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Form 8-K LSB INDUSTRIES, INC. For: Jul 27

July 27, 2022 4:34 PM EDT

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UNITED STATES

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): July 27, 2022

 

 

LSB INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

Delaware

 

1-7677

 

73-1015226

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

 

3503 NW 63rd Street, Suite 500, Oklahoma City, Oklahoma

 

73116

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (405235-4546

Not applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $.10

 

LXU

 

New York Stock Exchange

Preferred Stock Purchase Rights

 

N/A

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 

 


 


 

 

Item 2.02.

Results of Operations and Financial Condition.

On July 27, 2022, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the second quarter ended June 30, 2022. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On July 28, 2022, at 10:00 a.m. (Eastern time) / 9:00 a.m. (Central time), the Company will hold a conference call broadcast live over the Internet to discuss the financial results of the second quarter ended June 30, 2022.

The information contained in this Item 2.02 of this Form 8-K and the Exhibit 99.1 attached hereto are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Act of 1934 (as amended), or otherwise subject to the liabilities of such section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (as amended), except as shall be expressly set forth by specific reference to this Item 2.02 in such filing.

 

Item 9.01

Exhibits.

(d) Exhibits.

 

 

 

 

Exhibit
Number

  

Description

 

 

99.1

  

Press Release issued by LSB Industries, Inc. dated July 27, 2022, titled “LSB Industries, Inc. Reports Record Operating Results for the 2022 Second Quarter”.

104

 

Cover Page Interactive Data File (embedded within the XBRL document)

 


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 27, 2022

 

 

 

 

 

 

 

LSB INDUSTRIES, INC.

 

 

By:

 

/s/ Cheryl A. Maguire

Name:

 

Cheryl A. Maguire

Title:

 

Executive Vice President and Chief Financial Officer

 

 

 

3

 

Exhibit 99.1

 

LSB INDUSTRIES, INC. REPORTS RECORD OPERATING RESULTS

FOR THE 2022 SECOND QUARTER

Achieves All-Time Highest Quarterly EBITDA in Company History

 

OKLAHOMA CITY, Oklahoma…July 27, 2022…LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the second quarter ended June 30, 2022.

 

Second Quarter 2022 Highlights

 

Net sales of $284.8 million compared to $140.7 million in the second quarter of 2021

 

Adjusted EBITDA(1) of $158.1 million compared to $46.0 million in the second quarter of 2021

 

Adjusted EBITDA(1) margin of 55.5% compared to 32.7% in the second quarter of 2021

 

Adjusted EPS(1) of $1.22 in the second quarter of 2022

 

Cash Flow from Operations of $135.3 million and Capital Expenditures of $8.2 million

 

Total liquidity of over $500 million as of June 30, 2022

 

Authorized and commenced share repurchases under a $50 million buyback program

 

Announced feasibility study for a green ammonia project at Pryor Facility

 

“We had another quarter of record results with significant year-over-year growth in net sales, adjusted EBITDA and EPS,” stated Mark Behrman, LSB’s President and CEO. “We benefitted from higher selling prices compared to last year, and our strategic commercial initiatives enabled us to optimize our sales mix in the face of a dynamic market environment.  Nitrogen pricing declined through the second quarter from April’s peak levels.  This decline was largely due to a combination of wet weather throughout the corn belt, which delayed the fertilizer application season, along with the typical drop in fertilizer demand headed into the summer season.  Even so, pricing remains well above year ago levels and there are multiple supply and demand factors currently at play that we expect will support strong pricing for the remainder of 2022 and for 2023, if not longer, even in the event of a recession.”  

 

Mr. Behrman continued, “Our robust second quarter cash flow further enhanced our balance sheet, putting us in a financial position that we expect will enable us to pursue growth opportunities while at the same time, weather a potential economic downturn.  In May our Board authorized a $50 million stock repurchase program to return capital to shareholders by taking advantage of the value opportunity they believe currently exists with our shares.  Over the longer term, we believe we have an opportunity to drive shareholder value through debottlenecking projects that we are evaluating.  These projects can materially increase the production capacities of our facilities, enhancing our profit margins as we capitalize on the operating leverage inherent in our business model.  We expect to formalize our debottlenecking plans by

 

 (1 

) This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section

_______________________________________________________________________________________________________________________________

1


 

the end of this year and anticipate moving forward on one or more of these projects in early 2023.  In addition, we continue to advance our decarbonization activities.   Following our late-April announcement of our CO2 capture and sequestration or ‘blue’ ammonia project at our El Dorado facility, in late May we announced a feasibility study for a zero-carbon or ‘green’ ammonia project at our Pryor facility.  We look forward to providing updates on both of these exciting industry-leading initiatives as we make progress towards initial production of low and no carbon ammonia that we expect will be in high demand for use in a variety of critical applications in the years to come.”

 

Second Quarter Results Overview

 

 

Three Months Ended June 30,

Product (Gross Sales)

2022

 

2021

 

% Change 

    AN & Nitric Acid

$96,142

 

$56,739

 

69%

    Urea ammonium nitrate (UAN)

76,986

 

29,899

 

157%

    Ammonia

89,444

 

38,541

 

132%

    Other

22,231

 

15,517

 

43%

 

$284,803

 

$140,696

 

102%

 

Comparison of 2022 to 2021 quarterly periods:

 

Net sales increased during the quarter driven by stronger pricing for all of our products for sales made at both spot pricing as well as those related to a rise in the Tampa ammonia benchmark price, to which many of our contracts are tied.  The benefit of stronger pricing was partially offset by lower sales volumes due, in part, to the impact of wet weather in certain areas of the U.S., and dry conditions in other areas, on fertilizer purchases by farmers.  

 

The year-over-year improvement in operating income and adjusted EBITDA primarily resulted from higher selling prices, partially offset by higher natural gas feedstock prices and lower sales volumes.

 

The following tables provide key sales metrics for our products:

 

 

 

Three Months Ended June 30,

Key Product Volumes (short tons sold)

 

2022

 

2021

 

% Change

    AN & Nitric Acid

 

162,014

 

186,962

 

      (13) %

    Urea ammonium nitrate (UAN)

 

130,561

 

121,995

 

        7 %

    Ammonia

 

75,526

 

84,540

 

(11) %

 

 

368,101

 

393,497

 

(6) %

 

 

Average Selling Prices (price per short ton) (A)  

 

 

 

 

 

 

      AN & Nitric Acid

 

  $     525

 

$    259    

  

      103 %

      Urea ammonium nitrate (UAN)

 

$ 553

 

$    231    

 

      139 %

      Ammonia

 

$ 1,164  

 

$    441  

  

      164 %

 

(A)    Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons.  

 

 

 

2


 

 

 

 

 

Three Months Ended June 30,

 

 

2022

 

2021

 

% Change

Average Benchmark Prices (price per ton)

 

 

 

 

 

 

Tampa Ammonia (MT) Benchmark

 

$     1,257            

 

$      545

 

131 %

UAN Southern Plains

 

$        612            

 

$      342            

 

79 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Input Costs

 

 

 

 

 

 

    Average natural gas cost/MMBtu

 

$       7.15

 

$     2.78

 

157 %

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Position and Capital Expenditures

 

As of June 30, 2022, our total liquidity was over $500 million, including $450.8 million in cash and short-term investments and approximately $63.4 million of borrowing availability under our Working Capital Revolver. Total long-term debt, including the $11.0 million current portion, was $715.4 million on June 30, 2022 compared to $527.6 million on December 31, 2021.  

 

Interest expense for the both the second quarter of 2022 and 2021 was $12.3 million.  

 

During the second quarter we repurchased approximately $13 million of the Company’s stock at an average price of approximately $18 per share under the $50 million share repurchase plan authorized by our Board of Directors on May 16, 2022.

 

Capital expenditures were approximately $8.2 million for the second quarter of 2022.  For the full year 2022, total capital expenditures are expected to be approximately $65 million. 

 

Outlook

 

A variety of factors suggest that demand for fertilizers should continue to be robust, and fertilizer pricing should remain above historical averages for the rest of 2022, and full year 2023.  The U.S. corn belt had a very wet spring, causing farmers to forego their typical pre-planting fertilizer application and contributing to a near all-time high spike in corn prices during April and May.  As growing weather improved during June, corn prices retreated from peak levels, but continue to sit well above historical averages.  As a result, farmer income is likely to continue to be healthy, encouraging investment in fertilizers in order to maximize yield to capitalize on strong corn pricing.  The elevated corn price environment appears to have the underpinnings to persist given high levels of U.S. ethanol demand and the impact of dry conditions in South America and the Western U.S. on global corn supplies. Demand for corn from China for use as animal feed remains high as well.  While the third quarter is typically marked by limited fertilizer activity as planted corn matures, demand for agricultural ammonia could be strong in the fourth quarter, after the harvest, as farmers seek to replenish the nutrients in their soil in advance of the spring 2023 planting season, particularly given the diminished pre-plant application earlier this year.

 

Domestic natural gas prices are well above where they were at this time a year ago.  However, selling prices for our products have increased by a significant multiple of the increase in gas cost over the same period.  We expect this to translate into continued strong margins over the course of 2022 and likely

 

3


 

throughout 2023.    Natural gas costs in Europe have rebounded to near the peak levels reached this past March causing ammonia production at some European facilities to shut down again in the face of prohibitively high feedstock costs.  As such, U.S. producers remain at a significant production cost advantage and the global ammonia supply constraint should serve as the foundation for continued elevated nitrogen pricing.

 

Significantly exacerbating the aforementioned factors contributing to increased corn and fertilizer prices is the impact of the Russian invasion of Ukraine.  Ukraine is one of the world’s largest exporters of corn while Russia is among the world’s largest exporters of wheat and ammonia.  The current unstable geopolitical situation in that region could potentially disrupt the global supply of these products for the balance of 2022 and 2023.

 

Sales volumes for our industrial business have remained stable despite weakening forecasts for economic growth.  Demand for nitric acid, a product with a broad range of applications, continues to be strong and our large long-term nitric acid contract helps protect us on the downside in the event that some end markets are impacted by a potential recession.  Pricing for our industrial sales remains well above year ago levels, reflecting competition from fertilizer demand and other nitrogen demand and the continued strength in the Tampa ammonia price to which a number of our industrial product contracts are indexed.  With respect to U.S. natural gas feedstock price volatility, many of our industrial product contracts are cost-plus in nature enabling us to pass through increases in gas costs.

 

Conference Call

LSB’s management will host a conference call covering the second quarter results on Thursday, July 28, 2022 at 10:00 am ET / 9:00 am CT to discuss these results and recent corporate developments.  Participating in the call will be President & Chief Executive Officer, Mark Behrman and Executive Vice President & Chief Financial Officer, Cheryl Maguire. Interested parties may participate in the call by dialing (866) 682-6100 / (404) 267-0373.  Please call in 10 minutes before the conference is scheduled to begin and ask for the LSB conference call.  To coincide with the conference call, LSB will post a slide presentation at www.lsbindustries.com on the webcast section of the Investor tab of our website.

  

To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes prior to the conference call to download and install any necessary audio software.  If you are unable to listen live, the conference call webcast will be archived on the Company’s website.

 

LSB Industries, Inc.

LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma, manufactures and sells chemical products for the agricultural, mining, and industrial markets. The Company owns and operates facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operates a facility for a global chemical company in Baytown, Texas. LSB’s products are sold through distributors and directly to end customers primarily throughout the United States. Committed to improving the world by setting goals that will reduce our environmental impact on the planet and improve the quality of life for all of its people, the Company is well positioned to play a key role in the reduction of global carbon emissions through its planned carbon capture and sequestration, and zero carbon ammonia strategies.  Additional information about LSB can be found on its website at www.lsbindustries.com.

 

Forward-Looking Statements

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are

 

4


 

subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance including the effects of the COVID-19 pandemic and anticipated performance based on our growth and other strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or actual achievements to differ materially from the results, level of activity, performance or anticipated achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but are not limited to, business and market disruptions related to the COVID-19 pandemic, market conditions and price volatility for our products and feedstocks, as well as global and regional economic downturns, including as a result of the COVID-19 pandemic, that adversely affect the demand for our end-use products; disruptions in production at our manufacturing facilities and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC).

 

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.

 

See Accompanying Tables

 

 

Company Contact:

Cheryl Maguire, Executive Vice President & CFO

(405) 510-3524 

 

Fred Buonocore, CFA, Vice President of Investor Relations

(405) 510-3550

[email protected]

 

    

 

 

 

 

 

 


 

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LSB Industries, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

284,803

 

 

$

140,696

 

 

$

483,784

 

 

$

238,812

 

Cost of sales

 

 

141,879

 

 

 

105,688

 

 

 

250,130

 

 

 

195,744

 

Gross profit

 

 

142,924

 

 

 

35,008

 

 

 

233,654

 

 

 

43,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

9,638

 

 

 

8,545

 

 

 

20,573

 

 

 

17,338

 

Other expense (income), net

 

 

628

 

 

 

6

 

 

 

452

 

 

 

(257

)

Operating income

 

 

132,658

 

 

 

26,457

 

 

 

212,629

 

 

 

25,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

12,307

 

 

 

12,290

 

 

 

22,262

 

 

 

24,662

 

Loss (gain) on extinguishment of debt

 

 

 

 

 

(10,000

)

 

 

113

 

 

 

(10,000

)

Non-operating other expense (income), net

 

 

(3,430

)

 

 

745

 

 

 

(3,408

)

 

 

1,140

 

Income before provision (benefit) for income taxes

 

 

123,781

 

 

 

23,422

 

 

 

193,662

 

 

 

10,185

 

Provision (benefit) for income taxes

 

 

20,382

 

 

 

(248

)

 

 

31,497

 

 

 

(206

)

Net income

 

 

103,399

 

 

 

23,670

 

 

 

162,165

 

 

 

10,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on convertible preferred stocks

 

 

 

 

 

75

 

 

 

 

 

 

150

 

Dividends on Series E redeemable preferred stock

 

 

 

 

 

10,213

 

 

 

 

 

 

19,724

 

Accretion of Series E redeemable preferred stock

 

 

 

 

 

513

 

 

 

 

 

 

1,024

 

Net income attributable to participating securities

 

 

 

 

 

223

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

 

$

103,399

 

 

$

12,646

 

 

$

162,165

 

 

$

(10,507

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1.17

 

 

$

0.34

 

 

$

1.84

 

 

$

(0.28

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

1.15

 

 

$

0.32

 

 

$

1.81

 

 

$

(0.28

)

 

 

 

 

Adjusted Net Income and Adjusted EPS (1)

 

 

Adjusted net income attributable to common stockholders

 

$

103,399

 

$

23,372

 

$

162,165

 

 

$

       10,241

 

Other adjustments

 

 

5,782

 

 

3,018

 

 

9,413

 

 

 

4,071

 

Adjusted net income

 

$

109,181

 

$

26,390

 

$

     171,578

 

 

$

     14,312

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per common share excluding other

adjustments (1)

 

$

                     1.22  

 

$

               0.67

 

$

   1.91

 

 

$

0.37

 

 

(1)This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section

 

 

6


 

 

 

 

 

 

LSB Industries, Inc.

Consolidated Balance Sheets

(Information at June 30, 2022 is unaudited)

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

125,231

 

 

$

82,144

 

Short-term investments

 

 

325,566

 

 

 

 

Accounts receivable

 

 

97,406

 

 

 

86,902

 

Allowance for doubtful accounts

 

 

(652

)

 

 

(474

)

Accounts receivable, net

 

 

96,754

 

 

 

86,428

 

Inventories:

 

 

 

 

 

 

 

 

Finished goods

 

 

34,144

 

 

 

14,688

 

Raw materials

 

 

1,831

 

 

 

1,895

 

Total inventories

 

 

35,975

 

 

 

16,583

 

Supplies, prepaid items and other:

 

 

 

 

 

 

 

 

Prepaid insurance

 

 

6,174

 

 

 

14,244

 

Precious metals

 

 

13,929

 

 

 

14,945

 

Supplies

 

 

27,263

 

 

 

26,558

 

Other

 

 

7,134

 

 

 

2,234

 

Total supplies, prepaid items and other

 

 

54,500

 

 

 

57,981

 

Total current assets

 

 

638,026

 

 

 

243,136

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

839,411

 

 

 

858,480

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

 

27,056

 

 

 

27,317

 

Intangible and other assets, net

 

 

3,221

 

 

 

3,907

 

 

 

 

30,277

 

 

 

31,224

 

 

 

 

 

 

 

 

 

 

 

 

$

1,507,714

 

 

$

1,132,840

 

 

 

 

 

 

 

 

 

 

 

 

 


 

7


 

 

LSB Industries, Inc.

Consolidated Balance Sheets (continued)

(Information at June 30, 2022 is unaudited)

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

69,308

 

 

$

49,458

 

Short-term financing

 

 

5,682

 

 

 

12,716

 

Accrued and other liabilities

 

 

31,325

 

 

 

33,301

 

Current portion of long-term debt

 

 

10,977

 

 

 

9,454

 

Total current liabilities

 

 

117,292

 

 

 

104,929

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

704,427

 

 

 

518,190

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

18,681

 

 

 

19,568

 

 

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

523

 

 

 

3,030

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

57,232

 

 

 

26,633

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $.10 par value; 150 million shares authorized, 91.2 million

   shares issued

 

 

9,117

 

 

 

9,117

 

Capital in excess of par value

 

 

495,330

 

 

 

493,161

 

Retained earnings (accumulated deficit)

 

 

130,910

 

 

 

(31,255

)

 

 

 

635,357

 

 

 

471,023

 

Less treasury stock, at cost:

 

 

 

 

 

 

 

 

Common stock, 2.3 million shares (1.4 million shares at

December 31, 2021)

 

 

25,798

 

 

 

10,533

 

Total stockholders' equity

 

 

609,559

 

 

 

460,490

 

 

 

$

1,507,714

 

 

$

1,132,840

 

 

 

 

 


 

8


 

 

 

 

LSB Industries, Inc.

Non-GAAP Reconciliations

 

This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements.

 

EBITDA and Adjusted EBITDA Reconciliation

EBITDA is defined as net income (loss) plus interest expense, less gain (loss) on extinguishment of debt, plus depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization of intangible and other assets), plus provision (benefit) for income taxes. Adjusted EBITDA is reported to show the impact of non-cash stock-based compensation, one time/non-cash or non-operating items-such as, one-time income or fees, loss (gain) on sale of a business and/or other property and equipment, certain fair market value (FMV) adjustments, and consulting costs associated with reliability and purchasing initiatives (Initiatives). We historically have performed Turnaround activities on an annual basis; however, we have moved towards extending Turnarounds to a two or three-year cycle. Rather than being capitalized and amortized over the period of benefit, our accounting policy is to recognize the costs as incurred.  Given these Turnarounds are essentially investments that provide benefits over multiple years, they are not reflective of our operating performance in a given year.

 

We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. In addition, we believe that certain investors consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items.

 

EBITDA and adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the periods indicated. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.

 

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share have been adjusted for the impact of the closing of the Exchange Transaction on September 27, 2021 as well as the one time/non-cash or non-operating items referred to in the above section relating to Adjusted EBITDA.


 

9


 

 

LSB Industries, Inc.

Non-GAAP Reconciliations (continued)

 

 

 

 

LSB Consolidated ($ In Thousands)

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Net income

$103,399

 

$23,670

 

$162,165

 

$10,391

Plus:

 

 

 

 

 

 

 

     Interest expense, net

          11,584

 

          12,290

 

          21,539

 

        24,662

     Loss (gain) on extinguishment of debt

                  -  

 

        (10,000)

 

              113

 

       (10,000)

     Depreciation and amortization

          16,996

 

          17,277

 

          34,504

 

        34,354

     Provision (benefit) for income taxes

          20,382  

 

             (248)

 

          31,497

 

            (206)

EBITDA

$152,361

 

$42,989

 

$249,818

 

$59,201

 

 

 

 

 

 

 

 

Stock-based compensation

            1,365

 

            1,063

 

            2,168

 

          1,776

Noncash (gain) on natural gas contracts

                  -  

 

                  -  

 

                  -  

 

         (1,205)

Legal fees (Leidos)

              270

 

              441

 

              613

 

          1,327

Loss on disposal of assets

              852

 

                91

 

              806

 

             174

Fair market value adjustment on preferred stock         

    embedded derivatives

                  -  

 

              716

 

                  -  

 

          1,152

Turnaround costs

            3,295

 

              707

 

            5,826

 

             847

Adjusted EBITDA

$158,143

 

$46,007

 

$259,231

 

$63,272

 

 

 

 

 

 

 


 

10


 

 

LSB Industries, Inc.

Non-GAAP Reconciliations (continued)

 

 

 

 

Three Months Ended

 

 

Six Months Ended
June 30,

 

 

June 30,

 

 

 

 

2022

2021

 

 

2022

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands, Except Per Share Amounts)

Numerator:

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders

$

$     103,399

 

$        12,646

 

 

$     162,165

 

$      (10,507)

    Adjustments:

 

 

 

 

 

 

 

 

 

 

Dividend requirements on Series E
   Redeemable Preferred

 

                    -  

 

           10,213

 

 

                    -  

 

           19,724

 

Accretion of Series E Redeemable Preferred

 

                    -  

 

                513

 

 

                    -  

 

             1,024

Adjusted net income (loss) attributable to
  common stockholders

 

         103,399

 

           23,372

 

 

         162,165

 

           10,241

   Other Adjustments:

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

             1,365

 

             1,063

 

 

             2,168

 

             1,776

 

Noncash loss (gain) on natural gas contracts

 

                    -  

 

                    -  

 

 

                    -  

 

            (1,205)

 

Legal fees (Leidos)

 

                270

 

                441

 

 

                613

 

             1,327

 

Loss on disposal of assets

 

                852

 

                  91

 

 

                806

 

                174

 

Fair market value adjustment on preferred stock
embedded derivative

 

                    -  

 

                716

 

 

                    -  

 

             1,152

 

Turnaround costs

 

             3,295

 

                707

 

 

             5,826

 

                847

Adjusted net income (loss) attributable to
  common stockholders, excluding other adjustments

$

$     109,181

 

$        26,390

 

 

$     171,578

 

$        14,312

Denominator:

 

 

 

 

 

 

 

 

 

Adjusted weighted-average shares for basic
  net income (loss) per share and for adjusted net
  income (loss) per share (1)

 

88,181

 

37,031

 

 

88,301

 

37,162

    Adjustment:

 

 

 

 

 

 

 

 

 

 

Unweighted shares, including unvested restricted stock subject to forfeiture

 

             1,224

 

             2,199

 

 

             1,458

 

             1,665

Outstanding shares, net of treasury, at period end  
  for adjusted net income (loss) per share,
  excluding other adjustments

 

           89,405

 

           39,230

 

 

           89,759

 

           38,827

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per common share

$

$            1.17

 

$            0.34

 

 

$            1.84

 

$           (0.28)

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per common share,
   excluding other adjustments

$

$            1.22

 

$            0.67

 

 

$            1.91

 

$            0.37

 

 

 

 

 

 

 

 

 

 

 

(1) Excludes the weighted-average shares of unvested restricted stock that are subject to forfeiture

 

 

 

 

 

 

 

 

 

 

11


 

 

 

Ammonia, AN, UAN Sales Price Reconciliation

The following table provides a reconciliation of total identified net sales as reported under GAAP in our consolidated financial statements reconciled to netback sales which is calculated as net sales less freight and other non-netback costs. We believe this provides a relevant industry comparison among our peer group.

 

 

Three Months Ended                                  June 30,

 

2022

 

2021

 

              (In Thousands)

 

Ammonia, AN, Nitric Acid, UAN Net sales

$ 262,572

 

$ 125,179

 

 

 

 

 

 

Less freight and other

17,424

 

11,332

 

 

 

 

 

 

Ammonia, AN, UAN netback sales

$ 245,148

 

$ 113,847

 

 

 

 

12



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