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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, 2020

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

Preferred Stock Purchase Rights

 

LXU

N/A

 

New York Stock Exchange

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

 

 

 

 

 

 

 

 

 

 

 

 

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 29,317,168 shares as of October 30, 2020.

 

 

 

 


FORM 10-Q OF LSB INDUSTRIES, INC.

TABLE OF CONTENTS

 

 

 

PART I – Financial Information

 

Page

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

41

 

 

 

 

 

Item 1A.

 

Risk Factors

 

41

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

41

 

 

 

 

 

Item 4.

 

Mining Safety Disclosures

 

41

 

 

 

 

 

Item 5.

 

Other Information

 

41

 

 

 

 

 

Item 6.

 

Exhibits

 

41

 

 

2


PART I

FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at September 30, 2020 is unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

42,094

 

 

$

22,791

 

Accounts receivable

 

 

39,945

 

 

 

40,203

 

Allowance for doubtful accounts

 

 

(392

)

 

 

(261

)

Accounts receivable, net

 

 

39,553

 

 

 

39,942

 

Inventories:

 

 

 

 

 

 

 

 

Finished goods

 

 

17,637

 

 

 

21,738

 

Raw materials

 

 

1,565

 

 

 

1,573

 

Total inventories

 

 

19,202

 

 

 

23,311

 

Supplies, prepaid items and other:

 

 

 

 

 

 

 

 

Prepaid insurance

 

 

1,478

 

 

 

11,837

 

Precious metals

 

 

7,179

 

 

 

5,568

 

Supplies

 

 

25,174

 

 

 

24,689

 

Other

 

 

3,349

 

 

 

2,735

 

Total supplies, prepaid items and other

 

 

37,180

 

 

 

44,829

 

Total current assets

 

 

138,029

 

 

 

130,873

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

899,613

 

 

 

936,474

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

 

25,356

 

 

 

15,330

 

Intangible and other assets, net

 

 

6,927

 

 

 

5,812

 

 

 

 

32,283

 

 

 

21,142

 

 

 

 

 

 

 

 

 

 

 

 

$

1,069,925

 

 

$

1,088,489

 

 

(Continued on following page)

3


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at September 30, 2020 is unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

41,192

 

 

$

58,477

 

Short-term financing

 

 

751

 

 

 

9,929

 

Accrued and other liabilities

 

 

40,957

 

 

 

25,484

 

Current portion of long-term debt

 

 

15,203

 

 

 

9,410

 

Total current liabilities

 

 

98,103

 

 

 

103,300

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

470,751

 

 

 

449,634

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

19,249

 

 

 

11,404

 

 

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

5,596

 

 

 

6,214

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

32,663

 

 

 

35,717

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 $268,685,000 ($242,800,000 at December 31, 2019)

 

 

262,295

 

 

 

234,893

 

Series F redeemable Class C preferred stock, no par value, 1 share issued and

   outstanding; aggregate liquidation preference of $100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000

   shares issued and outstanding; aggregate liquidation preference

   of $3,205,000 ($3,025,000 at December 31, 2019)

 

 

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 $1,297,000 ($1,252,000 at December 31, 2019)

 

 

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

 

 

198,013

 

 

 

196,833

 

Retained earnings (accumulated deficit)

 

 

(9,989

)

 

 

57,632

 

 

 

 

194,152

 

 

 

260,593

 

Less treasury stock, at cost:

 

 

 

 

 

 

 

 

Common stock, 1,966,042 shares (2,009,566 shares at December 31, 2019)

 

 

12,884

 

 

 

13,266

 

Total stockholders' equity

 

 

181,268

 

 

 

247,327

 

 

 

$

1,069,925

 

 

$

1,088,489

 

 

 

See accompanying notes.

4


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

73,969

 

 

$

75,495

 

 

$

262,413

 

 

$

291,174

 

Cost of sales

 

 

75,028

 

 

 

85,228

 

 

 

241,900

 

 

 

273,912

 

Gross profit (loss)

 

 

(1,059

)

 

 

(9,733

)

 

 

20,513

 

 

 

17,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

7,068

 

 

 

9,115

 

 

 

25,578

 

 

 

24,705

 

Other expense, net

 

 

875

 

 

 

383

 

 

 

240

 

 

 

372

 

Operating loss

 

 

(9,002

)

 

 

(19,231

)

 

 

(5,305

)

 

 

(7,815

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

12,554

 

 

 

12,007

 

 

 

38,509

 

 

 

34,309

 

Non-operating other expense (income), net

 

 

216

 

 

 

39

 

 

 

(587

)

 

 

(605

)

Loss before benefit for income taxes

 

 

(21,772

)

 

 

(31,277

)

 

 

(43,227

)

 

 

(41,519

)

Benefit for income taxes

 

 

(1,370

)

 

 

(483

)

 

 

(3,008

)

 

 

(5,816

)

Net loss

 

 

(20,402

)

 

 

(30,794

)

 

 

(40,219

)

 

 

(35,703

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on convertible preferred stocks

 

 

75

 

 

 

75

 

 

 

225

 

 

 

225

 

Dividends on Series E redeemable preferred stock

 

 

8,889

 

 

 

7,764

 

 

 

25,885

 

 

 

22,609

 

Accretion of Series E redeemable preferred stock

 

 

508

 

 

 

500

 

 

 

1,517

 

 

 

1,493

 

Net loss attributable to common stockholders

 

$

(29,874

)

 

$

(39,133

)

 

$

(67,846

)

 

$

(60,030

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilutive net loss per common share

 

$

(1.06

)

 

$

(1.39

)

 

$

(2.41

)

 

$

(2.14

)

 

See accompanying notes.

5


LSB INDUSTRIES, INC.

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 (Accumulated Deficit)

 

 

Treasury

Stock-

Common

 

 

Total

 

 

 

(In Thousands)

 

Balance at December 31, 2019

 

 

31,283

 

 

 

(2,010

)

 

$

3,000

 

 

$

3,128

 

 

$

196,833

 

 

$

57,632

 

 

$

(13,266

)

 

$

247,327

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,452

)

 

 

 

 

 

 

(19,452

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,307

)

 

 

 

 

 

 

(8,307

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(504

)

 

 

 

 

 

 

(504

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

495

 

 

 

 

 

 

 

 

 

 

 

495

 

Other

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

(356

)

 

 

 

 

 

 

292

 

 

 

(64

)

Balance at March 31, 2020

 

 

31,283

 

 

 

(1,980

)

 

 

3,000

 

 

 

3,128

 

 

 

196,972

 

 

 

29,369

 

 

 

(12,974

)

 

 

219,495

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(365

)

 

 

 

 

 

 

(365

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,689

)

 

 

 

 

 

 

(8,689

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(505

)

 

 

 

 

 

 

(505

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

684

 

 

 

 

 

 

 

 

 

 

 

684

 

Other

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

(90

)

 

 

 

 

 

 

90

 

 

 

 

Balance at June 30, 2020

 

 

31,283

 

 

 

(1,966

)

 

 

3,000

 

 

 

3,128

 

 

 

197,566

 

 

 

19,810

 

 

 

(12,884

)

 

 

210,620

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,402

)

 

 

 

 

 

 

(20,402

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,889

)

 

 

 

 

 

 

(8,889

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(508

)

 

 

 

 

 

 

(508

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

447

 

 

 

 

 

 

 

 

 

 

 

447

 

Balance at September 30, 2020

 

 

31,283

 

 

 

(1,966

)

 

$

3,000

 

 

$

3,128

 

 

$

198,013

 

 

$

(9,989

)

 

$

(12,884

)

 

$

181,268

 

 

 

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