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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, 2021

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 30,300,571 shares as of July 23, 2021.

 

 

 


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

 

23

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

36

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

41

 

 

 

 

 

Item 1A.

 

Risk Factors

 

41

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

41

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

41

 

 

 

 

 

Item 4.

 

Mining Safety Disclosures

 

41

 

 

 

 

 

Item 5.

 

Other Information

 

41

 

 

 

 

 

Item 6.

 

Exhibits

 

41

 

 

2


PART I

FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at June 30, 2021 is unaudited)

 

 

 

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

 

 

(Continued on following page)

3


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at June 30, 2021 is unaudited)

 

 

 

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 (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

See accompanying notes.

4


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

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

)

 

See accompanying notes.

5


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

 

 

Common

Stock

Shares

 

 

Treasury

Stock-

Common

Shares

 

 

Non-

Redeemable

Preferred

Stock

 

 

Common

Stock

Par

Value

 

 

Capital in

Excess of

Par

Value

 

 

Retained

Earnings (Accumulated Deficit)

 

 

Treasury

Stock-

Common

 

 

Total

 

 

 

(In Thousands)

 

Balance at December 31, 2020

 

 

31,283

 

 

 

(2,075

)

 

$

3,000

 

 

$

3,128

 

 

$

198,215

 

 

$

(41,487

)

 

$

(13,213

)

 

$

149,643

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,279

)

 

 

 

 

 

 

(13,279

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,511

)

 

 

 

 

 

 

(9,511

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(511

)

 

 

 

 

 

 

(511

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

713

 

 

 

 

 

 

 

 

 

 

 

713

 

Issuance of restricted stock

 

 

 

 

 

 

835

 

 

 

 

 

 

 

 

 

 

 

(5,310

)

 

 

 

 

 

 

5,310

 

 

 

 

Other

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

Balance at March 31, 2021

 

 

31,283

 

 

 

(1,245

)

 

$

3,000

 

 

$

3,128

 

 

$

193,618

 

 

$

(64,788

)

 

$

(7,921

)

 

$

127,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,670

 

 

 

 

 

 

 

23,670

 

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,213

)

 

 

 

 

 

 

(10,213

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(513

)

 

 

 

 

 

 

(513

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,062

 

 

 

 

 

 

 

 

 

 

 

1,062

 

Issuance of unrestricted stock

 

 

 

 

 

 

267

 

 

 

 

 

 

 

 

 

 

 

(1,700

)

 

 

 

 

 

 

1,700

 

 

 

 

Other

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

(28

)

 

 

(28

)

Balance at June 30, 2021

 

 

31,283

 

 

 

(983

)

 

$

3,000

 

 

$

3,128

 

 

$

192,980

 

 

$

(51,844

)

 

$

(6,249

)

 

$

141,015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

31,283

 

 

 

(2,010

)

 

$

3,000

 

 

$

3,128

 

 

$

196,833

 

 

$

57,632

 

 

$

(13,266

)

 

$

247,327

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,452

)

 

 

 

 

 

 

(19,452

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,307

)

 

 

 

 

 

 

(8,307

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(504

)

 

 

 

 

 

 

(504

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

495

 

 

 

 

 

 

 

 

 

 

 

495

 

Other

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

(356

)

 

 

 

 

 

 

292

 

 

 

(64

)

Balance at March 31, 2020

 

 

31,283

 

 

 

(1,980

)

 

$

3,000

 

 

$

3,128

 

 

$

196,972

 

 

$

29,369

 

 

$

(12,974

)

 

$

219,495

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(365

)

 

 

 

 

 

 

(365

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,689

)

 

 

 

 

 

 

(8,689

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(505

)

 

 

 

 

 

 

(505

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

684

 

 

 

 

 

 

 

 

 

 

 

684

 

Other

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

(90

)

 

 

 

 

 

 

90

 

 

 

 

Balance at June 30, 2020

 

 

31,283

 

 

 

(1,966

)

 

$

3,000

 

 

$

3,128

 

 

$

197,566

 

 

$

19,810

 

 

$

(12,884

)

 

$

210,620

 

 

 

See accompanying notes.

6


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

 

(In Thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

10,391

 

 

$

(19,817

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

256

 

 

 

(1,661

)

Gain on extinguishment of debt

 

 

(10,000

)

 

 

 

Depreciation and amortization of property, plant and equipment

 

 

33,725

 

 

 

34,572

 

Amortization of intangible and other assets

 

 

629

 

 

 

631

 

Other

 

 

1,749

 

 

 

3,192

 

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

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(23,369

)

 

 

(3,117

)

Inventories

 

 

5,535

 

 

 

8,655

 

Prepaid insurance

 

 

6,633

 

 

 

6,642

 

Precious metals

 

 

(1,014

)

 

 

(2,114

)

Accounts payable

 

 

3,627

 

 

 

(7,674

)

Accrued interest

 

 

(20

)

 

 

1,685

 

Other assets and other liabilities

 

 

2,439

 

 

 

(1,618

)

Net cash provided by operating activities

 

 

30,581

 

 

 

19,376

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

(14,849

)