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Share Name | Share Symbol | Market | Type |
---|---|---|---|
LSB Industries Inc | NYSE:LXU | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.195 | 2.32% | 8.585 | 8.61 | 8.36 | 8.36 | 110,736 | 16:56:29 |
LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
Mark Behrman, LSB’s President and CEO, stated, “We generated a healthy increase in sales volumes relative to the first quarter of last year. This improvement reflects the benefits of the reliability investments we made in our facilities in 2022 along with our successful commercial initiatives. However, the stronger volumes were more than offset by lower product selling prices resulting largely from a decline in natural gas prices in Europe, which reached all-time highs during 2022 and drove ammonia prices to record levels. After declining steadily for the past six months, we believe that prices for ammonia and related products are at or near a bottom, bolstered by the significant increase in fertilizer demand we've seen recently. We expect the pricing stabilization coupled with continued strong operating performance by our facilities to benefit our second quarter 2023 financial results."
Mr. Behrman continued, "Despite the pricing headwinds in the first quarter, we continued to generate solid free cash flow which further strengthened our balance sheet. Our current financial position gives us the flexibility to create value for shareholders in multiple ways including investments in the growth of the business and potential debt reduction and/or additional share repurchases. Additionally, we are more excited than ever about our blue and green ammonia projects that we have underway, and other potential projects that we are exploring. The groundswell of interest in the use of ammonia as a clean fuel and as a carrier for hydrogen continues to build. Our vision is to be at the forefront of this energy transition, which we expect to result in a meaningful reduction to global CO2 emissions, including those of our company, while at the same time representing an attractive opportunity for us to generate significant incremental profitability and shareholder value."
(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 in $000's)
2023
2022
% Change
AN & Nitric Acid
$
58,272
$
71,800
(19
)%
Urea ammonium nitrate (UAN)
46,590
56,569
(18
)%
Ammonia
63,415
59,342
7
%
Other
12,687
11,270
13
%
Total Net Sales
$
180,964
$
198,981
(9
)%
Comparison of 2023 to 2022 quarterly periods:
The following tables provide key sales metrics for our products:
Three Months Ended March 31,
Key Product Volumes (short tons sold)
2023
2022
% Change
AN & Nitric Acid
122,745
144,517
(15
)%
Urea ammonium nitrate (UAN)
113,026
100,153
13
%
Ammonia
88,997
60,725
47
%
324,768
305,395
6
%
Average Selling Prices (price per short ton) (A)
AN & Nitric Acid
$
417
$
438
(5
)%
Urea ammonium nitrate (UAN)
$
379
$
553
(31
)%
Ammonia
$
703
$
961
(27
)%
(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,
2023
2022
% Change
Average Benchmark Prices (price per ton)
Tampa Ammonia (MT) Benchmark
$
728
$
1,206
(40
)%
NOLA UAN
$
318
$
569
(44
)%
Input Costs
Average natural gas cost/MMBtu
$
5.66
$
4.74
19
%
Financial Position and Capital Expenditures
As of March 31, 2023, our total liquidity was approximately $488 million, including $426 million in cash and short-term investments and approximately $62 million of availability under our Working Capital Revolver. Total long-term debt, including the $9 million current portion, was $711 million on March 31, 2023 compared to $712 million on December 31, 2022.
Interest expense for the first quarter of 2023 was $12 million compared to $10 million in the first quarter of 2022.
Capital expenditures were approximately $18 million for the first quarter of 2023. For the full year 2023, total capital expenditures are expected to be between $60 million to $80 million which includes maintenance and margin enhancement investments.
Market Outlook
Nitrogen fertilizer prices moderated in recent months, largely reflecting a decline in European production costs. Natural gas prices in Europe have dropped due to a reduction in demand primarily related to warmer than expected temperatures throughout Europe this past winter and a reduction in industrial demand. The lower natural gas costs have enabled numerous European ammonia facilities to resume operations, increasing global supply for nitrogen products. With that said, natural gas costs in Europe remain significantly higher than those in the U.S. and European operators remain the high cost, or marginal producers, with production costs substantially higher than those in the U.S.
In addition to the lower production costs for European producers as compared to a year ago, the decline in fertilizer prices reflects the impact of a delay in this season's spring fertilizer application in many corn growing regions of the U.S. due to cold and wet weather. Nitrogen prices have also been pressured by lower demand for ammonia from Asian industrial markets as well as from phosphate producers. Despite these factors, nitrogen pricing remains at attractive levels and appears to have stabilized with potential for improvement as 2023 progresses, given an increasingly favorable demand outlook.
U.S. corn stock/use ratios sit near multi-year lows due, in part, to persistent dry conditions in South America, along with areas of the U.S. and Europe. As a result, corn prices remain significantly above 10-year averages which, combined with lower input costs relative to last year, should incentivize farmers to plant additional acres and maximize yield through the current planting season. Recent USDA projections call for approximately 92 million acres of corn to be planted in the U.S. this year, up from approximately 88.6 million acres planted last year. We expect this to translate into strong demand for nitrogen fertilizers in the coming weeks and, ultimately, improved pricing as inventory levels decline.
Our industrial business has been robust and demand for our products is steady. Nitric acid demand is stable as the demand impacts of high inflation in the U.S. has been offset by global producers shifting production from international facilities to their U.S. operations in order to take advantage of lower domestic input costs. Demand for AN for use in mining applications is robust due to attractive market fundamentals for quarrying and aggregate production and U.S. metals.
Conference Call
LSB’s management will host a conference call covering the first quarter results on Wednesday, May 3, 2023 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 (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, 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
March 31,
2023
2022
(In Thousands, Except Per Share Amounts)
Net sales
$
180,964
$
198,981
Cost of sales
139,359
108,251
Gross profit
41,605
90,730
Selling, general and administrative expense
9,867
10,935
Other expense (income), net
1,203
(176
)
Operating income
30,535
79,971
Interest expense, net
12,212
9,955
Non-operating other expense (income), net
(3,476
)
135
Income before provision for income taxes
21,799
69,881
Provision for income taxes
5,898
11,115
Net income
15,901
58,766
Income per common share:
Basic:
Net income
$
0.21
$
0.66
Diluted:
Net income
$
0.21
$
0.65
Adjusted Net Income and Adjusted EPS(1)
Net income
$
15,901
$
58,766
Adjustments
2,876
3,630
Adjusted net income
$
18,777
$
62,396
Net income per common share, excluding adjustments
$
0.25
$
0.69
(1)
This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.
LSB Industries, Inc.
Condensed Consolidated Balance Sheets
(Information at March 31, 2023 is unaudited)
March 31,
December 31,
2023
2022
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
48,949
$
63,769
Short-term investments
376,882
330,553
Accounts receivable
60,251
75,494
Allowance for doubtful accounts
(693
)
(699
)
Accounts receivable, net
59,558
74,795
Inventories:
Finished goods
28,102
28,893
Raw materials
1,530
1,990
Total inventories
29,632
30,883
Supplies, prepaid items and other:
Prepaid insurance
12,271
17,429
Precious metals
14,474
13,323
Supplies
28,570
27,501
Other
9,491
8,346
Total supplies, prepaid items and other
64,806
66,599
Total current assets
579,827
566,599
Property, plant and equipment, net
842,925
848,661
Other assets:
Operating lease assets
21,321
22,682
Intangible and other assets, net
1,697
1,877
23,018
24,559
$
1,445,770
$
1,439,819
LSB Industries, Inc.
Condensed Consolidated Balance Sheets (continued)
(Information at March 31, 2023 is unaudited)
March 31,
December 31,
2023
2022
(In Thousands)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
68,341
$
78,182
Short-term financing
10,168
16,134
Accrued and other liabilities
43,617
38,470
Current portion of long-term debt
8,544
9,522
Total current liabilities
130,670
142,308
Long-term debt, net
702,071
702,733
Noncurrent operating lease liabilities
13,460
14,896
Other noncurrent accrued and other liabilities
522
522
Deferred income taxes
69,095
63,487
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
497,216
497,179
Retained earnings
214,993
199,092
721,326
705,388
Less treasury stock, at cost:
Common stock, 15.0 million shares (14.9 million shares at December 31, 2022)
191,374
189,515
Total stockholders' equity
529,952
515,873
$
1,445,770
$
1,439,819
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. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.
LSB Industries, Inc.
Non-GAAP Reconciliations (continued)
LSB Consolidated ($ In Thousands)
Three Months Ended March 31,
2023
2022
Net income
$
15,901
$
58,766
Plus:
Interest expense and interest income, net
8,731
9,955
Net loss on extinguishments of debt
—
113
Depreciation and amortization
17,604
17,507
Provision for income taxes
5,898
11,115
EBITDA
$
48,134
$
97,456
Stock-based compensation
719
803
Legal fees (Leidos)
273
342
Loss (gain) on disposal of assets
1,890
(46
)
Turnaround costs
(6
)
2,531
Adjusted EBITDA
$
51,010
$
101,086
LSB Industries, Inc.
Non-GAAP Reconciliations (continued)
(in thousands, except per share amounts)
Three Months Ended
March 31,
2023
2022
Numerator:
Net income
$
15,901
$
58,766
Adjustments:
Stock-based compensation
719
803
Legal fees (Leidos)
273
342
Loss (gain) on disposal of assets
1,890
(46
)
Turnaround costs
(6
)
2,531
Net income, excluding adjustments
$
18,777
$
62,396
Denominator:
Adjusted weighted-average shares for basic net income per share and for adjusted net income per share(1)
75,807
88,421
Adjustment:
Unweighted shares, including unvested restricted stock subject to forfeiture
409
1,691
Outstanding shares, net of treasury, at period end for adjusted net income per share, excluding other adjustments
76,216
90,112
Basic net income per common share
$
0.21
$
0.66
Net income per common share, excluding adjustments
$
0.25
$
0.69
(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 March 31,
2023
2022
(In Thousands)
Ammonia, AN, Nitric Acid, UAN net sales
$
168,277
$
187,712
Less freight and other
11,754
10,609
Ammonia, AN, Nitric Acid, UAN netback sales
$
156,523
$
177,103
View source version on businesswire.com: https://www.businesswire.com/news/home/20230502006088/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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