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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, 2021

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 88,824,475 shares as of October 27, 2021.

 

 

 


 

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

 

25

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

38

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

38

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

43

 

 

 

 

 

Item 1A.

 

Risk Factors

 

43

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

43

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

43

 

 

 

 

 

Item 4.

 

Mining Safety Disclosures

 

43

 

 

 

 

 

Item 5.

 

Other Information

 

43

 

 

 

 

 

Item 6.

 

Exhibits

 

43

 

 

2


 

PART I

FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at September 30, 2021 is unaudited)

 

 

 

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

 

 

(Continued on following page)

3


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at September 30, 2021 is unaudited)

 

 

 

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 (Note 6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

See accompanying notes.

4


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

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

)

 

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, 2020

 

 

39,926

 

 

 

(2,075

)

 

$

3,000

 

 

$

3,991

 

 

$

197,352

 

 

$

(41,487

)

 

$

(13,213

)

 

$

149,643

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,279

)

 

 

 

 

 

 

(13,279

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,511

)

 

 

 

 

 

 

(9,511

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(511

)

 

 

 

 

 

 

(511

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

713

 

 

 

 

 

 

 

 

 

 

 

713

 

Issuance of restricted stock

 

 

250

 

 

 

835

 

 

 

 

 

 

 

25

 

 

 

(5,335

)

 

 

 

 

 

 

5,310

 

 

 

 

Other

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

Balance at March 31, 2021

 

 

40,176

 

 

 

(1,245

)

 

 

3,000

 

 

 

4,016

 

 

 

192,730

 

 

 

(64,788

)

 

 

(7,921

)

 

 

127,037

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,670

 

 

 

 

 

 

 

23,670

 

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,213

)

 

 

 

 

 

 

(10,213

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(513

)

 

 

 

 

 

 

(513

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,062

 

 

 

 

 

 

 

 

 

 

 

1,062

 

Issuance of unrestricted stock

 

 

80

 

 

 

267

 

 

 

 

 

 

$

8

 

 

 

(1,708

)

 

 

 

 

 

 

1,700

 

 

 

 

Other

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Balance at June 30, 2021

 

 

40,256

 

 

 

(983

)

 

 

3,000

 

 

 

4,024

 

 

 

192,084

 

 

 

(51,844

)

 

 

(6,249

)

 

 

141,015

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,928

)

 

 

 

 

 

 

(8,928

)

Issuance of common stock in exchange

    for redeemable preferred stocks

 

 

49,066

 

 

 

 

 

 

 

 

 

 

 

4,907

 

 

 

526,232

 

 

 

 

 

 

 

 

 

 

 

531,139

 

Deemed dividend on redeemable

   preferred stocks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(231,812

)

 

 

 

 

 

 

 

 

 

 

(231,812

)

Dividend accrued on redeemable

   preferred stock prior to exchange

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,190

)

 

 

 

 

 

 

(10,190

)

Accretion of redeemable preferred

   stock prior to exchange

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(499

)

 

 

 

 

 

 

(499

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,553

 

 

 

 

 

 

 

 

 

 

 

2,553

 

Issuance of restricted and unrestricted stock

 

 

520

 

 

 

 

 

 

 

 

 

 

 

52

 

 

 

(52

)

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

(35

)

 

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

 

(312

)

 

 

(210

)

Balance at September 30, 2021

 

 

89,842

 

 

 

(1,018

)

 

$

3,000

 

 

$

8,983

 

 

$

489,107

 

 

$

(71,461

)

 

$

(6,561

)

 

$

423,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

39,901

 

 

 

(2,010

)

 

$

3,000

 

 

$

3,989

 

 

$

195,972

 

 

$

57,632

 

 

$

(13,266

)

 

$

247,327

 

Net loss