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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 June 30, 2023

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 74,344,336 shares as of July 21, 2023.

 


 

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

 

18

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

30

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

30

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

35

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

35

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

35

 

 

 

 

 

Item 5.

 

Other Information

 

36

 

 

 

 

 

Item 6.

 

Exhibits

 

37

 

When we refer to "us", "we", "our", "Company" or "LSB" we are describing LSB Industries, Inc. and its subsidiaries.

 

2


 

PART I

FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at June 30, 2023 is unaudited)

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,072

 

 

$

63,769

 

Short-term investments

 

 

268,762

 

 

 

330,553

 

Accounts receivable

 

 

51,431

 

 

 

75,494

 

Allowance for doubtful accounts

 

 

(692

)

 

 

(699

)

Accounts receivable, net

 

 

50,739

 

 

 

74,795

 

Inventories:

 

 

 

 

 

 

Finished goods

 

 

21,281

 

 

 

28,893

 

Raw materials

 

 

1,420

 

 

 

1,990

 

Total inventories

 

 

22,701

 

 

 

30,883

 

Supplies, prepaid items and other:

 

 

 

 

 

 

Prepaid insurance

 

 

7,084

 

 

 

17,429

 

Precious metals

 

 

13,100

 

 

 

13,323

 

Supplies

 

 

29,730

 

 

 

27,501

 

Other

 

 

2,904

 

 

 

8,346

 

Total supplies, prepaid items and other

 

 

52,818

 

 

 

66,599

 

Total current assets

 

 

440,092

 

 

 

566,599

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

835,423

 

 

 

848,661

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Operating lease assets

 

 

25,050

 

 

 

22,682

 

Intangible and other assets, net

 

 

1,572

 

 

 

1,877

 

 

 

 

26,622

 

 

 

24,559

 

 

 

 

 

 

 

 

 

 

$

1,302,137

 

 

$

1,439,819

 

(Continued on following page)

 

3


 

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at June 30, 2023 is unaudited)

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

54,524

 

 

$

78,182

 

Short-term financing

 

 

5,118

 

 

 

16,134

 

Accrued and other liabilities

 

 

31,210

 

 

 

38,470

 

Current portion of long-term debt

 

 

5,371

 

 

 

9,522

 

Total current liabilities

 

 

96,223

 

 

 

142,308

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

578,214

 

 

 

702,733

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

16,158

 

 

 

14,896

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

522

 

 

 

522

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

71,223

 

 

 

63,487

 

 

 

 

 

 

 

 

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

 

 

498,517

 

 

 

497,179

 

Retained earnings

 

 

240,088

 

 

 

199,092

 

 

 

 

747,722

 

 

 

705,388

 

Less treasury stock, at cost:

 

 

 

 

 

 

Common stock, 16.8 million shares (14.9 million shares at December 31, 2022)

 

 

207,925

 

 

 

189,515

 

Total stockholders' equity

 

 

539,797

 

 

 

515,873

 

 

 

$

1,302,137

 

 

$

1,439,819

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

165,845

 

 

$

284,803

 

 

$

346,809

 

 

$

483,784

 

Cost of sales

 

 

129,813

 

 

 

141,879

 

 

 

269,172

 

 

 

250,130

 

Gross profit

 

 

36,032

 

 

 

142,924

 

 

 

77,637

 

 

 

233,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

9,436

 

 

 

9,638

 

 

 

19,303

 

 

 

20,573

 

Other expense (income), net

 

 

(900

)

 

 

628

 

 

 

303

 

 

 

452

 

Operating income

 

 

27,496

 

 

 

132,658

 

 

 

58,031

 

 

 

212,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

11,836

 

 

 

12,307

 

 

 

24,048

 

 

 

22,262

 

(Gain) loss on extinguishment of debt

 

 

(8,644

)

 

 

 

 

 

(8,644

)

 

 

113

 

Non-operating other income, net

 

 

(3,764

)

 

 

(3,430

)

 

 

(7,240

)

 

 

(3,408

)

Income before provision for income taxes

 

 

28,068

 

 

 

123,781

 

 

 

49,867

 

 

 

193,662

 

Provision for income taxes

 

 

2,973

 

 

 

20,382

 

 

 

8,871

 

 

 

31,497

 

Net income

 

 

25,095

 

 

 

103,399

 

 

 

40,996

 

 

 

162,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.33

 

 

$

1.17

 

 

$

0.54

 

 

$

1.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.33

 

 

$

1.15

 

 

$

0.54

 

 

$

1.81

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

Common
Stock
Shares

 

 

Treasury
Stock-
Common
Shares

 

 

Common
Stock
Par
Value

 

 

Capital in
Excess of
Par
Value

 

 

Retained Earnings (Accumulated Deficit)

 

 

Treasury
Stock-
Common

 

 

Total

 

 

 

(In Thousands)

 

Balance at December 31, 2022

 

 

91,168

 

 

 

(14,888

)

 

$

9,117

 

 

$

497,179

 

 

$

199,092

 

 

$

(189,515

)

 

$

515,873

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,901

 

 

 

 

 

 

15,901

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

719

 

 

 

 

 

 

 

 

 

719

 

Shares issued restricted stock units

 

 

 

 

 

53

 

 

 

 

 

 

(682

)

 

 

 

 

 

682

 

 

 

 

Shares withheld restricted stock and
  restricted stock units vesting

 

 

 

 

 

(204

)

 

 

 

 

 

 

 

 

 

 

 

(2,541

)

 

 

(2,541

)

Balance at March 31, 2023

 

 

91,168

 

 

 

(15,039

)

 

 

9,117

 

 

 

497,216

 

 

 

214,993

 

 

 

(191,374

)

 

 

529,952

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,095

 

 

 

 

 

 

25,095

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

1,927

 

 

 

 

 

 

 

 

 

1,927

 

Purchase of common stock

 

 

 

 

 

(1,795

)

 

 

 

 

 

 

 

 

 

 

 

(17,218

)

 

 

(17,218

)

Shares issued restricted stock units
  and ESPP participants

 

 

 

 

 

58

 

 

 

 

 

 

(626

)

 

 

 

 

 

732

 

 

 

106

 

Shares withheld restricted stock
  units vesting

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

(65

)

Balance at June 30, 2023

 

 

91,168

 

 

 

(16,783

)

 

$

9,117

 

 

$

498,517

 

 

$

240,088

 

 

$

(207,925

)

 

$

539,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

See accompanying notes to condensed consolidated financial statements.

 

6


 

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

 

(In Thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

40,996

 

 

$

162,165

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Deferred income taxes

 

 

7,736

 

 

 

30,600

 

Loss (gain) on extinguishment of debt

 

 

(8,644

)

 

 

113

 

Depreciation and amortization of property, plant and equipment

 

 

34,416

 

 

 

33,883

 

Amortization of intangible and other assets

 

 

291

 

 

 

621

 

Stock-based compensation

 

 

2,646

 

 

 

2,168

 

Other

 

 

2,832

 

 

 

(850

)

Cash provided (used) by changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

24,937

 

 

 

(8,631

)

Inventories

 

 

8,171

 

 

 

(19,392

)

Prepaid insurance

 

 

10,346

 

 

 

8,070

 

Supplies, prepaid items and other

 

 

2,192

 

 

 

(4,749

)

Accounts payable

 

 

(14,789

)

 

 

20,974

 

Accrued interest

 

 

(4,054

)

 

 

(1,008

)

Other assets and other liabilities

 

 

(4,127

)

 

 

(3,151

)

Net cash provided by operating activities

 

 

102,949

 

 

 

220,813

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

(32,263

)

 

 

(16,431

)

Proceeds from short-term investments

 

 

264,212

 

 

 

 

Purchases of short-term investments

 

 

(201,751

)

 

 

(325,566

)

Other investing activities

 

 

10

 

 

 

63

 

Net cash provided (used) by investing activities

 

 

30,208

 

 

 

(341,934

)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Net proceeds from 6.25% senior secured notes

 

 

 

 

 

200,000

 

Repurchases of 6.25% senior secured notes

 

 

(114,320

)

 

 

 

Payments on other long-term debt

 

 

(6,800

)

 

 

(8,907

)

Payments on short-term financing

 

 

(11,016

)

 

 

(7,034

)

Acquisition of treasury stock, net

 

 

(19,718

)

 

 

(