lxu-8k_20211101.htm
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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): November 1, 2021

 

 

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.)

 

 

3503 NW 63rd Street, Suite 500, Oklahoma City, Oklahoma

 

73116

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code (405235-4546

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))

 

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

Preferred Stock Purchase Rights

 

N/A

 

New York Stock Exchange

 

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.  

 

 

 


 


 

 

Item 2.02.

Results of Operations and Financial Condition.

On November 1, 2021, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the third quarter ended September 30, 2021. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

On November 2, 2021, 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 third quarter ended September 30, 2021.

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.

 

Item 9.01

Exhibits.

(d) Exhibits.

 

 

 

 

Exhibit
Number

  

Description

 

 

99.1

  

Press Release issued by LSB Industries, Inc. dated November 1, 2021, titled “LSB Industries, Inc. Reports Operating Results for the 2021 Third Quarter”.

104

 

Cover Page Interactive Data File (embedded within the XBRL document)

 


2

 


 

 

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: November 1, 2021

 

 

 

 

 

 

 

LSB INDUSTRIES, INC.

 

 

By:

 

/s/ Cheryl A. Maguire

Name:

 

Cheryl A. Maguire

Title:

 

Executive Vice President and Chief Financial Officer

 

 

 

3

 

lxu-ex991_6.htm

Exhibit 99.1

 

LSB INDUSTRIES, INC. REPORTS OPERATING RESULTS

FOR THE 2021 THIRD QUARTER

 

Achieves Record Third Quarter Adjusted EBITDA

 

Positioned for Profitable Growth After Transformative Exchange Transaction and Debt Refinancing

 

OKLAHOMA CITY, Oklahoma…November 1, 2021…LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the third quarter ended September 30, 2021.

 

Third Quarter Highlights

 

Net sales of $127.2 million compared to $74.0 million in the third quarter of 2020

 

Adjusted EBITDA(1) of $37.7 million compared to $10.2 million in the third quarter of 2020

 

Adjusted EBITDA(1) margin of 29.6% compared to 13.8% in the third quarter of 2020

 

Total liquidity of approximately $81.1 million as of September 30, 2021

 

Completed exchange transaction converting outstanding preferred stock into shares of common stock, leading to credit rating upgrade and debt refinancing and significant reduction in cost of capital

 

“I am very pleased to report that over the past two months, we completed a series of steps that have transformed the financial foundation of our Company and positioned LSB to enter a new phase of growth and value creation,” stated Mark Behrman, LSB Industries’ President and CEO.  “In late September, we closed on our transaction with Eldridge Industries to exchange Eldridge’s $310 million of LSB preferred stock for shares of our common stock.  With this liability removed from our balance sheet, we received credit rating upgrades from the major rating agencies and proceeded in refinancing our debt through an offering of new senior notes.  Both transactions have helped us significantly reduce our cost of capital and bolster our liquidity.  We now have the flexibility to pursue earnings and cash flow growth opportunities through both organic initiatives and accretive acquisitions.”

 

Mr. Behrman continued, “Turning to our third quarter 2021 results, we delivered significant year-over-year growth in both our top and bottom line, despite an extensive turnaround at our Cherokee facility.  Net sales increased 72% while adjusted EBITDA was up almost 270% versus the same period last year and reached an all-time third quarter record level for our chemical operations.  These outstanding results reflect continued robust demand and pricing trends for both our agricultural and industrial products coupled with consistent operating performance by our facilities and the operating leverage inherent in our business model.”  

 

 

 

 (1 

) This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section

_______________________________________________________________________________________________________________________________

1


 

 

 

Third Quarter Results Overview

 

 

Three Months Ended September 30,

 

 

2021

 

2020

 

 

 

 

                                 (Dollars in thousands)

Net Sales by Market Sector

 

Net

Sales

 

Sector Mix

 

Net

Sales

 

Sector Mix

 

%

Change

   Agricultural

 

$ 51,102

    

40%

 

$ 31,986

    

43%

 

  60%

   Industrial

 

63,920

      

50%

 

32,372

 

44%

 

97%

   Mining

 

12,177

 

10%

 

9,611

 

13%

 

   27%

 

 

$ 127,199

 

 

 

$73,969

 

 

  72%

 

Comparison of 2021 to 2020 quarterly periods:

 

Net sales of our agricultural products increased during the quarter relative to the prior year period driven by stronger pricing for UAN, HDAN and ammonia.  Partially offsetting the benefit of stronger pricing was an extended turnaround at the Cherokee facility and the resultant lost production and sales volume.  

 

Net sales of our industrial and mining products increased as a result of higher pricing related to a rise in the Tampa ammonia benchmark price, to which many of our industrial contracts are tied.  Also benefitting industrial sales was the continued ramp up of a new nitric acid offtake agreement along with general strength in the U.S. economy, including the key automotive, home building and power generation end-use markets for our products.

 

The year-over-year improvement in operating income and adjusted EBITDA was primarily the result of the higher selling prices along with stronger Industrial volumes partially offset by the lost fixed cost absorption resulting from the aforementioned Turnaround at the Cherokee facility and higher natural gas feedstock prices.

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

 

 

 

Three Months Ended September 30,

Product (tons sold)

 

2021

 

2020

 

% Change

    Urea ammonium nitrate (UAN)

 

82,556

 

140,524

 

(41) %

    High density ammonium nitrate (HDAN)

 

37,011

 

27,800

 

33  %

    Ammonia

 

14,100

 

20,181

 

(30) %

    Other

 

2,394

 

2,824

 

  (15) %

 

 

136,061

 

191,329

 

(29) %

 

Average Selling Prices (price per ton) (A)  

 

 

 

 

 

 

    UAN

 

$   305    

 

$     130    

 

      135 %

    HDAN

 

$    355    

 

$     201    

  

      76 %

    Ammonia

 

$     545  

 

$     182    

 

200 %


(A) Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons.  

 

 

 

2


 

 

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

 

 

 

Three Months Ended September 30,

Product (tons sold)

 

2021

 

2020

 

% Change

    Ammonia

 

65,901  

 

68,366

 

      (4) %

    AN, Nitric Acid, Other

 

101,540

 

74,753

 

     36 %

 

 

167,441

 

143,119

 

    17 %

 

 

 

 

 

 

 

Tampa Ammonia Benchmark

(price per metric ton)

 

$     610            

 

$     207

 

195 %

 

 

 

 

 

 

 

Input Costs

 

 

 

 

 

 

    Average natural gas cost/MMBtu

 

$     3.71

 

$     1.98

 

87 %

 

 

Financial Position and Capital Expenditures

 

As of September 30, 2021, our total cash position was $32.9 million. Additionally, LSB had approximately $48.2 million of borrowing availability under its Working Capital Revolver resulting in total liquidity of approximately $81 million.  Total long-term debt, including the current portion, was $469.9 million on September 30, 2021 compared to $484.2 million on December 31, 2020.  On September 27, 2021, the Company closed on a transaction to exchange approximately $310 million of the Series E Redeemable Preferred stock held by Eldridge Industries for shares of LSB common stock.  The Company’s new common share count following the completion of the transaction is approximately 88.8 million shares.

 

Interest expense for the third quarter of 2021 was $13.0 million compared to $12.6 million for the same period in 2020.  

 

Cheryl Maguire, LSB’s Chief Financial Officer, stated, “On October 14, 2021 we closed on an offering of $500 million of senior secured notes due 2028, bearing an interest rate of 6.250%, which we used to redeem our $435 million of 9.625% senior notes that were due to mature in 2023, with the balance being used to enhance the liquidity of our balance sheet and for general corporate purposes.  By reducing the interest rate on our notes by nearly 340 basis points we expect to recognize an annual cash interest expense savings of approximately $11 million, enhancing our cash flow and positioning us to more aggressively pursue our growth strategies despite increasing our overall debt.”

 

Capital expenditures were approximately $26.1 million for the first nine months of 2021. For the full year, total capital expenditures related to capital work to be performed in 2021 are expected to be approximately $35 - $40 million, inclusive of investments for margin enhancement purposes.

 

Outlook

 

The environment for U.S. agricultural markets remains very favorable as a result of a combination of stronger farm incomes in 2020, increased demand for corn from China and other countries, and dry conditions in South America and the Western U.S. which have collectively constricted global corn supplies and pushed corn prices to levels well above the average of the past seven years, despite a recent pullback from peak levels. This translates into strong demand and a significant increase in pricing for fertilizers.

 

 

3


 

 

Our industrial business also continues to benefit from solid demand from key end markets including homebuilding and power generation.  While auto sales have backed off after rebounding from early 2020 pandemic lows and reaching peak levels in April of 2021 due to a shortage of microprocessors, we have yet to see any reduction in demand for our nitric acid, due in part to a large, multi-year contract we commenced in the first quarter of this year.   Economic forecasts point to continued expansion, including those from The International Monetary Fund, that predicts 6% year-over-year GDP growth for the U.S. in 2021, the largest percentage increase since 1984, and a solid 5% for 2022.  The strength in the Tampa ammonia price also has positive implications for our industrial business as many industrial chemical contracts are indexed to the Tampa ammonia price.  

 

As it relates to the surge in natural gas prices that began in the first quarter of this year, many of our industrial contracts are cost-plus, enabling us to pass along the cost of gas to our customers.  On the agricultural side of our business, natural gas price inflation has thus far been significantly outpaced by the increase in selling prices for ammonia, UAN and HDAN and also caused ammonia producers in certain regions, particularly Europe where gas costs now exceed $20/MMBtu, to take production offline, constraining global ammonia supply and causing further increase in ammonia selling prices.

 

Collectively, these factors make us very optimistic for continued strong sales and adjusted EBITDA levels for the balance of 2021 and well into 2022, which combined with our lower cost capital structure should enable us to generate consistent positive free cash flow that we plan to invest in bottom line growth initiatives.

 

Conference Call

LSB’s management will host a conference call covering the third quarter results on Tuesday, November 2, 2021 at 10:00 am ET / 9:00 am CT to discuss these results and recent corporate developments.  Participating in the call will be President & Chief Executive Officer, Mark Behrman and Executive Vice President & Chief Financial Officer, Cheryl Maguire. Interested parties may participate in the call by dialing (201) 689-8451.  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.

 

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 primarily throughout the United States and parts of Mexico and Canada. Additional information about the Company can be found on its website at www.lsbindustries.com.

 

Forward-Looking Statements

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance including the effects of the COVID-19 pandemic and anticipated

 

4


 

performance based on our growth and other strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or actual achievements to differ materially from the results, level of activity, performance or anticipated achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but are not limited to, business and market disruptions related to the COVID-19 pandemic, market conditions and price volatility for our products and feedstocks, as well as global and regional economic downturns, including as a result of the COVID-19 pandemic, that adversely affect the demand for our end-use products; disruptions in production at our manufacturing facilities; our ability to complete the preferred stock exchange transaction on the terms disclosed or at all and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC).

 

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.

 

See Accompanying Tables

 

 

 

 

Company Contact:

Cheryl Maguire, Executive Vice President & CFO

(405) 510-3524 

 

Fred Buonocore, CFA, Vice President of Investor Relations

(405) 510-3550

fbuonocore@lsbindustries.com

 

 

    

 

 

 


 

5


 

LSB Industries, Inc.

Condensed Consolidated Statement of Operations

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

127,199

 

 

$

73,969

 

 

$

366,011

 

 

$

262,413

 

Cost of sales

 

 

109,752

 

 

 

75,028

 

 

 

305,496

 

 

 

241,900

 

Gross profit (loss)

 

 

17,447

 

 

 

(1,059

)

 

 

60,515

 

 

 

20,513

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

11,600

 

 

 

7,068

 

 

 

28,938

 

 

 

25,578

 

Other expense, net

 

 

474

 

 

 

875

 

 

 

217

 

 

 

240

 

Operating income (loss)

 

 

5,373

 

 

 

(9,002

)

 

 

31,360

 

 

 

(5,305

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

12,956

 

 

 

12,554

 

 

 

37,618

 

 

 

38,509

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

(10,000

)

 

 

 

Non-operating other expense (income), net

 

 

1,326

 

 

 

216

 

 

 

2,466

 

 

 

(587

)

Income (loss) before provision (benefit) for income taxes

 

 

(8,909

)

 

 

(21,772

)

 

 

1,276

 

 

 

(43,227

)

Provision (benefit) for income taxes

 

 

19

 

 

 

(1,370

)

 

 

(187

)

 

 

(3,008

)

Net income (loss)

 

 

(8,928

)

 

 

(20,402

)

 

 

1,463

 

 

 

(40,219

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends on convertible preferred stocks

 

 

75

 

 

 

75

 

 

 

225

 

 

 

225

 

Dividends on Series E redeemable preferred stock

 

 

10,190

 

 

 

8,889

 

 

 

29,914

 

 

 

25,885

 

Accretion of Series E redeemable preferred stock

 

 

499

 

 

 

508

 

 

 

1,523

 

 

 

1,517

 

Deemed dividend on Series E and Series F

   redeemable preferred stocks

 

 

231,812

 

 

 

 

 

 

231,812

 

 

 

 

Net loss attributable to common stockholders

 

$

(251,504

)

 

$

(29,874

)

 

$

(262,011

)

 

$

(67,846

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and dilutive net loss per common share

 

$

(6.39

)

 

$

(0.81

)

 

$

(6.94

)

 

$

(1.85

)

 

 

Adjusted Net Income and Adjusted EPS (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) attributable to common stockholders, excluding Exchange Transaction

 

$

(9,003

)

 

$

(20,477)

 

 

$

1,238

 

 

$

(40,444)

 

Other adjustments

 

 

15,645

 

 

 

1,743

 

 

 

19,716

 

 

 

6,849

 

Adjusted Net income (loss)

 

$

6,642

 

 

$

      (18,734)

 

 

$

     20,954

 

 

$

(33,595)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per common share Excluding Exchange Transaction and Other Adjustments (1)

 

$

             0.07

 

 

$

               (0.49)

 

 

$

   0.24

 

 

$

(0.88)

 

 

(1)This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section

 

 

6


 

 

 

 


LSB Industries, Inc.

Consolidated Balance Sheets

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,855

 

 

$

16,264

 

Accounts receivable

 

 

66,082

 

 

 

42,929

 

Allowance for doubtful accounts

 

 

(377

)

 

 

(378

)

Accounts receivable, net

 

 

65,705

 

 

 

42,551

 

Inventories:

 

 

 

 

 

 

 

 

Finished goods

 

 

16,536

 

 

 

17,778

 

Raw materials

 

 

1,670

 

 

 

1,795

 

Total inventories

 

 

18,206

 

 

 

19,573

 

Supplies, prepaid items and other:

 

 

 

 

 

 

 

 

Prepaid insurance

 

 

1,879

 

 

 

12,315

 

Precious metals

 

 

10,670

 

 

 

6,787

 

Supplies

 

 

26,011

 

 

 

25,288

 

Other

 

 

7,629

 

 

 

6,802

 

Total supplies, prepaid items and other

 

 

46,189

 

 

 

51,192

 

Total current assets

 

 

162,955

 

 

 

129,580

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

869,497

 

 

 

891,198

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

 

28,308

 

 

 

26,403

 

Intangible and other assets, net

 

 

13,784

 

 

 

6,121

 

 

 

 

42,092

 

 

 

32,524

 

 

 

 

 

 

 

 

 

 

 

 

$

1,074,544

 

 

$

1,053,302

 

 

 

 

 

 

 

 

 

 


 

7


 

 

LSB Industries, Inc.

Consolidated Balance Sheets (continued)

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

73,658

 

 

$

46,551

 

Short-term financing

 

 

1,083

 

 

 

13,576

 

Accrued and other liabilities

 

 

50,772

 

 

 

30,367

 

Current portion of long-term debt

 

 

9,249

 

 

 

16,801

 

Total current liabilities

 

 

134,762

 

 

 

107,295

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

460,637

 

 

 

467,389

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

20,704

 

 

 

19,845

 

 

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

4,040

 

 

 

6,090

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

31,333

 

 

 

30,939

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable preferred stocks:

 

 

 

 

 

 

 

 

Series E 14% cumulative, redeemable Class C preferred stock, no par value,

   no shares issued or outstanding at September 30, 2021; (210,000 shares

   issued; 139,768 outstanding; aggregate liquidation preference

   $278 million at December 31, 2020)

 

 

 

 

 

272,101

 

Series F redeemable Class C preferred stock, no par value,  no shares

   issued or outstanding at September 30, 2021; (1 share issued and

   outstanding; aggregate liquidation preference of $100

   at December 31, 2020)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

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

   shares issued and outstanding; aggregate liquidation preference

   of $3.4 million ($3.3 million at December 31, 2020)

 

 

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 $1.4 million ($1.3 million at December 31, 2020)

 

 

1,000

 

 

 

1,000

 

Common stock, $.10 par value; 150 million shares authorized, 90 million

   shares issued (75 million shares authorized, 40 million shares issued

   at December 31, 2020)

 

 

8,983

 

 

 

3,991

 

Capital in excess of par value

 

 

489,107

 

 

 

197,352

 

Accumulated deficit

 

 

(71,461

)

 

 

(41,487

)

 

 

 

429,629

 

 

 

162,856

 

Less treasury stock, at cost:

 

 

 

 

 

 

 

 

Common stock, 1 million shares (2.1 million shares at December 31, 2020)

 

 

6,561

 

 

 

13,213

 

Total stockholders' equity

 

 

423,068

 

 

 

149,643

 

 

 

$

1,074,544

 

 

$

1,053,302

 

 

 

 

8


 

 

LSB Industries, Inc.

Non-GAAP Reconciliations

 

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 and Adjusted EBITDA Reconciliation

EBITDA is defined as net income (loss) plus interest expense, less gain on extinguishment of debt, plus depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization of intangible and other assets), plus provision for income taxes. 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 (FMV) adjustments, non-cash stock-based compensation, and consulting costs associated with reliability and purchasing initiatives (Initiatives). We historically have performed turnaround activities on an annual basis; however, we have moved 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.

 

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. In addition, we believe that certain investors consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items.

 

EBITDA and adjusted EBITDA have 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 and adjusted 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 and adjusted EBITDA for the periods indicated. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.

 

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share have been adjusted for the impact of the closing of the Exchange Transaction on September 27, 2021 as well as the one time/non-cash or non-operating items referred to in the above section relating to Adjusted EBITDA.


 

9


 

 

LSB Industries, Inc.

Non-GAAP Reconciliations (continued)

 

 

LSB Consolidated ($ in thousands)

Three Months Ended                                  September 30,

 

Nine Months Ended                                  September 30,

2021

 

2020

 

2021

 

2020

 

Net Income (loss)

$ (8,928)

 

        $ (20,402)

 

$ 1,463

 

$ (40,219)

Plus:

 

 

 

 

 

 

 

   Interest expense

12,956

 

12,554

 

37,618

 

38,509

   Depreciation and amortization

17,970

 

17,700

 

52,324

 

52,903

   Gain on Extinguishment of debt-PPP loan

                    -

 

                    -

 

        (10,000)

 

                   -

   Provision (benefit) for income taxes

                 19

 

(1,370)                

 

             (187)

 

          (3,008)

EBITDA

$ 22,017

 

$ 8,482

 

$ 81,218

 

$ 48,185

 

   Stock-based compensation

2,553

 

447

 

4,329

 

1,627

   Change of Control

3,223

 

-

 

3,223

 

                   -

   Noncash loss (gain) on natural gas contracts

-

 

(669)

 

(1,205)

 

(538)

   Legal fees (Leidos)

271

 

901

 

1,598

 

5,143

   Loss on disposal of assets

516

 

887

 

690

 

              610

   FMV adjustment on preferred

 

 

 

 

 

 

 

     stock embedded derivatives

1,106

 

141

 

2,258

 

            (616)

   Consulting costs associated with Initiatives

-

 

2

 

-

 

578

   Turnaround costs

7,976

 

34

 

8,823

 

45

Adjusted EBITDA

$ 37,662

 

$ 10,225

 

$ 100,934

 

$ 55,034

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin

 

            29.6 %

 

 

 

 

            

           13.8 %

 

 

 

           27.6 %

 

                  

 

          21.0 %

 

 

 

 

 

 

 

 

 

 


 

10


 

 

LSB Industries, Inc.

Non-GAAP Reconciliations (continued)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

Net loss attributable to common stockholders

$             (251,504)

$

$              (29,874)

$

$                (262,011)

$

$          (67,846)

    Adjustments for Exchange Transaction:

 

 

 

 

 

 

 

 

Dividend requirements on Series E
   Redeemable Preferred

                    10,190

 

                     8,889

 

                       29,914

 

                  25,885

 

Deemed dividend on Series E and Series F  
Redeemable Preferred

                  231,812

 

                            -  

 

                     231,812

 

                          -  

 

Accretion of Series E Redeemable Preferred

                         499

 

                        508

 

                         1,523

 

                  1,517

Adjusted net income (loss) attributable to
  common stockholders, excluding Exchange
  Transaction

                     (9,003)

 

                 (20,477)

 

                         1,238

 

                (40,444)

   Other Adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation

                      2,553

 

                        447

 

                         4,329

 

                 1,627

 

Change of control

                      3,223

 

                            -  

 

                         3,223

 

                          -  

 

Noncash loss (gain) on natural gas contracts

                             -  

 

                       (669)

 

                        (1,205)

 

                   (538)

 

Legal fees (Leidos)

                         271

 

                        901

 

                         1,598

 

                  5,143

 

Loss (gain) on disposal of assets

                         516

 

                        887

 

                             690

 

                     610

 

FMV adjustment on preferred stock embedded
derivative

                      1,106

 

                        141

 

                         2,258

 

                 (616)

 

Consulting costs associated with reliability and
  purchasing initiatives

                             -  

 

                             2

 

                                -  

 

                       578

 

Turnaround costs

                      7,976

 

                          34

 

                         8,823

 

                        45

Adjusted net income (loss) attributable to
  common stockholders, excluding Exchange
  Transaction and other adjustments

$                   6,642

$

$              (18,734)

$

$                    20,954

$

$          (33,595)

Denominator:

 

 

 

 

 

 

 

Adjusted weighted-average shares for basic and diluted net loss per share and for adjusted net
  income (loss) per share, excluding
  Exchange Transaction (14)

39,351,875

 

36,675,477

 

37,752,342

 

36,654,416

    Adjustment:

 

 

 

 

 

 

 

 

Unweighted shares, including unvested restricted
  stock subject to forfeiture

 

         49,472,600

 

       1,285,023

 

51,072,133

 

1,306,084

Outstanding shares, net of treasury, at period end for adjusted net income (loss) per share, excluding Exchange Transaction and other adjustments

             88,824,475

 

           37,960,500

 

                 88,824,475

 

           37,960,500

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share

$                    (6.39)

$

$                   (0.81)

$

$                       (6.94)

$

$           (1.85)

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per common share,
  excluding Exchange Transaction

$                    (0.23)

$

$                   (0.56)

$

$                        0.03

$

$           (1.10)

 

 

 

 

 

 

 

 

 

Adjusted net income (loss) per common share,
   excluding Exchange Transaction and other
   adjustments

$                     0.07

$

$                   (0.49)

$

$                        0.24

$

$           (0.88)

 

2 

(1) Excludes the weighted-average shares of unvested restricted stock that are subject to forfeiture

 

11


 

 

 

 

 

 

 

 

Agricultural Sales Price Reconciliation

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

 

 

Three Months Ended                                  September 30,

 

Nine Months Ended                                  September 30,

2021

 

2020

 

2021

 

2020

 

Agricultural net sales ($ in thousands)

$ 51,102

 

$ 31,986

 

$ 162,523

 

$ 138,441

 

 

 

 

 

 

 

 

Less freight

1,984

 

2,172

 

9,698

 

11,638

 

 

 

 

 

 

 

 

Agricultural netback sales

$ 49,118

 

$ 29,814

 

$ 152,825

 

$ 126,803

 

 

 

 

12