UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
|
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2019
OR
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-7677
LSB Industries, Inc.
(Exact name of Registrant as specified in its charter)
|
Delaware |
|
73-1015226 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. 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) (405) 235-4546
Not applicable
(Former name, former address and former fiscal year, if changed since last report.)
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 |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes ☐ No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
☒ Yes ☐ No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
☒ |
|
|
|
|
|
|
|
|
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☒ |
|
|
|
|
|
|
|
|
|
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|
|
|
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. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
The number of shares outstanding of the Registrant's common stock was 28,782,431 shares as of October 25, 2019.
FORM 10-Q OF LSB INDUSTRIES, INC.
TABLE OF CONTENTS
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PART I – Financial Information |
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Page |
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Item 1. |
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3 |
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Item 2. |
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Management's Discussion and Analysis of Financial Condition and Results of Operations |
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21 |
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Item 3. |
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36 |
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Item 4. |
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36 |
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PART II – Other Information |
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Item 1. |
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41 |
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Item 1A. |
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41 |
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Item 2. |
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41 |
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Item 3. |
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41 |
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Item 4. |
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41 |
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Item 5. |
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41 |
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Item 6. |
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41 |
2
LSB INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Information at September 30, 2019 is unaudited)
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018 |
|
||
|
|
|
(In Thousands) |
|
|||||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
66,783 |
|
|
$ |
26,048 |
|
|
Accounts receivable |
|
|
33,459 |
|
|
|
67,043 |
|
|
Allowance for doubtful accounts |
|
|
(458 |
) |
|
|
(351 |
) |
|
Accounts receivable, net |
|
|
33,001 |
|
|
|
66,692 |
|
|
Inventories: |
|
|
|
|
|
|
|
|
|
Finished goods |
|
|
18,931 |
|
|
|
27,726 |
|
|
Raw materials |
|
|
1,704 |
|
|
|
1,483 |
|
|
Total inventories |
|
|
20,635 |
|
|
|
29,209 |
|
|
Supplies, prepaid items and other: |
|
|
|
|
|
|
|
|
|
Prepaid insurance |
|
|
1,478 |
|
|
|
10,924 |
|
|
Supplies |
|
|
25,169 |
|
|
|
24,576 |
|
|
Other |
|
|
10,114 |
|
|
|
8,964 |
|
|
Total supplies, prepaid items and other |
|
|
36,761 |
|
|
|
44,464 |
|
|
Total current assets |
|
|
157,180 |
|
|
|
166,413 |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
950,175 |
|
|
|
974,248 |
|
|
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
|
Operating lease assets |
|
|
16,069 |
|
|
|
— |
|
|
Intangible and other assets, net |
|
|
6,357 |
|
|
|
7,672 |
|
|
|
|
|
22,426 |
|
|
|
7,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,129,781 |
|
|
$ |
1,148,333 |
|
(Continued on following page)
3
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Information at September 30, 2019 is unaudited)
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2019 |
|
|
2018 |
|
||
|
|
|
(In Thousands) |
|
|||||
|
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
54,088 |
|
|
$ |
62,589 |
|
|
Short-term financing |
|
|
607 |
|
|
|
8,577 |
|
|
Accrued and other liabilities |
|
|
39,309 |
|
|
|
42,129 |
|
|
Current portion of long-term debt |
|
|
9,090 |
|
|
|
12,518 |
|
|
Total current liabilities |
|
|
103,094 |
|
|
|
125,813 |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, net |
|
|
447,663 |
|
|
|
412,681 |
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent operating lease liabilities |
|
|
11,441 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent accrued and other liabilities |
|
|
7,001 |
|
|
|
8,861 |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
50,815 |
|
|
|
56,612 |
|
|
|
|
|
|
|
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|
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Commitments and contingencies (Note 6) |
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|
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Redeemable preferred stocks: |
|
|
|
|
|
|
|
|
|
Series E 14% cumulative, redeemable Class C preferred stock, no par value, 210,000 shares issued; 139,768 outstanding; aggregate liquidation preference of $234,680,000 ($212,071,000 at December 31, 2018) |
|
|
226,271 |
|
|
|
202,169 |
|
|
Series F redeemable Class C preferred stock, no par value, 1 share issued and outstanding; aggregate liquidation preference of $100 |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
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|
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Stockholders' equity: |
|
|
|
|
|
|
|
|
|
Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding; aggregate liquidation preference of $2,965,000 ($2,785,000 at December 31, 2018) |
|
|
2,000 |
|
|
|
2,000 |
|
|
Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued and outstanding; aggregate liquidation preference of $1,237,000 ($1,192,000 at December 31, 2018) |
|
|
1,000 |
|
|
|
1,000 |
|
|
Common stock, $.10 par value; 75,000,000 shares authorized, 31,283,210 shares issued |
|
|
3,128 |
|
|
|
3,128 |
|
|
Capital in excess of par value |
|
|
200,045 |
|
|
|
198,482 |
|
|
Retained earnings |
|
|
93,968 |
|
|
|
153,773 |
|
|
|
|
|
300,141 |
|
|
|
358,383 |
|
|
Less treasury stock, at cost: |
|
|
|
|
|
|
|
|
|
Common stock, 2,500,779 shares (2,438,305 shares at December 31, 2018) |
|
|
16,645 |
|
|
|
16,186 |
|
|
Total stockholders' equity |
|
|
283,496 |
|
|
|
342,197 |
|
|
|
|
$ |
1,129,781 |
|
|
$ |
1,148,333 |
|
See accompanying notes.
4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
|
|
|
(In Thousands, Except Per Share Amounts) |
|
|||||||||||||
|
Net sales |
|
$ |
75,495 |
|
|
$ |
79,781 |
|
|
$ |
291,174 |
|
|
$ |
283,430 |
|
|
Cost of sales |
|
|
85,228 |
|
|
|
89,523 |
|
|
|
273,912 |
|
|
|
280,006 |
|
|
Gross profit (loss) |
|
|
(9,733 |
) |
|
|
(9,742 |
) |
|
|
17,262 |
|
|
|
3,424 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
|
9,115 |
|
|
|
9,080 |
|
|
|
24,705 |
|
|
|
25,780 |
|
|
Other expense (income), net |
|
|
383 |
|
|
|
(2,265 |
) |
|
|
372 |
|
|
|
(1,814 |
) |
|
Operating loss |
|
|
(19,231 |
) |
|
|
(16,557 |
) |
|
|
(7,815 |
) |
|
|
(20,542 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
12,007 |
|
|
|
11,009 |
|
|
|
34,309 |
|
|
|
32,008 |
|
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,951 |
|
|
Non-operating other expense (income), net |
|
|
39 |
|
|
|
944 |
|
|
|
(605 |
) |
|
|
(296 |
) |
|
Loss before provision (benefit) for income taxes |
|
|
(31,277 |
) |
|
|
(28,510 |
) |
|
|
(41,519 |
) |
|
|
(58,205 |
) |
|
Provision (benefit) for income taxes |
|
|
(483 |
) |
|
|
(2,426 |
) |
|
|
(5,816 |
) |
|
|
976 |
|
|
Net loss |
|
|
(30,794 |
) |
|
|
(26,084 |
) |
|
|
(35,703 |
) |
|
|
(59,181 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on convertible preferred stocks |
|
|
75 |
|
|
|
75 |
|
|
|
225 |
|
|
|
225 |
|
|
Dividends on Series E redeemable preferred stock |
|
|
7,764 |
|
|
|
6,782 |
|
|
|
22,609 |
|
|
|
19,748 |
|
|
Accretion of Series E redeemable preferred stock |
|
|
500 |
|
|
|
481 |
|
|
|
1,493 |
|
|
|
2,882 |
|
|
Net loss attributable to common stockholders |
|
$ |
(39,133 |
) |
|
$ |
(33,422 |
) |
|
$ |
(60,030 |
) |
|
$ |
(82,036 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and dilutive net loss per common share |
|
$ |
(1.39 |
) |
|
$ |
(1.22 |
) |
|
$ |
(2.14 |
) |
|
$ |
(2.98 |
) |
See accompanying notes.
5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
Common Stock Shares |
|
|
Treasury Stock- Common Shares |
|
|
Non- Redeemable Preferred Stock |
|
|
Common Stock Par Value |
|
|
Capital in Excess of Par Value |
|
|
Retained Earnings |
|
|
Treasury Stock- Common |
|
|
Total |
|
||||||||
|
|
|
(In Thousands) |
|
|||||||||||||||||||||||||||||
|
Balance at December 31, 2018 |
|
|
31,283 |
|
|
|
(2,438 |
) |
|
$ |
3,000 |
|
|
$ |
3,128 |
|
|
$ |
198,482 |
|
|
$ |
153,773 |
|
|
$ |
(16,186 |
) |
|
$ |
342,197 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,540 |
) |
|
|
|
|
|
|
(11,540 |
) |
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,256 |
) |
|
|
|
|
|
|
(7,256 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(496 |
) |
|
|
|
|
|
|
(496 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
612 |
|
|
|
|
|
|
|
|
|
|
|
612 |
|
|
Other |
|
|
|
|
|
|
(76 |
) |
|
|
|
|
|
|
|
|
|
|
(144 |
) |
|
|
|
|
|
|
(546 |
) |
|
|
(690 |
) |
|
Balance at March 31, 2019 |
|
|
31,283 |
|
|
|
(2,514 |
) |
|
|
3,000 |
|
|
|
3,128 |
|
|
|
198,950 |
|
|
|
134,481 |
|
|
|
(16,732 |
) |
|
|
322,827 |
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,631 |
|
|
|
|
|
|
|
6,631 |
|
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,589 |
) |
|
|
|
|
|
|
(7,589 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(497 |
) |
|
|
|
|
|
|
(497 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
686 |
|
|
|
|
|
|
|
|
|
|
|
686 |
|
|
Balance at June 30, 2019 |
|
|
31,283 |
|
|
|
(2,514 |
) |
|
|
3,000 |
|
|
|
3,128 |
|
|
|
199,636 |
|
|
|
133,026 |
|
|
|
(16,732 |
) |
|
|
322,058 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,794 |
) |
|
|
|
|
|
|
(30,794 |
) |
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,764 |
) |
|
|
|
|
|
|
(7,764 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(500 |
) |
|
|
|
|
|
|
(500 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
|
|
|
|
|
|
|
|
|
501 |
|
|
Other |
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
(92 |
) |
|
|
|
|
|
|
87 |
|
|
|
(5 |
) |
|
Balance at September 30, 2019 |
|
|
31,283 |
|
|
|
(2,501 |
) |
|
$ |
3,000 |
|
|
$ |
3,128 |
|
|
$ |
200,045 |
|
|
$ |
93,968 |
|
|
$ |
(16,645 |
) |
|
$ |
283,496 |
|
|
Balance at December 31, 2017 |
|
|
31,281 |
|
|
|
(2,662 |
) |
|
$ |
3,000 |
|
|
$ |
3,128 |
|
|
$ |
193,956 |
|
|
$ |
256,214 |
|
|
$ |
(18,102 |
) |
|
$ |
438,196 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,591 |
) |
|
|
|
|
|
|
(5,591 |
) |
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,338 |
) |
|
|
|
|
|
|
(6,338 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,599 |
) |
|
|
|
|
|
|
(1,599 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,382 |
|
|
|
|
|
|
|
|
|
|
|
1,382 |
|
|
Other |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
(49 |
) |
|
|
|
|
|
|
(53 |
) |
|
|
(102 |
) |
|
Balance at March 31, 2018 |
|
|
31,281 |
|
|
|
(2,667 |
) |
|
|
3,000 |
|
|
|
3,128 |
|
|
|
195,289 |
|
|
|
242,686 |
|
|
|
(18,155 |
) |
|
|
425,948 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,506 |
) |
|
|
|
|
|
|
(27,506 |
) |
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,628 |
) |
|
|
|
|
|
|
(6,628 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(802 |
) |
|
|
|
|
|
|
(802 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,553 |
|
|
|
|
|
|
|
|
|
|
|
1,553 |
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50 |
) |
|
|
|
|
|
|
7 |
|
|
|
(43 |
) |
|
Balance at June 30, 2018 |
|
|
31,281 |
|
|
|
(2,667 |
) |
|
|
3,000 |
|
|
|
3,128 |
|
|
|
196,792 |
|
|
|
207,750 |
|
|
|
(18,148 |
) |
|
|
392,522 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,084 |
) |
|
|
|
|
|
|
(26,084 |
) |
|
Dividend accrued on redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,782 |
) |
|
|
|
|
|
|
(6,782 |
) |
|
Accretion of redeemable preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(481 |
) |
|
|
|
|
|
|
(481 |
) |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,349 |
|
|
|
|
|
|
|
|
|
|
|
1,349 |
|
|
Other |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
35 |
|
|
|
(3 |
) |
|
Balance at September 30, 2018 |
|
|
31,281 |
|
|
|
(2,662 |
) |
|
$ |
3,000 |
|
|
$ |
3,128 |
|
|
$ |
198,103 |
|
|
$ |
174,403 |
|
|
$ |
(18,113 |
) |
|
$ |
360,521 |
|
See accompanying notes.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Nine Months Ended |
|
|||||
|
|
|
September 30, |
|
|||||
|
|
|
2019 |
|
|
2018 |
|
||
|
|
|
(In Thousands) |
|
|||||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(35,703 |
) |
|
$ |
(59,181 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
(5,797 |
) |
|
|
1,015 |
|
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
5,951 |
|
|
Depreciation and amortization of property, plant and equipment |
|
|
51,575 |
|
|
|
53,514 |
|
|
Amortization of intangible and other assets |
|
|
936 |
|
|
|
1,787 |
|
|
Loss (gain) on sales of property and equipment |
|
|
657 |
|
|
|
(1,924 |
) |
|
Other |
|
|
4,093 |
|
|
|
7,075 |
|
|
Cash provided (used) by changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
15,511 |
|
|
|
6,308 |
|
|
Inventories |
|
|
8,852 |
|
|
|
4,599 |
|
|
Prepaid insurance |
|
|
9,446 |
|
|
|
8,878 |
|
|
Accounts payable |
|
|
(15,257 |
) |
|
|
5,023 |
|
|
Accrued interest |
|
|
10,886 |
|
|
|
3,298 |
|
|
Other assets and other liabilities |
|
|
(4,227 |
) |
|
|
2,437 |
|
|
Net cash provided by operating activities |
|
|
40,972 |
|
|
|
38,780 |
|
|
|
|
|
|
|
|
|||