<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 1994
----------------
ADDINGTON RESOURCES, INC.
-------------------------
(Exact name of registrant as specified in charter)
Delaware 0-16498 61-1125039
- --------------- ----------- --------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
1500 North Big Run Road
Ashland, Kentucky 41102
- ----------------------- ----------
(Address of principal executive offices) (Zip code)
Company's telephone number, including area code: (606) 928-3433
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Route 180, Big Run Road, Ashland, Kentucky 41101
------------------------------------------------
(Former name or former address,
if changed since last report.)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
- ---------------------------------------------
On January 14, 1994 (the "Closing Date"), pursuant to the terms of a Stock
Purchase Agreement (the "Agreement") dated as of September 24, 1993, between
Addington Holding Company, Inc., a wholly owned subsidiary of Addington
Resources, Inc. (the "Company"), and Pittston Acquisition Company, an indirect
wholly owned subsidiary of The Pittston Company ("Pittston"), Pittston purchased
the Company's stock in five of the Company's indirect wholly owned coal
subsidiaries (collectively, the "Subsidiaries"), Addington, Inc., Appalachian
Mining, Inc., Appalachian Land Company, Vandalia Resources, Inc., and Kanawha
Development Corporation (the "Transaction"). The Subsidiaries constituted a
substantial portion of the Company's coal operations.
The purchase price paid by Pittston on the Closing Date for the Subsidiaries
was $157,000,000 cash and was determined based on arm's length negotiations. In
addition, before the Closing Date, certain property, plant and equipment and
mineral reserves were transferred from the Subsidiaries to the Company. In
addition, before the Closing Date the Subsidiaries distributed their excess
working capital to the Company in accordance with the terms of the Agreement.
Within sixty days of the Closing Date, the Company will deliver to Pittston a
statement of working capital for the Subsidiaries showing the Subsidiaries'
Combined Net Working Capital (as defined in the Agreement) as of the close of
business on the Closing Date. If the Subsidiaries' Combined Net Working Capital
exceeds zero, Pittston will cause the Subsidiaries to distribute to the Company
an amount equal to the difference between the Subsidiaries' Combined Net Working
Capital and zero. In the alternative, if the Subsidiaries' Combined Net Working
Capital is less than zero, the Company will pay to Pittston an amount equal to
the difference between the Subsidiaries' Combined Net Working Capital and zero.
The Agreement provides that any adjustment paid for the Subsidiaries' Combined
Net Working Capital will be paid in cash within 10 days after determination of
the Subsidiaries' Combined Net Working Capital.
Pursuant to a coal sales contract dated March 1, 1992, between the Company
and Pittston, Pittston agreed to purchase up to 1,790,000 tons of coal from one
of the Company's mines in West Virginia through 1994. During October 1992, the
Company modified this coal sales contract whereby the Company agreed to supply
900,000 tons per year to Pittston for 1993 and 1994. Pursuant to another coal
sales contract dated March 1, 1992, the Company also agreed to purchase
approximately 2,300,000 tons of coal from one of Pittston's mines in eastern
Kentucky through February 1996. Both of the coal sales contracts entered into by
the Company and Pittston in March 1992 were acquired by Pittston on the Closing
Date.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information, and Exhibits
- ---------------------------------------------------------------------------
(a) Financial statements of business acquired.
------------------------------------------
Not applicable.
(b) Pro Forma Financial Information.
--------------------------------
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DISPOSITION
In accordance with the Agreement, on January 14, 1994, the Company sold to
Pittston the stock of the Subsidiaries: Addington, Inc., Appalachian Mining,
Inc., Appalachian Land Company, Vandalia Resources, Inc., and Kanawha
Development Company. The Subsidiaries represented the majority of the Company's
coal mining operations and, after excluding the portion of such Subsidiaries'
coal mining operations retained by the Company, are collectively referred to
herein as the "disposed business." Included in the disposed business are: coal
producing properties, coal reserves, coal loading docks, coal wash plants, coal
tipples, land, buildings, machinery and equipment, coal sales contracts, and
certain liabilities and working capital items.
ACQUISITION
In accordance with the terms of an Acquisition Agreement dated January 29,
1993, between subsidiaries of the Company and NERCO Coal Corp. (NERCO), the
Company acquired the majority of NERCO's West Virginia mining operations, herein
referred to as the "acquired business." Included in the acquired business are:
inventories, property, plant and equipment, coal sales contracts, certain
reclamation liabilities and the rights to approximately 80 million tons of coal
reserves. This acquisition is not a part of the Transaction described above and
is included only in the December 31, 1992 unaudited pro forma condensed
consolidated statement of operations as described below.
PRO FORMA
The following unaudited pro forma condensed consolidated financial information
is based on the historical consolidated financial statements of the Company,
adjusted to give effect to the Transaction.
The unaudited pro forma condensed consolidated balance sheet as of September
30, 1993 gives effect to the elimination of the disposed business, as well as
other adjustments, assuming the disposition of the business had taken place on
September 30, 1993, and the cash had been received at that time. The cash
proceeds received by the Company from the sale will be used to retire the
Company's Senior Secured Notes and certain other notes payable.
The unaudited pro forma condensed consolidated statements of operations for
the year ended December 31, 1992 and the nine months ended September 30, 1993
give effect to the elimination of the disposed business, as well as other
adjustments, assuming the disposition of the business had taken place on
January 1, 1992.
The unaudited pro forma condensed consolidated statement of operations for the
year ended December 31, 1992 also gives effect to the acquired business, as
described above, assuming the acquisition had taken place on January 1, 1992.
Included in the disposed business, however, is the elimination of the acquired
business since it is included in the business sold to Pittston.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable.
The following unaudited pro forma condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Management does not believe that this pro
forma presentation is indicative of the financial position and results which
would have occurred had the Transaction occurred on the dates indicated in the
various pro forma condensed consolidated financial statements because of the
hypothetical nature of the pro forma information and because the repayment of
indebtedness from the proceeds of the Transaction would have permitted the
Company to have operated its other businesses differently during the periods
indicated.
2
<PAGE>
ADDINGTON RESOURCES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MINUS
DISPOSED PRO FORMA PRO FORMA
HISTORICAL BUSINESS ADJUSTMENTS RESULTS
---------- -------- ----------- ---------
(NOTE A) (NOTE B) (NOTE C)
<S> <C> <C> <C> <C>
Revenues:
Mining.......................... $258,766 $183,114 $(5,640)(1) $70,012
Environmental................... 17,214 -- -- 17,214
Other........................... 260 -- -- 260
-------- -------- ------- -------
276,240 183,114 (5,640) 87,486
-------- -------- ------- -------
Costs and expenses:
Cost of operations.............. 225,060 147,361 (2,808)(1) 74,891
Depreciation and amortization... 23,087 15,507 (3,033)(2) 4,547
General and administrative...... 15,834 8,526 (602)(3) 6,706
-------- -------- ------- -------
263,981 171,394 (6,443) 86,144
-------- -------- ------- -------
Income from operations............ 12,259 11,720 803 1,342
-------- -------- ------- -------
Interest and other income
(expense):
Interest expense................ (12,412) (11,007) 1,061(4) (344)
Interest income................. 457 3,385 3,367(4) 439
Loss on sale of assets.......... (47) (47) -- --
Other, net...................... 815 497 -- 318
-------- -------- ------- -------
(11,187) (7,172) 4,428 413
-------- -------- ------- -------
Income before income taxes........ 1,072 4,548 5,231 1,755
Income tax provision.............. 296 -- 318(5) 614
-------- -------- ------- -------
Net income........................ $ 776 $ 4,548 $ 4,913 $ 1,141
======== ======== ======= =======
Weighted average number of shares
outstanding...................... 15,861 15,861
======== =======
Net income per share.............. $ 0.05 $ 0.07
======== =======
</TABLE>
3
<PAGE>
ADDINGTON RESOURCES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993
(UNAUDITED)
PRO FORMA
The preceding pro forma statement of operations presents the consolidated
results of Addington Resources, Inc. for the nine months ended September 30,
1993, after eliminating the disposed business and after giving effect to the
adjustments described in Note C below.
The adjustments made to this pro forma statement of operations assume that
the disposition of this business had taken place on January 1, 1992.
It is management's opinion that these pro forma results are not necessarily
indicative of the results which would have occurred had the disposition been
made on January 1, 1992.
Note A: Represents the historical consolidated results of Addington Resources,
Inc. for the nine months ended September 30, 1993.
Note B: Represents the historical results of the disposed business for the nine
months ended September 30, 1993. Such historical results for the
disposed business have been prepared using the Agreement referred to
herein and represent the accounts of the disposed "business". The
disposed business comprises the majority of the Company's coal mining
operations. Certain coal mining operations, however, have been retained
by the Company. Such retained coal mining operations were previously
included in the subsidiaries to be sold. The accompanying historical
results represent only the business disposed to Pittston and do not
represent the business retained by the Company.
Various allocations and carve out adjustments have been made in the
preparation of the historical results of the disposed business. Such
allocations have been recorded to segregate the historical accounts to
reflect the business disposed based upon the following methods: (a)
specific identification, where possible, and (b) relative ratio of coal
production disposed. Management believes that the method used for
allocations and carve out adjustments is reasonable. No income taxes
have been provided in the historical results of the disposed business.
Note C: Represents the effects of pro forma adjustments. The adjustments are as
follows:
(1) This adjustment reduces revenues to the amounts that would be
realized on coal sales to Pittston (from retained mines) per the
agreement. It also reduces certain costs that are based on sales
price. Cost of operations is also reduced by certain nonrecurring
(per sales agreement) coal transportation and processing costs.
(2) This adjustment eliminates depreciation and amortization related to:
1) coal sales contract amortization as all coal sales contracts with
cost basis have been sold to Pittston, and 2) depreciation related
to retained assets that were written off as part of disposal.
(3) This adjustment eliminates sales commissions on coal sales as the
commission agreements (and obligations) have been sold to Pittston.
(4) This adjustment removes interest expense related to the Senior
Secured Notes and other notes payable that were paid off with the
proceeds from the sale. Interest income has not been imputed from
the remaining proceeds (if any). The adjustment for interest income
is to eliminate intercompany interest earned by the disposed
business.
(5) This adjustment states the pro forma income tax provision at the
statutory rates.
Note D: In connection with this disposal transaction, the Company expects to
record an estimated loss on sale of approximately $1.9 million (sales
proceeds, net of commissions and other estimated selling expenses,
including an estimated $3.6 million for employee compensation, less the
Company's basis in the disposed business, reduced by certain adjustments
described in Note C to the pro forma condensed consolidated balance
sheet included herein), together with a writedown adjustment of $7.6
million as well as the related tax effects thereon ($3.3 million
benefit), resulting in an overall after tax equity decrease of $6.2
million. This nonrecurring charge results directly from the transaction
and will be included in the Company's results of operations within the
twelve months succeeding the transaction. Accordingly, such amount is
not considered in the accompanying pro forma condensed consolidated
statement of operations.
4
<PAGE>
ADDINGTON RESOURCES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MINUS
PRO
PLUS FORMA PRO
ACQUIRED DISPOSED PRO FORMA FORMA
HISTORICAL BUSINESS BUSINESS ADJUSTMENTS RESULTS
---------- -------- -------- ----------- --------
(NOTE A) (NOTE B) (NOTE C) (NOTE D)
<S> <C> <C> <C> <C> <C>
Revenues:
Mining................ $292,225 $35,232 $219,689 $(8,681)(1) $ 99,087
Environmental......... 7,779 -- -- -- 7,779
Other................. 1,470 -- -- -- 1,470
-------- ------- -------- ------- --------
301,474 35,232 219,689 (8,681) 108,336
-------- ------- -------- ------- --------
Costs and expenses:
Cost of operations.... 236,854 33,280 177,592 (4,654)(1) 87,888
Depreciation and
amortization......... 25,111 337 18,188 (4,591)(2) 2,669
General and
administrative....... 21,274 925 9,243 (824)(3) 12,132
-------- ------- -------- ------- --------
283,239 34,542 205,023 (10,069) 102,689
-------- ------- -------- ------- --------
Income from operations.. 18,235 690 14,666 1,388 5,647
-------- ------- -------- ------- --------
Interest and other
income (expense):
Interest expense...... (13,483) (603) (13,790) (261)(4) (557)
Interest income....... 791 -- 1,468 1,151 (4) 474
Gain on sale of
assets............... 14,829 -- 4,319 -- 10,510
Litigation settlement. (5,100) -- -- -- (5,100)
Other, net............ 1,052 (53) 1,368 -- (369)
-------- ------- -------- ------- --------
(1,911) (656) (6,635) 890 4,958
-------- ------- -------- ------- --------
Income before income
taxes.................. 16,324 34 8,031 2,278 10,605
Income tax provision
(benefit).............. 5,288 11 11 (1,682)(5) 3,606
-------- ------- -------- ------- --------
Net income.............. $ 11,036 $ 23 $ 8,020 $ 3,960 $ 6,999
======== ======= ======== ======= ========
Weighted average number
of shares outstanding.. 15,240 15,240
======== ========
Net income per share.... $ .72 $ .46
======== ========
</TABLE>
5
<PAGE>
ADDINGTON RESOURCES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
(UNAUDITED)
PRO FORMA
The preceding pro forma statement of operations presents the consolidated
results of Addington Resources, Inc. (Addington) for the year ended December
31, 1992, after adding the acquired business (Note B below) and after
eliminating the disposed business (Note C below) and after giving effect to the
adjustments described in Note D below. The acquired business is part of the
business to be sold to Pittston.
The adjustments made to this pro forma statement of operations assume that
the disposition of this business had taken place on January 1, 1992.
It is management's opinion that these pro forma results are not necessarily
indicative of the results which would have occurred had the disposition been
made on January 1, 1992.
Note A: Represents the historical consolidated results of Addington Resources,
Inc. for the year ended December 31, 1992.
Note B: Represents the pro forma condensed consolidated statement of operations
for the acquired business for the year ended December 31, 1992.
Note C: Represents the pro forma results of the disposed business for the year
ended December 31, 1992. Such results include both the historical
results of the disposed business, excluding the acquired business, (see
Note B to the notes to Pro Forma Condensed Consolidated Statement of
Operations for the nine months ended September 30, 1993) and the pro
forma results of the acquired business for the year then ended (Note B
above).
Note D: Represents the effects of pro forma adjustments. The adjustments are as
follows:
(1) This adjustment reduces revenues to the amounts that would be
realized on coal sales to Pittston (from retained mines) per the
agreement. It also reduces certain costs that are based on sales
price. Cost of operations is also reduced by certain nonrecurring
(per sales agreement) coal transportation and processing costs.
(2) This adjustment eliminates depreciation and amortization related
to: 1) coal sales contract amortization as all coal sales contracts
with cost basis have been sold to Pittston, and 2) depreciation
related to retained assets that were written off as part of
disposal.
(3) This adjustment eliminates sales commissions on coal sales as the
commission agreements (and obligations) have been sold to Pittston.
(4) This adjustment removes interest expense related to the Senior
Secured Notes and other notes payable that were paid off with the
proceeds from the sale. Interest income has not been imputed from
the remaining proceeds (if any). The adjustment for interest income
is to eliminate intercompany interest earned by the disposed
business.
(5) This adjustment states the pro forma income tax provision at the
statutory rates.
Note E: In connection with this disposal transaction, the Company expects to
record an estimated loss on sale of approximately $1.9 million (sales
proceeds, net of commissions and other estimated selling expenses,
including an estimated $3.6 million for employee compensation, less the
Company's basis in the disposed business, reduced by certain adjustments
described in Note C to the pro forma condensed consolidated balance
sheet included herein), together with a writedown adjustment of $7.6
million as well as the related tax effects thereon ($3.3 million
benefit), resulting in an overall after tax equity decrease of $6.2
million. This nonrecurring charge results directly from the transaction
and will be included in the Company's results of operations within the
twelve months succeeding the transaction. Accordingly, such amount is
not considered in the accompanying pro forma condensed consolidated
statement of operations.
6
<PAGE>
ADDINGTON RESOURCES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1993
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DISPOSED PRO FORMA PRO FORMA
HISTORICAL BUSINESS ADJUSTMENTS RESULTS
---------- -------- ----------- ---------
(NOTE A) (NOTE B) (NOTE C)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash...................... $ 23,419 $150,900 (1) $(153,822)(3) $ 20,497
Accounts receivable....... 44,556 (13,025)(2) -- 31,531
Other current assets...... 44,410 (21,271)(2) (8,753)(4) 14,386
-------- -------- --------- ---------
Total current assets.... 112,385 116,604 (162,575) 66,414
-------- -------- --------- ---------
Property, plant, and
equipment, net............. 187,897 (60,373) (17,241)(5) 110,283
-------- -------- --------- ---------
Coal sales contracts, net... 22,371 (22,114) (257)(5) --
Other assets................ 55,015 (29,402) (8,207)(6) 17,406
-------- -------- --------- ---------
Total assets............ $377,668 $ 4,715 $(188,280) $ 194,103
======== ======== ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable.......... $ 29,553 $(24,429)(2) $ -- $ 5,124
Accrued expenses and
other.................... 29,622 (8,902)(2) -- 20,720
Other current liabilities. 30,087 (965)(2) (27,857)(3) 1,265
-------- -------- --------- ---------
Total current
liabilities............ 89,262 (34,296) (27,857) 27,109
Senior secured notes........ 125,000 -- (125,000)(3) --
Other long term liabilities. 22,025 (14,142) 23,900 (7) 31,783
-------- -------- --------- ---------
Total liabilities....... 236,287 (48,438) (128,957) 58,892
-------- -------- --------- ---------
Stockholders' equity........ 141,381 53,153 (8) (59,323)(8) 135,211
-------- -------- --------- ---------
Total liabilities and
stockholders' equity... $377,668 $ 4,715 $(188,280) $ 194,103
======== ======== ========= =========
Book value per share.... $ 9.05 $ 8.65
======== =========
Shares outstanding at
September 30, 1993..... 15,627 15,627
======== =========
</TABLE>
7
<PAGE>
ADDINGTON RESOURCES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1993
(UNAUDITED)
PRO FORMA
The preceding pro forma balance sheet presents the consolidated financial
position of Addington Resources, Inc. as of September 30, 1993, after
eliminating the disposed business and after giving effect to the adjustments
described in Note C below.
The adjustments made to this pro forma balance sheet assume that the
disposition of the business had taken place on September 30, 1993, and the cash
had been received at that time.
It is management's opinion that this pro forma condensed balance sheet is not
necessarily indicative of the financial position which would have occurred had
the disposition been made on September 30, 1993.
Note A: Represents the historical consolidated balances of Addington Resources,
Inc. as of September 30, 1993.
Note B: Represents the proceeds (net of commissions and other estimated selling
expenses, including an estimated $3.6 million for employee compensation)
from the sale of the disposed business, net of the historical balances
of the disposed business as of September 30, 1993. Adjustments (1), (2),
and (8) are described in Note C below.
Note C: Represents the effect of pro forma adjustments. The adjustments are as
follows:
(1) This adjustment records the proceeds from the sale ($157 million),
net of commissions and other estimated selling expenses.
(2) Working capital items are stated to net to zero to reflect those
amounts as calculated pursuant to the working capital provisions of
the Agreement.
(3) This adjustment records the effect of using the proceeds to retire
the Senior Secured Notes and certain other notes payable. Also
included in other current liabilities is an adjustment to record the
tax benefit for the effect of the pro forma adjustments as described
in Note (8) below.
(4) This adjustment eliminates the basis in certain deferred costs on
assets purchased by Pittston. This adjustment arises due to the
different method in determining value (not cost basis) for the
respective current asset being sold.
(5) This adjustment eliminates the basis in property, plant, and
equipment and a contract mining agreement retained by Addington
which have been written off. These retained assets have been written
off in this transaction due to the nature of the assets and their
expected future use and value to Addington. Addington has also
recorded other writeoffs, principally that of the Company's
investment ($7.6 million) in its sulfur mine development project.
This project will be abandoned in connection with the Company's
deemphasis on mining operations.
(6) This adjustment eliminates the basis in: 1) advance royalties and
mineral reserves retained by Addington which have been written off,
and 2) deferred financing costs which will be eliminated upon
retirement of the related debt (see Note (3) above).
8
<PAGE>
(7) This adjustment reflects the following: 1) accrual related to the
call premium upon retirement of the Senior Secured Notes (see note
(3) above), 2) accrual related to reclamation and other costs for
retained properties, and 3) accrual related to royalty obligations
to Pittston.
(8) These adjustments reflect the net effect on stockholder's equity of
the loss on disposal ($1.9 million) and other writedown adjustments
($7.6 million) as well as the related tax effect thereon ($3.3
million benefit), resulting in an overall after tax equity decrease
of $6.2 million.
9
