SEC Filing | LSB Industries

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lxu-10q_20220630.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 June 30, 2022

☐	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 88,851,277 shares as of July 22, 2022.

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	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

	PART II – Other Information

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	36

Item 4.	Mining Safety Disclosures	36

Item 5.	Other Information	36

Item 6.	Exhibits	36

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at June 30, 2022 is unaudited)

	June 30,			December 31,
	2022			2021
	(In Thousands)
Assets
Current assets:
Cash and cash equivalents	$	125,231		$	82,144
Short-term investments		325,566			—
Accounts receivable		97,406			86,902
Allowance for doubtful accounts		(652	)		(474	)
Accounts receivable, net		96,754			86,428
Inventories:
Finished goods		34,144			14,688
Raw materials		1,831			1,895
Total inventories		35,975			16,583
Supplies, prepaid items and other:
Prepaid insurance		6,174			14,244
Precious metals		13,929			14,945
Supplies		27,263			26,558
Other		7,134			2,234
Total supplies, prepaid items and other		54,500			57,981
Total current assets		638,026			243,136

Property, plant and equipment, net		839,411			858,480

Other assets:
Operating lease assets		27,056			27,317
Intangible and other assets, net		3,221			3,907
		30,277			31,224

	$	1,507,714		$	1,132,840

(Continued on following page)

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at June 30, 2022 is unaudited)

	June 30,		December 31,
	2022		2021
	(In Thousands)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	69,308	$	49,458
Short-term financing		5,682		12,716
Accrued and other liabilities		31,325		33,301
Current portion of long-term debt		10,977		9,454
Total current liabilities		117,292		104,929

Long-term debt, net		704,427		518,190

Noncurrent operating lease liabilities		18,681		19,568

Other noncurrent accrued and other liabilities		523		3,030

Deferred income taxes		57,232		26,633

Commitments and contingencies (Note 5)

Stockholders' equity:
Common stock, $.10 par value; 150 million shares authorized, 91.2 million shares issued		9,117		9,117
Capital in excess of par value		495,330		493,161
Retained earnings (accumulated deficit)		130,910		(31,255	)
		635,357		471,023
Less treasury stock, at cost:
Common stock, 2.3 million shares (1.4 million shares at December 31, 2021)		25,798		10,533
Total stockholders' equity		609,559		460,490
	$	1,507,714	$	1,132,840

See accompanying notes to condensed consolidated financial statements.

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2022			2021			2022			2021
	(In Thousands, Except Per Share Amounts)
Net sales	$	284,803		$	140,696		$	483,784		$	238,812
Cost of sales		141,879			105,688			250,130			195,744
Gross profit		142,924			35,008			233,654			43,068

Selling, general and administrative expense		9,638			8,545			20,573			17,338
Other expense (income), net		628			6			452			(257	)
Operating income		132,658			26,457			212,629			25,987

Interest expense, net		12,307			12,290			22,262			24,662
Loss (gain) on extinguishment of debt		—			(10,000	)		113			(10,000	)
Non-operating other expense (income), net		(3,430	)		745			(3,408	)		1,140
Income before provision (benefit) for income taxes		123,781			23,422			193,662			10,185
Provision (benefit) for income taxes		20,382			(248	)		31,497			(206	)
Net income		103,399			23,670			162,165			10,391

Dividends on convertible preferred stocks		—			75			—			150
Dividends on Series E redeemable preferred stock		—			10,213			—			19,724
Accretion of Series E redeemable preferred stock		—			513			—			1,024
Net income attributable to participating securities		—			223			—			—
Net income (loss) attributable to common stockholders	$	103,399		$	12,646		$	162,165		$	(10,507	)

Income (loss) per common share:
Basic:
Net income (loss)	$	1.17		$	0.34		$	1.84		$	(0.28	)

Diluted:
Net income (loss)	$	1.15		$	0.32		$	1.81		$	(0.28	)

See accompanying notes to condensed consolidated financial statements.

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, 2021		91,168		(1,375	)	$	—	$	9,117	$	493,161		$	(31,255	)	$	(10,533	)	$	460,490
Net income														58,766						58,766
Stock-based compensation											803									803
Other				(229	)												(1,871	)		(1,871	)
Balance at March 31, 2022		91,168		(1,604	)		—		9,117		493,964			27,511			(12,404	)		518,188
Net income														103,399						103,399
Stock-based compensation											1,366									1,366
Purchase of common stock				(713	)												(13,394	)		(13,394	)
Balance at June 30, 2022		91,168		(2,317	)	$	—	$	9,117	$	495,330		$	130,910		$	(25,798	)	$	609,559

Balance at December 31, 2020		39,926		(2,075	)	$	3,000	$	3,993	$	197,350		$	(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		4,018		192,728			(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	$	4,026	$	192,082		$	(51,844	)	$	(6,249	)	$	141,015

See accompanying notes condensed consolidated financial statements.

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,
	2022		2021
	(In Thousands)
Cash flows from operating activities
Net income	$	162,165	$	10,391
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		30,600		256
Loss (gain) on extinguishment of debt		113		(10,000	)
Depreciation and amortization of property, plant and equipment		33,883		33,725
Amortization of intangible and other assets		621		629
Other		1,318		1,749
Cash provided (used) by changes in assets and liabilities:
Accounts receivable		(8,631