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): August 7, 2015
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.) |
| 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma | 73107 | |
| (Address of principal executive offices) | (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):
| ¨ | 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)) |
Section 2 – Financial Information
| Item 2.02. | Results of Operations and Financial Condition |
On August 7, 2015, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the second quarter ended June 30, 2015. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On August 7, 2015, at 10:00 a.m. (Eastern time) / 9:00 a.m. (Central time), the Company held a conference call broadcast live over the Internet to discuss the financial results of the second quarter ended June 30, 2015.
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 to this Item 2.02 in such filing.
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 to such Exhibit 99.1 in such filing.
(d) Exhibits.
| Exhibit | Description | |
| 99.1 | Press Release issued by LSB Industries, Inc. dated August 7, 2015 | |
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: August 7, 2015
| LSB INDUSTRIES, INC. | ||
| By: | /s/ Mark T. Behrman | |
| Name: | Mark T. Behrman | |
| Title: | Executive Vice President of Finance and | |
| Chief Financial Officer | ||
Exhibit 99.1
FOR IMMEDIATE RELEASE
LSB INDUSTRIES, INC. REPORTS OPERATING RESULTS
FOR THE 2015 SECOND QUARTER
Updates Status of El Dorado Facility Expansion
Provides Chemical Business Product Volume Guidance for 2015 Third Quarter
OKLAHOMA CITY, Oklahoma… August 7, 2015… LSB Industries, Inc. (“LSB”) (NYSE: LXU) today announced results for the second quarter ended June 30, 2015.
Financial Highlights of Second Quarter 2015 Compared to Second Quarter 2014
| • | Net sales decreased 9.4% to $182.7 million compared to $201.7 million. |
| • | Operating income was $2.6 million compared to operating income of $23.8 million. |
| • | EBITDA was $13.0 million compared to $32.6 million. |
| • | Net income applicable to common shareholders was $0.4 million, or $0.02 per diluted share, compared to net income applicable to common shareholders of $11.1 million, or $0.47 per diluted share. |
“Our second quarter results were impacted by both internal and external factors,” stated Barry Golsen, LSB’s President and CEO. “Chemical Business sales declined primarily as a result of a 17 day unplanned outage at our Pryor Facility ammonia plant during May which was caused by the need to replace a failed heat exchanger and, to a lesser extent, a water main break in the industrial park where the facility is located. Additionally, the lower Chemical sales as compared to prior year second quarter reflects the previously discussed April 2015 expiration of our contract with Orica for low density ammonium nitrate. A final factor negatively affecting second quarter Chemical Business results was the impact of unfavorable weather in our agricultural markets, which shortened the spring fertilizer application season, reducing our volumes and depressing prices for ammonia, UAN and AN in the quarter.”
Mr. Golsen continued, “Our Climate Control Business delivered solid growth in sales driven by demand for our hydronic fan coils, large custom air handlers and modular chillers. The outlook for commercial/institutional and residential construction appears strong and we have been focused on cultivating our customer relationships and new product development efforts to position our business to capitalize on these growth opportunities. Climate Control operating profit declined as compared to the prior year period due to lower sales of heat pumps, higher warranty expense and freight costs along with an increase in personnel related costs.”
Chemical Business Second Quarter 2015 Compared to Second Quarter 2014:
| Three Months Ended June 30, | ||||||||||||
| 2015 | 2014 | Change | ||||||||||
| (In millions) | ||||||||||||
| Net sales |
$ | 112.8 | $ | 135.8 | $ | (23.0 | ) | |||||
| Operating income |
$ | 6.8 | $ | 23.6 | $ | (16.8 | ) | |||||
| Segment EBITDA |
$ | 15.8 | $ | 31.1 | $ | (15.3 | ) | |||||
Comparison of 2015 period to 2014 period:
| • | Net sales decreased due to lower demand from mining customers primarily reflecting reduced volumes of low-density ammonium nitrate related to the April 2015 expiration of the Company’s take-or-pay contract with Orica and overall softening in the coal markets. Agricultural product volumes declined compared to the prior year quarter due largely to an unplanned outage of 17 days at the Pryor Facility ammonia plant resulting from a failed heat exchanger along with a water main break in the industrial park where the facility is located. |
| • | Operating income and EBITDA, declined in the second quarter due to lower sales and lower absorption of fixed overhead costs at the El Dorado Facility resulting primarily from the decreased production and sales of low density ammonium nitrate attributable to the aforementioned Orica contract. |
| • | The El Dorado Facility produces agricultural grade AN, nitric acid and industrial grade AN from purchased ammonia, which is currently at a cost disadvantage compared to products produced from natural gas. This cost disadvantage, along with the lost sales volume impact from the loss of Orica and certain additional expenses related to the El Dorado Expansion projects, resulted in an operating loss for the facility during the 2015 period of approximately $10 million compared to an operating loss of approximately $1 million in second quarter 2014. |
| Three Months Ended June 30, | ||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||
| Sales by Market Sector |
Sales | Sector Mix |
Sales | Sector Mix |
% Change |
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| Agricultural |
$ | 60.9 | 54 | % | $ | 75.4 | 56 | % | (19 | )% | ||||||||||
| Industrial, mining and other |
51.9 | 46 | % | 60.4 | 44 | % | (14 | )% | ||||||||||||
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| $ | 112.8 | $ | 135.8 | (17 | )% | |||||||||||||||
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The following tables provide key operating metrics for the Agricultural products of our Chemical Business.
| Three Months Ended June 30, | ||||||||||||
| Product (tons sold) |
2015 | 2014 | % Change | |||||||||
| Urea ammonium nitrate (UAN) |
88,440 | 102,688 | (14 | )% | ||||||||
| Ammonium nitrate (AN) |
61,119 | 73,636 | (17 | )% | ||||||||
| Ammonia |
22,761 | 25,392 | (10 | )% | ||||||||
| Other |
9,240 | 13,400 | (31 | )% | ||||||||
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| 181,560 | 215,116 | (16 | )% | |||||||||
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| Average Selling Prices (price per ton) |
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| UAN |
$ | 246 | $ | 268 | (8 | )% | ||||||
| AN |
$ | 333 | $ | 352 | (5 | )% | ||||||
| Ammonia |
$ | 525 | $ | 520 | 1 | % | ||||||
2
With respect to sales of Industrial, Mining and Other Chemical Products, the following table indicates the volumes sold of our major products.
| Three Months Ended June 30, | ||||||||||||
| Product (tons sold) |
2015 | 2014 | % Change | |||||||||
| Nitric acid |
134,333 | 115,083 | 17 | % | ||||||||
| LDAN |
16,453 | 25,615 | (A) | (36 | )% | |||||||
| AN solution |
26,189 | 25,715 | 2 | % | ||||||||
| Ammonia |
10,571 | 11,273 | (6 | )% | ||||||||
| (A) | Under the Orica contract that expired in April 2015, Orica paid for 60,000 tons of ammonium nitrate in Q2 2014, but actual tons sold to Orica for the quarter were 22,366. |
| Input Costs |
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| Average purchased ammonia cost/ton |
$ | 455 | $ | 523 | (13 | )% | ||||||
| Average natural gas cost/MMbtu |
$ | 3.16 | $ | 4.55 | (31 | )% | ||||||
Climate Control Business Second Quarter 2015 Compared to Second Quarter 2014:
| Three Months Ended June 30, | ||||||||||||
| 2015 | 2014 | Change | ||||||||||
| (In millions) | ||||||||||||
| Net sales |
$ | 66.8 | $ | 62.8 | $ | 4.0 | ||||||
| Operating income |
$ | 4.0 | $ | 4.6 | $ | (0.6 | ) | |||||
| Segment EBITDA |
$ | 5.2 | $ | 5.8 | $ | (0.6 | ) | |||||
Comparison of 2015 period to 2014 period:
| • | Net sales increased largely due to higher sales of hydronic fan coils and other HVAC products, primarily custom air handlers and modular chillers. These results include a $6 million sales reduction in the second quarter of 2015 as compared to the second quarter of 2014, which resulted from the loss of the water source heat pump Carrier contract. Excluding Carrier water source heat pump sales, overall commercial/institutional product sales increased 22% while residential product sales decreased 3%. |
| • | Operating income and EBITDA were lower compared to the prior year period as the increase in gross profit generated by higher sales was offset by higher warranty expense due to specific project claims, an increase in freight costs resulting from product and customer mix, and higher personnel costs, the total which includes one-time expenses of approximately $700,000. |
| • | New orders for Climate Control products were $70.2 million in the second quarter of 2015, down 15% compared to the second quarter of 2014, but up 6% from the first quarter of 2015. New orders from the commercial end-markets were down 15% from the second quarter of 2014, while residential product new orders declined 20% reflecting the termination of our activity with Carrier in May 2014 for the sale of heat pumps. Backlog of $75.1 million as of June 30, 2015 increased approximately 10% over second quarter 2014 levels and was 9% higher than our backlog at March 31, 2015. As of July 31, 2015, backlog was $74.5 million. |
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| Three Months Ended June 30, | ||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||
| Sales by Market Sector |
Sales | Sector Mix |
Sales | Sector Mix |
% Change |
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| Commercial/Institutional |
$ | 58.4 | 87 | % | $ | 53.3 | 85 | % | 10 | % | ||||||||||
| Residential |
8.4 | 13 | % | 9.5 | 15 | % | (12 | )% | ||||||||||||
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| $ | 66.8 | $ | 62.8 | 6 | % | |||||||||||||||
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| Sales by Product Category |
Sales | Product Mix |
Sales | Product Mix |
% Change |
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| Heat pumps |
$ | 38.7 | 58 | % | $ | 41.9 | 67 | % | (8 | )% | ||||||||||
| Fan coils |
16.2 | 24 | % | 12.4 | 20 | % | 31 | % | ||||||||||||
| Other HVAC |
11.9 | 18 | % | 8.5 | 13 | % | 40 | % | ||||||||||||
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| $ | 66.8 | $ | 62.8 | 6 | % | |||||||||||||||
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Financial Position and Capital Additions
As of June 30, 2015, total cash and investments were $157.7 million, including short-term investments.
Total long-term debt was $470.2 million at June 30, 2015 compared to $457.3 million at December 31, 2014 and our $100 million Working Capital Revolver Loan remains undrawn (borrowing availability, which is tied in to eligible accounts receivable and inventories, was $75.3 million at June 30, 2015). Interest expense, net of capitalized interest, for the second quarter of 2015 was $2.2 million compared to $5.7 million for the same period in 2014.
Capital additions were $112.3 million in the second quarter of 2015, including $104.5 million relating to the expansion projects at the El Dorado Facility, which include a 1,150 ton per day anhydrous ammonia production plant; a new 1,100 ton per day 65% strength nitric acid plant and concentrator; and other support infrastructure. Planned capital additions for the remainder of 2015, in the aggregate, are estimated to range from $254 million to $290 million, including $223 million to $243 million remaining for the El Dorado expansion projects. However, it is possible that a portion of the capital additions for the expansion projects could occur during the first quarter of 2016.
The Company’s outlook for sales volume for the third quarter of 2015 in its Chemical Business is as follows:
| Products |
Sales (tons) | |
| Agriculture: |
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| UAN |
95,000 – 105,000 | |
| HDAN |
22,500 – 27,500 | |
| Ammonia |
20,000 – 30,000 | |
| Industrial, Mining and Other: |
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| Nitric acid |
140,000 – 150,000 | |
| LDAN |
10,000 – 15,000 | |
| AN solution |
20,000 – 25,000 | |
| Ammonia |
11,000 – 13,000 | |
4
El Dorado Facility Expansion Update
During the first part of August 2015, the engineering, procurement and construction contractor and other consultants we have retained in connection with the El Dorado Expansion projects advised us they are now estimating that the total cost to complete the El Dorado Expansion projects will exceed what we previously projected, due, in part, to work performed by a previous subcontractor. We have now been advised that the total cost to complete the El Dorado Expansion projects is estimated to be in the range of $660 million to $680 million ($437 million spent as of June 30, 2015 and $223 million to $243 million to be spent in the balance of 2015 with the possibility that a portion of these capital additions could occur during the first quarter of 2016).
It is expected that the new ammonia plant will be mechanically complete by the end of 2015 and should begin production early in the second quarter 2016. As it relates to the new nitric acid plant and concentrator, the concentrator went into production in June 2015 and the nitric acid plant is expected to be mechanically complete in September 2015, with production beginning mid-fourth quarter 2015.
We expect to be able to fund the cash needs for our operations and our capital expenditures, including the El Dorado Expansion projects and our other planned discretionary capital projects, from cash on hand, internally generated cash flow, working capital, borrowings under our working capital revolver, and other financings. We are currently negotiating with third party lenders for the financing for certain discrete pieces of equipment in connection with the El Dorado Expansion projects. Additionally, the Indenture governing our Senior Secured Notes allows us to incur an additional $50 million in debt. We are also in discussions with other financing providers to provide additional capital, as needed, for the completion of the El Dorado Expansion projects. If for some reason we are unable to complete these financings or there is a shortfall in our internally generated cash flow, either of which would negatively affect our ability to fund all of the discretionary capital projects we had planned to complete or initiate during the balance of 2015 and 2016, we would be required to reduce, delay the start of, or terminate at least some of these capital projects.
LSB to Implement Strategic and Corporate Governance Enhancements
LSB also today announced in a separate press release that the Strategic Committee of the LSB Board of Directors, comprised of independent directors, presented the Board of Directors with a report and certain recommendations on July 30, 2015 following an evaluation of the Company’s business strategy, corporate governance structure, related party transactions and other governance practices of the Company. LSB intends to implement the initiatives and corporate governance enhancements recommended by the Strategic Committee while continuing to execute on the Company’s strategy to create sustained shareholder value by lowering production costs, improving manufacturing efficiency, driving sales growth and enhancing profitability.
Conference Call
LSB’s management will host a conference call covering the second quarter results on Friday, August 7, 2015 at 10:00 am ET/9:00 am CT to discuss these results and recent corporate developments. Participating in the call will be Executive Chairman, Jack E. Golsen; President and CEO, Barry H. Golsen and CFO, Mark Behrman. Interested parties may participate in the call by dialing (201) 493-6739. 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 Investor Info tab.
5
To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes before the conference call to download and install any necessary audio software. The conference call webcast will be archived on the Company’s website. LSB suggests that listeners use Microsoft Explorer as their web browser.
LSB Industries, Inc.
LSB is a manufacturing and marketing company. LSB’s principal business activities consist of the manufacture and sale of chemical products for the agricultural, mining and industrial markets; and, the manufacture and sale of commercial and residential climate control products, such as water source and geothermal heat pumps, hydronic fan coils, modular geothermal and other chillers and large custom air handlers.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements generally are identifiable by use of the words “believe,” “expects,” “intends,” “plans to,” “estimates,” “projects” or similar expressions, and include but not limited to, outlook for commercial and residential construction; planned capital additions for balance of 2015; cost of El Dorado facility expansion and timing of completion; funding of capital expenditures and cash needs; effect if not able to complete additional financings; and implementation of recommendation by Strategic Committee.
Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to, general economic conditions; weather conditions; lack of growth in the commercial and residential construction industry; acceptance by the market of our geothermal heat pump products; acceptance of our technology; increased competitive pressures, domestically and foreign; price increases for raw materials; loss of significant customer; changes to federal legislation or adverse regulations; available working capital; ability to install necessary equipment and renovations at the El Dorado Facility and the Pryor Facility in a timely manner; receipt in a timely manner of production equipment; problems with production equipment; and other factors set forth under “Risk Factors” and “A Special Note Regarding Forward-Looking Statements” in the Form 10-K for year ended December 31, 2014 and in the Form 10-Q for the quarter ended March 31, 2015, which contain a discussion of a variety of factors which could cause the future outcome to differ materially from the forward-looking statements contained in this release.
| Company Contact:
Mark Behrman, Chief Financial Officer (405) 235-4546 |
Investor Relations Contact:
Fred Buonocore (212) 836-9607 Linda Latman (212) 836-9609 The Equity Group Inc. |
See Accompanying Tables
6
LSB Industries, Inc.
Financial Highlights
Six Months and Three Months Ended June 30,
| Six Months | Three Months | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||||
| Net sales |
$ | 376,517 | $ | 380,187 | $ | 182,659 | $ | 201,662 | ||||||||
| Cost of sales |
299,276 | 282,596 | 147,777 | 152,793 | ||||||||||||
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| Gross profit |
77,241 | 97,591 | 34,882 | 48,869 | ||||||||||||
| Selling, general and administrative expense |
60,216 | 52,156 | 32,025 | 24,498 | ||||||||||||
| Provision for (recovery of) losses on accounts receivable |
513 | (156 | ) | 491 | 3 | |||||||||||
| Property insurance recoveries in excess of losses incurred |
— | (5,147 | ) | — | — | |||||||||||
| Other expense (income), net |
(271 | ) | 1,113 | (194 | ) | 604 | ||||||||||
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| Operating income |
16,783 | 49,625 | 2,560 | 23,764 | ||||||||||||
| Interest expense, net |
5,628 | 12,379 | 2,230 | 5,671 | ||||||||||||
| Non-operating other income, net |
(84 | ) | (153 | ) | (49 | ) | (76 | ) | ||||||||
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| Income from continuing operations before provisions (benefit) for income taxes and equity in earnings of affiliate |
11,239 | 37,399 | 379 | 18,169 | ||||||||||||
| Provisions (benefit) for income taxes |
4,140 | 14,701 | (41 | ) | 7,047 | |||||||||||
| Equity in earnings of affiliate |
— | (79 | ) | — | (12 | ) | ||||||||||
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| Income from continuing operations |
7,099 | 22,777 | 420 | 11,134 | ||||||||||||
| Net loss from discontinued operations |
33 | 23 | 3 | 21 | ||||||||||||
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| Net income |
7,066 | 22,754 | 417 | 11,113 | ||||||||||||
| Dividends on preferred stocks |
300 | 300 | — | — | ||||||||||||
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| Net income applicable to common stock |
$ | 6,766 | $ | 22,454 | $ | 417 | $ | 11,113 | ||||||||
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| Weighted-average common shares: |
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| Basic |
22,711 | 22,539 | 22,748 | 22,545 | ||||||||||||
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| Diluted |
23,412 | 23,650 | 23,777 | 23,660 | ||||||||||||
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| Income per common share: |
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| Basic |
$ | 0.30 | $ | 1.00 | $ | 0.02 | $ | 0.49 | ||||||||
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| Diluted |
$ | 0.29 | $ | 0.96 | $ | 0.02 | $ | 0.47 | ||||||||
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LSB Industries, Inc.
Financial Highlights
Six Months and Three Months Ended June 30,
| Six Months | Three Months | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (In Thousands) | ||||||||||||||||
| Net sales: |
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| Chemical |
$ | 239,582 | $ | 250,977 | $ | 112,768 | $ | 135,756 | ||||||||
| Climate Control |
132,040 | 123,100 | 66,842 | 62,751 | ||||||||||||
| Other |
4,895 | 6,110 | 3,049 | 3,155 | ||||||||||||
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| $ | 376,517 | $ | 380,187 | $ | 182,659 | $ | 201,662 | |||||||||
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| Gross profit: (1) |
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| Chemical (2) |
$ | 35,457 | $ | 57,682 | $ | 13,627 | $ | 29,256 | ||||||||
| Climate Control |
40,043 | 37,766 | 20,081 | 18,502 | ||||||||||||
| Other |
1,741 | 2,143 | 1,174 | 1,111 | ||||||||||||
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| $ | 77,241 | $ | 97,591 | $ | 34,882 | $ | 48,869 | |||||||||
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| Operating income: (3) |
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| Chemical (2) |
$ | 23,500 | $ | 52,402 | $ | 6,840 | $ | 23,589 | ||||||||
| Climate Control |
8,316 | 8,944 | 4,004 | 4,612 | ||||||||||||
| Other |
576 | 901 | 578 | 514 | ||||||||||||
| General corporate expenses (4) |
(15,609 | ) | (12,622 | ) | (8,862 | ) | (4,951 | ) | ||||||||
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| 16,783 | 49,625 | 2,560 | 23,764 | |||||||||||||
| Interest expense, net (5) |
5,628 | 12,379 | 2,230 | 5,671 | ||||||||||||
| Non-operating income, net: |
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| Chemical |
(61 | ) | (140 | ) | (28 | ) | (63 | ) | ||||||||
| Climate Control |
(4 | ) | — | (4 | ) | — | ||||||||||
| Corporate and other business operations |
(19 | ) | (13 | ) | (17 | ) | (13 | ) | ||||||||
| Provisions (benefit) for income taxes |
4,140 | 14,701 | (41 | ) | 7,047 | |||||||||||
| Equity in earnings of affiliate - Climate Control |
— | (79 | ) | — | (12 | ) | ||||||||||
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| Income from continuing operations |
$ | 7,099 | $ | 22,777 | $ | 420 | $ | 11,134 | ||||||||
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| (1) | Gross profit by business 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 first quarter of 2014, we recognized business interruption and property insurance recoveries totaling $28.0 million, of which approximately $22.9 million was recognized as a reduction to cost of sales. |
| (3) | Our chief operating decision makers use operating income by business segment for purposes of making decisions that include resource allocations and performance evaluations. Operating income by business segment represents gross profit by business segment less selling, general and administrative expense (“SG&A”) incurred by each business segment plus other income and other expense earned/incurred by each business segment before general corporate expenses. |
8
LSB Industries, Inc.
Financial Highlights
Three Months Ended June 30, 2015 and 2014
| (4) | General corporate expenses consist of the following: |
| Six Months Ended June 30, |
Three Months Ended June 30, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (In Thousands) | ||||||||||||||||
| Selling, general and administrative: |
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| Personnel costs |
$ | (6,690 | ) | $ | (4,344 | ) | $ | (4,088 | ) | $ | (2,812 | ) | ||||
| Fees and expenses relating to shareholders (A) |
(4,334 | ) | (4,462 | ) | (2,655 | ) | (262 | ) | ||||||||
| Professional fees |
(2,831 | ) | (2,148 | ) | (1,287 | ) | (960 | ) | ||||||||
| All other |
(1,771 | ) | (1,718 | ) | (874 | ) | (944 | ) | ||||||||
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|
|
|||||||||
| Total selling, general and administrative |
(15,626 | ) | (12,672 | ) | (8,904 | ) | (4,978 | ) | ||||||||
| Other income |
69 | 50 | 45 | 27 | ||||||||||||
| Other expense |
(52 | ) | — | (3 | ) | — | ||||||||||
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|
|
|
|
|
|
|
|||||||||
| Total general corporate expenses |
$ | (15,609 | ) | $ | (12,622 | ) | $ | (8,862 | ) | $ | (4,951 | ) | ||||
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| (A) | These fees and expenses include costs associated with evaluating and analyzing proposals received from certain activist shareholders and dealing, negotiating and settling with those shareholders in order to avoid proxy contests. |
| (5) | During the six and three months ended June 30, 2015, interest expense is net of capitalized interest of $12.6 million and $7.0 million, respectively. During the six and three months ended June 30, 2014, interest expense is net of capitalized interest of $5.3 million and $3.0 million, respectively. |
9
LSB Industries, Inc.
Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2015 | 2014 | |||||||
| (In Thousands) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 132,708 | $ | 186,811 | ||||
| Restricted cash |
238 | 365 | ||||||
| Short-term investments |
25,000 | 14,500 | ||||||
| Accounts receivable, net |
85,343 | 88,074 | ||||||
| Inventories: |
||||||||
| Finished goods |
25,440 | 28,218 | ||||||
| Work in progress |
2,505 | 2,763 | ||||||
| Raw materials |
26,109 | 25,605 | ||||||
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|
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| Total inventories |
54,054 | 56,586 | ||||||
| Supplies, prepaid items and other: |
||||||||
| Prepaid insurance |
6,305 | 13,752 | ||||||
| Precious metals |
14,116 | 12,838 | ||||||
| Supplies |
16,827 | 15,927 | ||||||
| Prepaid and refundable income taxes |
2,972 | 7,387 | ||||||
| Other |
6,555 | 5,438 | ||||||
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| Total supplies, prepaid items and other |
46,775 | 55,342 | ||||||
| Deferred income taxes |
15,998 | 17,204 | ||||||
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|
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| Total current assets |
360,116 | 418,882 | ||||||
| Property, plant and equipment, net |
787,465 | 619,205 | ||||||
| Other assets: |
||||||||
| Noncurrent restricted cash and cash equivalents |
— | 45,969 | ||||||
| Noncurrent restricted investments |
— | 25,000 | ||||||
| Other, net |
30,598 | 27,949 | ||||||
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|
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| Total other assets |
30,598 | 98,918 | ||||||
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|
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| $ | 1,178,179 | $ | 1,137,005 | |||||
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(Continued on following page)
10
LSB Industries, Inc.
Consolidated Balance Sheets (continued)
| June 30, 2015 |
December 31, 2014 |
|||||||
| (In Thousands) | ||||||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 106,317 | $ | 81,456 | ||||
| Short-term financing |
4,805 | 11,955 | ||||||
| Accrued and other liabilities |
49,195 | 51,166 | ||||||
| Current portion of long-term debt |
24,095 | 10,680 | ||||||
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| Total current liabilities |
184,412 | 155,257 | ||||||
| Long-term debt |
446,091 | 446,638 | ||||||
| Noncurrent accrued and other liabilities |
18,432 | 17,934 | ||||||
| Deferred income taxes |
85,391 | 83,128 | ||||||
| Commitments and contingencies |
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| Stockholders’ equity: |
||||||||
| Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding |
2,000 | 2,000 | ||||||
| Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued and outstanding |
1,000 | 1,000 | ||||||
| Common stock, $.10 par value; 75,000,000 shares authorized, 27,109,544 shares issued (26,968,212 shares at December 31, 2014) |
2,711 | 2,697 | ||||||
| Capital in excess of par value |
173,562 | 170,537 | ||||||
| Retained earnings |
292,954 | 286,188 | ||||||
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| 472,227 | 462,422 | |||||||
| Less treasury stock, at cost: |
||||||||
| Common stock, 4,320,462 shares |
28,374 | 28,374 | ||||||
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|
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| Total stockholders’ equity |
443,853 | 434,048 | ||||||
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|
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| $ | 1,178,179 | $ | 1,137,005 | |||||
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11
LSB Industries, Inc.
Non-GAAP Reconciliation
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 Reconciliations
EBITDA is defined as net income plus interest expense, depreciation, and depletion of property plant and equipment, amortization of other assets, less interest included in amortization, plus provision for income taxes plus loss from discontinued operations. 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. EBITDA has 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 may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income to EBITDA for the periods indicated.
| Six Months Ended June 30, |
Three Months Ended June 30, |
|||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| ($ in millions) | ||||||||||||||||
| LSB Consolidated |
||||||||||||||||
| Net income |
$ | 7.1 | $ | 22.8 | $ | 0.4 | $ | 11.1 | ||||||||
| Plus: |
||||||||||||||||
| Interest expense |
5.6 | 12.4 | 2.2 | 5.7 | ||||||||||||
| Depreciation and amortization |
19.8 | 17.4 | 10.4 | 8.7 | ||||||||||||
| Provisions for income taxes |
4.2 | 14.7 | — | 7.1 | ||||||||||||
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| EBITDA |
$ | 36.7 | $ | 67.3 | $ | 13.0 | $ | 32.6 | ||||||||
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| Chemical Business |
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| Operating income |
$ | 23.5 | $ | 52.4 | $ | 6.8 | $ | 23.6 | ||||||||
| Plus: |
||||||||||||||||
| Non-operating income |
0.1 | 0.2 | 0.1 | 0.1 | ||||||||||||
| Depreciation and amortization |
16.7 | 14.8 | 8.9 | 7.4 | ||||||||||||
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| EBITDA |
$ | 40.3 | $ | 67.4 | $ | 15.8 | $ | 31.1 | ||||||||
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| Climate Control Business |
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| Operating income |
$ | 8.3 | $ | 8.9 | $ | 4.0 | $ | 4.6 | ||||||||
| Plus: |
||||||||||||||||
| Equity in earnings |
— | 0.1 | — | — | ||||||||||||
| Depreciation and amortization |
2.4 | 2.3 | 1.2 | 1.2 | ||||||||||||
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| EBITDA |
$ | 10.7 | $ | 11.3 | $ | 5.2 | $ | 5.8 | ||||||||
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12