Achieves Record Third Quarter Adjusted
EBITDA
LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the third quarter ended September 30,
2022.
Third Quarter 2022 Highlights
- Net sales of $184 million compared to $127 million in the third
quarter of 2021
- Adjusted EBITDA(1) of $50 million compared to $38 million in
the third quarter of 2021
- Adjusted EPS(1) of $0.27 compared to $0.07 in the third quarter
of 2021
- Cash Flow from Operations of $38 million and Capital
Expenditures of $16 million
- Total liquidity of approximately $450 million as of September
30, 2022
- Successfully completed major turnarounds at two facilities
during past three months
- Repurchased approximately 7 million shares during the third
quarter
"We delivered strong top and bottom line growth as compared to
last year despite executing two turnarounds in this year's third
quarter versus one in last year's third quarter," stated Mark
Behrman, LSB’s President and CEO. "We continued to benefit from
higher selling prices compared to last year, and our strategic
commercial initiatives that enabled us to optimize our sales mix in
the face of a rapidly changing market environment. Pricing remains
well above year-ago levels and there are multiple supply and demand
factors currently at play that we expect will continue to support
strong pricing for the final two months of 2022 and for 2023, if
not longer."
"Even with the reduced volumes resulting from our third quarter
scheduled maintenance activities at our Pryor and El Dorado
facilities, we once again generated meaningful positive operating
cash flow. Our increasingly strong balance sheet enabled us to
complete a total of $100 million of share repurchases for a total
of approximately 7.6 million shares since the program began in May.
These repurchases included 5.5 million shares that we bought from
our largest shareholder, efficiently returning capital to our
shareholders while not diminishing the liquidity of our stock."
Mr. Behrman continued, "Over the next several years, we believe
we have an opportunity to continue to drive shareholder value
through ongoing improvement of our operating rates, continued
product optimization and potential debottlenecking projects. We
believe these projects could 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 and announce our debottlenecking
plans in early 2023."
"In addition, we continue to advance our decarbonization
activities. In April we announced our CO2 capture and sequestration
or 'blue' ammonia project at our El Dorado facility where we intend
to initially capture approximately 450,000 tons of CO2 annually. We
have made significant advancements on data collection necessary for
a Class VI permit application and expect to file that application
in the second quarter of 2023. Additionally, in May we announced a
feasibility study for a zero-carbon or 'green' ammonia project at
our Pryor facility and we are in the final stages of completing
that study. We will report on the results of the feasibility study
when it is complete."
Mr. Behrman concluded, "As we head into the final months of 2022
we are highly enthusiastic about our near and longer term prospects
for profitable growth, free cash flow generation and increased
shareholder value given the favorable outlook for our markets
coupled with the company-specific initiatives we have underway.
Supporting that belief, on Monday we announced an increase of $75
million to our share repurchase program bringing the total
repurchase program to $175 million."
______________________
(1) This is a Non-GAAP measure. Refer
to the Non-GAAP Reconciliation section.
Third Quarter Results Overview
Three Months Ended September
30,
Product (Gross Sales
in $000's)
2022
2021
% Change
AN & Nitric Acid
$
66,161
$
47,453
39
%
Urea ammonium nitrate (UAN)
50,459
26,034
94
%
Ammonia
52,075
42,307
23
%
Other
15,578
11,405
37
%
$
184,273
$
127,199
45
%
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
largely to turnarounds at two of our facilities that took place in
the third quarter of 2022 versus only one turnaround in the third
quarter of 2021.
- 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 September
30,
Key Product Volumes
(short tons sold)
2022
2021
% Change
AN & Nitric Acid
125,446
135,279
(7
)%
Urea ammonium nitrate (UAN)
115,352
82,555
40
%
Ammonia
55,825
80,001
(30
)%
296,623
297,835
(0
)%
Average Selling
Prices (price per short ton) (A)
AN & Nitric Acid
$
458
$
290
58
%
Urea ammonium nitrate (UAN)
$
417
$
305
37
%
Ammonia
$
906
$
515
76
%
(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 September
30,
2022
2021
% Change
Average Benchmark
Prices (price per ton)
Tampa Ammonia (MT) Benchmark
$
1,093
$
610
79
%
UAN Southern Plains
$
482
$
355
36
%
Input
Costs
Average natural gas cost/MMBtu
$
7.65
$
3.71
106
%
Financial Position and Capital Expenditures
As of September 30, 2022, our total liquidity was approximately
$450 million, including $385 million in cash and short-term
investments and approximately $65 million of borrowing availability
under our Working Capital Revolver. Total long-term debt, including
the $10 million current portion, was $714 million on September 30,
2022 compared to $528 million on December 31, 2021.
Interest expense for the third quarter of 2022 was $12 million
as compared to $13 million in the third quarter of 2021.
During the third quarter we repurchased approximately $90
million of the Company’s stock at an average price of approximately
$13 per share under the share repurchase plan that our Board of
Directors increased from the $50 million originally authorized on
May 16, 2022 to $100 million on August 8, 2022.
Capital expenditures were approximately $16.1 million for the
third quarter of 2022. For the full year 2022, total capital
expenditures are expected to be approximately $65 million.
Outlook
Market conditions remain intact to keep fertilizer prices above
historical averages for the remainder of 2022 and full year 2023.
Farmer economics continue to be very favorable as a result of
strong global demand for corn in the face of constrained supply.
Key factors include the impact on global corn supplies of dry
conditions in South America, the Western U.S. and parts of Europe
coupled with continued high demand for corn from China. As a
result, corn prices remain above 10-year averages and farmer
profitability is meaningfully positive despite inflation across
their cost inputs. In order to maximize yield in 2023 to capitalize
on these favorable economics, we expect demand for agricultural
ammonia to be strong through November and into December as farmers
seek to replenish the nitrogen in their soil in advance of the
coming Spring planting season.
Natural gas costs in Europe continue to be a major driver of
high fertilizer prices. While down from the peak levels reached in
August, which caused operations at numerous European ammonia
facilities to cease due to prohibitively high production costs,
natural gas prices in Europe remain well above historical averages.
Moving into the winter heating season it appears possible that
European gas prices could rise again if temperatures are below
average for periods of time as supply remains tight. This would
limit or prevent many of the continent's ammonia facilities from
resuming production, keeping nitrogen fertilizer prices high.
Despite energy cost inflation in the U.S., domestic natural gas
prices remain a fraction of those in Europe, giving U.S. ammonia
producers a substantial cost advantage in the global market.
The impact of the Russian invasion of Ukraine and the ongoing
conflict in the region has contributed to the constraints to both
global grain and ammonia supplies, as well as an aggravating factor
to Europe's high gas prices. 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 was historically a major
supplier of gas to much of Europe. At this point, it seems likely
that even if the current unstable geopolitical situation in the
region were to be resolved soon, the global supply of these
commodities would still be short to meet demand throughout the
entirety of 2023 and beyond.
With respect to industrial markets, demand remains stable from
domestic end-use markets, while orders from customers producing
products largely for export to Europe and Asia have softened to a
degree given weakening international economies. Importantly, in
addition to our contractual agreements with industrial customers
that specify minimum volumes, our product mix flexibility helps us
mitigate the impact of a reduction in demand from certain end
markets by shifting production to products with stronger demand. An
example would be our ability to reduce our nitric acid volumes in
favor of increased production of ammonium nitrate. Relative to
this, we have been experiencing favorable trends in our mining
business as rising global consumption of coal has strengthened
demand and pricing for ammonium nitrate, a product we sell to
mining services companies for use in aggregates and metals mining
operations. Overall, despite growing global recessionary forces,
our industrial and mining business remains stable as a whole.
Conference Call
LSB’s management will host a conference call covering the third
quarter results on Wednesday, November 2, 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) 437-3179 / (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 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
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
(In Thousands, Except Per Share
Amounts)
Net sales
$
184,273
$
127,199
$
668,057
$
366,011
Cost of sales
162,144
109,752
412,274
305,496
Gross profit
22,129
17,447
255,783
60,515
Selling, general and administrative
expense
9,138
11,600
29,711
28,938
Other expense (income), net
(75
)
474
377
217
Operating income
13,066
5,373
225,695
31,360
Interest expense, net
12,193
12,956
34,455
37,618
Loss (gain) on extinguishment of debt
—
—
113
(10,000
)
Non-operating other expense (income),
net
(2,219
)
1,326
(5,627
)
2,466
Income before provision (benefit) for
income taxes
3,092
(8,909
)
196,754
1,276
Provision (benefit) for income taxes
780
19
32,277
(187
)
Net income (loss)
2,312
(8,928
)
164,477
1,463
Dividends on convertible preferred
stocks
—
75
—
225
Dividends on Series E redeemable preferred
stock
—
10,190
—
29,914
Accretion of Series E redeemable preferred
stock
—
499
—
1,523
Deemed dividend on Series E and Series F
redeemable preferred stocks
—
231,812
—
231,812
Net income (loss) attributable to common
stockholders
$
2,312
$
(251,504
)
$
164,477
$
(262,011
)
Income (loss) per common share:
Basic:
Net income (loss)
$
0.03
$
(6.39
)
$
1.89
$
(6.94
)
Diluted:
Net income (loss)
$
0.03
$
(6.39
)
$
1.86
$
(6.94
)
Adjusted Net Income and Adjusted
EPS(1)
Adjusted net income (loss) attributable to
common stockholders, excluding Exchange Transaction
$
2,312
$
(9,003
)
$
164,477
$
1,238
Other adjustments
20,483
15,645
29,896
19,716
Adjusted net income (loss) attributable to
common stockholders, excluding Exchange Transaction and other
adjustments
$
22,795
$
6,642
$
194,373
$
20,954
Adjusted net income per common share,
excluding Exchange Transaction and other adjustments
$
0.27
$
0.07
$
2.20
$
0.24
(1) This is a Non-GAAP measure. Refer to
the Non-GAAP Reconciliation section.
LSB Industries, Inc.
Consolidated Balance
Sheets
(Information at September 30,
2022 is unaudited)
September 30,
December 31,
2022
2021
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
19,635
$
82,144
Short-term investments
365,573
—
Accounts receivable
107,847
86,902
Allowance for doubtful accounts
(620
)
(474
)
Accounts receivable, net
107,227
86,428
Inventories:
Finished goods
28,165
14,688
Raw materials
1,565
1,895
Total inventories
29,730
16,583
Supplies, prepaid items and other:
Prepaid insurance
1,758
14,244
Precious metals
14,843
14,945
Supplies
27,036
26,558
Other
5,250
2,234
Total supplies, prepaid items and
other
48,887
57,981
Total current assets
571,052
243,136
Property, plant and equipment, net
853,939
858,480
Other assets:
Operating lease assets
24,885
27,317
Intangible and other assets, net
2,856
3,907
27,741
31,224
$
1,452,732
$
1,132,840
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
(Information at September 30,
2022 is unaudited)
September 30,
December 31,
2022
2021
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
93,887
$
49,458
Short-term financing
1,425
12,716
Accrued and other liabilities
42,062
33,301
Current portion of long-term debt
10,269
9,454
Total current liabilities
147,643
104,929
Long-term debt, net
703,811
518,190
Noncurrent operating lease liabilities
16,768
19,568
Other noncurrent accrued and other
liabilities
523
3,030
Deferred income taxes
57,843
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
496,251
493,161
Retained earnings (accumulated
deficit)
133,222
(31,255
)
638,590
471,023
Less treasury stock, at cost:
Common stock, 9.2 million shares (1.4
million shares at December 31, 2021)
112,446
10,533
Total stockholders' equity
526,144
460,490
$
1,452,732
$
1,132,840
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 September
30,
Nine Months Ended September
30,
2022
2021
2022
2021
Net income (loss), common
shareholders
$
2,312
$
(8,928
)
$
164,477
$
1,463
Plus:
Interest expense, net
9,960
12,956
31,499
37,618
Loss (gain) on extinguishment of debt
-
-
113
(10,000
)
Depreciation and amortization
16,398
17,970
50,902
52,324
Provision (benefit) for income taxes
780
19
32,277
(187
)
EBITDA
$
29,450
$
22,017
$
279,268
$
81,218
Stock-based compensation
921
2,553
3,089
4,329
Change of Control
-
3,223
-
3,223
Noncash (gain) on natural gas
contracts
-
-
-
(1,205
)
Legal fees (Leidos)
301
271
914
1,598
Loss on disposal of assets
22
516
828
690
Fair market value adjustment on preferred
stock embedded derivatives
-
1,106
-
2,258
Turnaround costs
19,238
7,976
25,064
8,823
Adjusted EBITDA
$
49,932
$
37,662
$
309,163
$
100,934
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
(in thousands, except per
share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2022
2021
2022
2021
Numerator:
Net income (loss) attributable to
common stockholders
$
2,312
$
(251,504
)
$
164,477
$
(262,011
)
Adjustments for Exchange Transaction:
Dividend requirements on Series E
Redeemable Preferred
-
10,190
-
29,914
Deemed dividend on Series E and Series F
Redeemable Preferred
-
231,812
-
231,812
Accretion of Series E Redeemable
Preferred
-
499
-
1,523
Adjusted net income (loss) attributable
to common stockholders, excluding Exchange Transaction
2,312
(9,003
)
164,477
1,238
Other Adjustments:
Stock-based compensation
921
2,553
3,089
4,329
Change of control
-
3,223
-
3,223
Noncash gain on natural gas contracts
-
-
-
(1,205
)
Legal fees (Leidos)
302
271
915
1,598
Loss on disposal of assets
22
516
828
690
FMV adjustment on preferred stock embedded
derivative
-
1,106
-
2,258
Turnaround costs
19,238
7,976
25,064
8,823
Adjusted net income attributable to
common stockholders, excluding Exchange Transaction and other
adjustments
$
22,795
$
6,642
$
194,373
$
20,954
Denominator:
Adjusted weighted-average shares for
basic and diluted net income (loss) per share and for adjusted net
income per share, excluding Exchange Transaction (1)
84,187
39,352
86,929
37,752
Adjustment:
Unweighted shares, including unvested
restricted stock subject to forfeiture
1,224
49,473
1,380
51,072
Outstanding shares, net of treasury, at
period end for adjusted net income per share, excluding Exchange
Transaction and other adjustments
85,411
88,825
88,309
88,824
Basic net income (loss) per common
share
$
0.03
$
(6.39
)
$
1.89
$
(6.94
)
Adjusted net income (loss) per common
share, excluding Exchange Transaction
$
0.03
$
(0.23
)
$
1.89
$
0.03
Adjusted net income per common share,
excluding Exchange Transaction and other adjustments
$
0.27
$
0.07
$
2.20
$
0.24
(1) Excludes the weighted-average shares
of unvested restricted stock that are subject to forfeiture
Ammonia, AN, Nitric Acid, 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 September
30,
2022
2021
(In Thousands)
Ammonia, AN, Nitric Acid, UAN Net
sales
$
168,696
$
115,794
Less freight and other
12,514
10,080
Ammonia, AN, Nitric Acid, UAN netback
sales
$
156,182
$
105,714
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221101006259/en/
Company Contact: 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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