<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
FORM 8-K/A
AMENDMENT NO. 1
TO CURRENT REPORT ON FORM 8-K DATED OCTOBER 17, 1997
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): OCTOBER 17, 1997
LAROCHE INDUSTRIES INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 33-79532 13-3341472
(State of Incorporation) (Commission File Number) (IRS Employer Identification
Number)
</TABLE>
1100 JOHNSON FERRY RD., N.E.
ATLANTA, GEORGIA 30342
(Address of principal executive offices)
(404) 851-0300
(Registrant's telephone number, including area code)
===============================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Previously reported in Form 8-K dated October 17, 1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Business Acquired.
The following audited combined statements of the Chlor-Alkali
Business and Gas-Fired Co-Generation Operations, together with a
manually signed independent auditors' report thereon and the notes
thereto, are included in Exhibit 99.3:
(i) Independent Accountants' Report;
(ii) Combined Statement of Assets and Liabilities as of December 31,
1996 and June 30, 1997 (unaudited);
(iii) Combined Statement of Direct Revenues and Operating Expenses for
the period from January 1, 1996 through December 31, 1996 and
for the period from January 1. 1997 through June 30, 1997
(unaudited);
(iv) Notes to the Combined Statements.
(b) Pro Forma Financial Information.
The unaudited Pro Forma Combined Consolidated Financial Statements of
LaRoche Industries Inc. for the year ended February 28, 1997 and for
the six month period ended August 31, 1997, and the notes thereto, are
included in Exhibit 99.4.
(c) Exhibits.
10.1* Stock Purchase Agreement (and amendments thereto), dated
August 1, 1997, by and among the Company, LII Europe
S.A.R.L., Rhone-Poulenc Chimie S.A. and Rhone L S.A.S.
99.1* Text of Press Release of the Company, dated June 3, 1997.
99.2* Text of Press Release of the Company, dated October 21, 1997.
99.3 Audited Combined Statements of the Chlor-Alkali Business and
Gas-Fired Co-Generation Operations, as described in Item 7(a)
of this Form 8-K/A.
99.4 Unaudited Pro Forma Combined Consolidated Financial
Statements of LaRoche Industries Inc., as described in Item
7(b) of this Form 8-K/A.
- --------------------
* previously filed
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
LAROCHE INDUSTRIES INC.
(Registrant)
By: /s/ Harold W. Ingalls
------------------------------------------
Harold W. Ingalls,
Vice President and Chief Financial Officer
Date: December 31, 1997
-----------------
<PAGE> 1
EXHIBIT 99.3
CHLOR-ALKALI BUSINESS
AND
GAS-FIRED CO-GENERATION OPERATIONS
(ACQUIRED BUSINESS)
COMBINED STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997
<PAGE> 2
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
- Report of Independent Accountants 3
- Combined Statements 4
- Notes to the Combined Statements 6
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Rhone-Poulenc Chimie S.A. and
LaRoche Industries, Inc.:
We have audited the accompanying combined statement of assets and
liabilities of the Rhone-Poulenc Chimie S.A. chlor-alkali manufacturing facility
and Pont de Claix gas-fired co-generation facility included in the Acquired
Business as defined in note 1, and the related combined statement of direct
revenues and operating expenses for the 12-month period ended December 31, 1996.
These combined statements are the responsibility of Rhone-Poulenc Chimie S.A.'s
management. Our responsibility is to express an opinion on these combined
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the combined
statements. We believe that our audit provides a reasonable basis for our
opinion.
The combined statements referred to above have been prepared from the
records maintained by Rhone-Poulenc Chimie S.A. and are not intended to be a
complete presentation of Rhone-Poulenc Chimie S.A.'s chlor-alkali manufacturing
and gas-fired co-generation facilities' financial position, results of
operations or cash flows. These statements may not necessarily be indicative of
the financial position or results of operations had the chlor-alkali
manufacturing and gas-fired co-generation activities included in the Acquired
Business as defined in note 1 to these combined statements been operated on a
stand-alone basis. As described in note 2 to these combined statements, certain
amounts recorded in the combined statements correspond to allocations derived
from items applicable to Rhone-Poulenc Chimie S.A. as a whole.
In our opinion, the combined statements referred to above present
fairly, in all material respects, the combined statement of assets and
liabilities of the Rhone-Poulenc Chimie S.A. chlor-alkali manufacturing facility
and Pont de Claix gas-fired co-generation facility included in the Acquired
Business as defined in note 1, and the related combined statement of direct
revenues and operating expenses for the 12-month period ended December 31, 1996,
in accordance with accounting principles generally accepted in the United States
of America.
Paris, France, October 14, 1997 COOPERS & LYBRAND AUDIT
/s/ Benoit Pinoche
-----------------------
Benoit Pinoche
Partner
<PAGE> 4
4
COMBINED STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
NOTE DECEMBER 31, JUNE 30,
---- ------------ --------
1996 1997
---- ----
(IN FRF THOUSANDS) (IN FRF THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Inventories 4 33 147 30 438
Prepaid expenses and other current assets 5 13 063 13 529
Financial assets 6 3 517 3 957
Property, plant and equipment 7 212 772 204 174
Intangible assets 8 178 170
-------------- ------------
TOTAL ASSETS 262 677 252 268
-------------- ------------
LIABILITIES
Current liabilities 9 11 742 13 548
Long-term debt 10 179 690 178 691
Provision for supplementary pension and retirement indemnities 11 15 513 16 135
Other long-term liabilities 12 7 425 9 039
Minority interests 13 19 467 19 045
------------ ------------
TOTAL LIABILITIES 233 837 236 458
------------ ------------
------------ ------------
NET ASSETS 28 840 15 810
============ ============
</TABLE>
The accompanying notes are an integral part of these combined statements
<PAGE> 5
5
COMBINED STATEMENT OF DIRECT REVENUES AND OPERATING EXPENSES
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
NOTE 1996 1997
---- ---- ----
(IN FRF THOUSANDS) (IN FRF THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Net sales 14 703 066 357 709
Cost of goods sold (including depreciation for FRF 36 097 thousand
and FRF 16 638 thousand, respectively) 15, 18 (590 821) (322 809)
GROSS PROFIT 112 245 34 900
Selling, general and administrative expenses 16 (36 610) (16 238)
Research and development costs 17 (6 342) (2 980)
Minority interests 13 0 0
======= =======
EXCESS OF DIRECT REVENUES OVER OPERATING EXPENSES 69 293 15 682
======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements
<PAGE> 6
6
NOTES TO THE COMBINED STATEMENTS
1 - ORGANIZATION AND OPERATIONS
The combined statement have been prepared for the purposes of the
acquisition of the Rhone-Poulenc Chimie S.A. (a wholly-owned subsidiary of
Rhone-Poulenc S.A.) chlor-alkali manufacturing facility and part of the Pont de
Claix gas-fired co-generation facility ("the Acquisition") by LaRoche
Industries Inc. ("LaRoche"). The description of the chlor-alkali business is
provided in the Stock Purchase Agreement dated August 1, 1997, and in the
Contribution Agreement dated July 29, 1997, and the description of the
gas-fired co-generation operations is provided in the Contribution Agreement
dated July 29, 1997.
LaRoche is considering acquiring from Rhone-Poulenc Chimie S.A. 50% of
the share capital of ChlorAlp S.A.S. ("ChlorAlp") which will operate certain
French chlor-alkali businesses of Rhone-Poulenc Chimie S.A. located at the Pont
de Claix plant site (chlor-alkali facilities), the Elf Atochem St. Fons plant
(bleach facilities) and the Hauterives site (brine mine). ChlorAlp will own a
60% interest in Cevco G.I.E. ("Cevco"), the company which operates the Pont de
Claix gas-fired co-generation facility.
The Acquired Business corresponds to the combination of the activity
to be operated by ChlorAlp and 60% of the operations to be managed by Cevco.
As a result of the Acquisition, the combined chlor-alkali Business in
France and the gas-fired co-generation operations referred to as the Acquired
Business include the following activities:
[CHART]
The accompanying notes are an integral part of these combined statements
<PAGE> 7
7
2 - BASIS OF PRESENTATION
The accompanying combined statements of assets and liabilities as of
December 31, 1996 and direct revenues and operating expenses for the period
from January 1, 1996 through December 31, 1996 are not intended to be a
complete presentation of Rhone-Poulenc Chimie S.A.'s chlor-alkali and gas-fired
co-generation facilities' financial position, results of operations or cash
flows.
The combined statements of the Acquired Business have been prepared
based on the following:
- the accounts of the Acquired Business have been carved out from the
historical accounts of the chlor-alkali activity and the gas-fired
co-generation operations as generated by Rhone-Poulenc Chimie S.A.'s
accounting system;
- the functional currency is the French franc;
- all amounts included in these combined statements are reported in
French francs.
These combined statements have been carved out according to the
following principles:
- the statement of assets and liabilities includes assets and
liabilities such as described in the Contribution Agreements dated
July 29, 1997, at historical cost; as a result, it does not include
all assets and liabilities that could have been directly associated
with the Acquired Business. In particular, no data regarding trade
receivables or trade payables are included since such amounts are
integrated within the Rhone-Poulenc Chimie S.A. system;
- the statement of direct revenues and operating expenses includes
revenues and expenses associated with the Acquired Business;
- the statement of direct revenues and operating expenses includes costs
allocated to the combined chlor-alkali business and the gas-fired
co-generation operations by Rhone-Poulenc Chimie S.A.'s cost
allocation system. This statement does not reflect some indirect
expenses which are not allocated from Rhone-Poulenc Chimie S.A. such
as income taxes or interest expenses;
- in accordance with the Rhone-Poulenc Chimie S.A. cost accounting
procedures, no selling, general and administrative expenses are
currently allocated to the gas-fired co-generation operations in the
statement of direct revenues and operating expenses of the Acquired
Business.
The accompanying notes are an integral part of these combined statements
<PAGE> 8
8
Management believes that all carve out assumptions and allocation
methodologies utilized in preparing the combined statements are reasonable.
However, theses combined statements may not necessarily reflect the results and
financial position that would have been derived had the combined entities
operated together independently of Rhone-Poulenc. For example, research and
development costs and general and administrative expenses incurred through the
use of Rhone-Poulenc's resources might have been different if the Acquired
Business were not a component of Rhone-Poulenc. The Acquired Business also
potentially benefited from purchasing and services (i.e. insurance)
arrangements made through Rhone-Poulenc's centralized structure.
Management is not able to quantify the impact on the historical
results of the Acquired Business for the disclosed periods if the Acquired
Business had been operated independently.
All significant transactions between combined companies have been
eliminated.
The combined statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) PROPERTY, PLANT AND EQUIPMENT
Depreciation is calculated on a straight-line basis over the estimated
useful lives of the respective assets as determined by Rhone-Poulenc's
management.
The principal useful lives employed are:
<TABLE>
<S> <C>
Buildings 10-40 years
Machinery and equipment
- machines and installations 5-15 years
- transportation equipment 4-20 years
- other equipment 3-15 years
- furniture 8-15 years
</TABLE>
Routine maintenance, repairs and replacement costs are charged against
current operations. At scheduled intervals, a complete shutdown and
inspection of the Pont de Claix facilities are conducted. Estimated costs for
such major turnarounds are accrued through charges to expense over the period
between shutdowns.
The accompanying notes are an integral part of these combined statements
<PAGE> 9
9
B) INVENTORIES
Inventories and work-in-progress are valued at the lower of average cost or
replacement value (for goods purchased from third parties), or manufacturing
cost (for goods manufactured) without exceeding their net realizable value.
Purchase prices generally correspond to weighted average costs which, given the
rate of inventory turnover, reflect the last known prices as of the date of the
statement of assets and liabilities.
C) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are recorded as expenses in the year in
which they are incurred. Some of these costs relate to specific chlor-alkali
projects, others are allocated from Rhone-Poulenc's general research project
costs.
D) SUPPLEMENTARY PENSION AND RETIREMENT INDEMNITIES
Some employees of Pont de Claix should become employees of the Acquired
Business. Supplementary pension and retirement indemnities for these
employees have been identified and accrued in the combined statements.
E) REVENUE RECOGNITION
The Acquired Business recognizes revenue at the point of shipment of the
products to the customer. Costs and related expenses to manufacture the
Acquired Business's products are recorded in cost of sales when the related
revenue is recognized.
4 - INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1996 1997
---- ----
(UNAUDITED)
(IN FRF MILLIONS)
-----------------
<S> <C> <C>
Raw materials 14.1 14.0
Finished products and work-in-process 6.6 4.2
Spare parts 19.2 18.9
Less: valuation allowances (6.8) (6.7)
------- -------
NET INVENTORIES 33.1 30.4
======= =======
</TABLE>
5 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Other current assets consist mainly of prepaid expenses related to the
operating lease for some of the gas-fired co-generation turbines.
The accompanying notes are an integral part of these combined statements
<PAGE> 10
10
6 - FINANCIAL ASSETS
Financial assets consist mainly of an interest-free loan amounting to FRF
3.5 million, repayable in 10 years to the "Caisse Interprofessionnelle du
Logement" (CIL). The loan has been funded in accordance with French tax
regulations.
7 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment can be analyzed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
----------- --------
1996 1997
---- ----
(UNAUDITED)
(IN FRF MILLIONS)
---------------
<S> <C> <C>
Land 1.3 1.3
Buildings 45.0 45.4
Equipment 909.9 909.6
Buildings and equipment in progress 14.0 22.8
------ ------
TOTAL GROSS BOOK VALUE 970.2 979.1
------ ------
Less: accumulated depreciation (757.5) (774.9)
====== ======
NET 212.7 204.2
====== ======
</TABLE>
8 - INTANGIBLE ASSETS
Intangible assets are linked to the Hauterives brine mine permit. For
legal reasons, until the permit has been effectively transferred to the
Acquired Business, the mine will continue to be operated administratively by
Compagnie Industrielle et Miniere ("CIM"), a wholly-owned subsidiary of
Rhone-Poulenc Participations S.A. (a wholly-owned subsidiary of Rhone-Poulenc
S.A.). The corresponding permit amounts to FRF 178 thousand in the combined
statements of assets and liabilities of the Acquired Business.
9 - OTHER CURRENT LIABILITIES
Other current liabilities consist mainly of costs related to the staff to be
transferred to the Acquired Business (vacations, etc.). About 175 employees are
to be transferred to ChlorAlp and 51 to Cevco. The statement of assets and
liabilities does not include accrued social security taxes. Such accrued
liabilities will not be assumed by the Acquired Business at the date of
transfer.
The accompanying notes notes are an integral part of these combined statements
<PAGE> 11
11
10 - LONG-TERM DEBT
Long-term debt to be contributed can be analyzed as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------
1996 1997
---- ----
(UNAUDITED)
<S> <C> <C>
(IN FRF MILLIONS)
---------------
Rhone-Poulenc Participations advance 156.0 156.0
Elf Atochem loan 23.7 22.7
----- -----
TOTAL 179.7 178.7
===== =====
</TABLE>
The Rhone-Poulenc Participations S.A. advance consists of an 8.60%
interest-bearing advance repayable within 3 months following the lender's
request. The level of this advance has been agreed upon by both parties and is
specified in the Contribution Agreement dated July 29, 1997.
The Elf Atochem 6% interest-bearing loan has been used to fund
Rhone-Poulenc Chimie S.A.'s investments in the Hauterives brine mine. The loan
is repayable over the remaining useful life of equipment purchased.
The combined statement of direct revenues and operating expenses does not
include interest expense on long-term debt.
11 - PROVISION FOR SUPPLEMENTARY PENSION AND RETIREMENT INDEMNITIES
Supplementary pension and retirement indemnities relate only to the
transferred employees of the Pont de Claix site. In particular provisions
related to employees not transferred and indirectly participating in the
operations of the Acquired Business remain at the Rhone-Poulenc Chimie S.A.
level.
An actuarial evaluation of commitments was performed in accordance with
FASB 87. The commitments are not funded. Significant actuarial assumptions
include:
- Turnover assumptions for current personnel, together with
mortality and salary progression assumptions;
- An assumed retirement age of 60 to 65 years and service period
carrying entitlement to retirement benefits at the full rate;
- A discount rate used to determine the present value of the
future benefit obligation. The rate used was 7.5%.
The accompanying notes are an integral part of these combined statements
<PAGE> 12
12
The valuation of pension costs for the Acquired Business is shown in the
table below:
<TABLE>
<CAPTION>
(IN FRF MILLIONS) DECEMBER 31,
--------------- ------------
1996
----
<S> <C>
Vested benefits 0.0
Non-vested benefits 15.8
-------------------------------------------------------------------------------------
Accumulated benefit obligation 15.8
-------------------------------------------------------------------------------------
Effect of projected salary increases 4.7
-------------------------------------------------------------------------------------
Projected benefit obligation 20.5
Plan asset 0.0
Adjustment required to recognize minimum liability 6.9
Unamortized amount resulting from unrecognized net actuarial
losses (11.9)
-------------------------------------------------------------------------------------
Short and long term liability 15.5
-------------------------------------------------------------------------------------
The periodic pension cost comprise the following items:
Benefits earned during the year 0.7
Interest cost on projected benefit obligation 1.2
Net amortization and other deferral 1.0
-------------------------------------------------------------------------------------
Net pension expense 2.9
-------------------------------------------------------------------------------------
</TABLE>
12 - OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist primarily of provisions for the cost
of the maintenance shutdown at the Pont de Claix site. Inspection shutdown are
scheduled every two to three years and the next is to occur in June 1998.
13 - MINORITY INTERESTS
Minority interests represent Rhone-Poulenc Chimie S.A.'s 40% interest
in Cevco G.I.E.. On historical basis, the operations to be managed by Cevco had
no net income.
14 - NET SALES
The net sales of the Acquired Business can be analyzed as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Sales before transporation costs 755.5 390.8
Transportation costs (52.5) (33.0)
------ ------
Net sales 703.0 357.8
------ ------
Sales in France 682.7 348.2
Expert sales 20.3 9.6
------ ------
Total 703.0 357.8
------ ------
</TABLE>
The accompanying notes are an integral part of these combined statements
<PAGE> 13
13
Sales by the Acquired Business to Rhone-Poulenc Group companies were as
follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
RP Chimie 296.1 150.9
RP Agro 55.1 26.4
RP Animal Nutrition 46.6 14.9
Other 51.4 18.1
----- -----
Total 449.2 210.3
----- -----
including sales with related parties with no margin 204.7 112.6
</TABLE>
In particular, the Acquired Business sells chlorine and hydrogen to the TDI
(Toluene di-isocyanate) activity of Rhone-Poulenc Chimie S.A. with no margin.
All transactions between Cevco and Rhone-Poulenc Chimie S.A. are valued at cost.
Analysis of the Acquired Business's net sales by product is as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
CHLORALP
Caustic 302.7 127.8
Chlorine 172.8 101.4
Bleach 22.6 13.4
Other Chlor Alp products 49.5 25.5
----- -----
SUB-TOTAL 547.6 268.1
----- -----
CEVCO
Electricity 97.9 64.3
Steam 54.2 23.5
Other Cevco's products 3.3 1.8
----- -----
SUBTOTAL 155.4 89.6
----- -----
TOTAL 703.0 357.7
===== =====
including trading activities 38.7 12.1
</TABLE>
The trading activity relates primarily to the following:
- Sales of the bleach produced at the Rhone-Poulenc Biochimie plant
site located in Elbeuf. These facilities closed down in 1996 and
the associated production volumes should be transferred to St. Fons.
The Acquired Business sold the chlorine used for bleach production
purposes to Elbeuf in 1996;
- Sales of mercury caustic purchased from Elf Atochem and Solvay. The
Acquired Business also supplies electrolysis caustic to these
companies.
The accompanying notes are an integral part of these combined statements
<PAGE> 14
14
15. COST OF GOODS SOLD
Cost of sales can be analyzed as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Proportional cost of sales and packaging (306.7) (165.8)
Non proportional cost of sales (245.7) (138.6)
Depreciation (note 18) (36.1) (16.6)
Other production costs (2.3) (1.8)
------ ------
Total (590.8) (322.8)
------ ------
</TABLE>
Proportional cost corresponds primarily to raw materials costs included in
Pont de Claix's production costs, mainly gas, electricity and brine.
Steam and electricity at the Pont de Claix site are said to be supplied by
Cevco. A portion of this electricity is sold to Electricite De France. The
valuation of the steam and electricity produced by the Acquired Business is
based on the following:
- the production cost of the energy generated by the gas-fired
co-generation facility is calculated by the Rhone-Poulenc Chimie
S.A. cost accounting system;
- the margin related to the sale of electricity to Electricite De
France is consistently shared by all electricity- and steam-
consuming activities at the Pont de Claix site (including the
chlor-alkali activity).
Non-proportional cost corresponds primarily to manufacturing labor costs,
other production expenses (i.e. routine maintenance) and taxes (i.e. business
tax). Supplementary pension and retirement indemnities related to transferred
employees are included in non-proportional cost of sales. Non-proportional
cost also includes profit-sharing costs. With the exception of labor costs
directly related to the chlor-alkali activity, most of indirect
non-proportional production cost corresponds to an allocation of such expenses
for the Pont de Claix, St. Fons and Hauterives sites. For example,
administrative expenses ("CSU") for the Pont de Claix site are shared among
businesses using an allocation key based on direct labor and maintenance
expenses included in cost of sales; the corresponding portion of CSU allocated
to the Acquired Business amounted to FRF 30 million as of December 31, 1996.
As the gas-fired co-generation operations are not considered to be an integral
business by Rhone-Poulenc Chimie S.A. for accounting purposes, no CSU are
allocated to Cevco's products ranges.
Other production costs concern primarily insurance expenses and studies
performed in connection with production investments at the sites.
The accompanying notes are an integral part of these combined statements
<PAGE> 15
15
16 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses can be analyzed as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Headquarters expenses (6.6) (4.4)
Allocated administrative expenses (16.6) (6.3)
Logistics expenses (14.1) (5.3)
Other expenses 0.7 (0.3)
----- -----
TOTAL (36.6) (16.3)
----- -----
</TABLE>
Headquarters expenses represent primarily the salaries of headquarters
employees directly assigned to the chlor-alkali activity including expenses
related to the business manager, sales manager, marketing manager and
management controller.
In Rhone-Poulenc's organizational structure, allocated administrative
expenses correspond to Rhone-Poulenc Chimie S.A.'s share of such expenses,
including central services, general management, legal, taxes, human resources,
communications and strategy. The allocation of these expenses is based
primarily on non-proportional cost of sales for the activity or actual
consumption.
Logistics expenses represent storage costs and costs related to freight
cars.
As the gas-fired co-generation operations are not considered to be an
integral business by Rhone-Poulenc Chimie S.A. for accounting purposes, no
selling, general and administrative expenses are allocated to Cevco's products
ranges.
17 - RESEARCH AND DEVELOPMENT
The Acquired Business does not have its own R&D department and therefore
uses resources made available by Rhone-Poulenc. R&D expenses were as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
---- ----
(IN FRF MILLIONS) (IN FRF MILLIONS)
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Direct R&D costs (6.3) (3.0)
</TABLE>
Direct R&D costs represent primarily research costs invoiced by
Rhone-Poulenc related to projects specifically concerning chlor-alkali
production output.
The accompanying notes are an integral part of these combined statements
<PAGE> 16
16
18 - DEPRECIATION
Depreciation included in the value of finished products represents
historical depreciation allowances related to manufacturing plant at the Pont de
Claix site, as well as depreciation allowances related to the fixed assets to
be contributed to the chlor-alkali activity at other sites (i.e. St. Fons and
Hauterives).
19 - OPERATING LEASES
Future minimum lease payments under the operating lease covering some
gas-fired co-generation turbines are estimated as follows:
<TABLE>
<CAPTION>
YEAR (IN FRF MILLIONS)
---- ---------------
<S> <C>
1997 29.9
1998 30.7
1999 31.6
2000 32.6
Thereafter 109.2
-----
TOTAL 234.0
-----
</TABLE>
The accompanying notes are an integral part of these combined statements
<PAGE> 1
EXHIBIT 99.4
LAROCHE INDUSTRIES INC.
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On October 17, 1997, LaRoche Industries Inc. (the "Company"), through its
wholly-owned subsidiary LII Europe S.A.R.L., acquired a 50% interest in
ChlorAlp S.A.S. ("ChlorAlp"), a joint venture company with Rhone-Poulenc
Chimie, S.A. ("RPC") for approximately U.S. $37.7 million (the "ChlorAlp
Acquisition"). The purchase price includes an initial investment of
approximately $26.4 million and a loan to ChlorAlp of approximately $11.3
million. The ChlorAlp Acquisition was accounted for as a purchase, and the
Company intends to account for its investment in ChlorAlp and its share of
ChlorAlp's results of operations using the equity method of accounting.
The following pro forma combined consolidated financial statements of the
Company consist of unaudited Pro Forma Combined Consolidated Statements of
Operations for the year ended February 28, 1997 and the six month period ended
August 31, 1997 and an unaudited Pro Forma Combined Consolidated Balance Sheet
as of August 31, 1997. The unaudited Pro Forma Combined Consolidated Statements
of Operations for the year and six month period ended February 28, 1997 and
August 31, 1997, respectively, reflect the Company's actual results of
operations for those periods and reflect ChlorAlp's results of operations for
the twelve month and six month periods ended December 31, 1996 and June 30,
1997, respectively, and give effect to the ChlorAlp Acquisition as if it
occurred on March 1, 1996. The unaudited Pro Forma Combined Consolidated
Balance Sheet as of August 31, 1997 reflects the Company's actual financial
position as of that date and ChlorAlp's financial position as of June 30, 1997
and give effect to the ChlorAlp Acquisition as if it occurred on August 31,
1997. The purchase price allocation assumed in the pro forma financial
statements is based upon management's best estimate of fair value of the assets
and liabilities acquired. The purchase price allocation is subject to change
pending a final analysis of the values of the assets and liabilities acquired.
The Company financed the ChlorAlp Acquisition with borrowings aggregating
approximately $35 million under the term loan portion of its bank credit
facility; the term loan bears interest at variable rates based upon LIBOR (the
"Term Loan"). The Company's bank credit facility (the "Bank Credit Facility")
consists of the Term Loan and a $125 million revolving credit facility (the
"Revolving Credit Facility").
Additional pro forma adjustments give effect to the Company's (a) issuance in
September 1997 of $175 million of 9.5% Senior Subordinated Notes due 2007 (the
"9.5% Notes"), (b) redemption of substantially all of its outstanding $100
million 13% Senior Subordinated Notes due 2004 (the "13% Notes"), (c)
completion of its Revolving Credit Facility and retirement of its previous
credit facility, (d) repayment of borrowings under its Revolving Credit
Facility with proceeds from the 9.5% Notes and (e) prefunding of certain
capital expenditures (collectively, the "Refinancing"). The Company completed
the Refinancing in order to reduce the interest rate on its senior indebtedness.
The Company believes that the Refinancing will add operating and financial
flexibility necessary to implement its business strategy most effectively. The
Pro Forma
<PAGE> 2
LAROCHE INDUSTRIES INC.
PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(continued)
Combined Consolidated Statements of Operations reflect the Refinancing as if it
occurred on March 1, 1996, and the Pro Forma Combined Consolidated Balance
Sheet reflects the Refinancing as if it occurred on August 31, 1997.
The pro forma combined consolidated financial information may not be indicative
of the results of the Company that would have actually occurred if these
transactions had been effected on the dates indicated or results that may be
obtained in the future. The pro forma combined consolidated financial
information are based upon currently available information and upon certain
assumptions that the Company believes are reasonable under the circumstances.
The pro forma combined financial information should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 28, 1997.
<PAGE> 3
LAROCHE INDUSTRIES INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28, 1997
------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(a) CHLORALP S.A.S. REFINANCING
LAROCHE CHLORALP PRO FORMA PRO FORMA PRO FORMA
INDUSTRIES INC. S.A.S. ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $379,285 $ 137,425 $ (137,425) (b) $ 379,285
COST OF SALES 313,871 115,485 1,807 (c)
(117,292) (b) 313,871
-------------------------------------------- ---------- ------------
GROSS PROFIT 65,414 21,940 (21,940) 65,414
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 54,777 8,396 4,374 (c)
(12,770) (b) 54,777
-------------------------------------------- ---------- ------------
INCOME FROM OPERATIONS 10,637 13,544 (13,544) 10,637
INTEREST EXPENSE (14,881) -- (2,800) (d) (3,760) (g) (21,441)
INCOME FROM EQUITY INVESTMENTS 4,909 -- 1,566 (b) 6,475
OTHER INCOME/(EXPENSE), NET 411 -- 332 (e) 743
-------------------------------------------- ---------- ------------
INCOME BEFORE INCOME TAXES 1,076 13,544 (14,446) (3,760) (3,586)
(PROVISION)/BENEFIT FOR INCOME TAXES (417) -- 825 (f) 1,504 (h) 1,912
-------------------------------------------- ---------- ------------
NET INCOME/(LOSS) $ 659 $ 13,544 $ (13,621) $ (2,256) $ (1,674)
============================================ ========== ============
EBITDA (i) $ 39,099 $ 20,600 $ (16,020) $ -- $ 43,679
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE> 4
LAROCHE INDUSTRIES INC.
PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31, 1997
-----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(a) CHLORALP S.A.S. REFINANCING
LAROCHE CHLORALP PRO FORMA PRO FORMA PRO FORMA
INDUSTRIES INC. S.A.S. ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES $ 194,338 $ 62,938 $ (62,938) (b) $ 194,338
COST OF SALES 160,261 56,798 1,061 (c)
(57,859) (b) 160,261
------------------------------------- ---------- -------------
GROSS PROFIT 34,077 6,140 (6,140) 34,077
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 25,913 3,381 1,969 (c)
(5,350) (b) 25,913
------------------------------------- ---------- -------------
INCOME FROM OPERATIONS 8,164 2,759 (2,759) 8,164
INTEREST EXPENSE (7,736) -- (1,400) (d) (1,108) (g) (10,244)
INCOME FROM EQUITY INVESTMENTS 2,104 -- (444) (b) 1,660
OTHER INCOME/(EXPENSE), NET 49 -- 166 (e) 215
------------------------------------- ---------- -------------
INCOME BEFORE INCOME TAXES 2,581 2,759 (4,437) (1,108) (205)
(PROVISION)/BENEFIT FOR INCOME TAXES (1,033) -- 597 (f) 443 (h) 7
------------------------------------- ---------- -------------
NET INCOME/(LOSS) $ 1,548 $ 2,759 $ (3,840) $ (665) $ (198)
===================================== ========== =============
EBITDA (i) $ 23,892 $ 5,686 $ (4,186) $ -- $ 25,392
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE> 5
LAROCHE INDUSTRIES INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FEBRUARY 28, 1997 AND AUGUST 31, 1997
Pro forma adjustments for the year ended February 28, 1997 and the six month
period ended August 31, 1997 are as follows (dollars in thousands):
(a) The average exchange rates used to convert the Combined Statements of
Direct Revenues and Operating Expenses denominated in French francs
("FRF") to U. S. dollars ("USD") were 5.116 and 5.684 for the period from
January 1, 1996 through December 31, 1996 and the period from January 1,
1997 through June 30, 1997, respectively.
(b) Pro forma adjustment to eliminate the results of operations of ChlorAlp
and reflect the Company's interest in the net income of ChlorAlp under the
equity method of accounting. The historical net income of ChlorAlp has
been adjusted to reflect pro forma interest expense of $1,492 and $671,
provision for income taxes of $2,155 and $346 and amortization on certain
intangible assets purchased of $292 and $146 for the year and six months
ended February 28, 1997 and August 31, 1997, respectively.
(c) Pro forma adjustment to reflect additional depreciation expense on
ChlorAlp's property and equipment purchased.
(d) Pro forma adjustment to reflect an increase in interest expense as a
result of borrowings under the Term Loan to fund the purchase of the
Company's 50% interest in ChlorAlp. The Term Loan bears interest at
variable rates based upon LIBOR. The foregoing adjustment assumes an
average interest rate of 8.0%. The impact of a one-eighth percent change
in the assumed average interest would change interest expense by $350 and
$175 for the year ended February 28, 1997 and the six month period ended
August 31, 1997, respectively.
(e) Reflects an increase in interest income associated with a note receivable
from ChlorAlp.
(f) Reflects (1) the expected income tax effect of repatriating the Company's
interest in the pro forma net income of ChlorAlp, and (2) the income tax
effect of the items described in (d) and (e) above at an assumed tax rate
of 40%.
(g) Pro forma adjustment to reflect an increase in interest and amortization
of debt expense as a result of the Refinancing.
(h) Reflects the income tax effect of the Company's increase in interest and
amortization of debt expense as a result of the Refinancing at an assumed
tax rate of 40%.
(i) EBITDA represents income from operations plus cash received from equity
investments plus depreciation, amortization and non-cash long-term asset
writedowns reflected in income from operations plus amounts received in
repayment or prepayment of the Company's loan to ChlorAlp. The inclusion
of amounts received on the Company's loan to ChlorAlp in the calculation of
EBITDA reflect the provisions of the 9.5% Notes and the Revolving Credit
Facility. EBITDA should not be considered as an alternative measure of net
income or cash flow provided by operating activities (both as determined in
accordance with generally accepted accounting principles), but is presented
to provide additional information related to the Company's debt service
capability. EBITDA should not be considered in isolation or as a
substitute for other measures of financial performance or liquidity.
<PAGE> 6
LAROCHE INDUSTRIES INC.
PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AUGUST 31, 1997
---------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
(a) CHLORALP S.A.S. REFINANCING
LAROCHE CHLORALP PRO FORMA PRO FORMA PRO FORMA
INDUSTRIES INC. S.A.S. ADJUSTMENTS ADJUSTMENTS CONSOLIDATED
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
CASH $ 3,211 $ -- $ 1,159 (d) $ 11,989 (f) $ 16,359
RECEIVABLES:
TRADE RECEIVABLES 37,592 -- -- 37,592
OTHER RECEIVABLES 9,726 673 (673) (b) 9,726
INVENTORIES 29,135 5,182 (5,182) (b) 29,135
OTHER CURRENT ASSETS 4,764 2,303 697 (b) 7,764
------------------------------------- --------- ---------
TOTAL CURRENT ASSETS 84,428 8,158 (3,999) 11,989 100,576
INVESTMENTS 17,336 -- 21,111 (b) 38,447
PROPERTY, PLANT AND EQUIPMENT, NET 187,619 34,757 (34,757) (b) 187,619
NOTE RECEIVABLE -- -- 8,330 (b) 8,330
OTHER ASSETS 17,971 29 1,371 (e) 5,360 (f) 24,731
------------------------------------- --------- ---------
TOTAL ASSETS $ 307,354 $ 42,944 $(7,944) $ 17,349 $ 359,703
===================================== ========= =========
CURRENT LIABILITIES:
REVOLVING CREDIT FACILITY $ 38,000 $ -- $ -- $ (38,000) (f) $ --
ACCOUNTS PAYABLE 31,659 -- -- 31,659
OTHER ACCRUED LIABILITIES 16,427 2,307 (2,307) (b) (536) (f) 15,891
CURRENT PORTION OF LONG-TERM DEBT 1,480 -- 2,920 (c) 4,400
------------------------------------- --------- ---------
TOTAL CURRENT LIABILITIES 87,566 2,307 613 (38,536) 51,950
LONG-TERM DEBT 102,961 30,419 32,080 (c) 75,915 (f)
(30,419) (b) 210,956
DEFERRED INCOME TAXES 22,592 -- -- (8,012) (f) 14,580
OTHER NON-CURRENT LIABILITIES 38,631 4,285 (4,285) (b) 38,631
MINORITY INTERESTS -- 3,242 (3,242) (b) --
REDEEMABLE COMMON STOCK 3,577 -- -- 3,577
STOCKHOLDERS' EQUITY 52,027 -- -- (12,018) (f) 40,009
NET ASSETS OF CHLOR ALP -- 2,691 (2,691) (b) --
------------------------------------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 307,354 $ 42,944 (7,944) $ 17,349 $ 359,703
===================================== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE> 7
LAROCHE INDUSTRIES INC.
NOTES TO PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AUGUST 31, 1997
Pro forma adjustments as of August 31, 1997 are as follows (dollars in
thousands):
(a) The average exchange rate used to convert the Combined Statement of
Assets and Liabilities as of June 30, 1997 denominated in FRF to USD was
5.874.
(b) Pro forma adjustment to eliminate the historical assets and liabilities
of ChlorAlp and reflect the Company's investments in and advances to
ChlorAlp. The Company's investments in and advances to ChlorAlp are
initially comprised of an equity investment of $21,111 and a note
receivable of $11,330 bearing interest of approximately 4.0% per annum.
Principal repayments of the note receivable are assumed to be $3,000 per
year for purposes of the pro forma calculations.
(c) Reflects borrowings aggregating $35,000 under the Term Loan the proceeds
of which were used primarily to fund the initial investment in and
advances to ChlorAlp.
(d) Represents proceeds from the $35,000 Term Loan in excess of the initial
investment in and advances to ChlorAlp and other acquisition costs.
(e) Reflects payment of additional acquisition costs incurred during the
purchase of the Company's 50% interest in ChlorAlp.
(f) Reflects the results of the Refinancing, including the related debt
issuance costs, the associated repayment of borrowings under the Company's
then existing revolving credit facility, and the extraordinary loss net of
income tax benefits (of $8,012) incurred of $12,018.
