SEC Filing | LSB Industries

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lxu-10q_20200930.htm

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

☐	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 63^rd 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

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.

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

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)

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.

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.

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	)					(