Achieves All-Time Highest Quarterly EBITDA
in Company History
LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the first quarter ended March 31, 2022.
First Quarter 2022 Highlights
- Net sales of $199.0 million compared to $98.1 million in the
first quarter of 2021
- Adjusted EBITDA(1)of $101.1 million compared to $17.3 million
in the first quarter of 2021
- Adjusted EBITDA(1) margin of 50.8% compared to 17.6% in the
first quarter of 2021
- Adjusted EPS(1) of $0.69 in the first quarter of 2022
- Cash Flow from Operations of $85.5 million and Capital
Expenditures of $8.3 million
- Total liquidity of over $400 million as of March 31, 2021
“We delivered another quarter of record results and substantial
growth in net sales and adjusted EBITDA and EPS,” stated Mark
Behrman, LSB Industries President and CEO. “Our strong performance
once again reflects increases in product selling prices coupled
with the benefits of our successful commercial initiatives over the
past several years, along with solid operations at our facilities.
Nitrogen industry market dynamics are historically robust
reflecting limited global supply partially due to high natural gas
prices throughout Europe and higher demand driven by low global
grain stocks. Conditions supporting the strong pricing appear
likely to persist for the balance of 2022 and 2023.”
Mr. Behrman continued, “Our strong profitability led to another
quarter of significant cash flow, further enhancing our balance
sheet. Additionally, in March we completed a $200 million senior
notes offering, taking advantage of the low interest rate
environment in anticipation of a rising rates, bolstering our
liquidity position and giving us greater financial flexibility to
capitalize on organic growth opportunities and to pursue accretive
acquisitions. As part of our organic growth opportunities, we are
currently evaluating debottlenecking projects that can
significantly increase the production capacities at our facilities,
allowing us to benefit even more fully from the operating leverage
inherent in our business model, and plan to move forward on one or
more of these projects in the coming quarters. In addition, we are
committed to the planning and implementation of our decarbonization
activities, as evidenced by our recent announcement of our
agreement with Lapis Energy to develop a CO2 capture and
sequestration project at our El Dorado facility. We expect this
will be the first of several projects that will position LSB as a
leader in the decarbonization of hydrogen and ammonia for use in a
variety of critical applications.”
____________________________
(1)
This is a Non-GAAP measure. Refer to the
Non-GAAP Reconciliation section
First Quarter Results Overview
Three Months Ended March 31,
Product (Gross
Sales)
2022
2021
%Change
AN & Nitric Acid
$
71,800
$
49,837
44
%
Urea ammonium nitrate (UAN)
56,569
17,638
221
%
Ammonia
59,342
21,165
180
%
Other
11,270
9,476
19
%
$
198,981
$
98,116
103
%
Comparison of 2022 to 2021 quarterly periods:
- Net sales increased during the quarter driven by stronger
pricing for all of our products for sales made at both spot pricing
as well as those related to a rise in the Tampa ammonia benchmark
price, to which many of our contracts are tied. The benefit of
stronger pricing was partially offset by lower sales volumes due,
in part, to the delay of fertilizer purchases by farmers resulting
from wet weather in certain areas of the U.S. Additionally, the
Company entered the first quarter of 2022 with a lower level of
high density ammonium nitrate (HDAN) inventory than in previous
years as a result of increased nitric acid production and sales in
the second half of 2021 in connection with a new nitric acid
offtake agreement, reducing first quarter sales volumes of HDAN
relative to the 2021 first quarter.
- The year-over-year improvement in operating income and adjusted
EBITDA primarily resulted from higher selling prices, partially
offset by higher natural gas feedstock prices and lower sales
volumes.
The following tables provide key sales metrics for our
products:
Three Months Ended March 31,
Key Product Volumes
(short tons sold)
2022
2021
% Change
AN & Nitric Acid
144,517
186,282
(22
)%
Urea ammonium nitrate (UAN)
100,153
109,243
(8
)%
Ammonia
60,725
65,247
(7
)%
305,395
360,772
(15
)%
Average Selling
Prices (price per short ton) (B)
AN & Nitric Acid
$
438
$
221
98
%
Urea ammonium nitrate (UAN)
$
553
$
150
269
%
Ammonia
$
961
$
312
208
%
(B)
Average selling prices represent “net
back” prices which are calculated as sales less freight expenses
divided by product sales volume in tons.
Three Months Ended March 31,
2022
2021
% Change
Average Benchmark
Prices (price per ton)
Tampa Ammonia (MT) Benchmark
$
1,206
$
348
247
%
UAN Southern Plains
$
595
$
241
147
%
Input
Costs
Average natural gas cost/MMBtu
$
4.74
$
3.15
50
%
Financial Position and Capital Expenditures
As of March 31, 2022, our total liquidity was over $400 million,
including $343.6 million in cash and short-term investments and
approximately $63 million of borrowing availability under our
Working Capital Revolver. Total long-term debt, including the $8.1
million current portion, was $716.5 million on March 31, 2022
compared to $527.6 million on December 31, 2021. On March 8, 2022
we closed on an offering of $200 million of senior secured notes
due 2028, bearing an interest rate of 6.250%. The proceeds of this
offering are intended to be used to pursue strategic acquisition
opportunities, to fund organic growth projects including
debottlenecking of our facilities to increase production capacity,
and other growth projects.
Interest expense for the first quarter of 2022 was $10.0 million
compared to $12.4 million for the same period in 2021.
Capital expenditures were approximately $8.3 million for the
first quarter of 2022. For the full year 2022, total capital
expenditures related to environmental, health and safety and plant
investments are expected to be approximately $50 million with
another $15 million earmarked for identified growth
initiatives.
Outlook
Demand for fertilizers is expected to remain robust for the
balance 2022. Corn prices are currently near record-high levels,
and corn futures point to corn prices remaining at elevated levels
throughout 2022 and through the first half of 2023. These trends
should translate into strong farmer income and promote significant
demand for fertilizers as farmers seek to maximize yield in order
to capitalize on the anticipated strong pricing environment for
corn. Factors supporting strong domestic corn prices include U.S.
ethanol demand which is currently near pre-pandemic levels, as well
as the impact of dry conditions in South America and the Western
U.S. which have constricted global corn supplies.
Natural gas prices remain a matter of focus for both our
business and our industry. Domestic gas prices are at their highest
levels since 2008, with the Henry Hub spot gas price at
approximately $8 per MMBtu. Despite this increase in our feedstock
cost, selling prices for our products have increased by a
significant multiple of the increase in gas cost. We expect this to
translate into continued strong margins over the course of the
2022. Natural gas costs in Europe remain historically high, but
have receded from the peak levels of early March. We are seeing
some ammonia production that was off-line due to prohibitively high
gas costs over the past eight months coming back on-line. With that
said, European gas costs remain significantly elevated with prices
still approximating $30/MMBtu on an MMBtu equivalent basis,
providing U.S. producers with a continued significant production
cost advantage.
Significantly exacerbating all of the aforementioned factors
contributing to increased corn and fertilizer prices has been the
impact of the Russian invasion of Ukraine. Ukraine is one of the
world’s largest exporters of corn while Russia is among the world’s
largest exporters of wheat and ammonia and the current unstable
geopolitical situation is currently and expected to continue to
disrupt the global supply of these products throughout 2022 and
2023.
With respect to our industrial business, The Conference Board is
forecasting full year 2022 GDP expansion of 3.0%. This represents a
healthy rate of economic growth that we expect to result in
continued strong demand for our products. Sales volumes of our
nitric acid continue to increase driven by homebuilding, with
housing starts at their highest in nearly 16 years, as well as
power generation and the sales related to the large, multi-year
contract we commenced in the first quarter of 2021 which ramped up
over the course of the year. This is partially offset by the
continued impact of the microprocessor shortage on automobile
production and sales, although consumer demand for new cars
continues to be strong. The strength in the Tampa ammonia price
also has positive implications for our industrial business as a
number of industrial chemical contracts are indexed to the Tampa
ammonia price.
Conference Call
LSB’s management will host a conference call covering the first
quarter results on Wednesday, May 4, 2022 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 (888) 428-7458 / (862) 298-0702.
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.
Committed to improving the world by setting goals that will reduce
our environmental impact on the planet and improve the quality of
life for all of its people, the Company is well positioned to play
a key role in the reduction of global carbon emissions through its
planned carbon capture and sequestration, and zero carbon ammonia
strategies. Additional information about LSB 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
March 31,
2022
2021
(In Thousands, Except Per Share
Amounts)
Net sales
$
198,981
$
98,116
Cost of sales
108,251
90,056
Gross profit
90,730
8,060
Selling, general and administrative
expense
10,935
8,793
Other income, net
(176
)
(263
)
Operating income (loss)
79,971
(470
)
Interest expense, net
9,955
12,372
Non-operating other expense (income),
net
135
395
Income (loss) before provision (benefit)
for income taxes
69,881
(13,237
)
Provision for income taxes
11,115
42
Net income (loss)
58,766
(13,279
)
Dividends on convertible preferred
stocks
—
75
Dividends on Series E redeemable preferred
stock
—
9,511
Accretion of Series E redeemable preferred
stock
—
511
Net income (loss) attributable to common
stockholders
$
58,766
$
(23,376
)
Income (loss) per common share:
Basic:
Net income (loss)
$
0.66
$
(0.63
)
Diluted:
Net income (loss)
$
0.65
$
(0.63
)
Adjusted Net Income and Adjusted EPS
(1)
Adjusted net income (loss) attributable to
common stockholders, excluding Exchange Transaction
$
58,766
$
(13,354
)
Other adjustments
3,630
1,053
Adjusted net income (loss)
$
62,396
$
(12,301
)
Adjusted net income (loss) per common
share,
excluding other adjustments(1)
$
0.69
$
(0.32
)
____________________________
(1)
This is a Non-GAAP measure. Refer to the
Non-GAAP Reconciliation section
LSB Industries, Inc.
Consolidated Balance
Sheets
March 31,
December 31,
2022
2021
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
254,299
$
82,144
Short-term investments
89,311
—
Accounts receivable
97,515
86,902
Allowance for doubtful accounts
(463
)
(474
)
Accounts receivable, net
97,052
86,428
Inventories:
Finished goods
25,810
14,688
Raw materials
1,590
1,895
Total inventories
27,400
16,583
Supplies, prepaid items and other:
Prepaid insurance
10,557
14,244
Precious metals
13,945
14,945
Supplies
27,066
26,558
Other
9,805
2,234
Total supplies, prepaid items and
other
61,373
57,981
Total current assets
529,435
243,136
Property, plant and equipment, net
850,372
858,480
Other assets:
Operating lease assets
24,829
27,317
Intangible and other assets, net
3,555
3,907
28,384
31,224
$
1,408,191
$
1,132,840
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
March 31,
December 31,
2022
2021
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
60,649
$
49,458
Short-term financing
9,911
12,716
Accrued and other liabilities
44,913
33,301
Current portion of long-term debt
8,112
9,454
Total current liabilities
123,585
104,929
Long-term debt, net
708,398
518,190
Noncurrent operating lease liabilities
17,542
19,568
Other noncurrent accrued and other
liabilities
3,023
3,030
Deferred income taxes
37,455
26,633
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $.10 par value; 150 million
shares authorized, 91.2 million
shares issued
9,117
9,117
Capital in excess of par value
493,964
493,161
Retained earnings (accumulated
deficit)
27,511
(31,255
)
530,592
471,023
Less treasury stock, at cost:
Common stock, 1.6 million shares (1.4
million shares at December 31, 2021)
12,404
10,533
Total stockholders' equity
518,188
460,490
$
1,408,191
$
1,132,840
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 (loss) 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 (benefit) 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/or 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.
Adjusted Net Income (Loss) and Adjusted
Net Income (Loss) Per Share
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per
share have been adjusted for the impact of the closing of the
Exchange Transaction on September 27, 2021 as well as the one
time/non-cash or non-operating items referred to in the above
section relating to Adjusted EBITDA.
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
LSB Consolidated
Three Months Ended March 31,
2022
2021
(In Thousands)
Net income (loss)
$
58,766
$
(13,279
)
Plus:
Interest expense
9,955
12,372
Loss on Extinguishment of debt
113
—
Depreciation and amortization
17,507
17,077
Provision (benefit) for income taxes
11,115
42
EBITDA
$
97,456
$
16,212
Stock-based compensation
803
713
Noncash loss (gain) on natural
gas contracts
—
(1,205
)
Legal fees (Leidos)
342
886
Loss (gain) on disposal of
assets
(46
)
83
FMV adjustment on preferred stock
embedded derivatives
—
436
Turnaround costs
2,531
140
Adjusted EBITDA
$
101,086
$
17,265
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
Three Months Ended
March 31,
2022
2021
(In Thousands, Except Per Share
Amounts)
Numerator:
Net income (loss) attributable to
common stockholders
$
58,766
$
(23,376
)
Adjustments:
Dividend requirements on Series ERedeemable Preferred
-
9,511
Accretion of Series E Redeemable Preferred
-
511
Adjusted net income (loss) attributable
to common stockholders
58,766
(13,354
)
Other Adjustments:
Stock-based compensation
803
713
Noncash loss (gain) on natural gas contracts
-
(1,205
)
Legal fees (Leidos)
342
886
Loss (gain) on disposal of assets
(46
)
83
FMV adjustment on preferred stock embeddedderivative
-
436
Turnaround costs
2,531
140
Adjusted net income (loss) attributable
to common stockholders, excluding other adjustments
$
62,396
$
(12,301
)
Denominator:
Adjusted weighted-average shares for
basic net income (loss) per share and for adjusted net income
(loss) per share (1)
88,421
36,850
Adjustment:
Unweighted shares, including unvested restrictedstock subject to
forfeiture
1,691
1,131
Outstanding shares, net of treasury, at
period end for adjusted net income (loss) per share, excluding
other adjustments
90,112
37,981
Basic net income (loss) per common
share
$
0.66
$
(0.63
)
Adjusted net income (loss) per common
share, excluding other adjustments
$
0.69
$
(0.32
)
(1)
Excludes the weighted-average shares of
unvested restricted stock that are subject to forfeiture
Ammonia, AN, UAN Sales Price
Reconciliation
The following table provides a reconciliation of total
identified net sales as reported under GAAP in our consolidated
financial statement reconciled to netback sales which is calculated
as net sales less freight and other non-netback costs. We believe
this provides a relevant industry comparison among our peer
group.
Three Months Ended March 31,
2022
2021
(In Thousands)
Ammonia, AN, Nitric Acid, UAN Net
sales
$
187,712
$
88,640
Less freight and other
10,609
10,793
Ammonia, AN, UAN netback sales
$
177,103
$
77,847
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220503006243/en/
Cheryl Maguire, Executive Vice President & CFO (405)
510-3524
Fred Buonocore, CFA, Vice President of Investor Relations (405)
510-3550 fbuonocore@lsbindustries.com
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