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): February 26, 2019

LSB INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

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):

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.  ☐

On February 26, 2019, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the fourth quarter ended December 31, 2018. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On February 27, 2019, 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 fourth quarter ended December 31, 2018.

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.

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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: February 26, 2019

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Exhibit 99.1

LSB INDUSTRIES, INC. REPORTS IMPROVED OPERATING RESULTS

FOR THE 2018 FOURTH QUARTER

OKLAHOMA CITY, Oklahoma…February 26, 2019… LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the fourth quarter ended December 31, 2018.

Fourth Quarter Highlights

“Our fourth quarter results were consistent with our expectations headed into the period and improved significantly relative to the 2017 fourth quarter,” stated Mark Behrman, LSB’s President and CEO. “Net sales and adjusted EBITDA increased as compared to last year driven by stronger pricing across our agricultural and industrial products and stronger overall sales volumes, partially offset by the impact of a spike in natural gas prices that occurred in the latter half of the quarter that impacted us by approximately $5 million.”

“We were pleased with the operating rates of all three of our facilities. Cherokee’s ammonia plant ran at a 93% on-stream rate for the quarter and 94% for the full year. Pryor’s ammonia plant delivered a 97% on-stream rate for the quarter and for the second half of 2018, and for the full year ran at 89%. This was Pryor’s best full year performance since LSB brought the facility online in 2010, which we view as an indication that the leadership changes and reliability investments we’ve made, coupled with the maintenance management systems, procedures, and preventative maintenance programs we’ve been implementing are yielding positive results. While we anticipate that Pryor may have periods of unscheduled downtime during 2019 as we continue to take actions to develop its long-term reliability, we expect these periods of downtime to be of less magnitude and frequency going forward. We believe we are on the right path towards achieving Pryor’s potential to generate a consistent mid-90s on-stream rate for its ammonia plant beginning in 2020. El Dorado’s ammonia plant also performed well, operating at a 98% on-stream rate in the fourth quarter and 88% for the full year, also showing continued operating improvement as compared to 2017.”

Mr. Behrman continued, “We realized year-over-year pricing improvement for all of our major agricultural product categories during the fourth quarter, with net pricing per ton for agricultural ammonia, UAN, and HDAN rising 47%, 45%, and 18% respectively, reflecting the continued absorption of new domestic production capacity along with reduced volumes of low-priced product being imported into the U.S.”

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“Looking ahead to 2019, we expect continued year-over-year improvement in product pricing, albeit to a lesser degree than what we experienced in 2018. During the first two months of 2019, U.S. nitrogen prices have been trending downward due to weak demand for ammonia following a fall application season that was hampered by a delayed harvest and very wet weather across the corn belt. As a result, U.S. inventories of ammonia and related products are now quite high, leading to a price decline that has continued into the early part of 2019 as heavy snow and extreme cold temperatures have delayed pre-spring applications. Despite these weather-related headwinds, we expect that a slowing of U.S. capacity expansions that we experienced over the past two years, coupled with global demand for corn that continues to outpace supply, along with what we believe will be a heavy spring fertilizer application season, will lead to solid fundamentals for the U.S. nitrogen market for 2019 as a whole. That is supported by sales prices of product sold in the first quarter of 2019 and sales prices of forward sales that are above those in the first quarter of 2018. Selling prices and volumes for our industrial products during the 2018 fourth quarter were also higher than the prior year’s fourth quarter, reflecting the continued strength of the U.S. economy and our increased sales efforts. Sales prices for our mining products were flat in the fourth quarter of 2018 as compared to the fourth quarter of 2017, however, volumes improved as a result of our efforts to expand our customer relationships and strengthen our marketing activities in this sector.”

“Our overall outlook for 2019 calls for continued year-over-year increases in our net sales and adjusted EBITDA,” Mr. Behrman concluded. “While the favorable pricing trends that we experienced in 2018 have slowed, we still expect to see increased product pricing, further improvement in the operations of our facilities, and the key benefits of our sales and marketing efforts, leading to higher sales volumes and stronger profitability and cash flow for the year.”

Comparison of 2018 to 2017 periods:

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The following tables provide key sales metrics for our Agricultural products:

The following table indicates the volumes sold of our major Industrial products:

The following table indicates the volumes sold of our major Mining products:

Financial Position and Capital Expenditures

As of December 31, 2018, our total cash position was $26.0 million. Additionally, we had approximately $37.2 million of borrowing availability under our Working Capital Revolver. We generally have higher working capital needs in the fourth quarter as we build inventory going into the spring season. Additionally, during the fourth quarter, we delivered product to several customers with extended short-term payment terms as a means of optimizing our inventory and storage capacity heading into the spring season. We utilize the Working Capital Revolver to finance working capital fluctuations such as these, and, as a result, had approximately $10.0 million of borrowings on the facility at year-end which we expect to receive back in the first half of 2019 as we sell down the inventory and collect on receivables. Total long-term debt, including the current portion, was $425.2 million at December 31, 2018 compared to $409.4 million at December 31, 2017. The increase in long-term debt relates to the refinance of our senior notes which we completed in the second quarter of 2018. The aggregate liquidation value of the Series E Redeemable Preferred at December 31, 2018, inclusive of accrued dividends of $72.3 million, was $212.1 million.

Interest expense for the fourth quarter of 2018 was $11.1 million compared to $9.3 million for the same period in 2017, and full year 2018 interest expense was $43.1 million. The increase in interest expenses relates to the refinance of our senior notes which we completed in the second quarter of 2018.

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Capital expenditures were approximately $9.9 million in the fourth quarter of 2018 and $37.0 million for the full year. For the full year of 2019, total capital expenditures are expected to be between $30 million and $35 million. This is inclusive of a new sulfuric acid converter at our El Dorado facility that we plan to install in the fourth quarter of 2019 at an approximate cost of $7.5 million. We expect this investment to significantly improve the reliability of that plant while increasing the production capacity from approximately 140,000 tons to 160,000 tons allowing us to take advantage of attractive market conditions. We are finalizing the equipment financing for this capital project.

Volume Outlook

The Company’s outlook for sales volumes for the full year 2019 are as follows:

Conference Call

LSB’s management will host a conference call covering the fourth quarter results on Wednesday, February 27, 2019 at 10:00 a.m. ET/9:00 a.m. CT to discuss these results and recent corporate developments. Participating in the call will be President & Chief Executive Officer, Mark Behrman, Senior Vice President & Chief Financial Officer, Cheryl Maguire and Executive Vice President of Manufacturing, John Diesch. 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 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. We suggest listeners use Microsoft Explorer as their web browser.

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 throughout the United States. Additional information about the Company can be found on its website at www.lsbindustries.com.

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Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identifiable by use of the words “may,” “believe,” “expect,” “intend,” “plan to,” “estimate,” “project” or similar expressions, and include but are not limited to: financial performance improvement; view on sales to mining customers; estimates of consolidated depreciation and amortization and future Turnaround expenses; our expectation of production consistency and enhanced reliability at our Facilities; our projections of trends in the fertilizer market; improvement of our financial and operational performance; our planned capital expenditures for 2019; reduction of SG&A expenses; volume outlook and our ability to complete plant repairs as anticipated.

Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties. Though we believe that expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectation will prove to be correct. Actual results may differ materially from the forward-looking statements as a result of various factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC), including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in our Form 10-K for the year ended December 31, 2018 and, if applicable, our Current Reports on Form 8-K. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statement to reflect events, new information or circumstances occurring after the date of this press release except as required by applicable law.

See Accompanying Tables

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LSB Industries, Inc.

Financial Highlights

Three and Twelve Months Ended December 31,

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LSB Industries, Inc.

Consolidated Balance Sheets

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LSB Industries, Inc.

Consolidated Balance Sheets (continued)

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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 Reconciliation

EBITDA is defined as net income (loss) plus interest expense, plus loss on extinguishment of debt, plus depreciation, depletion and amortization (DD&A) (which includes DD&A of property, plant and equipment and amortization of intangible and other assets), plus provision for income taxes. 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 (loss) to EBITDA for the periods indicated.

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LSB Industries, Inc.

Non-GAAP Reconciliation (continued)

Adjusted EBITDA

Adjusted EBITDA is reported to show the impact of one time/non-cash or non-operating items-such as, loss (gain) on sale of a business and other property and equipment, one-time income or fees, certain fair market value adjustments, non-cash stock-based compensation, and consulting costs associated with our 2018 reliability and purchasing initiatives. For comparative purposes, 2017 is also adjusted to remove the impact of businesses sold during 2017. We historically have performed Turnaround activities on an annual basis, however we are moving 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. As a result, we believe it is more meaningful for investors to exclude them from our calculation of adjusted EBITDA used to assess our performance for comparative 2017 has also been adjusted to remove the impact of Turnaround maintenance costs. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items. The following tables provide reconciliations of EBITDA excluding the impact of the supplementary adjustments. Our policy is to adjust for non-cash, non-recurring, non-operating items that are greater than $0.5 million quarterly or cumulatively.

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Net Sales Reconciliation

Since we adopted ASC 606 using the “modified retrospective” method, the prior periods were not restated. As a result, we are presenting Adjusted Net Sales to show the impact of applying ASC 606 to certain arrangements for 2017 consistent with accounting treatment used for the same period in 2018. ASC 606 had no net impact on operating loss. Additionally, net sales are adjusted to remove revenue associated with businesses sold in 2017.

Agricultural Sales Price Reconciliation

The following table provides a reconciliation of total agricultural sales as reported under GAAP in our consolidated financial statement reconciled to “net” sales which is calculated as sales less freight expenses. We believe this provides a relevant industry comparison among our peer group.

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