young LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000060714
<NAME> LSB INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,534
<SECURITIES> 0
<RECEIVABLES> 48,459
<ALLOWANCES> 1,980
<INVENTORY> 68,975
<CURRENT-ASSETS> 129,045
<PP&E> 137,955
<DEPRECIATION> 61,341
<TOTAL-ASSETS> 242,433
<CURRENT-LIABILITIES> 54,496
<BONDS> 96,647
<COMMON> 1,462
151
48,000
<OTHER-SE> 41,677
<TOTAL-LIABILITY-AND-EQUITY> 242,433
<SALES> 65,269
<TOTAL-REVENUES> 65,931
<CGS> 49,127
<TOTAL-COSTS> 49,127
<OTHER-EXPENSES> 12,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,388
<INCOME-PRETAX> 1,547
<INCOME-TAX> 99
<INCOME-CONTINUING> 1,448
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,448
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
