LSB Industries, Inc. Reports Operating Results for the 2015 Third Quarter
Revises Cost Estimate for El Dorado Facility Expansion to $831
Million to $855 Million; $564 Million Invested as of September 30, 2015
Announces Strategic Investment of $260 Million to Complete El Dorado
Expansion
El Dorado Ammonia Plant Remains on Track to be in Production Early in
Second Quarter of 2016
Provides Chemical Business Product Volume Guidance for 2015 Fourth
Quarter
LSB Industries, Inc. (“LSB”) (NYSE:LXU) today announced results for the
third quarter ended September 30, 2015.
Financial Highlights of Third Quarter 2015 Compared to Third Quarter
2014 (See Pages 14-15 for Non-GAAP Reconciliations)
-
Net sales decreased 7.8% to $157.7 million compared to $171.0 million.
-
Adjusted operating loss was $13.0 million compared to operating loss
of $1.2 million.
-
Adjusted EBITDA was a loss of $1.6 million compared to gain of $8.1
million. Adjusted net loss applicable to common shareholders was $8.3
million, or $0.36 per diluted share, compared to net loss applicable
to common shareholders of $3.8 million, or $0.17 per diluted share.
“Our ongoing engineering and construction review and analysis of our El
Dorado Facility Expansion recently determined that the expected cost to
complete the project is higher than we previously estimated when we
reported second quarter 2015 results in August,” stated Daniel
Greenwell, LSB’s Interim CEO. “The primary reason for the further cost
escalation relates to mechanical and piping labor cost increases versus
earlier estimates. Despite the increased cost estimate to complete our
expansion project, the new nitric acid plant should be in production
next week, and the ammonia plant remains on track to be in production
early in the second quarter of 2016, which we expect to dramatically
increase the profitability of the facility. Additionally, we are pleased
to report that we have signed a three-year offtake agreement with Koch
Fertilizer for all of the excess ammonia the new El Dorado ammonia plant
is expected to produce, above that consumed by that plant for upgrade
into other products. We’ve worked hard to secure the financing that
should allow us to complete the project with little impact to our
timeline, and expect that even with the increased costs, the new ammonia
and nitric acid facilities will provide a solid return and significant
incremental cash flow.”
Mr. Greenwell continued, “Turning to our third quarter financial
performance, as we previously announced, the results for our Chemical
Business were negatively impacted by an unplanned outage at our Pryor
Facility. Sales levels at our El Dorado Facility relative to the 2014
third quarter continued to reflect the April 2015 expiration of our
contract with Orica for low density ammonium nitrate while operating
losses at the facility were the result of lower fixed cost absorption on
the reduced volume and the ongoing cost disadvantage resulting from the
use of purchased ammonia. While the issues at both Pryor and El Dorado
have constrained our financial performance for several quarters, we now
expect increased reliability and more consistent production levels at
Pryor in the quarters to come. Pryor may continue to have periodic
outages through the end of 2016 as we continue the plant modernization
and critical maintenance activities, but with the upgrades completed
since 2013, and the remaining improvements we have planned, we expect
this facility to operate more consistently and profitably. This is
evidenced by the fact that Pryor ran at full operational rates for the
month of October. We are also pleased that our Cherokee Facility is
running at improved rates, with a 100% on-stream rate in the third
quarter and over 95% in the last three quarters.”
“Our Climate Control Business posted modest sales growth in the third
quarter as a result of continued strong demand for our hydronic fan
coils, large custom air handlers and engineering and construction
services offset by a decline in sales of heat pumps for residential
applications as the impact that sustained low natural gas prices has
been having on demand for our residential geothermal HVAC systems. We
continue to implement our operational excellence initiatives in this
business, including managerial enhancements, new product development and
cost reductions aimed at driving increased sales and profitability.”
Mr. Greenwell concluded, “During the third quarter, I assumed the role
of LSB’s Interim CEO while fellow Board member, Richard Sanders, was
appointed Interim Executive Vice President of Chemical Manufacturing. I
believe LSB is in the midst of an important and pivotal transition
period, during which we are diligently positioning the Company for
significantly enhanced long-term growth. Working with the existing
leadership team, both Richard and I are committed to advancing the
strategic growth initiatives that the Company has had underway, while
instilling a performance oriented, accountable culture throughout the
organization, and pursuing the previously disclosed strategic
alternatives for both of our businesses. During the third quarter, our
primary focus was to accurately revise the capital expenditure
projections for the El Dorado project, increase the reliability and
production consistency of our facilities, and secure the financing
necessary to complete our El Dorado Expansion. We believe these three
objectives have been met. Over the longer-term, our goal is to deliver
significantly improved value to our shareholders, while providing
excellent service to our customers, and a safe, motivating environment
for our employees.”
Chemical Business Third Quarter 2015 Compared to Third Quarter 2014:
|
|
Three Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
Change
|
|
|
(In millions)
|
Net sales
|
|
$
|
80.6
|
|
|
$
|
94.8
|
|
|
$
|
(14.2
|
)
|
Operating loss
|
|
$
|
(55.0
|
)
|
|
$
|
(5.6
|
)
|
|
$
|
(49.4
|
)
|
Segment EBITDA
|
|
$
|
(5.5
|
)
|
|
$
|
2.2
|
|
|
$
|
(7.7
|
)
|
|
|
|
|
|
|
|
|
|
|
Comparison of 2015 period to 2014 period:
-
Net sales decreased as a 25-day turnaround followed by an unplanned
outage at the Pryor Facility, coupled with lower selling prices,
reduced sales of agricultural products. These factors were partially
offset by higher on-stream rates at the Cherokee Facility, which
underwent a bi-annual turnaround in the third quarter of 2014 without
a turnaround in 2015. Sales of mining products declined due to the
expiration of our take-or-pay contract with Orica in April 2015, and
overall softening in the coal markets. A decrease in sales of
industrial products was the result of lower ammonia prices passed
through to contractual customers, partially offset by higher volumes.
-
Operating loss and EBITDA were negatively impacted by the lower
on-stream production rates at the Pryor Facility, which translated
into lost sales and reduced absorption of fixed overhead costs. The El
Dorado Facility also experienced lower fixed cost absorption as a
result of the decreased production and sales of low density ammonium
nitrate attributable to the aforementioned Orica contract. Also
included in operating loss was an impairment expense of $39.7 million
to write down the carrying value of our working interest in natural
gas properties. Excluding this item, adjusted operating loss was $15.3
million.
-
The El Dorado Facility produces agricultural grade AN, nitric acid and
industrial grade AN from purchased ammonia, which is currently at a
cost disadvantage compared to products produced from natural gas. This
cost disadvantage, along with the impact from the loss of Orica and
certain additional expenses related to the El Dorado Expansion
projects, resulted in an operating loss for the facility during the
2015 period of approximately $15.0 million compared to an operating
loss of approximately $6.6 million in third quarter 2014.
|
|
Three Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
|
|
|
(Dollars in millions)
|
Sales by Market Sector
|
|
Sales
|
|
Sector Mix
|
|
Sales
|
|
Sector Mix
|
|
% Change
|
Agricultural
|
|
$
|
29.2
|
|
36 %
|
|
$
|
34.1
|
|
36 %
|
|
(14) %
|
Industrial, mining and other
|
|
|
51.4
|
|
64 %
|
|
|
60.7
|
|
64 %
|
|
(15) %
|
|
|
$
|
80.6
|
|
|
|
$
|
94.8
|
|
|
(15) %
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables provide key operating metrics for the Agricultural
products of our Chemical Business.
|
|
Three Months Ended September 30,
|
Product (tons sold)
|
|
2015
|
|
2014
|
|
% Change
|
Urea ammonium nitrate (UAN)
|
|
|
63,355
|
|
|
44,949
|
|
41
|
%
|
Ammonium nitrate (AN)
|
|
|
16,165
|
|
|
24,411
|
|
(34
|
) %
|
Ammonia
|
|
|
15,976
|
|
|
24,699
|
|
(35
|
) %
|
Other
|
|
|
3,514
|
|
|
4,522
|
|
(22
|
) %
|
|
|
|
99,010
|
|
|
98,581
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
Average Selling Prices (price per ton)
|
|
|
|
|
|
|
UAN
|
|
$
|
206
|
|
$
|
233
|
|
(12
|
) %
|
AN
|
|
$
|
323
|
|
$
|
360
|
|
(10
|
) %
|
Ammonia
|
|
$
|
465
|
|
$
|
480
|
|
(3
|
) %
|
|
|
|
|
|
|
|
|
|
|
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 September 30,
|
Product (tons sold)
|
|
2015
|
|
2014
|
|
% Change
|
Nitric acid
|
|
144,290
|
|
139,801
|
|
|
3
|
%
|
LDAN/HDAN
|
|
11,746
|
|
12,735
|
(A)
|
|
(8
|
) %
|
AN solution
|
|
28,771
|
|
23,790
|
|
|
21
|
%
|
Ammonia
|
|
11,272
|
|
11,360
|
|
|
(1
|
) %
|
(A) Under the Orica contract that expired in April 2015, Orica paid for
60,000 tons of ammonium nitrate in Q3 2014, but actual tons sold to
Orica for the quarter were 11,022.
Input Costs
|
|
|
|
|
|
|
Average purchased ammonia cost/ton
|
|
$
|
445
|
|
$
|
513
|
|
(13
|
) %
|
Average natural gas cost/MMbtu
|
|
$
|
3.19
|
|
$
|
4.13
|
|
(23
|
) %
|
|
|
|
|
|
|
|
|
|
|
Climate Control Business Third Quarter 2015 Compared to Third Quarter
2014:
|
|
Three Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
Change
|
|
|
(In millions)
|
Net sales
|
|
$
|
75.1
|
|
$
|
73.5
|
|
$
|
1.6
|
|
Operating income
|
|
$
|
7.2
|
|
$
|
8.4
|
|
$
|
(1.2
|
)
|
Segment EBITDA
|
|
$
|
8.4
|
|
$
|
9.7
|
|
$
|
(1.3
|
)
|
|
|
|
|
|
|
|
Comparison of 2015 period to 2014 period:
-
Net sales increased largely due to higher sales of hydronic fan coils
resulting from stronger incoming orders in the first quarter, an
increase in average unit price and favorable product mix. Sales of
other HVAC products also rose, with higher sales of custom air
handlers reflecting increased order levels in 2014, and higher
engineering and construction services resulting from a project award
received earlier in the year that is expected to be completed in the
fourth quarter of 2015, partially offset by a decline in sales of
modular chillers due to the push out of customer requested delivery
dates. Heat pump sales were lower, predominantly for residential
markets and, to a lesser extent, commercial/institutional markets
reflecting the loss of the water source heat pump contract with
Carrier. Excluding Carrier sales, water source heat pump sales for the
commercial/institutional markets increased 3%.
-
Operating income and EBITDA were lower compared to the prior year
period as a result of unfavorable product mix towards
commercial/institutional products, which carry lower margins than
residential products coupled with higher variable selling expenses
primarily relating to warranty and freight costs.
-
New orders for Climate Control products were $65.1 million in the
third quarter of 2015, down 12% compared to the third quarter of 2014,
and down 7% from the second quarter of 2015. New orders from the
commercial end-markets were down 10% from the third quarter of 2014,
while residential product new orders declined 23%. Backlog of $71.2
million as of September 30, 2015 declined approximately 3% from third
quarter 2014 levels and was 5% lower than backlog at June 30, 2015. As
of October 31, 2015, backlog was $71.8 million.
|
|
Three Months Ended September 30,
|
|
|
2015
|
|
2014
|
|
|
|
|
(Dollars in millions)
|
|
Sales by Market Sector
|
|
Sales
|
|
Sector Mix
|
|
Sales
|
|
Sector Mix
|
|
%
Change
|
Commercial/Institutional
|
|
$
|
66.4
|
|
88
|
%
|
|
$
|
61.5
|
|
84
|
%
|
|
8
|
%
|
Residential
|
|
|
8.7
|
|
12
|
%
|
|
|
12.0
|
|
16
|
%
|
|
(28
|
) %
|
|
|
$
|
75.1
|
|
|
|
$
|
73.5
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Sales by Product Category
|
|
Sales
|
|
Product
Mix
|
|
Sales
|
|
Product
Mix
|
|
%
Change
|
Heat pumps
|
|
$
|
42.0
|
|
56
|
%
|
|
$
|
46.5
|
|
63
|
%
|
|
(10
|
) %
|
Fan coils
|
|
|
19.0
|
|
25
|
%
|
|
|
16.5
|
|
23
|
%
|
|
15
|
%
|
Other HVAC
|
|
|
14.1
|
|
19
|
%
|
|
|
10.5
|
|
14
|
%
|
|
34
|
%
|
|
|
$
|
75.1
|
|
|
|
$
|
73.5
|
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Position and Capital Additions
As of September 30, 2015, total cash and investments were $39.0 million,
including short-term investments.
Total long-term debt was $496.4 million at September 30, 2015 compared
to $457.3 million at December 31, 2014 and the borrowings on our $100
million Working Capital Revolver Loan were $13.3 million (borrowing
availability, which is tied in to eligible accounts receivable and
inventories, was $57.6 million at September 30, 2015). Interest expense,
net of capitalized interest, for the third quarter of 2015 was $0.9
million compared to $5.1 million for the same period in 2014.
Capital additions were $139.7 million in the third quarter of 2015,
including $128.6 million relating to the expansion projects at the El
Dorado Facility. Planned capital additions, in the aggregate, are
estimated to range from $280 million to $310 million, including $267
million to $291 million remaining for the El Dorado Expansion projects.
An estimated $70 million to $75 million of the capital additions needed
to complete the El Dorado Expansion projects will occur in 2016.
Fourth Quarter 2015 Chemical Business Sales Volume Outlook
The Company’s outlook for sales volume for the fourth quarter of 2015 in
its Chemical Business is as follows:
Products
|
|
Sales (tons)
|
Agriculture:
|
|
|
UAN
|
|
100,000 – 110,000
|
HDAN
|
|
25,000 – 30,000
|
Ammonia
|
|
25,000 – 30,000
|
|
|
|
Industrial, Mining and Other:
|
|
|
Nitric acid
|
|
130,000 – 140,000
|
LDAN/HDAN
|
|
15,000 – 20,000
|
AN solution
|
|
20,000 – 25,000
|
Ammonia
|
|
5,000 – 10,000
|
|
|
|
El Dorado Facility Expansion Update
Over the course of September and October, management in conjunction with
the owner’s representative, the engineering, procurement and
construction contractor and other consultants determined that the total
cost to complete the El Dorado Expansion projects will exceed what we
previously projected, due, in part, to mechanical and piping labor cost
increases compared to earlier estimates. We have now determined that the
total cost to complete the El Dorado Expansion projects is estimated to
be in the range of $831 million to $855 million ($564 million spent as
of September 30, 2015 and $197 million to $216 million to be spent in
the fourth quarter of 2015 and between $70 million to $75 million to be
spent in 2016).
It is expected that the new ammonia plant will be mechanically complete
by early February 2016 and should begin production early in the second
quarter of 2016. As it relates to the new nitric acid plant and
concentrator, the concentrator went into production in June 2015 and the
nitric acid plant is expected to be in production beginning the week of
November 9th.
New Financing to Complete El Dorado Project
On November 6, 2015, the Company executed a commitment for financing for
the purpose of completing its El Dorado Expansion project. The
commitment is from Security Benefit Corporation and one or more of its
affiliates (“Investor”) and provides for $260 million of capital in the
form of debt and equity. The details are as follows:
-
$50 million in Senior Secured Notes issued at par with a 12% annual
interest rate, subject to certain adjustments, maturity of August
2019, callable by the Company beginning August 2016 at 106%, August
2017 at 103% after August 2018 at par.
-
$210 million in cumulative redeemable nonconvertible perpetual
non-voting preferred stock (“Preferred Stock”) with a 14% annual
dividend rate and an economic participation right equal to 2% of the
outstanding common stock before the transaction; Company will be
entitled to redeem the Preferred Stock at any time without premium or
penalty at the liquidation preference plus accrued and unpaid
dividends plus the value of the participating right .The Investor will
have the option to redeem the Preferred Stock beginning one day after
the maturity date of the Company’s existing Senior Secured Notes.
-
Warrants to purchase 17.99% of the Company with an exercise price of
$0.01 per warrant and a ten year term.
-
Voting rights equal to 19.99% of the outstanding common stock before
the transaction.
-
The right to appoint three nominees to the Company’s Board as
replacements for three existing independent directors effective at the
closing of the Preferred Stock.
-
The Company will pay a commitment fee of 2% on the full amount of the
committed financing and a funding fee of 2% upon issuance of each of
the Senior Secured Notes and the Preferred Stock.
-
The Company will pay a fee of 3% of the Preferred Stock commitment in
the event that the Preferred Stock and Warrants are not issued as a
result of the Company obtaining financing from a different entity or
if the Preferred Stock and Warrants are not issued as a result of the
Company’s failure to satisfy conditions precedent that are solely
within its control.
Timing and Conditions of Financing
-
We expect to close the Senior Secured Notes over the next few days. We
expect to close the rest of the financing prior to December 31st,
subject to definitive agreements and Hart-Scott-Rodino Act approval,
if required.
Conference Call
LSB’s management will host a conference call covering the third quarter
results on Friday, November 6, 2015 at 10:00 am ET/9:00 am CT to discuss
these results and recent corporate developments. Participating in the
call will be Interim CEO, Dan Greenwell and Executive Vice President and
CFO, Mark Behrman. Interested parties may participate in the call by
dialing (201) 493-6739. 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 Investor Info tab.
To listen to a webcast of the call, please go to the Company’s website
at www.lsbindustries.com
at least 15 minutes before the conference call to download and install
any necessary audio software. The conference call webcast will be
archived on the Company’s website. LSB suggests that listeners use
Microsoft Explorer as their web browser.
LSB Industries, Inc.
LSB is a manufacturing and marketing company. LSB’s principal business
activities consist of the manufacture and sale of chemical products for
the agricultural, mining and industrial markets; and, the manufacture
and sale of commercial and residential climate control products, such as
water source and geothermal heat pumps, hydronic fan coils, modular
geothermal and other chillers and large custom air handlers.
This press release contains certain forward-looking statements within
the meaning of the Private Securities Litigation Act of 1995. These
forward-looking statements generally are identifiable by use of the
words “believe,” “expects,” “intends,” “plans to,” “estimates,”
“projects” or similar expressions, and include but not limited to, our
expectation that the closing of the sale of the Senior Secured Notes,
Preferred Stock and Warrants will occur; belief that the following
objectives have been met: accurately revise the capital expenditure
projections for the El Dorado project, increase in the reliability and
production consistency of our facilities, and securing the financing
necessary to complete our El Dorado Expansion; outlook for commercial
and residential construction; planned capital additions for balance of
2015; cost of El Dorado facility expansion and timing of completion and;
funding of capital expenditures and cash needs.
Investors are cautioned that such forward-looking statements are not
guarantees of future performance and involve risk and uncertainties, and
that 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; lack of growth in
the commercial and residential construction industry; acceptance by the
market of our geothermal heat pump products; acceptance of our
technology; increased competitive pressures, domestically and foreign;
price increases for raw materials; loss of significant customer; changes
to federal legislation or adverse regulations; available working
capital; ability to install necessary equipment and renovations at the
El Dorado Facility and the Pryor Facility in a timely manner; receipt in
a timely manner of production equipment; problems with production
equipment; and other factors set forth under “Risk Factors” and “A
Special Note Regarding Forward-Looking Statements” in the Form 10-K for
year ended December 31, 2014 and if applicable, our Quarterly Reports on
Form 10-Q and our Current Reports on Form 8-K, which contain a
discussion of a variety of factors which could cause the future outcome
to differ materially from the forward-looking statements contained in
this release. The closings of the sale of Senior Secured Notes,
Preferred Stock and Warrants are subject to satisfaction of certain
conditions, including conditions that may be out of LSB’s control.
See Accompanying Tables
|
LSB Industries, Inc.
|
Financial Highlights
|
Three Months and Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
(In Thousands, Except Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
157,685
|
|
$
|
171,046
|
|
$
|
534,202
|
|
$
|
551,233
|
Cost of sales
|
|
|
144,406
|
|
|
146,660
|
|
|
443,682
|
|
|
429,256
|
Gross profit
|
|
|
13,279
|
|
|
24,386
|
|
|
90,520
|
|
|
121,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense
|
|
|
29,382
|
|
|
25,208
|
|
|
89,598
|
|
|
77,364
|
Provision for (recovery of) losses on accounts receivable
|
|
|
(161)
|
|
|
70
|
|
|
352
|
|
|
(86)
|
Impairment of natural gas properties
|
|
|
39,670
|
|
|
-
|
|
|
39,670
|
|
|
-
|
Property insurance recoveries in excess of losses incurred
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(5,147)
|
Other expense (income), net
|
|
|
(725)
|
|
|
305
|
|
|
(996)
|
|
|
1,418
|
Operating income (loss)
|
|
|
(54,887)
|
|
|
(1,197)
|
|
|
(38,104)
|
|
|
48,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
877
|
|
|
5,079
|
|
|
6,505
|
|
|
17,458
|
Non-operating other income, net
|
|
|
(23)
|
|
|
(89)
|
|
|
(107)
|
|
|
(242)
|
Income (loss) from continuing operations before provision (benefit)
for income taxes and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
equity in earnings of affiliate
|
|
|
(55,741)
|
|
|
(6,187)
|
|
|
(44,502)
|
|
|
31,212
|
Provision (benefit) for income taxes
|
|
|
(21,982)
|
|
|
(2,415)
|
|
|
(17,842)
|
|
|
12,286
|
Equity in earnings of affiliate
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(79)
|
Income (loss) from continuing operations
|
|
|
(33,759)
|
|
|
(3,772)
|
|
|
(26,660)
|
|
|
19,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations
|
|
|
4
|
|
|
5
|
|
|
37
|
|
|
28
|
Net income (loss)
|
|
|
(33,763)
|
|
|
(3,777)
|
|
|
(26,697)
|
|
|
18,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on preferred stocks
|
|
|
-
|
|
|
-
|
|
|
300
|
|
|
300
|
Net income (loss) applicable to common stock
|
|
$
|
(33,763)
|
|
$
|
(3,777)
|
|
$
|
(26,997)
|
|
$
|
18,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
22,799
|
|
|
22,596
|
|
|
22,741
|
|
|
22,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
22,799
|
|
|
22,596
|
|
|
22,741
|
|
|
23,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(1.48)
|
|
$
|
(0.17)
|
|
$
|
(1.19)
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
$
|
(1.48)
|
|
$
|
(0.17)
|
|
$
|
(1.19)
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LSB Industries, Inc.
|
Financial Highlights
|
Three Months and Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
$
|
80,623
|
|
$
|
94,767
|
|
$
|
320,205
|
|
$
|
345,744
|
|
Climate Control
|
|
|
75,050
|
|
|
73,485
|
|
|
207,090
|
|
|
196,585
|
|
Other
|
|
|
|
2,012
|
|
|
2,794
|
|
|
6,907
|
|
|
8,904
|
|
|
|
|
|
|
|
$
|
157,685
|
|
$
|
171,046
|
|
$
|
534,202
|
|
$
|
551,233
|
Gross profit (loss): (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical (2)
|
|
$
|
(10,456)
|
|
$
|
(521)
|
|
$
|
25,001
|
|
$
|
57,161
|
|
Climate Control
|
|
|
22,978
|
|
|
23,862
|
|
|
63,021
|
|
|
61,628
|
|
Other
|
|
|
|
757
|
|
|
1,045
|
|
|
2,498
|
|
|
3,188
|
|
|
|
|
|
|
|
$
|
13,279
|
|
$
|
24,386
|
|
$
|
90,520
|
|
$
|
121,977
|
Operating income (loss): (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical (2)(3)
|
|
$
|
(55,046)
|
|
$
|
(5,587)
|
|
$
|
(31,546)
|
|
$
|
46,815
|
|
Climate Control
|
|
|
7,163
|
|
|
8,452
|
|
|
15,479
|
|
|
17,396
|
|
Other
|
|
|
|
169
|
|
|
397
|
|
|
745
|
|
|
1,298
|
|
General corporate expenses (4)
|
|
|
(7,173)
|
|
|
(4,459)
|
|
|
(22,782)
|
|
|
(17,081)
|
|
|
|
|
|
|
|
|
(54,887)
|
|
|
(1,197)
|
|
|
(38,104)
|
|
|
48,428
|
Interest expense, net (5)
|
|
|
877
|
|
|
5,079
|
|
|
6,505
|
|
|
17,458
|
Non-operating income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemical
|
|
|
(16)
|
|
|
(73)
|
|
|
(77)
|
|
|
(213)
|
|
Climate Control
|
|
|
-
|
|
|
-
|
|
|
(4)
|
|
|
-
|
|
Corporate and other business operations
|
|
|
(7)
|
|
|
(16)
|
|
|
(26)
|
|
|
(29)
|
Provision (benefit) for income taxes
|
|
|
(21,982)
|
|
|
(2,415)
|
|
|
(17,842)
|
|
|
12,286
|
Equity in earnings of affiliate - Climate Control
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(79)
|
Income (loss) from continuing operations
|
|
$
|
(33,759)
|
|
$
|
(3,772)
|
|
$
|
(26,660)
|
|
$
|
19,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Gross profit (loss) by business segment represents net sales less
cost of sales. Gross profit classified as “Other” relates to the sales
of industrial machinery and related components. Operating income (loss)
by business segment represents gross profit (loss) by business segment
less selling, general and administrative expense (“SG&A”) incurred by
each business segment plus other income and other expense
earned/incurred by each business segment before general corporate
expenses.
(2) During the third quarter of 2015, a Turnaround was performed at our
Pryor Facility. Following the completion of a Turnaround at our Pryor
Facility we experienced unplanned downtime while restarting the plant
that negatively impacted production, sales and operating results. During
the first quarter of 2014, we recognized business interruption and
property insurance recoveries totaling $28.0 million, of which
approximately $22.9 million was recognized as a reduction to cost of
sales. During the third quarter of 2014, a Turnaround was performed at
our Cherokee Facility, which negatively impacted production, sales and
operating results.
|
LSB Industries, Inc.
|
Financial Highlights
|
Three Months and Nine Months Ended September 30,
|
|
(3) During the third quarter of 2015, our Chemical Business
recognized an impairment charge of $39.7 million relating to
our working interest in natural gas properties.
|
|
(4) General corporate expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Selling, general and administrative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel costs
|
|
$
|
(4,428)
|
|
$
|
(2,134)
|
|
$
|
(11,118)
|
|
$
|
(6,478)
|
|
Fees and expenses relating to shareholders (A)
|
|
|
(113)
|
|
|
(230)
|
|
|
(4,447)
|
|
|
(4,692)
|
|
Professional fees
|
|
|
(1,556)
|
|
|
(1,185)
|
|
|
(4,387)
|
|
|
(3,333)
|
|
All other
|
|
|
(1,058)
|
|
|
(915)
|
|
|
(2,829)
|
|
|
(2,633)
|
Total selling, general and administrative
|
|
|
(7,155)
|
|
|
(4,464)
|
|
|
(22,781)
|
|
|
(17,136)
|
Other income
|
|
|
4
|
|
|
19
|
|
|
73
|
|
|
69
|
Other expense
|
|
|
(22)
|
|
|
(14)
|
|
|
(74)
|
|
|
(14)
|
Total general corporate expenses
|
|
$
|
(7,173)
|
|
$
|
(4,459)
|
|
$
|
(22,782)
|
|
$
|
(17,081)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) 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.
(5) During the three and nine months ended September 30, 2015, interest
expense is net of capitalized interest of $8.3 million and $20.9
million, respectively. During the three and nine months ended September
30, 2014, interest expense is net of capitalized interest of $3.9
million and $9.2 million, respectively.
|
LSB Industries, Inc.
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
23,958
|
|
$
|
186,811
|
|
Restricted cash
|
|
|
-
|
|
|
365
|
|
Short-term investments
|
|
|
15,000
|
|
|
14,500
|
|
Accounts receivable, net
|
|
|
90,064
|
|
|
88,074
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Finished goods
|
|
|
24,170
|
|
|
28,218
|
|
|
Work in progress
|
|
|
2,743
|
|
|
2,763
|
|
|
Raw materials
|
|
|
26,782
|
|
|
25,605
|
|
|
|
Total inventories
|
|
|
53,695
|
|
|
56,586
|
|
Supplies, prepaid items and other:
|
|
|
|
|
|
|
|
|
Prepaid insurance
|
|
|
2,611
|
|
|
13,752
|
|
|
Precious metals
|
|
|
14,398
|
|
|
12,838
|
|
|
Supplies
|
|
|
17,220
|
|
|
15,927
|
|
|
Prepaid and refundable income taxes
|
|
|
8,709
|
|
|
7,387
|
|
|
Other
|
|
|
4,175
|
|
|
5,438
|
|
|
|
Total supplies, prepaid items and other
|
|
|
47,113
|
|
|
55,342
|
|
Deferred income taxes
|
|
|
20,385
|
|
|
17,204
|
Total current assets
|
|
|
250,215
|
|
|
418,882
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
874,575
|
|
|
619,205
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
Noncurrent restricted cash and cash equivalents
|
|
|
-
|
|
|
45,969
|
|
Noncurrent restricted investments
|
|
|
-
|
|
|
25,000
|
|
Intangible and other, net
|
|
|
32,204
|
|
|
27,949
|
|
|
Total other assets
|
|
|
32,204
|
|
|
98,918
|
|
|
|
|
|
|
|
$
|
1,156,994
|
|
$
|
1,137,005
|
|
|
|
|
|
|
|
|
|
|
|
|
(Continued on following page)
|
LSB Industries, Inc.
|
Consolidated Balance Sheets (continued)
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
(In Thousands)
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable $
|
|
$
|
110,950
|
|
$
|
81,456
|
|
Short-term financing
|
|
|
1,204
|
|
|
11,955
|
|
Accrued and other liabilities
|
|
|
46,317
|
|
|
51,166
|
|
Current portion of long-term debt
|
|
|
23,849
|
|
|
10,680
|
Total current liabilities
|
|
|
182,320
|
|
|
155,257
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
472,599
|
|
|
446,638
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent accrued and other liabilities
|
|
|
17,863
|
|
|
17,934
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
73,182
|
|
|
83,128
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
|
|
|
|
27,131,724 shares issued (26,968,212 at December 31, 2014)
|
|
|
2,713
|
|
|
2,697
|
|
Capital in excess of par value
|
|
|
174,500
|
|
|
170,537
|
|
Retained earnings
|
|
|
259,191
|
|
|
286,188
|
|
|
|
|
|
|
|
|
439,404
|
|
|
462,422
|
|
Less treasury stock, at cost:
|
|
|
|
|
|
|
|
|
Common stock, 4,320,462 shares
|
|
|
28,374
|
|
|
28,374
|
|
Total stockholders' equity
|
|
|
411,030
|
|
|
434,048
|
|
|
|
|
|
|
|
$
|
1,156,994
|
|
$
|
1,137,005
|
|
|
|
|
|
|
|
|
|
|
|
|
LSB Industries, Inc. Non-GAAP Reconciliation
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 Reconciliations
EBITDA is defined as net income plus interest expense, depreciation, and
depletion of property plant and equipment, amortization of other assets,
less interest included in amortization, impairment on natural gas
properties, plus provision for income taxes plus loss 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 (loss) or
operating income (loss) to EBITDA for the periods indicated.
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
($ in millions)
|
LSB Consolidated
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ (33.8)
|
|
$ (3.8)
|
|
$ (26.7)
|
|
$ 19.0
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
0.9
|
|
5.1
|
|
6.5
|
|
17.5
|
|
|
Depreciation and amortization
|
|
11.3
|
|
9.2
|
|
31.1
|
|
26.6
|
|
|
Impairment on natural gas properties
|
|
39.7
|
|
-
|
|
39.7
|
|
-
|
|
|
Provision (benefit) for income taxes
|
|
(22.0)
|
|
(2.4)
|
|
(17.8)
|
|
12.3
|
EBITDA
|
|
|
$ (3.8)
|
|
$ 8.1
|
|
$ 32.8
|
|
$ 75.4
|
Climate Control Business
|
|
|
|
|
|
|
|
|
Operating income
|
|
$ 7.2
|
|
$ 8.5
|
|
$ 15.5
|
|
$ 17.4
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings
|
|
-
|
|
-
|
|
-
|
|
0.1
|
|
|
Depreciation and amortization
|
|
1.2
|
|
1.2
|
|
3.6
|
|
3.5
|
EBITDA
|
|
|
$ 8.4
|
|
$ 9.7
|
|
$ 19.1
|
|
$ 21.0
|
Chemical Business
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$ (55.0)
|
|
$ (5.6)
|
|
$ (31.5)
|
|
$ 46.8
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income
|
|
-
|
|
0.1
|
|
0.1
|
|
0.2
|
|
|
Depreciation and amortization
|
|
9.8
|
|
7.7
|
|
26.6
|
|
22.6
|
|
|
Impairment on natural gas properties
|
|
39.7
|
|
-
|
|
39.7
|
|
-
|
EBITDA
|
|
|
$ (5.5)
|
|
$ 2.2
|
|
$ 34.9
|
|
$ 69.6
|
|
|
|
|
|
|
|
|
|
|
LSB Industries, Inc. Non-GAAP Reconciliation (continued)
Adjusted Operating Income (Loss), EBITDA, Net
Income (Loss) Applicable to Common Stock and Diluted Earnings per Share
Adjusted operating income (loss), adjusted EBITDA, adjusted net income
(loss) applicable to common stock and adjusted income (loss) per diluted
share are reported to show the impact of the impairment on natural gas
properties and non-recurring general corporate expense related to
severance costs. We believe that the inclusion of supplementary
adjustments to operating income, EBITDA, net income applicable to common
stock and diluted income per common share, are appropriate to provide
additional information to investors about certain unusual items. The
following tables provide reconciliations of operating income, EBITDA,
net income applicable to common stock and diluted income per common
share excluding the impairment expense and severance costs.
|
|
|
Three Months Ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
($ in millions)
|
LSB Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(54.9)
|
|
$
|
(1.2)
|
Less:
|
|
|
|
|
|
|
|
Impairment on natural gas properties
|
|
|
(39.7)
|
|
|
-
|
|
Severance costs
|
|
|
(2.2)
|
|
|
-
|
Adjusted operating loss
|
|
$
|
(13.0)
|
|
$
|
(1.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
(3.8)
|
|
$
|
8.1
|
Less:
|
|
|
|
|
|
|
|
Severance costs
|
|
|
(2.2)
|
|
|
-
|
Adjusted EBITDA
|
|
$
|
(1.6)
|
|
$
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss applicable to common stock
|
|
$
|
(33.8)
|
|
$
|
(3.8)
|
Less:
|
|
|
|
|
|
|
|
Impairment on natural gas properties (net of tax)
|
|
|
(24.2)
|
|
|
-
|
|
Severance costs (net of tax)
|
|
|
(1.3)
|
|
|
-
|
Adjusted net loss applicable to common stock
|
|
$
|
(8.3)
|
|
$
|
(3.8)
|
|
|
|
|
|
|
|
Weighted-average common shares (in thousands)
|
|
|
22,799
|
|
|
22,596
|
Adjusted loss per diluted share
|
|
$
|
(0.36)
|
|
$
|
(0.17)
|
|
|
|
|
|
|
|
Chemical Business
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
$
|
(55.0)
|
|
$
|
(5.6)
|
Less:
|
|
|
|
|
|
|
Impairment on natural gas properties
|
|
|
(39.7)
|
|
|
-
|
Adjusted operating loss
|
|
$
|
(15.3)
|
|
$
|
(5.6)
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20151106005280/en/ Copyright Business Wire 2015
Source: Business Wire
(November 6, 2015 - 6:30 AM EST)
News by QuoteMedia
www.quotemedia.com
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