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form_8k.htm
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)    March 11, 2008 

LSB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

 
b
Delaware
  
1-7677
  
73-1015226
(State or other jurisdiction
of incorporation)
  
(Commission File
Number)
  
(IRS Employer
Identification No.)
   
16 South Pennsylvania, Oklahoma City, Oklahoma
(Address of principal executive offices)
  
 73107 
            (Zip Code)
         
Registrant's telephone number, including area code      (405) 235-4546

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):

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

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

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

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

Section 2 – Financial Information
 
Item 2.02.  Results of Operations and Financial Condition

On March 11, 2008, LSB Industries, Inc. (the “Company”) issued a press release to report its audited financial results for the fourth quarter and year ended December 31, 2007.  The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On March 12, 2008, at 11:00 a.m. EDT/10:00 a.m. CDT, the Company held a conference call broadcast live over the Internet to discuss the audited results of the fourth quarter and year ended December 31, 2007.  The conference call was announced in the press release, dated March 11, 2008, attached hereto as Exhibit 99.1.

The information contained in this Item 2.02 of this Form 8-K and the Exhibit 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 in such filing.

Item 8.01. Other Events

On March 11, 2008, the Company’s Board of Directors approved a stock repurchase plan to buy an unstipulated number of shares of the Company’s common stock in open market and privately negotiated transactions for an indefinite period of time.  The stock repurchase plan is to remain in effect until such time as the Board of Directors decide to end it.  The repurchases by the Company will be conducted pursuant to Rule 10b-18, and the Company will use its working capital to fund the repurchase plan.

Item 9.01. Exhibits
 
The information contained in the accompanying Exhibit 99.1 shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by reference in any filing under the Exchange Act or the Securities Act, except as shall be expressly set forth by specific reference in such filing.
 
(d) Exhibits.
 
Exhibit                      Description
 
99.1           Press Release issued by LSB Industries, Inc. dated March 11, 2008


 
 
 


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:     March 14, 2008
 
 
                                   LSB INDUSTRIES, INC.

                                   By: /s/Tony M. Shelby    
                                   Name:  Tony M. Shelby
                                   Title:  Executive Vice President,
                                   Chief Financial Officer


ex_991.htm
 


COMPANY CONTACT:
Investor Relations Contact:
Tony M. Shelby, Chief Financial Officer
Linda Latman (212) 836-9609
(405) 235-4546
Lena Cati (212) 836-9611
 
The Equity Group Inc.


FOR IMMEDIATE RELEASE


LSB INDUSTRIES, INC. REPORTS RECORD RESULTS
FOR THE 2007 FOURTH QUARTER AND YEAR
Net Sales Increase of 19% Produces 117% Gain in Operating Income
For The Year

Oklahoma City, Oklahoma .  .  . March 11, 2008 ..  .  . LSB Industries, Inc. (AMEX:LXU), today reported results for the fourth quarter and year ended December 31, 2007.

Fourth Quarter 2007 Compared to Fourth Quarter 2006:
§  
Net sales increased 8.8% to $134.7 million from $123.7 million;
§  
Operating income rose 89.4% to $11.2 million from $5.9 million;
§  
Net income was $4.5 million compared to $2.7 million, an increase of 65.9%;
§  
After deducting preferred stock dividend requirements, net income applicable to common stock was $4.5 million for 2007, compared to $1.8 million for 2006; there were no dividend requirements for the fourth quarter 2007;
§  
Diluted earnings per share were $.20 or up 100% from last year’s $.10 per share.

2007 Compared to 2006:
§  
Net sales increased 19.2% to $586.4 million from $492.0 million;
§  
Operating income was $59.0 million, up 117.4% compared to $27.1 million;
§  
Net income of $46.9 million was 202.2% ahead of last year’s $15.5 million;
§  
After preferred stock dividend requirements, net income applicable to common stock was $41.3 million, up 220.3% from $12.9 million;
§  
Diluted earnings per share were $1.84, or 142.1% ahead of last year’s $.76 per share.

Business Overview
LSB’s CEO, Jack E. Golsen, noted that 2007 results for sales and earnings exceeded expectations, sales and profits were an all-time record and the Company accomplished a great deal to improve the balance sheet and net worth.  “Both of our core businesses turned in a record performance in 2007.  We are confident that we are in the right spot because of our energy saving and green products and the country’s quest for energy independence.  We continue to dominate the niche markets we serve as our market share of key products continues to grow.  The products of both of our businesses are a necessity for the future of our country.”
 
(more)

 
 
 

In commenting on the results for the fourth quarter and calendar year 2007, Tony Shelby, LSB’s CFO stated that earnings included certain income items that made a great quarter and year even better.”

He pointed out that the fourth quarter 2007 includes $1.3 million of pretax income relative to i) a business interruption insurance recovery of $2.3 million offset by ii)  $1.0 million write-off of unamortized debt issuance costs as the result of the early pay-off of a $50.0 million term loan in November.

In addition, calendar year 2007 includes $6.1 million pretax income relative to i) a litigation settlement of $3.3 million , ii) a business interruption insurance recovery of $3.8 million, and as previously mentioned, both offset by iii) $1.0 million write-off of unamortized debt issuance costs as the result of the early pay-off of a $50.0 million term loan in November.

Conference Call
LSB will host a conference call covering the fourth quarter and year 2007 results on Wednesday, March 12, 2008 at 11:00 am EDT/ 10:00 am CDT.  You are invited to listen to the call by dialing: 1-706-679-3079.  Additionally, there will be a webcast posted on the Company’s website at www.lsb-okc.com.  If you are unable to listen live, the conference call webcast will be archived on the Company’s website for 90 days.
 
LSB Industries, Inc.
We are a diversified holding company and our principal business activities consist of the:

·  
Climate Control Business engaged in the manufacturing and selling of a broad range of air conditioning and heating products consisting of water source heat pumps including geothermal heat pumps, hydronic fan coils, large custom air handlers and other products used in commercial and residential new building construction, renovation of existing buildings and replacement of existing systems.

·  
Chemical Business engaged in the manufacturing and selling of chemical products produced from plants in Texas, Arkansas and Alabama for the industrial, mining and agricultural markets.

Statements in this release which are not historical in nature are forward-looking statements.  Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words.  Forward-looking statements contained herein include, without limitation, our products are a necessity to the future of our country. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors.  These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Special Note Regarding Forward Looking Statements” and “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2007, and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update the information contained in this press release.
See Accompanying Tables




LSB Industries, Inc.
Unaudited Financial Highlights
Years and Three Months Ended December 31, 2007 and 2006
 

 
 
Year Ended
December 31,
  
Three Months Ended
December 31,
  
 
2007
  
2006
  
2007
  
2006
 
(In Thousands, Except Share and Per Share Amounts)
  
Net sales
$
586,407
    
$
491,952
    
$
134,653
    
$
123,736
    
Cost of sales
  
453,814
      
401,090
      
103,941
      
101,911
    
Gross profit
  
132,593
      
90,862
      
30,712
      
21,825
    
                                 
Selling, general and administrative expense
  
75,033
      
64,134
      
19,212
      
17,378
    
Provision for (recovery of)  losses on accounts receivable
  
858
      
426
      
(16
)
    
(173
)
  
Other expense
  
1,186
      
722
      
333
      
 16
    
Other income
  
(3,495
)
    
(1,559
)
    
(55
)
    
(1,328
)
  
Operating income
  
59,011
      
 27,139
      
11,238
      
5,932
    
                                 
Interest expense
  
12,078
      
11,915
      
4,016
      
2,958
    
Non-operating other income, net
  
(1,264
)
    
(624
)
    
(659
)
    
(59
)
  
Income from continuing operations before provision for income taxes and equity in earnings of affiliate
  
 
48,197
      
 
15,848
      
 
7,881
      
 
3,033
    
Provision for income taxes
  
2,540
      
901
      
3,557
      
493
    
Equity in earnings of affiliate
  
(877
)
    
(821
)
    
(223
)
    
(210
)
  
Income from continuing operations
  
46,534
      
15,768
      
4,547
      
2,750
    
                                 
Net loss (income) from discontinued operations
  
(348
)
    
253
      
-
      
9
    
Net income
  
46,882
      
15,515
      
4,547
      
2,741
    
                                 
Preferred stock dividend requirements
  
5,608
      
2,630
      
-
      
975
    
Net income applicable to common stock
$
41,274
    
$
12,885
    
$
4,547
    
$
1,766
    
                                 
Weighted average common shares:
                                
Basic
  
19,579,664
      
14,331,963
      
20,868,564
      
15,810,883
    
                                 
Diluted
  
23,495,644
      
20,871,659
      
22,827,185
      
17,813,675
    
                                 
Income (loss) per common share:
                                
Basic:
                                
Income from continuing operations
$
2.09
    
$
.92
    
$
.22
    
$
.11
    
Net income (loss)  from discontinued operations
  
.02
      
(.02
)
    
-
      
-
    
Net income
$
2.11
    
$
.90
    
$
.22
    
$
.11
    
                                 
Diluted:
                                
Income from continuing operations
$
1.82
    
$
.77
    
$
.20
    
$
.10
    
Net income (loss)  from discontinued operations
  
.02
      
(.01
)
    
-
      
-
    
Net income
$
1.84
    
$
.76
    
$
.20
    
$
.10
    

  (See accompanying notes)



 
 
 

 
LSB Industries, Inc.
Notes to Unaudited Financial Highlights
Years and Three Months Ended December 31, 2007 and 2006

 
Note 1: Net income applicable to common stock is computed by adjusting net income by the amount of preferred stock dividends, dividend requirements and stock dividends.  Basic income per common share is based upon net income applicable to common stock and the weighted average number of common shares outstanding during each period.  Diluted income per share is based on net income applicable to common stock plus preferred stock dividends and dividend requirements on preferred stock assumed to be converted, if dilutive, and interest expense including amortization of debt issuance cost, net of income taxes, on convertible debt assumed to be converted, if dilutive, and the weighted average number of common shares and dilutive common equivalent shares outstanding, and the assumed conversion of dilutive convertible securities outstanding.

 
Note 2:  In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. AUG AIR-1 (“FSP”), accounting for planned major maintenance activities.  Effective January 1, 2007, we changed from the accrue-in-advance method to the direct expense  method in accordance with the FSP.  As a result of the change, net income for the year ended December 31, 2006 as presented in the Financial Highlights has been decreased $.4 million and income for the three months ended December 31, 2006 has been decreased $.6 million, as a result of the retrospective application of the FSP.

 
Note 3: The 2007 provision for income taxes is net of the benefit of deferred taxes primarily resulting from the reversal of deferred tax valuation allowances.  Prior to 2007, we had valuation allowances in place against the net deferred tax assets arising from NOL carryforwards and other temporary differences. However, as the result of improving financial results including some unusual transactions (settlement of pending litigation and insurance recovery of business interruption claim) and our expectation of generating taxable income in the future, we reversed valuation allowances as a benefit for income taxes and recognized deferred tax asset and a deferred tax liability.

The state income taxes includes the provision for 2007 state taxes, as well as, approximately $.5 million for prior year state taxes recognized in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes.

 
Note 4:  Information about the Company’s operations in different industry segments for the year and three months ended December 31, 2007 and 2006 is detailed on the following page.



 
 
 

 
LSB INDUSTRIES, INC.
 
Notes to Unaudited Financial Highlights
 
Years and Three Months Ended December 31, 2007 and 2006
 
 

 
Year Ended
December 31,
  
Three Months Ended
December 31,
  
 
2007
  
2006
  
2007
  
2006
 
(In Thousands)
  
Net sales:
 
 
    
 
 
    
 
 
    
 
 
  
Climate Control
$
286,365
    
$
221,161
    
$
64,901
    
$
60,916
  
Chemical
  
288,840
       260,651        66,446        59,190   
Other
   11,202        10,140        3,306        3,630   
 
$
586,407
    
$
491,952
    
$
134,653
    
$
123,736
  
 
                              
Gross profit:                              
Climate Control
  $
 83,638
      $
 65,496
      $
 18,577
      $
 17,134
  
Chemical
  
 44,946
      
 22,023
      
 10,966
      
 3,593
  
Other
  
 4,009
      
 3,343
      
 1,169
      
 1,098
  
   $
 132,593
      $
 90,862
      $
 30,712
      $
 21,825
  
                               
Operating income (loss):                              
Climate Control
  $
 34,194
      $
 25,428
      $
 6,310
      $
 6,948
  
Chemical
  
 35,011
      
 9,785
      
 7,888
      
 766
  
General corporate expenses and other business operations, net
  
 (10,194
 )     
 (8,074
 )     
 (2,960
 )     
 (1,782
 ) 
   
59,011
      
 27,139
      
 11,238
      
 5,932
  
                               
Interest expense  
 (12,078
 )    
(11,915
 )    
(4,016
 )    
(2,958
)
Non-operating other income, net:                              
Climate Control
  
2
      
1
      
-
      
-
  
Chemical
  
109
      
311
      
17
      
 50
  
Corporate and othe business operations
  
1,153
      
312
      
642
      
 9
  
Provisions for income taxes  
(2,540
 )    
(901
 )    
(3,557
 )    
(493
 )
Equity in earnings of affiliate, Climate Control  
877
      
821
      
 223
      
210
  
Income from continuing operations  $
46,534
      $
15,768
      $
 4,547
    
 $
2,750
  
                               


 
 
 


 
LSB INDUSTRIES, INC.
 
Notes to Unaudited Financial Highlights
 
Years and Three Months Ended December 31, 2007 and 2006

 
(1)
Gross profit by industry segment represents net sales less cost of sales.  Gross profit classified as “Other” relates to the sales of industrial machinery and related components.

 
(2)
During the year and three months ended December 31, 2007, we realized insurance recoveries of $3.8 million and $2.3 million, respectively, relating to a business interruption claim associated with the Cherokee, Alabama facility.  During the year ended December 31, 2006, we realized insurance recoveries of $.9 million relating to a business interruption claim associated with the El Dorado, Arkansas facility.  The above transactions contributed to an increase in gross profit.

 
(3)
Our chief operating decision makers use operating income by industry segment for purposes of making decisions which include resource allocations and performance evaluations.  Operating income by industry segment represents gross profit by industry segment less SG&A incurred by each industry segment plus other income and other expense earned/incurred by each industry segment before general corporate expenses and other business operations, net.  General corporate expenses and other business operations, net, consist of unallocated portions of gross profit, SG&A, other income and other expense.

 
(4)
During the year ended December 31, 2007, we recognized income of $3.3 million relating to a settlement of a pending litigation.  During the year ended December 31, 2006 an arbitrator awarded a subsidiary of the Company $1.2 million for reimbursement of defense costs which we included in other income.

 
(5)
General corporate expenses and other business operations, net, amounts are not allocated to our Climate Control and Chemical Businesses since these items are not included in the operating results reviewed by our chief operating decision makers for purposes of making decisions as discussed above.


 
 
 

 
LSB INDUSTRIES, INC.
Consolidated Balance Sheets
(unaudited)
 
 
 
December 31,
2007
  
2006
  
 
    (In Thousands)
Assets
              
Current assets:
              
Cash and cash equivalents
$
58,224
    
$
2,255
  
Restricted cash
  
230
      
2,479
  
Accounts receivable, net
  
70,577
      
67,571
  
Inventories:
  
 
      
 
  
Finished goods
  
28,177
      
20,252
  
Work in process
  
3,569
      
3,205
  
Raw materials
  
25,130
      
21,992
  
Total inventories
  
56,876
      
45,449
  
Supplies, prepaid items and other:
              
    Prepaid insurance
  
3,350
      
3,443
  
    Precious metals
  
10,935
      
6,406
  
Supplies
  
3,849
      
3,424
  
Other
  
 1,464
      
1,468
  
Total supplies, prepaid items and other
  
19,598
      
14,741
  
               
Deferred income taxes
  
10,030
      
 -
  
 
  
 
      
 
  
Total current assets   215,508       132,495  
               
Property, plant and equipment, net   79,692       76,404  
               
Oter assets:              
Noncurrent restricted cash
  
-
 
    
1,202
 
Debt issuance and other debt-related costs, net
  
4,639
      
2,221
  
Investment in affiliate
  
3,426
      
3,314
  
Goodwill
  
1,724
      
1,724
  
Other, net
  
2,565
      
2,567
  
Total other assets
  
12,354
      
11,028
  
 
$
307,554
    
$
219,927
  
 
 
(continued on following page)

 
 
 

LSB INDUSTRIES, INC.
Consolidated Balance Sheets
(unaudited)
 
 
 
December 31,
2007
  
2006
  
 
    (In Thousands)
Liabilities and Stockholders’ Equity
              
Current liabilities:
              
Accounts payable
$
39,060
    
$
42,870
  
Short-term financing and drafts payable
  
919
      
2,986
  
Accrued and other liabilities
  
38,942
      
26,816
  
Current portion of long-term debt
  
1,043
      
11,579
  
Total current liabilities
  
79,964
      
84,251
  
               
Long-term debt
  
121,064
      
86,113
  
               
Noncurrent accrued and other liabilities:
              
    Deferred income taxes
  
5,330
      
-
  
    Other
  
6,913
      
5,929
  
   
12,243
      
5,929
  
               
Commitments and contingencies
              
               
Stockholders' equity:
              
Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding
  
2,000
      
2,000
  
Series 2 $3.25 convertible, exchangeable Class C preferred stock, $50 stated value; 517,402 shares issued at December 31, 2006
  
 
-
      
 
25,870
  
Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued
  
1,000
      
1,000
  
Common stock, $.10 par value; 75,000,000 shares authorized, 24,466,506 shares issued (20,215,339 at December 31, 2006)
  
 
2,447
      
 
2,022
  
Capital in excess of par value
  
123,336
      
79,838
  
Accumulated other comprehensive loss
  
(411
)
    
(701
)
Accumulated deficit
  
(16,437
)
    
(47,962
)
   
111,935
      
62,067
  
Less treasury stock at cost:
              
Series 2 Preferred, 18,300 shares at December 31, 2006
  
-
      
797
  
Common stock, 3,448,518 shares    (3,447,754 at December 31, 2006)
  
17,652
      
17,636
  
Total stockholders' equity
  
94,283
      
43,634
  
 
$
307,554
    
$
219,927