Achieves All-Time Highest Quarterly EBITDA
in Company History
LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the second quarter ended June 30, 2022.
Second Quarter 2022 Highlights
- Net sales of $284.8 million compared to $140.7 million in the
second quarter of 2021
- Adjusted EBITDA(1) of $158.1 million compared to $46.0 million
in the second quarter of 2021
- Adjusted EBITDA(1) margin of 55.5% compared to 32.7% in the
second quarter of 2021
- Adjusted EPS(1) of $1.22 in the second quarter of 2022
- Cash Flow from Operations of $135.3 million and Capital
Expenditures of $8.2 million
- Total liquidity of over $500 million as of June 30, 2022
- Authorized and commenced share repurchases under a $50 million
buyback program
- Announced feasibility study for a green ammonia project at
Pryor Facility
“We had another quarter of record results with significant
year-over-year growth in net sales, adjusted EBITDA and EPS,”
stated Mark Behrman, LSB’s President and CEO. “We benefitted from
higher selling prices compared to last year, and our strategic
commercial initiatives enabled us to optimize our sales mix in the
face of a dynamic market environment. Nitrogen pricing declined
through the second quarter from April’s peak levels. This decline
was largely due to a combination of wet weather throughout the corn
belt, which delayed the fertilizer application season, along with
the typical drop in fertilizer demand headed into the summer
season. Even so, pricing remains well above year ago levels and
there are multiple supply and demand factors currently at play that
we expect will support strong pricing for the remainder of 2022 and
for 2023, if not longer, even in the event of a recession.”
Mr. Behrman continued, “Our robust second quarter cash flow
further enhanced our balance sheet, putting us in a financial
position that we expect will enable us to pursue growth
opportunities while at the same time, weather a potential economic
downturn. In May our Board authorized a $50 million stock
repurchase program to return capital to shareholders by taking
advantage of the value opportunity they believe currently exists
with our shares. Over the longer term, we believe we have an
opportunity to drive shareholder value through debottlenecking
projects that we are evaluating. These projects can materially
increase the production capacities of our facilities, enhancing our
profit margins as we capitalize on the operating leverage inherent
in our business model. We expect to formalize our debottlenecking
plans by the end of this year and anticipate moving forward on one
or more of these projects in early 2023. In addition, we continue
to advance our decarbonization activities. Following our late-April
announcement of our CO2 capture and sequestration or ‘blue’ ammonia
project at our El Dorado facility, in late May we announced a
feasibility study for a zero-carbon or ‘green’ ammonia project at
our Pryor facility. We look forward to providing updates on both of
these exciting industry-leading initiatives as we make progress
towards initial production of low and no carbon ammonia that we
expect will be in high demand for use in a variety of critical
applications in the years to come.”
______________________
(1) This is a Non-GAAP measure. Refer to
the Non-GAAP Reconciliation section
Second Quarter Results Overview
Three Months Ended June 30,
Product (Gross
Sales)
2022
2021
% Change
AN & Nitric Acid
$96,142
$56,739
69%
Urea ammonium nitrate (UAN)
76,986
29,899
157%
Ammonia
89,444
38,541
132%
Other
22,231
15,517
43%
$284,803
$140,696
102%
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 impact of wet weather in certain areas of the U.S.,
and dry conditions in other areas, on fertilizer purchases by
farmers.
- 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 June 30,
Key Product Volumes
(short tons sold)
2022
2021
% Change
AN & Nitric Acid
162,014
186,962
(13
) %
Urea ammonium nitrate (UAN)
130,561
121,995
7
%
Ammonia
75,526
84,540
(11
) %
368,101
393,497
(6
) %
Average Selling
Prices (price per short ton) (A)
AN & Nitric Acid
$
525
$
259
103
%
Urea ammonium nitrate (UAN)
$
553
$
231
139
%
Ammonia
$
1,164
$
441
164
%
(A) 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 June 30,
2022
2021
% Change
Average Benchmark
Prices (price per ton)
Tampa Ammonia (MT) Benchmark
$
1,257
$
545
131
%
UAN Southern Plains
$
612
$
342
79
%
Input
Costs
Average natural gas cost/MMBtu
$
7.15
$
2.78
157
%
Financial Position and Capital Expenditures
As of June 30, 2022, our total liquidity was over $500 million,
including $450.8 million in cash and short-term investments and
approximately $63.4 million of borrowing availability under our
Working Capital Revolver. Total long-term debt, including the $11.0
million current portion, was $715.4 million on June 30, 2022
compared to $527.6 million on December 31, 2021.
Interest expense for the both the second quarter of 2022 and
2021 was $12.3 million.
During the second quarter we repurchased approximately $13
million of the Company’s stock at an average price of approximately
$18 per share under the $50 million share repurchase plan
authorized by our Board of Directors on May 16, 2022.
Capital expenditures were approximately $8.2 million for the
second quarter of 2022. For the full year 2022, total capital
expenditures are expected to be approximately $65 million.
Outlook
A variety of factors suggest that demand for fertilizers should
continue to be robust, and fertilizer pricing should remain above
historical averages for the rest of 2022, and full year 2023. The
U.S. corn belt had a very wet spring, causing farmers to forego
their typical pre-planting fertilizer application and contributing
to a near all-time high spike in corn prices during April and May.
As growing weather improved during June, corn prices retreated from
peak levels, but continue to sit well above historical averages. As
a result, farmer income is likely to continue to be healthy,
encouraging investment in fertilizers in order to maximize yield to
capitalize on strong corn pricing. The elevated corn price
environment appears to have the underpinnings to persist given high
levels of U.S. ethanol demand and the impact of dry conditions in
South America and the Western U.S. on global corn supplies. Demand
for corn from China for use as animal feed remains high as well.
While the third quarter is typically marked by limited fertilizer
activity as planted corn matures, demand for agricultural ammonia
could be strong in the fourth quarter, after the harvest, as
farmers seek to replenish the nutrients in their soil in advance of
the spring 2023 planting season, particularly given the diminished
pre-plant application earlier this year.
Domestic natural gas prices are well above where they were at
this time a year ago. However, selling prices for our products have
increased by a significant multiple of the increase in gas cost
over the same period. We expect this to translate into continued
strong margins over the course of 2022 and likely throughout 2023.
Natural gas costs in Europe have rebounded to near the peak levels
reached this past March causing ammonia production at some European
facilities to shut down again in the face of prohibitively high
feedstock costs. As such, U.S. producers remain at a significant
production cost advantage and the global ammonia supply constraint
should serve as the foundation for continued elevated nitrogen
pricing.
Significantly exacerbating the aforementioned factors
contributing to increased corn and fertilizer prices is 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. The current unstable geopolitical
situation in that region could potentially disrupt the global
supply of these products for the balance of 2022 and 2023.
Sales volumes for our industrial business have remained stable
despite weakening forecasts for economic growth. Demand for nitric
acid, a product with a broad range of applications, continues to be
strong and our large long-term nitric acid contract helps protect
us on the downside in the event that some end markets are impacted
by a potential recession. Pricing for our industrial sales remains
well above year ago levels, reflecting competition from fertilizer
demand and other nitrogen demand and the continued strength in the
Tampa ammonia price to which a number of our industrial product
contracts are indexed. With respect to U.S. natural gas feedstock
price volatility, many of our industrial product contracts are
cost-plus in nature enabling us to pass through increases in gas
costs.
Conference Call
LSB’s management will host a conference call covering the second
quarter results on Thursday, July 28, 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 (866) 682-6100 / (404) 267-0373.
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 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
Statements of Operations
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2022
2021
2022
2021
(In Thousands, Except Per Share
Amounts)
Net sales
$
284,803
$
140,696
$
483,784
$
238,812
Cost of sales
141,879
105,688
250,130
195,744
Gross profit
142,924
35,008
233,654
43,068
Selling, general and administrative
expense
9,638
8,545
20,573
17,338
Other expense (income), net
628
6
452
(257
)
Operating income
132,658
26,457
212,629
25,987
Interest expense, net
12,307
12,290
22,262
24,662
Loss (gain) on extinguishment of debt
—
(10,000
)
113
(10,000
)
Non-operating other expense (income),
net
(3,430
)
745
(3,408
)
1,140
Income before provision (benefit) for
income taxes
123,781
23,422
193,662
10,185
Provision (benefit) for income taxes
20,382
(248
)
31,497
(206
)
Net income
103,399
23,670
162,165
10,391
Dividends on convertible preferred
stocks
—
75
—
150
Dividends on Series E redeemable preferred
stock
—
10,213
—
19,724
Accretion of Series E redeemable preferred
stock
—
513
—
1,024
Net income attributable to participating
securities
—
223
—
—
Net income (loss) attributable to common
stockholders
$
103,399
$
12,646
$
162,165
$
(10,507
)
Income (loss) per common share:
Basic:
Net income (loss)
$
1.17
$
0.34
$
1.84
$
(0.28
)
Diluted:
Net income (loss)
$
1.15
$
0.32
$
1.81
$
(0.28
)
Adjusted Net Income and Adjusted EPS
(1)
Adjusted net income attributable to common
stockholders
$
103,399
$
23,372
$
162,165
$
10,241
Other adjustments
5,782
3,018
9,413
4,071
Adjusted net income
$
109,181
$
26,390
$
171,578
$
14,312
Adjusted net income per common share
excluding other
adjustments (1)
$
1.22
$
0.67
$
1.91
$
0.37
________________________________ (1) This is a Non-GAAP measure.
Refer to the Non-GAAP Reconciliation section
LSB Industries, Inc.
Consolidated Balance
Sheets
(Information at June 30, 2022
is unaudited)
June 30,
December 31,
2022
2021
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
125,231
$
82,144
Short-term investments
325,566
—
Accounts receivable
97,406
86,902
Allowance for doubtful accounts
(652
)
(474
)
Accounts receivable, net
96,754
86,428
Inventories:
Finished goods
34,144
14,688
Raw materials
1,831
1,895
Total inventories
35,975
16,583
Supplies, prepaid items and other:
Prepaid insurance
6,174
14,244
Precious metals
13,929
14,945
Supplies
27,263
26,558
Other
7,134
2,234
Total supplies, prepaid items and
other
54,500
57,981
Total current assets
638,026
243,136
Property, plant and equipment, net
839,411
858,480
Other assets:
Operating lease assets
27,056
27,317
Intangible and other assets, net
3,221
3,907
30,277
31,224
$
1,507,714
$
1,132,840
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
(Information at June 30, 2022
is unaudited)
June 30,
December 31,
2022
2021
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
69,308
$
49,458
Short-term financing
5,682
12,716
Accrued and other liabilities
31,325
33,301
Current portion of long-term debt
10,977
9,454
Total current liabilities
117,292
104,929
Long-term debt, net
704,427
518,190
Noncurrent operating lease liabilities
18,681
19,568
Other noncurrent accrued and other
liabilities
523
3,030
Deferred income taxes
57,232
26,633
Commitments and contingencies
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
495,330
493,161
Retained earnings (accumulated
deficit)
130,910
(31,255
)
635,357
471,023
Less treasury stock, at cost:
Common stock, 2.3 million shares (1.4
million shares at
December 31, 2021)
25,798
10,533
Total stockholders' equity
609,559
460,490
$
1,507,714
$
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 non-cash stock-based compensation,
one time/non-cash or non-operating items-such as, one-time income
or fees, loss (gain) on sale of a business and/or other property
and equipment, certain fair market value (FMV) adjustments, 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
($ In Thousands)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Net income
$
103,399
$
23,670
$
162,165
$
10,391
Plus:
Interest expense, net
11,584
12,290
21,539
24,662
Loss (gain) on extinguishment of debt
-
(10,000
)
113
(10,000)
Depreciation and amortization
16,996
17,277
34,504
34,354
Provision (benefit) for income taxes
20,382
(248
)
31,497
(206)
EBITDA
$
152,361
$
42,989
$
249,818
$
59,201
Stock-based compensation
1,365
1,063
2,168
1,776
Noncash (gain) on natural gas
contracts
-
-
-
(1,205)
Legal fees (Leidos)
270
441
613
1,327
Loss on disposal of assets
852
91
806
174
Fair market value adjustment on preferred
stock embedded derivatives
-
716
-
1,152
Turnaround costs
3,295
707
5,826
847
Adjusted EBITDA
$
158,143
$
46,007
$
259,231
$
63,272
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022
2021
2022
2021
(In Thousands, Except Per Share
Amounts)
Numerator:
Net income (loss) attributable to
common stockholders
$
103,399
$
12,646
$
162,165
$
(10,507
)
Adjustments:
Dividend requirements on Series E Redeemable Preferred
-
10,213
-
19,724
Accretion of Series E Redeemable Preferred
-
513
-
1,024
Adjusted net income (loss) attributable
to common stockholders
103,399
23,372
162,165
10,241
Other Adjustments:
Stock-based compensation
1,365
1,063
2,168
1,776
Noncash loss (gain) on natural gas contracts
-
-
-
(1,205
)
Legal fees (Leidos)
270
441
613
1,327
Loss on disposal of assets
852
91
806
174
Fair market value adjustment on preferred stock embedded derivative
-
716
-
1,152
Turnaround costs
3,295
707
5,826
847
Adjusted net income (loss) attributable
to common stockholders, excluding other adjustments
$
109,181
$
26,390
$
171,578
$
14,312
Denominator:
Adjusted weighted-average shares for
basic net income (loss) per share and for adjusted net income
(loss) per share (1)
88,181
37,031
88,301
37,162
Adjustment:
Unweighted shares, including unvested restricted stock subject to
forfeiture
1,224
2,199
1,458
1,665
Outstanding shares, net of treasury, at
period end for adjusted net income (loss) per share, excluding
other adjustments
89,405
39,230
89,759
38,827
Basic net income (loss) per common
share
$
1.17
$
0.34
$
1.84
$
(0.28
)
Adjusted net income (loss) per common
share, excluding other adjustments
$
1.22
$
0.67
$
1.91
$
0.37
(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 statements 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 June 30,
2022
2021
(In Thousands)
Ammonia, AN, Nitric Acid, UAN Net
sales
$
262,572
$
125,179
Less freight and other
17,424
11,332
Ammonia, AN, UAN netback sales
$
245,148
$
113,847
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220727005928/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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