LXU LSB Industries Inc

LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the first quarter ended March 31, 2024.

First Quarter 2024 Results and Recent Highlights

• Net sales of $138 million compared to $181 million in the first quarter of 2023
• Net income of $6 million compared to net income $16 million in the first quarter of 2023
• Diluted EPS of $0.08 compared to $0.21 for the first quarter of 2023
• Adjusted EBITDA(1) of $33 million compared to $51 million in the first quarter of 2023
• Cash Flow from Operations of $24 million with Capital Expenditures of $18 million
• Repurchased approximately 0.7 million shares of common stock during the first quarter of 2024, and approximately 1.5 million shares year-to-date
• Repurchased $33 million in principal amount of Senior Secured Notes during the first quarter of 2024, and $75 million in principal amount year-to-date
• Total cash and short-term investments of approximately $265 million as of March 31, 2024

____________________________

(1)

This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

“Our first quarter results were consistent with our expectations for a significant improvement relative to our fourth quarter of 2023," stated Mark Behrman, LSB Industries’ President and CEO. "Selling prices remained lower relative to the prior year quarter as the spike in nitrogen prices experienced in 2022 kept prices elevated during the first quarter of 2023. This was partially offset by a solid increase in sales volumes driven by strong demand for fertilizers, enhanced by our strategic commercial efforts. Additionally, we benefited from a healthy increase in downstream production volumes.”

"We generated solid cash flow in the first quarter, contributing to our ability to return value to shareholders through stock repurchases, while further de-risking our balance sheet by repurchasing bonds at a discount to market. We continue to make investments in the reliability and safety of our facilities that we expect to lead to greater production volumes. During the second half of this year we will be deploying capital to conduct Turnarounds at our Pryor and Cherokee facilities and complete multiple smaller projects that we believe will collectively lead to incremental EBITDA and improved shareholder value."

"We are increasingly excited about our clean ammonia initiatives as we continue to make progress in bringing our two projects to fruition. Indications from the EPA remain favorable with respect to the anticipated timeline for our partner, Lapis Energy, to begin capturing and sequestering CO2 at our El Dorado facility. Additionally, we are pleased with the interest we are seeing in off-take for low-carbon nitrogen products out of El Dorado when our project comes online. With respect to our Houston Ship Channel project, we have signed an agreement with Samsung Engineering to perform the Pre-FEED on our ammonia loop adding another large, blue-chip partner to the group of companies developing the project. We remain committed to becoming a leader in the global energy transition through the production of low carbon ammonia and downstream products over the next several years."

Market Outlook

• The outlook for nitrogen fertilizers is favorable:

- Current prices for ammonia and other nitrogen products should prove attractive to retailers and farmers

- Attractive U.S. corn futures prices are providing support for fertilizer demand for the 2024 application season

• Ammonia demand has been strong and pricing has been stable driven by:

- Robust agricultural demand in the fourth quarter of 2023 and first quarter of 2024

- Constrained ammonia imports into Europe from the Middle East due to the disruption of shipping through the Suez Canal

- Delayed startup of new production capacity

• UAN demand and pricing are expected to remain strong through much of Q2'24 reflecting:

- Tight inventories throughout much of the U.S.

- Lower import levels due to unplanned production issues

• Industrial and mining business is robust reflecting:

- Steady demand for industrial products supported by resilient U.S. economy

- Demand for AN for mining applications is steady due to attractive market fundamentals for quarrying/aggregate production and U.S. metals

Low-Carbon Ammonia Projects Summary

• Houston Ship Channel Blue Ammonia project with INPEX, Air Liquide and Vopak Exolum Houston

- Feasibility study completed during Q1'23 on a 1.1 million metric ton per year blue ammonia plant utilizing blue hydrogen provided by Air Liquide/INPEX (JV)

- Selected KBR to provide the technology licensing and proprietary engineering design for the ammonia loop portion of the plant

- Selected Samsung Engineering to perform a Pre-FEED (Front End Engineering Design) to refine the cost estimate for the ammonia loop. Pre-FEED is underway with expected completion in Q3'24

- FEED study expected to begin in Q4'24 with expected completion during Q3'25 and final investment decision in Q4'25

• El Dorado Carbon Capture and Sequestration (CCS) Project with Lapis Energy

- Awaiting approval of Class VI permit to construct application by the EPA

- Lapis Energy, our partner, will begin construction of the CCS equipment upon approval of Class VI permit to construct

- Lapis has ordered long lead time items

- Focused on beginning operations in Q1'26

- Expect Lapis, the owner of the CCS equipment, to receive the 45Q federal tax credits for sequestered CO2 and pay LSB a fee for each ton of CO2 captured and permanently sequestered

• MOU with Amogy to Develop Ammonia as a Marine Fuel

- Collaborating on the evaluation and development of pilot program that would combine LSB's low-carbon ammonia and Amogy's ammonia-to-power engine solution

- Amogy to test tugboat with engine retrofitted for ammonia as a fuel during Q3'24

First Quarter Results Overview

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

% Change

 

Product Sales ($ in Thousands)

 

 

 

 

 

 

 

 

 

AN & Nitric Acid

 

$

48,435

 

 

$

58,272

 

 

 

(17

)%

Urea ammonium nitrate (UAN)

 

 

41,192

 

 

 

46,590

 

 

 

(12

)%

Ammonia

 

 

39,530

 

 

 

63,415

 

 

 

(38

)%

Other

 

 

9,047

 

 

 

12,687

 

 

 

(29

)%

Total net sales

 

$

138,204

 

 

$

180,964

 

 

 

 

Comparison of 2024 to 2023 quarterly periods:

• Net sales and operating income declined during the quarter driven by lower pricing for all of our products. The headwind of lower pricing was offset by higher sales volumes of all of our products. Operating profit also benefited from lower natural gas prices.

The following tables provide key sales metrics for our products:

 

 

Three Months Ended

 

 

 

March 31,

 

Key Product Volumes (short tons sold)

 

2024

 

 

2023

 

 

% Change

 

AN & Nitric Acid

 

 

128,801

 

 

 

122,745

 

 

 

5

%

Urea ammonium nitrate (UAN)

 

 

134,933

 

 

 

113,026

 

 

 

19

%

Ammonia

 

 

94,831

 

 

 

88,997

 

 

 

7

%

 

 

 

358,565

 

 

 

324,768

 

 

 

10

%

Average Selling Prices (price per short ton) (A)

 

 

 

 

 

 

 

 

 

AN & Nitric Acid

 

$

319

 

 

$

417

 

 

 

(23

)%

Urea ammonium nitrate (UAN)

 

$

265

 

 

$

379

 

 

 

(30

)%

Ammonia

 

$

403

 

 

$

703

 

 

 

(43

)%

(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 March 31,

 

 

 

2024

 

 

2023

 

 

% Change

 

Average Benchmark Prices (price per ton)

 

 

 

 

 

 

 

 

 

Tampa Ammonia (MT) Benchmark

 

$

466

 

 

$

728

 

 

 

(36

)%

NOLA UAN

 

$

251

 

 

$

318

 

 

 

(21

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Input Costs

 

 

 

 

 

 

 

 

 

Average natural gas cost/MMBtu in cost of materials and other

 

$

2.82

 

 

$

6.39

 

 

 

(56

)%

Average natural gas cost/MMBtu used in production

 

$

2.33

 

 

$

5.66

 

 

 

(59

)%

Conference Call

LSB’s management will host a conference call covering the first quarter results on Tuesday, April 30, 2024 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, Executive Vice President & Chief Financial Officer, Cheryl Maguire and Executive Vice President & Chief Commercial Officer, Damien Renwick. Interested parties may participate in the call by dialing (877) 407-6176 / (201) 689-8451. 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, is committed to playing a leadership role in the energy transition through the production of low and no carbon products that build, feed and power the world. The LSB team is dedicated to building a culture of excellence in customer experiences as we currently deliver essential products across the agricultural, industrial, and mining end markets and, in the future, the energy markets. The company manufactures ammonia and ammonia-related products at facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma and operates a facility for a global chemical company in Baytown, Texas. Additional information about LSB can be found on our 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 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, market conditions and price volatility for our products and feedstocks, as well as global and regional economic downturns 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.

Consolidated Statements of Operations

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

138,204

 

 

$

180,964

 

Cost of sales

 

 

115,926

 

 

 

139,359

 

Gross profit

 

 

22,278

 

 

 

41,605

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

10,294

 

 

 

9,867

 

Other expense, net

 

 

724

 

 

 

1,203

 

Operating income

 

 

11,260

 

 

 

30,535

 

 

 

 

 

 

 

 

Interest expense, net

 

 

9,729

 

 

 

12,212

 

Gain on extinguishment of debt

 

 

(1,134

)

 

 

—

 

Non-operating other income, net

 

 

(3,561

)

 

 

(3,476

)

Income before provision for income taxes

 

 

6,226

 

 

 

21,799

 

Provision for income taxes

 

 

603

 

 

 

5,898

 

Net income

 

 

5,623

 

 

 

15,901

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Net income

 

$

0.08

 

 

$

0.21

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

Net income

 

$

0.08

 

 

$

0.21

 

LSB Industries, Inc.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

125,991

 

 

$

98,500

 

Restricted cash

 

 

2,532

 

 

 

2,532

 

Short-term investments

 

 

139,238

 

 

 

207,434

 

Accounts receivable

 

 

54,108

 

 

 

40,749

 

Allowance for doubtful accounts

 

 

(366

)

 

 

(364

)

Accounts receivable, net

 

 

53,742

 

 

 

40,385

 

Inventories:

 

 

 

 

 

 

Finished goods

 

 

19,643

 

 

 

26,329

 

Raw materials

 

 

2,320

 

 

 

1,799

 

Total inventories

 

 

21,963

 

 

 

28,128

 

Supplies, prepaid items and other:

 

 

 

 

 

 

Prepaid insurance

 

 

10,768

 

 

 

14,846

 

Precious metals

 

 

11,560

 

 

 

12,094

 

Supplies

 

 

30,682

 

 

 

30,486

 

Other

 

 

2,767

 

 

 

2,337

 

Total supplies, prepaid items and other

 

 

55,777

 

 

 

59,763

 

Total current assets

 

 

399,243

 

 

 

436,742

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

832,192

 

 

 

835,298

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

Operating lease assets

 

 

27,235

 

 

 

24,852

 

Intangible and other assets, net

 

 

1,449

 

 

 

1,292

 

 

 

 

28,684

 

 

 

26,144

 

 

 

 

 

 

 

 

 

 

$

1,260,119

 

 

$

1,298,184

 

LSB Industries, Inc.

Consolidated Balance Sheets (continued)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

56,064

 

 

$

68,323

 

Short-term financing

 

 

9,018

 

 

 

13,398

 

Accrued and other liabilities

 

 

38,820

 

 

 

30,961

 

Current portion of long-term debt

 

 

5,742

 

 

 

5,847

 

Total current liabilities

 

 

109,644

 

 

 

118,529

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

543,835

 

 

 

575,874

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

18,260

 

 

 

16,074

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

523

 

 

 

523

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

69,672

 

 

 

68,853

 

 

 

 

 

 

 

 

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

 

 

501,097

 

 

 

501,026

 

Retained earnings

 

 

232,638

 

 

 

227,015

 

 

 

 

742,852

 

 

 

737,158

 

Less treasury stock, at cost:

 

 

 

 

 

 

Common stock, 18.9 million shares (18.1 million shares at December 31, 2023)

 

 

224,667

 

 

 

218,827

 

Total stockholders' equity

 

 

518,185

 

 

 

518,331

 

 

 

$

1,260,119

 

 

$

1,298,184

 

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 and interest income, net, 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 (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.

Non-GAAP Reconciliations (continued)

 

LSB Consolidated ($ In Thousands)

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net income

 

$

5,623

 

 

$

15,901

 

Plus:

 

 

 

 

 

 

Interest expense and interest income, net

 

 

6,135

 

 

 

8,731

 

Net (gain) on extinguishment of debt

 

 

(1,134

)

 

 

—

 

Depreciation and amortization

 

 

17,148

 

 

 

17,604

 

Provision for income taxes

 

 

603

 

 

 

5,898

 

EBITDA

 

$

28,375

 

 

$

48,134

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,393

 

 

 

719

 

Legal fees (Leidos)

 

 

377

 

 

 

273

 

Loss on disposal and impairment of assets

 

 

1,454

 

 

 

1,890

 

Turnaround costs

 

 

915

 

 

 

(6

)

Growth Initiatives

 

 

81

 

 

 

 

Adjusted EBITDA

 

$

32,595

 

 

$

51,010

 

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 March 31,

 

 

 

2024

 

 

2023

 

 

 

(In Thousands)

 

Ammonia, AN, Nitric Acid, UAN net sales

 

$

129,157

 

 

$

168,277

 

 

 

 

 

 

 

 

Less freight and other

 

 

14,192

 

 

 

11,754

 

 

 

 

 

 

 

 

Ammonia, AN, Nitric Acid, UAN netback sales

 

$

114,965

 

 

$

156,523

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240429344622/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