LSB Industries, Inc. Reports Operating Results for the 2016 Second Quarter
Second Quarter Highlights
- Start-up of 375,000 tons per year ammonia plant at El Dorado Facility
-
Entered into sale agreement of the Climate Control Business, which
closed on
July 1, 2016 -
Net sales from continuing operations of
$110.0 million -
EBITDA from continuing operations of
$9.6 million ; adjusted EBITDA from continuing operations of$11.1 million , includingEl Dorado ammonia start-up costs of$3.8 million -
Operating loss from continuing operations of
$8.9 million ; adjusted operating loss from continuing operations of$3.5 million , includingEl Dorado ammonia start-up costs of$3.8 million -
Net loss from continuing operations applicable to common shareholders
of
$17.7 million , or$0.70 loss per diluted share; adjusted net loss from continuing operations applicable to common shareholders of$18.3 million , or$0.73 loss per diluted share, includingEl Dorado ammonia start-up costs of$2.3 million , net of tax
“We achieved two major milestones during the second quarter that make us
very optimistic about our Company’s future,” stated
“Turning to our second quarter 2016 financial performance, results for
our chemical operations declined relative to the prior year quarter due
largely to lower selling prices for our agricultural products and
“Our industrial end markets remain solid given the continued gradual
improvement in the U.S. economy. However, we do not anticipate
meaningful recovery of sales to mining customers. Clearly, tough times
continue for coal mining companies in the U.S., both from commodity
price and regulatory standpoints, with little relief in sight. As a
result, we are working on shifting the capacity at
“In addition to our accomplishments at
| Three Months Ended June 30, | |||||||||||||||||||||
| 2016 | 2015 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||
|
Sales by Market Sector |
Sales |
Sector |
Sales |
Sector |
% |
||||||||||||||||
| Agricultural | $ | 60.3 | 55 | % | $ | 67.6 | 54 | % | (10.8 | ) % | |||||||||||
| Industrial, Mining and Other | $ | 49.7 | 45 | % | 57.9 | 46 | % | (14.2 | ) % | ||||||||||||
| $ | 110.0 | $ | 125.5 | (12.4 | ) % | ||||||||||||||||
Comparison of 2016 to 2015 periods:
- Net sales of agricultural products decreased, driven by a 28-30% decline in selling prices of our key products, as indicated in the table below. Offsetting some of the reduction in selling prices were increases in sales volumes for UAN and HDAN, which were higher by 36% and 43%, respectively. Our UAN sales volumes were higher due to improved on-stream rates at our Pryor Facility while HDAN sales volumes were higher due to stronger demand and favorable weather conditions in the markets we sell into. Industrial acids and other chemical products sales decreased as a result of lower product selling prices and sales volumes. Sales volumes were lower primarily as a result of a planned turnaround at the Baytown Facility during the second quarter resulting in less product for sale.
- Operating income and EBITDA declined primarily as a result of lower selling prices and higher operating costs partially offset by lower overall natural gas and ammonia feedstock costs and higher on-stream rates at our Pryor Facility. Operating costs were higher during the second quarter of 2016 primarily due to start-up and commissioning activities at our El Dorado Facility. Please refer to “Non-GAAP Reconciliation” in the financial tables below for a reconciliation of Non-GAAP financial measures to the most directly comparable GAAP financial measures.
The following tables provide key sales metrics for our Agricultural products:
| Three Months Ended June 30, | ||||||||||
|
Product (tons sold) |
2016 | 2015 | % Change | |||||||
| Urea ammonium nitrate (UAN) | 120,481 | 88,440 | 36% | |||||||
| High density ammonium nitrate (HDAN) | 87,688 | 61,119 | 43% | |||||||
| Ammonia | 18,657 | 22,761 | (18) % | |||||||
| Other | 11,237 | 9,240 | 22% | |||||||
| 238,063 | 181,560 | 31% | ||||||||
|
Average Selling Prices (price per ton) (A) |
||||||||||
| UAN | $ | 182 | $ | 253 | (28) % | |||||
| HDAN | $ | 232 | $ | 333 | (30) % | |||||
| Ammonia | $ | 379 | $ | 525 | (28) % | |||||
(A) Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons
With respect to sales of Industrial, Mining and Other Chemical Products, the following table indicates the volumes sold of our major products:
| Three Months Ended June 30, | ||||||||||||
|
Product (tons sold) |
2016 | 2015 | % Change | |||||||||
| Nitric acid | 115,128 | 134,333 | (14) % | |||||||||
| LDAN/HDAN | 19,404 | 16,453 | 18 % | |||||||||
| AN solution | 25,251 | 26,189 | (4) % | |||||||||
| Ammonia | 18,378 | 10,571 | 74 % | |||||||||
|
|
178,161 | 187,546 | (5) % | |||||||||
|
Input Costs |
||||||||||||
| Average purchased ammonia cost/ton | $ | 308 | $ | 455 | (32)% | |||||||
| Average natural gas cost/MMbtu | $ | 2.34 | $ | 3.16 |
(26)% |
|||||||
Financial Position and Capital Additions
As of
Capital additions were approximately
Total long-term debt, including the current portion was
The aggregate liquidation value of preferred stock was
Revised Volume Outlook
The Company’s revised outlook for our sales volumes for the second half and full year of 2016 are as follows:
|
Products |
Second Half 2016 Sales |
Full Year 2016 Sales |
||||
| Agriculture: | ||||||
| UAN | 220,000 – 230,000 | 435,000 – 445,000 | ||||
| HDAN | 70,000 – 80,000 | 210,000 – 220,000 | ||||
| Ammonia | 40,000 – 50,000 | 110,000 – 120,000 | ||||
| Industrial, Mining and Other: | ||||||
| Nitric acid | 275,000 – 290,000 | 525,000 – 540,000 | ||||
| LDAN/HDAN | 45,000 – 55,000 | 75,000 – 85,000 | ||||
| AN Solution | 22,000 – 27,000 | 68,000 – 73,000 | ||||
| Ammonia | 110,000 – 120,000 | 135,000 – 145,000 | ||||
Conference Call
LSB’s management will host a conference call covering the second quarter
results on
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. We suggest listeners use Microsoft Explorer as their web browser.
Forward-Looking Statements
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements generally are identifiable by use of
the words “believe,” “expect,” “intend,” “plan to,” “estimate,”
“project” or similar expressions, and include but are not limited to:
our ability to deleverage with proceeds of the Climate Control Business
sale; financial performance improvement in the second half of 2016; view
on sales to mining customers; estimates of consolidated depreciation and
amortization and future turnaround expenses; our expectation of
production consistency and enhanced reliability at our Facilities,
including our
Investors are cautioned that such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties.
Though we believe that expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such
expectation will prove to be correct. Actual results may differ
materially from the forward-looking statements as a result of various
factors, including, but not limited to: general economic conditions;
weather conditions; ability to install necessary equipment and
renovations at our Facilities in a timely manner; changes to federal
legislation or adverse regulations; increased competitive pressures,
domestic and foreign; ability to complete transactions to address our
leveraged balance sheet and cash flow requirements; loss of significant
customers; increased costs of raw materials; and other factors set forth
under “Risk Factors” and “Special Note Regarding Forward-Looking
Statements” in our Form 10-K for the year ended
See Accompanying Tables
|
LSB Industries, Inc. |
|||||||||||||||||||||
| Three Months | Six Months | ||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| (In Thousands, Except Per Share Amounts) | |||||||||||||||||||||
| Net sales | $ | 109,982 | $ | 125,503 | $ | 208,954 | $ | 259,103 | |||||||||||||
| Cost of sales (A) | 107,853 | 112,887 | 212,989 | 225,688 | |||||||||||||||||
| Gross profit (loss) | 2,129 | 12,616 | (4,035 | ) | 33,415 | ||||||||||||||||
| Selling, general and administrative expense | 10,874 | 14,546 | 21,768 | 25,746 | |||||||||||||||||
| Other expense (income), net | 138 | (333 | ) | 389 | (491 | ) | |||||||||||||||
| Operating income (loss) | (8,883 | ) | (1,597 | ) | (26,192 | ) | 8,160 | ||||||||||||||
| Interest expense, net | 6,446 | 2,229 | 7,796 | 5,626 | |||||||||||||||||
| Non-operating other income, net | (3,970 | ) | (45 | ) | (2,014 | ) | (80 | ) | |||||||||||||
| Income (loss) from continuing operations before | |||||||||||||||||||||
| provisions (benefit) for income taxes | (11,359 | ) | (3,781 | ) | (31,974 | ) | 2,614 | ||||||||||||||
| Provisions (benefit) for income taxes | (3,671 | ) | (907 | ) | (8,521 | ) | 1,251 | ||||||||||||||
| Income (loss) from continuing operations | (7,688 | ) | (2,874 | ) | (23,453 | ) | 1,363 | ||||||||||||||
| Net income from discontinued operations, | |||||||||||||||||||||
| including taxes | 22,779 | 3,291 | 23,603 | 5,703 | |||||||||||||||||
| Net income | 15,091 | 417 | 150 | 7,066 | |||||||||||||||||
| Dividends on convertible preferred stocks | 75 | — | 150 | 300 | |||||||||||||||||
| Dividends on Series E redeemable preferred stock | 7,629 | — | 14,979 | — | |||||||||||||||||
| Accretion of Series E redeemable preferred stock | 2,241 | — | 4,484 | — | |||||||||||||||||
| Net income attributable to participating securities | 91 | — | — | — | |||||||||||||||||
| Net income (loss) attributable to common | |||||||||||||||||||||
| Stockholders | $ | 5,055 | $ | 417 | $ | (19,463 | ) | $ | 6,766 | ||||||||||||
| Income (loss) per common share: | |||||||||||||||||||||
| Basic | |||||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.70 | ) | $ | (0.13 | ) | $ | (1.81 | ) | $ | 0.05 | ||||||||||
| Income from discontinued operations, including taxes | 0.90 | 0.15 | 0.99 | 0.25 | |||||||||||||||||
| Net income (loss) | $ | 0.20 | $ | 0.02 | $ | (0.82 | ) | $ | 0.30 | ||||||||||||
| Diluted | |||||||||||||||||||||
| Income (loss) from continuing operations | $ | (0.70 | ) | $ | (0.13 | ) | $ | (1.81 | ) | $ | 0.05 | ||||||||||
| Income from discontinued operations, including taxes | 0.90 | 0.15 | 0.99 | 0.24 | |||||||||||||||||
| Net income (loss) | $ | 0.20 | $ | 0.02 | (0.82 | ) | $ | 0.29 | |||||||||||||
(A) Refer to Non-GAAP Reconciliation later in this news release for a list of one-time, non-cash items included in cost of sales.
|
LSB Industries, Inc. |
|||||||||||||||||
|
Selling, general and administrative: |
|||||||||||||||||
|
Three Months Ended |
Six Months Ended |
||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| (In Thousands) | |||||||||||||||||
| Selling, general and administrative: | |||||||||||||||||
| Personnel costs (A) | $ | 5,254 | $ | 7,059 | $ | 10,576 | $ | 12,025 | |||||||||
| Fees and expenses relating to shareholders (B) | 594 | 3,021 | 1,118 | 4,968 | |||||||||||||
| Professional fees (C) | 1,681 | 925 | 3,918 | 2,277 | |||||||||||||
| All other | 3,345 | 3,541 | 6,156 | 6,476 | |||||||||||||
| Total selling, general and administrative | $ | 10,874 | $ | 14,546 | $ | 21,768 | $ | 25,746 | |||||||||
| (A) | Decreases in 2016 relate to lower compensation, bonus and training expenses. | |
| (B) | For the first half of 2015, these fees and expenses include costs associated with evaluating and analyzing proposals received from certain activist shareholders and dealing, negotiating and settling with those shareholders in order to avoid proxy contests. | |
| (C) | Increases in professional fees in 2016 are primarily related to our review of strategic initiatives and updates to our corporate governance policies and practices. | |
|
LSB Industries, Inc. |
||||||||
| June 30, | December 31, | |||||||
| 2016 | 2015 | |||||||
| (In Thousands) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 22,836 | $ | 127,195 | ||||
| Accounts receivable, net | 43,410 | 49,601 | ||||||
| Inventories: | ||||||||
| Finished goods | 15,860 | 19,029 | ||||||
| Raw materials | 2,930 | 5,428 | ||||||
| Total inventories, net | 18,790 | 24,457 | ||||||
| Supplies, prepaid items and other: | ||||||||
| Prepaid insurance | 4,470 | 10,563 | ||||||
| Precious metals | 10,617 | 12,918 | ||||||
| Supplies | 21,661 | 18,681 | ||||||
| Prepaid and refundable income taxes | 7,387 | 6,811 | ||||||
| Other | 3,192 | 4,701 | ||||||
| Total supplies, prepaid items and other | 47,327 | 53,674 | ||||||
| Deferred income taxes | 5,718 | 4,774 | ||||||
| Current assets held for sale | 114,468 | 72,996 | ||||||
| Total current assets | 252,549 | 332,697 | ||||||
| Property, plant and equipment, net | 1,093,609 | 978,709 | ||||||
| Intangible and other, net | 15,756 | 16,640 | ||||||
| Noncurrent assets held for sale | — | 33,781 | ||||||
| $ | 1,361,914 | $ | 1,361,827 | |||||
| Liabilities and Stockholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 72,987 | $ | 87,999 | ||||
| Short-term financing | 3,666 | 9,119 | ||||||
| Accrued and other liabilities | 35,603 | 39,808 | ||||||
| Revolving credit facility | 30,907 | — | ||||||
| Current portion of long-term debt | 15,173 | 22,468 | ||||||
| Current liabilities held for sale | 47,289 | 32,526 | ||||||
| Total current liabilities | 205,625 | 191,920 | ||||||
| Long-term debt | 513,505 | 497,954 | ||||||
| Noncurrent accrued and other liabilities | 9,223 | 8,786 | ||||||
| Noncurrent liabilities held for sale | — | 12,136 | ||||||
| Deferred income taxes | 31,681 | 52,179 | ||||||
| Commitments and contingencies | ||||||||
| Redeemable preferred stocks: | ||||||||
|
Series E 14% cumulative, redeemable Class C preferred stocks, |
||||||||
|
no par value, 210,000 shares issued and outstanding; aggregate |
196,735 |
177,272 |
||||||
|
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 |
2,000 | 2,000 | ||||||
|
Series D 6% cumulative, convertible Class C preferred stock, |
||||||||
|
no par value; 1,000,000 shares issued and outstanding |
1,000 | 1,000 | ||||||
|
Common stock, $.10 par value; 75,000,000 shares authorized, |
||||||||
|
31,280,685 shares issued (27,131,724 at December 31, 2015) |
3,128 | 2,713 | ||||||
| Capital in excess of par value | 192,152 | 192,249 | ||||||
| Retained earnings | 228,837 | 248,150 | ||||||
| 427,117 | 446,112 | |||||||
| Less treasury stock, at cost: | ||||||||
|
Common stock, 3,317,503 shares |
||||||||
|
(3,735,503 shares at December 31, 2015) |
21,972 | 24,532 | ||||||
| Total stockholders' equity | 405,145 | 421,580 | ||||||
| $ | 1,361,914 | $ | 1,361,827 | |||||
Non-GAAP Reconciliation
This news release includes certain “non-GAAP financial measures” under
the rules of the
EBITDA Reconciliation
EBITDA is defined as net income plus interest expense, depreciation, depletion and amortization of property plant and equipment (which includes amortization of other assets and excludes interest included in amortization), plus provision for income taxes less income from discontinued operations. 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. EBITDA has 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 may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income to EBITDA for the periods indicated.
|
Three Months Ended |
Six Months Ended |
||||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||
|
LSB Consolidated |
|||||||||||||||||||||
| Net income | $ | 15.1 | $ | 0.4 | $ | 0.2 | $ | 7.1 | |||||||||||||
| Plus: | |||||||||||||||||||||
| Interest expense | 6.4 | 2.2 | 7.8 | 5.6 | |||||||||||||||||
| Depreciation and amortization | 14.6 | 9.3 | 25.6 | 17.4 | |||||||||||||||||
| Provision (benefit) for income taxes | (3.7 | ) | (0.9 | ) | (8.5 | ) | 1.3 | ||||||||||||||
| Income from discontinued operations | (22.8 | ) | (3.3 | ) | (23.6 | ) | (5.7 | ) | |||||||||||||
| EBITDA | $ | 9.6 | $ | 7.7 | $ | 1.5 | $ | 25.7 | |||||||||||||
Non-GAAP Reconciliation (continued)
Adjusted Operating Income, EBITDA, Adjusted Net Income (Loss) from continuing operations applicable to Common Stock and Adjusted Income (Loss) from continuing operations per Diluted Share
Adjusted operating income, adjusted EBITDA, adjusted net income (loss)
from continuing operations applicable to common stock and adjusted
income (loss) from continuing operations per diluted share are reported
to show the impact of a one-time consulting fee, start-up/commissioning
costs, certain fair market value adjustments, non-cash stock based
compensation, non-cash loss on disposal of property, plant, and
equipment,
|
LSB Consolidated ($ in millions except per share data) |
Three Months Ended |
Six Months Ended |
|||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Operating income (loss) Plus: | $ | (8.9 | ) | $ | (1.6 | ) | $ | (26.2 | ) | $ | 8.2 | ||||||||
| Consulting Fee- Negotiated property tax savings at El Dorado | - | - | 12.1 | - | |||||||||||||||
| Loss on disposal of property, plant, and equipment | 0.6 | - | 0.6 | - | |||||||||||||||
| Stock based compensation | 1.0 | 0.3 | 1.9 | 0.6 | |||||||||||||||
| Start-up/ Commissioning costs at El Dorado | 3.8 | - | 5.1 | - | |||||||||||||||
| Adjusted operating income (loss) | $ | (3.5 | ) | $ | (1.3 | ) | $ | (6.5 | ) | $ | 8.8 | ||||||||
| EBITDA Plus: | $ | 9.6 | $ | 7.7 | $ | 1.5 | $ | 25.7 | |||||||||||
| Consulting Fee- Negotiated property tax savings at El Dorado | - | - | 12.1 | - | |||||||||||||||
| Loss on disposal of property, plant, and equipment | 0.6 | - | 0.6 | - | |||||||||||||||
| Stock based compensation | 1.0 | 0.3 | 1.9 | 0.6 | |||||||||||||||
| Start-up/ Commissioning costs at El Dorado | 3.8 | - | 5.1 | - | |||||||||||||||
| Fair market value adjustment on preferred stock embedded derivatives | (3.9 | ) | - | (1.4 | ) | - | |||||||||||||
| Delaware unclaimed property liability | - | - | 0.3 | - | |||||||||||||||
| Life insurance recovery | - | - | (0.7 | ) | - | ||||||||||||||
| Adjusted EBITDA | $ | 11.1 | $ | 8.0 | $ | 19.4 | $ | 26.3 | |||||||||||
| Net income (loss) from continuing operations applicable to common stock Plus: | $ | (17.7 | ) | $ | (2.9 | ) | $ | (43.1 | ) | $ | 1.1 | ||||||||
| Consulting Fee- Negotiated property tax savings at El Dorado (net of tax) | - | - | 7.4 | - | |||||||||||||||
| Loss on disposal of property, plant, and equipment (net of tax) | 0.4 | - | 0.4 | - | |||||||||||||||
| Stock based compensation (net of tax) | 0.6 | 0.2 | 1.2 | 0.4 | |||||||||||||||
| Start-up/ Commissioning costs at El Dorado (net of tax) | 2.3 | - | 3.1 | - | |||||||||||||||
| Fair market value adjustment on preferred stock embedded derivatives (non-tax deductible) | (3.9 | ) | - | (1.4 | ) | - | |||||||||||||
| Delaware unclaimed property liability (net of tax) | - | - | 0.2 | - | |||||||||||||||
| Valuation allowance on state net operating losses | - | - | 3.7 | - | |||||||||||||||
| Life insurance recovery (non-tax deductible) | - | - | (0.7 | ) | - | ||||||||||||||
| Adjusted net income (loss) from continuing operations applicable to common stock | $ | (18.3 | ) | $ | (2.7 | ) | $ | (29.2 | ) | $ | 1.5 | ||||||||
| Weighted-average common shares (in thousands) | 25,240 | 22,748 | 23,823 | 22,820 | |||||||||||||||
| Adjusted income (loss) from continuing operations per diluted share | $ | (0.73 | ) | $ | (0.12 | ) | $ | (1.23 | ) | $ | 0.07 | ||||||||
Non-GAAP Reconciliation (continued)
Agricultural Sales Price Reconciliation
The following table provides a reconciliation of total agricultural sales as reported under GAAP in our consolidated financial statement reconciled to “net back” sales which is calculated as sales less freight expenses. We believe this provides a relevant industry comparison among our peer group.
|
Three Months Ended |
Six Months Ended |
||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||
| Agricultural Sales ($ in millions) | $ | 60.3 | $ | 67.6 | $ | 110.0 | $ | 138.6 | |||||||||
| Less Freight: | 4.4 | 3.4 | 7.5 | 8.1 | |||||||||||||
| Netback | $ | 55.9 | $ | 64.2 | $ | 102.5 | $ | 130.5 | |||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20160808006226/en/
Source:
Company:
LSB Industries, Inc.
Mark Behrman,
405-235-4546
Chief Financial Officer
or
Investor
Relations:
The Equity Group Inc.
Fred Buonocore,
212-836-9607
or
Kevin Towle, 212-836-9620