Achieves Record Adjusted EBITDA
LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the second quarter ended June 30, 2021.
Second Quarter Highlights
- Net sales of $140.7 million compared to $105.0 million in the
second quarter of 2020
- Adjusted EBITDA(1) of $46.0 million compared to $29.2 million
in the second quarter of 2020
- Adjusted EBITDA(1) margin of 32.7% compared to 27.8% in the
second quarter of 2020
- Total liquidity of approximately $68 million as of June 30,
2021
- Initiated process of exchanging outstanding preferred stock
into shares of common stock in order to provide Company with lower
cost of capital and unlock growth opportunities
“We delivered significant year-over-year growth in both our top
and bottom line in the second quarter,” stated Mark Behrman, LSB
Industries’ President and CEO. “Our net sales increased 34% while
adjusted EBITDA, which reached an all-time record level for our
chemical operations, was up almost 60% versus the same period last
year. These outstanding results reflect robust demand and pricing
trends for both our agricultural and industrial products coupled
with continued solid operating performance by our facilities and
the operating leverage inherent in our business model.”
“In addition to the strong improvement in our financial
performance, which we expect to persist through the balance of the
year and into 2022, we recently announced that we signed an
agreement with the holder of our outstanding preferred stock to
exchange their preferred stock for shares of LSB common stock. If
our shareholders approve the exchange transaction, we expect this
transformative transaction to simplify our capital structure, lower
our cost of capital and provide us with greater financial
flexibility to pursue growth initiatives. Given the favorable
nitrogen industry dynamics we are currently experiencing, we
believe that now is an opportune time to execute this transaction,
particularly given our intention to refinance our senior secured
notes and opportunities we believe exist to drive organic growth,
including our entry into the rapidly emerging blue/green ammonia
and clean energy markets. Additionally, we regularly evaluate
M&A prospects that we believe could be accretive to earnings as
a result of the increased scale and expanded production
capabilities that they would provide us. We believe that the
exchange of this preferred stock into common stock and the overall
simplification of our capital structure, including the potential
refinancing of our senior secured notes, will enhance our ability
to generate profitable growth and greater long-term value for our
shareholders.”
Second Quarter Results Overview
Three Months Ended June 30,
2021
2020
(Dollars in thousands)
Net Sales by Market
Sector
Net Sales
Sector Mix
Net Sales
Sector Mix
% Change
Agricultural
$ 66,508
47%
$ 64,997
62%
2%
Industrial
60,608
43%
29,559
28%
105%
Mining
13,580
10%
10,477
10%
30%
$ 140,696
$105,033
34%
Comparison of 2021 to 2020 quarterly periods:
- Net sales of our agricultural products increased during the
quarter relative to the prior year period driven by stronger
pricing for UAN, ammonia and HDAN. Partially offsetting the benefit
of stronger pricing was the impact from winter storm Uri in
February 2021. Our El Dorado and Pryor facilities were shut down as
our natural gas supply was curtailed during the very cold weather
conditions that were experienced throughout the central United
States. This shutdown, resulted in a drawdown of inventory,
particularly of HDAN, given increased sales in the first quarter,
reducing our inventory available for sale in the second quarter.
Also depressing agricultural volumes during the second quarter was
the impact of wet weather across the Southern Plains throughout
much of May which delayed the application of fertilizer products.
Agricultural sales were also impacted by a shift in product mix as
we continue our focus on the Industrial business.
- Net sales of our industrial and mining products increased as a
result of higher pricing related to a rise in the Tampa ammonia
benchmark price, to which many of our industrial contracts are
tied. Also benefitting industrial sales was the ramp up of a new
nitric acid offtake agreement along with the continued recovery of
demand from several key end markets including automotive, home
building and power generation, which have now exceeded pre-pandemic
levels of demand.
- The year-over-year improvement in operating income and adjusted
EBITDA was primarily the result of the higher selling prices along
with stronger Industrial and Mining volumes partially offset by
higher natural gas prices as well as the impact of the weather
issues that reduced our inventory headed into the second
quarter.
The following tables provide key sales metrics for our
Agricultural products:
Three Months Ended June 30,
Product (tons
sold)
2021
2020
% Change
Urea ammonium nitrate (UAN)
121,995
111,860
9
%
High density ammonium nitrate (HDAN)
76,539
128,018
(40
) %
Ammonia
17,038
28,383
(40
) %
Other
6,628
9,257
(28
) %
222,200
277,518
(20
) %
Average Selling
Prices (price per ton) (A)
UAN
$
231
$
149
55
%
HDAN
$
286
$
232
23
%
Ammonia
$
395
$
250
58
%
(A) Average selling prices represent “net back” prices which are
calculated as sales less freight expenses divided by product sales
volume in tons.
The following table indicates the volumes sold of our major
Industrial and Mining products:
Three Months Ended June 30,
Product (tons
sold)
2021
2020
% Change
Ammonia
67,503
62,108
9
%
AN, Nitric Acid, Other
118,327
72,990
62
%
185,830
135,098
38
%
Tampa Ammonia Benchmark (price per metric
ton)
$
545
$
234
133
%
Input
Costs
Average natural gas cost/MMBtu
$
2.78
$
1.81
54
%
Financial Position and Capital Expenditures
As of June 30, 2021, our total cash position was $17.6 million.
Additionally, LSB had approximately $50.3 million of borrowing
availability under its Working Capital Revolver resulting in total
liquidity of approximately $68 million. Total long-term debt,
including the current portion, was $470.5 million on June 30, 2021
compared to $484.2 million on December 31, 2020. The aggregate
liquidation value of the Series E-! Redeemable Preferred at June
30, 2021, inclusive of accrued dividends of $157.9 million, was
$297.7 million.
Interest expense for the second quarter of 2021 was $12.3
million compared to $12.5 million for the same period in 2020.
In June 2021, the entire principal balance and interest of the
Company’s Paycheck Protection Program (“PPP”) loan was forgiven in
the amount of $10.0 million plus interest. The loan was originally
issued to the Company in April 2020 under the CARES Act.
Capital expenditures were approximately $14.8 million for the
first half of 2021. For the full year of 2021, total capital
expenditures related to capital work to be performed in 2021 are
expected to be approximately $30-$35 million, inclusive of
investments for margin enhancement purposes.
Outlook
The environment for U.S. agricultural markets is significantly
more favorable relative to this point last year due to a
combination of stronger farmer incomes in 2020, increased demand
for corn from China and other countries, and dry conditions in
South America, which have led to the highest corn prices in eight
years. This has translated into strong demand and a significant
increase in pricing for fertilizers. Tampa ammonia, based on its
second quarter 2021 average selling price, increased by over
$300/MT, or 133% relative to the same period in 2020, while UAN and
HDAN, increased by approximately $80 per ton and $50 per ton, or
nearly 55% and 25%, respectively, compared to the same period last
year. Our industrial business also continues to benefit from
positive trends in its key end markets including automotive,
homebuilding and power generation, which have recovered to above
pre-pandemic levels reflecting the beneficial impact of widespread
COVID vaccination throughout the U.S. Economic forecasts point to
continued expansion, including those from The International
Monetary Fund, that predict 7% year-over-year GDP growth for the
U.S. in 2021, the largest percentage increase since 1984. The
strength in the Tampa ammonia price also has positive ramifications
for our industrial business as many industrial chemical contracts
are indexed to the Tampa ammonia price. With the market trends on
both sides of our business expected to continue through 2021, we
continued to anticipate significant growth in net sales and
adjusted EBITDA for the full year relative to 2020.
Conference Call
LSB’s management will host a conference call covering the second
quarter results on Thursday, July 29, 2021 at 10:00 am ET / 9:00 am
CT to discuss these results and recent corporate developments.
Participating in the call will be President & Chief Executive
Officer, Mark Behrman and Executive Vice President & Chief
Financial Officer, Cheryl Maguire. 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 the Investor tab of our website.
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.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma,
manufactures and sells chemical products for the agricultural,
mining, and industrial markets. The Company owns and operates
facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor,
Oklahoma, and operates a facility for a global chemical company in
Baytown, Texas. LSB’s products are sold through distributors and
directly to end customers primarily throughout the United States
and parts of Mexico and Canada. Additional information about the
Company can be found on its website at www.lsbindustries.com.
Forward-Looking
Statements
Statements in this release that are not historical are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements, which are subject to known and unknown risks,
uncertainties and assumptions about us, may include projections of
our future financial performance including the effects of the
COVID-19 pandemic and anticipated performance based on our growth
and other strategies and anticipated trends in our business. These
statements are only predictions based on our current expectations
and projections about future events. There are important factors
that could cause our actual results, level of activity, performance
or actual achievements to differ materially from the results, level
of activity, performance or anticipated achievements expressed or
implied by the forward-looking statements. Significant risks and
uncertainties may relate to, but are not limited to, business and
market disruptions related to the COVID-19 pandemic, market
conditions and price volatility for our products and feedstocks, as
well as global and regional economic downturns, including as a
result of the COVID-19 pandemic, that adversely affect the demand
for our end-use products; disruptions in production at our
manufacturing facilities; our ability to complete the preferred
stock exchange transaction on the terms disclosed or at all and
other financial, economic, competitive, environmental, political,
legal and regulatory factors. These and other risk factors are
discussed in the Company’s filings with the Securities and Exchange
Commission (SEC).
Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time,
and it is not possible for our management to predict all risks and
uncertainties, nor can management assess the impact of all factors
on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Although we
believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
level of activity, performance or achievements. Neither we nor any
other person assumes responsibility for the accuracy or
completeness of any of these forward-looking statements. You should
not rely upon forward-looking statements as predictions of future
events. Unless otherwise required by applicable laws, we undertake
no obligation to update or revise any forward-looking statements,
whether because of new information or future developments.
See Accompanying Tables
LSB Industries, Inc.
Condensed Consolidated
Statement of Operations
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
(In Thousands, Except Per Share
Amounts)
Net sales
$
140,696
$
105,033
$
238,812
$
188,444
Cost of sales
105,688
86,012
195,744
166,872
Gross profit
35,008
19,021
43,068
21,572
Selling, general and administrative
expense
8,545
8,504
17,338
18,510
Other expense (income), net
6
(167
)
(257
)
(635
)
Operating income
26,457
10,684
25,987
3,697
Interest expense, net
12,290
12,476
24,662
25,955
Gain on extinguishment of debt
(10,000
)
—
(10,000
)
—
Non-operating other expense (income),
net
745
(128
)
1,140
(803
)
Income (loss) before benefit for income
taxes
23,422
(1,664
)
10,185
(21,455
)
Benefit for income taxes
(248)
(1,299
)
(206)
(1,638
)
Net income (loss)
23,670
(365
)
10,391
(19,817
)
Dividends on convertible preferred
stocks
75
75
150
150
Dividends on Series E redeemable preferred
stock
10,213
8,689
19,724
16,996
Accretion of Series E redeemable preferred
stock
513
505
1,024
1,009
Net income attributable to participating
securities
223
—
—
—
Net income (loss) attributable to common
stockholders
$
12,646
$
(9,634
)
$
(10,507
)
$
(37,972
)
Income (loss) per Common share:
Basic:
Net income (loss)
$
0.44
$
(0.34
)
$
(0.37)
$
(1.35
)
Diluted:
Net income (loss)
$
0.42
$
(0.34
)
$
(0.37)
$
(1.35
)
LSB Industries, Inc.
Consolidated Balance
Sheets
June 30,
December 31,
2021
2020
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
17,625
$
16,264
Accounts receivable
67,431
42,929
Allowance for doubtful accounts
(377
)
(378
)
Accounts receivable, net
67,054
42,551
Inventories:
Finished goods
12,781
17,778
Raw materials
1,521
1,795
Total inventories
14,302
19,573
Supplies, prepaid items and other:
Prepaid insurance
5,682
12,315
Precious metals
7,801
6,787
Supplies
25,878
25,288
Other
4,757
6,802
Total supplies, prepaid items and
other
44,118
51,192
Total current assets
143,099
129,580
Property, plant and equipment, net
871,780
891,198
Other assets:
Operating lease assets
27,854
26,403
Intangible and other assets, net
6,752
6,121
34,606
32,524
$
1,049,485
$
1,053,302
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
June 30,
December 31,
2021
2020
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
51,212
$
46,551
Short-term financing
4,516
13,576
Accrued and other liabilities
30,541
30,367
Current portion of long-term debt
9,049
16,801
Total current liabilities
95,318
107,295
Long-term debt, net
461,459
467,389
Noncurrent operating lease liabilities
20,277
19,845
Other noncurrent accrued and other
liabilities
7,372
6,090
Deferred income taxes
31,195
30,939
Commitments and contingencies
Redeemable preferred stocks:
Series E 14% cumulative, redeemable Class
C preferred stock, no par value,
210,000 shares issued; 139,768
outstanding; aggregate liquidation preference
of $297,706,000 ($277,982,000 at December
31, 2020)
292,849
272,101
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; aggregate
liquidation preference
of $3,385,000 ($3,265,000 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 $1,342,000 ($1,312,000 at December 31,
2020)
1,000
1,000
Common stock, $.10 par value; 75,000,000
shares authorized,
31,283,210 shares issued
3,128
3,128
Capital in excess of par value
192,980
198,215
Accumulated deficit
(51,844
)
(41,487
)
147,264
162,856
Less treasury stock, at cost:
Common stock, 982,639 shares (2,074,565
shares at December 31, 2020)
6,249
13,213
Total stockholders' equity
141,015
149,643
$
1,049,485
$
1,053,302
LSB Industries,
Inc. Non-GAAP Reconciliations
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 and Adjusted EBITDA
Reconciliation
EBITDA is defined as net income (loss) plus interest expense,
less gain on extinguishment of debt, plus depreciation and
amortization (D&A) (which includes D&A of property, plant
and equipment and amortization of intangible and other assets),
plus provision for income taxes. Adjusted EBITDA is reported to
show the impact of one time/non-cash or non-operating items-such
as, loss (gain) on sale of a business and other property and
equipment, one-time income or fees, certain fair market value (FMV)
adjustments, non-cash stock-based compensation, and consulting
costs associated with reliability and purchasing initiatives
(Initiatives). We historically have performed turnaround activities
on an annual basis; however, we have moved towards extending
Turnarounds to a two or three-year cycle. Rather than being
capitalized and amortized over the period of benefit, our
accounting policy is to recognize the costs as incurred. Given
these Turnarounds are essentially investments that provide benefits
over multiple years, they are not reflective of our operating
performance in a given year.
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. In addition, we believe that
certain investors consider adjusted EBITDA as more meaningful to
further assess our performance. We believe that the inclusion of
supplementary adjustments to EBITDA is appropriate to provide
additional information to investors about certain items.
EBITDA and adjusted EBITDA have 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 and adjusted EBITDA may not be comparable to a similarly
titled measure of other companies. The following table provides a
reconciliation of net income (loss) to EBITDA and adjusted EBITDA
for the periods indicated. Adjusted EBITDA margin is calculated by
taking adjusted EBITDA divided by Net Sales.
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
LSB
Consolidated ($ in thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Net income (loss)
$ 23,670
$ (365)
$ 10,391
$ (19,817)
Plus:
Interest expense
12,290
12,476
24,662
25,955
Depreciation and amortization
17,277
17,295
34,354
35,202
Gain on Extinguishment of debt-PPP
loan
(10,000)
-
(10,000)
-
Benefit for income taxes
(248)
(1,299)
(206)
(1,638)
EBITDA
$ 42,989
$ 28,107
$ 59,201
$ 39,702
Stock-based compensation
1,063
685
1,776
1,180
Noncash loss (gain) on natural gas
contracts
-
(396)
(1,205)
131
Legal fees (Leidos)
441
955
1,327
4,242
Loss (gain) on disposal of assets
91
(54)
174
(277)
FMV adjustment on preferred
stock embedded derivatives
716
(120)
1,152
(757)
Consulting costs associated with
Initiatives
-
-
-
576
Turnaround costs
707
11
847
11
Adjusted EBITDA
$ 46,007
$ 29,188
$ 63,272
$ 44,808
Adjusted EBITDA Margin
32.7 %
27.8 %
26.5 %
23.8 %
Agricultural Sales Price
Reconciliation
The following table provides a reconciliation of total
agricultural net sales as reported under GAAP in our consolidated
financial statement reconciled to netback sales which is calculated
as net sales less freight expenses. We believe this provides a
relevant industry comparison among our peer group.
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Agricultural net sales ($ in
thousands)
$ 66,508
$ 64,997
$ 111,421
$ 106,455
Less freight
4,089
5,530
7,715
9,466
Agricultural netback sales
$ 62,419
$ 59,467
$ 103,706
$ 96,989
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210728005992/en/
Company Contact: Mark Behrman, President & CEO Cheryl
Maguire, Executive Vice President & CFO (405) 235-4546
Investor Contact: The Equity Group Inc. Fred Buonocore,
CFA (212) 836-9607 Mike Gaudreau (212) 836-9620
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