UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

Commission file number 1-7677

 

LSB Industries, Inc.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

73-1015226

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3503 NW 63rd Street, Suite 500, Oklahoma City, Oklahoma

 

73116

(Address of principal executive offices)

 

(Zip Code)

 

(Registrant's telephone number, including area code) (405)  235-4546

Not applicable

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, Par Value $.10

 

LXU

 

New York Stock Exchange

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

  Yes      No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

  Yes      No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

  Yes      No

The number of shares outstanding of the Registrant's common stock was 29,303,216 shares as of May 1, 2020.

 

 

 

 


FORM 10-Q OF LSB INDUSTRIES, INC.

TABLE OF CONTENTS

 

 

 

PART I – Financial Information

 

Page

 

 

 

 

 

Item 1.

 

Financial Statements

 

3

 

 

 

 

 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

20

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

32

 

 

 

 

 

 

 

PART II – Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

36

 

 

 

 

 

Item 1A.

 

Risk Factors

 

36

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

37

 

 

 

 

 

Item 4.

 

Mining Safety Disclosures

 

37

 

 

 

 

 

Item 5.

 

Other Information

 

37

 

 

 

 

 

Item 6.

 

Exhibits

 

37

 

 

2


PART I

FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at March 31, 2020 is unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,483

 

 

$

22,791

 

Accounts receivable

 

 

51,060

 

 

 

40,203

 

Allowance for doubtful accounts

 

 

(328

)

 

 

(261

)

Accounts receivable, net

 

 

50,732

 

 

 

39,942

 

Inventories:

 

 

 

 

 

 

 

 

Finished goods

 

 

24,632

 

 

 

21,738

 

Raw materials

 

 

1,671

 

 

 

1,573

 

Total inventories

 

 

26,303

 

 

 

23,311

 

Supplies, prepaid items and other:

 

 

 

 

 

 

 

 

Prepaid insurance

 

 

8,722

 

 

 

11,837

 

Supplies

 

 

25,162

 

 

 

24,689

 

Other

 

 

8,833

 

 

 

8,303

 

Total supplies, prepaid items and other

 

 

42,717

 

 

 

44,829

 

Total current assets

 

 

157,235

 

 

 

130,873

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

928,393

 

 

 

936,474

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

Operating lease assets

 

 

19,149

 

 

 

15,330

 

Intangible and other assets, net

 

 

5,374

 

 

 

5,812

 

 

 

 

24,523

 

 

 

21,142

 

 

 

 

 

 

 

 

 

 

 

 

$

1,110,151

 

 

$

1,088,489

 

 

(Continued on following page)

3


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

(Information at March 31, 2020 is unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

54,010

 

 

$

58,477

 

Short-term financing

 

 

6,893

 

 

 

9,929

 

Accrued and other liabilities

 

 

40,544

 

 

 

25,484

 

Current portion of long-term debt

 

 

9,665

 

 

 

9,410

 

Total current liabilities

 

 

111,112

 

 

 

103,300

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

 

480,837

 

 

 

449,634

 

 

 

 

 

 

 

 

 

 

Noncurrent operating lease liabilities

 

 

14,506

 

 

 

11,404

 

 

 

 

 

 

 

 

 

 

Other noncurrent accrued and other liabilities

 

 

5,154

 

 

 

6,214

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

35,343

 

 

 

35,717

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable preferred stocks:

 

 

 

 

 

 

 

 

Series E 14% cumulative, redeemable Class C preferred stock, no par value,

   210,000 shares issued; 139,768 outstanding; aggregate liquidation preference

   of $251,108,000 ($242,800,000 at December 31, 2019)

 

 

243,704

 

 

 

234,893

 

Series F redeemable Class C preferred stock, no par value, 1 share issued and

   outstanding; aggregate liquidation preference of $100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000

   shares issued and outstanding; aggregate liquidation preference

   of $3,085,000 ($3,025,000 at December 31, 2019)

 

 

2,000

 

 

 

2,000

 

Series D 6% cumulative, convertible Class C preferred stock, no par value;

   1,000,000 shares issued and outstanding; aggregate liquidation preference

   of $1,267,000 ($1,252,000 at December 31, 2019)

 

 

1,000

 

 

 

1,000

 

Common stock, $.10 par value; 75,000,000 shares authorized,

   31,283,210 shares issued

 

 

3,128

 

 

 

3,128

 

Capital in excess of par value

 

 

196,972

 

 

 

196,833

 

Retained earnings

 

 

29,369

 

 

 

57,632

 

 

 

 

232,469

 

 

 

260,593

 

Less treasury stock, at cost:

 

 

 

 

 

 

 

 

Common stock, 1,979,994 shares (2,009,566 shares at December 31, 2019)

 

 

12,974

 

 

 

13,266

 

Total stockholders' equity

 

 

219,495

 

 

 

247,327

 

 

 

$

1,110,151

 

 

$

1,088,489

 

 

See accompanying notes.

4


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands, Except Per Share Amounts)

 

Net sales

 

$

83,411

 

 

$

94,152

 

Cost of sales

 

 

80,860

 

 

 

86,834

 

Gross profit

 

 

2,551

 

 

 

7,318

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

 

10,006

 

 

 

7,224

 

Other expense (income), net

 

 

(468

)

 

 

23

 

Operating income (loss)

 

 

(6,987

)

 

 

71

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

13,479

 

 

 

10,987

 

Non-operating other expense (income), net

 

 

(675

)

 

 

224

 

Loss before provision (benefit) for income taxes

 

 

(19,791

)

 

 

(11,140

)

Provision (benefit) for income taxes

 

 

(339

)

 

 

400

 

Net loss

 

 

(19,452

)

 

 

(11,540

)

 

 

 

 

 

 

 

 

 

Dividends on convertible preferred stocks

 

 

75

 

 

 

75

 

Dividends on Series E redeemable preferred stock

 

 

8,307

 

 

 

7,256

 

Accretion of Series E redeemable preferred stock

 

 

504

 

 

 

496

 

Net loss attributable to common stockholders

 

$

(28,338

)

 

$

(19,367

)

 

 

 

 

 

 

 

 

 

Basic and dilutive net loss per common share

 

$

(1.01

)

 

$

(0.69

)

 

See accompanying notes.

5


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

 

 

Common

Stock

Shares

 

 

Treasury

Stock-

Common

Shares

 

 

Non-

Redeemable

Preferred

Stock

 

 

Common

Stock

Par

Value

 

 

Capital in

Excess of

Par

Value

 

 

Retained

Earnings

 

 

Treasury

Stock-

Common

 

 

Total

 

 

 

(In Thousands)

 

Balance at December 31, 2019

 

 

31,283

 

 

 

(2,010

)

 

$

3,000

 

 

$

3,128

 

 

$

196,833

 

 

$

57,632

 

 

$

(13,266

)

 

$

247,327

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,452

)

 

 

 

 

 

 

(19,452

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,307

)

 

 

 

 

 

 

(8,307

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(504

)

 

 

 

 

 

 

(504

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

495

 

 

 

 

 

 

 

 

 

 

 

495

 

Other

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

(356

)

 

 

 

 

 

 

292

 

 

 

(64

)

Balance at March 31, 2020

 

 

31,283

 

 

 

(1,980

)

 

 

3,000

 

 

 

3,128

 

 

 

196,972

 

 

 

29,369

 

 

 

(12,974

)

 

 

219,495

 

 

 

Balance at December 31, 2018

 

 

31,283

 

 

 

(2,438

)

 

$

3,000

 

 

$

3,128

 

 

$

198,482

 

 

$

153,773

 

 

$

(16,186

)

 

$

342,197

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,540

)

 

 

 

 

 

 

(11,540

)

Dividend accrued on redeemable

   preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,256

)

 

 

 

 

 

 

(7,256

)

Accretion of redeemable preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(496

)

 

 

 

 

 

 

(496

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

612

 

 

 

 

 

 

 

 

 

 

 

612

 

Other

 

 

 

 

 

 

(76

)

 

 

 

 

 

 

 

 

 

 

(144

)

 

 

 

 

 

 

(546

)

 

 

(690

)

Balance at March 31, 2019

 

 

31,283

 

 

 

(2,514

)

 

 

3,000

 

 

 

3,128

 

 

 

198,950

 

 

 

134,481

 

 

 

(16,732

)

 

 

322,827

 

 

 

 

See accompanying notes.

6


LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(19,452

)

 

$

(11,540

)

Adjustments to reconcile net loss to net cash provided (used) by operating activities:

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

(374

)

 

 

445

 

Depreciation and amortization of property, plant and equipment

 

 

17,592

 

 

 

16,826

 

Amortization of intangible and other assets

 

 

315

 

 

 

313

 

Other

 

 

1,373

 

 

 

2,098

 

Cash provided (used) by changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(7,512

)

 

 

2,543

 

Inventories

 

 

(2,996

)

 

 

(3,393

)

Prepaid insurance

 

 

3,115

 

 

 

2,991

 

Accounts payable

 

 

(3,171

)

 

 

(10,480

)

Accrued interest

 

 

11,805

 

 

 

9,659

 

Other assets and other liabilities

 

 

(2,873

)

 

 

(2,401

)

Net cash provided (used) by operating activities

 

 

(2,178

)

 

 

7,061

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Expenditures for property, plant and equipment

 

 

(10,737

)

 

 

(7,115

)

Other investing activities

 

 

179

 

 

 

9

 

Net cash used by investing activities

 

 

(10,558

)

 

 

(7,106

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from revolving debt facility

 

 

30,000

 

 

 

 

Proceeds from other long-term debt

 

 

2,570

 

 

 

795

 

Payments on other long-term debt

 

 

(2,042

)

 

 

(1,610

)

Payments on short-term financing

 

 

(3,036

)

 

 

(2,714

)

Taxes paid on equity awards

 

 

(64

)

 

 

(690

)

Other financing activities

 

 

 

 

 

(79

)

Net cash provided (used) by financing activities

 

 

27,428

 

 

 

(4,298

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

14,692

 

 

 

(4,343

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

22,791

 

 

 

26,048

 

Cash and cash equivalents at end of period

 

$

37,483

 

 

$

21,705

 

 

See accompanying notes.

 

 

7


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1. Summary of Significant Accounting Policies

For a complete discussion of our significant accounting policies, refer to the notes to our audited consolidated financial statements included in our Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 25, 2020.

Basis of Consolidation LSB Industries, Inc. (“LSB”) and its subsidiaries (the “Company”, “We”, “Us”, or “Our”) are consolidated in the accompanying consolidated financial statements.  LSB is a holding company with no significant operations or assets other than cash, cash equivalents, and investments in its subsidiaries.  All material intercompany accounts and transactions have been eliminated.  Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to current period presentation.

Nature of Business – We are engaged in the manufacture and sale of chemical products.  The chemical products we primarily manufacture, market and sell are ammonia, fertilizer grade AN (“HDAN”) and UAN for agricultural applications, high purity and commercial grade ammonia, high purity AN, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid for industrial applications, and industrial grade AN (“LDAN”) and solutions for the mining industry.  We manufacture and distribute our products in four facilities; three of which we own and are located in El Dorado, Arkansas (the “El Dorado Facility”); Cherokee, Alabama (the “Cherokee Facility”); and Pryor, Oklahoma (the “Pryor Facility”); and one of which we operate on behalf of a global chemical company in Baytown, Texas (the “Baytown Facility”).  

Sales to customers include farmers, ranchers, fertilizer dealers and distributors primarily in the ranch land and grain production markets in the United States (“U.S.”); industrial users of acids throughout the U.S. and parts of Canada; and explosive manufacturers in the U.S.

In our opinion, the unaudited condensed consolidated financial statements of the Company as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 include all adjustments and accruals, consisting of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods.  These interim results are not necessarily indicative of results for a full year due, in part, to the seasonality of our sales of agricultural products and the timing of performing our major plant maintenance activities.  Our selling seasons for agricultural products are primarily during the spring and fall planting seasons, which typically extend from March through June and from September through November.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC.  These condensed consolidated financial statements should be read in connection with our audited consolidated financial statements and notes thereto included in our 2019 Form 10-K.

Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Income Taxes – Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.  We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be realized.  Significant judgment is applied in evaluating the need for and the magnitude of appropriate valuation allowances against deferred tax assets.

In addition, we do not recognize a tax benefit unless we conclude that it is more likely than not that the benefit will be sustained on audit by the relevant taxing authorities based solely on the technical merits of the associated tax position.  If the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is greater than 50% likely to be realized.

Income tax benefits associated with amounts that are deductible for income tax purposes are recorded through the statement of operations.  These benefits are principally generated from exercises of restricted stock.  We reduce income tax expense for investment tax credits in the period the credit arises and is earned.

See Note 7 regarding the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

8


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.  Summary of Significant Accounting Policies (continued)

Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur.  We and our legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.  If the assessment of a contingency indicates that it is probable that a loss has been incurred, we would accrue for such contingent losses when such losses can be reasonably estimated.  If the assessment indicates that a potentially material loss contingency is not probable but reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.  Estimates of potential legal fees and other directly related costs associated with contingencies are not accrued but rather are expensed as incurred.  Loss contingency liabilities are included in current and noncurrent accrued and other liabilities and are based on current estimates that may be revised in the near term.  In addition, we recognize contingent gains when such gains are realized or when the contingencies have been resolved (generally at the time a settlement has been reached).  

Redeemable Preferred Stocks Our redeemable preferred stocks that are redeemable outside of our control are classified as temporary/mezzanine equity.  The redeemable preferred stocks were recorded at fair value upon issuance, net of issuance costs or discounts.  In addition, certain embedded features included in the Series E Redeemable Preferred required bifurcation and are classified as derivative liabilities.  The carrying values of the redeemable preferred stocks are being increased by periodic accretions (including the amount for dividends earned but not yet declared or paid) using the interest method so that the carrying amount will equal the redemption value as of October 25, 2023, the earliest possible redemption date by the holder.  The accretion was recorded to retained earnings. However, this accretion will change if the expected redemption date changes.

Derivatives, Hedges and Financial Instruments Derivatives are recognized in the balance sheet and are measured at fair value.  Changes in fair value of derivatives are recorded in results of operations unless the normal purchase or sale exceptions apply, or hedge accounting is elected.

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Level 1 - Valuations of contracts classified as Level 1 are based on quoted prices in active markets for identical contracts.

Level 2 - Valuations of contracts classified as Level 2 are based on quoted prices for similar contracts and valuation inputs other than quoted prices that are observable for these contracts

Level 3 - Valuations of assets and liabilities classified as Level 3 are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement

Revenue Recognition

We determine revenue recognition through the following steps:

 

Identification of the performance obligations in the contract;

 

Determination of the transaction price;

 

Allocation of the transaction price to the performance obligations in the contract; and

 

Recognition of revenue when, or as, we satisfy a performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account.  A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.  Generally, satisfaction occurs when control of the promised goods is transferred to the customer or as services are rendered or completed in exchange for consideration in an amount for which we expect to be entitled.  Generally, control is transferred when the preparation for shipment of the product to a customer has been completed.  Most of our contracts contain a single performance obligation with the promise to transfer a specific product.

Most of our revenue is recognized from performance obligations satisfied at a point in time, however, we have a performance obligation to perform certain services that are satisfied over a period of time.  Revenue is recognized from this type of performance obligation as services are rendered and are based on the amount for which we have a right to invoice, which reflects the amount of expected consideration that corresponds directly with the value of the services performed.  

For most of our contracts with customers, the transaction price from the inception of a contract is constrained to a short period of time (generally one month) as these contracts contain terms with variable consideration related to both price and quantity.  These contract prices are often based on commodity indexes (such as NYMEX natural gas index) published monthly and the contract quantities are typically based on estimated ranges.  The quantities become fixed and determinable over a period of time as each sale order is received from the customer.

9


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1.  Summary of Significant Accounting Policies (continued)

The nature of our contracts also gives rise to other types of variable consideration, including volume discounts and rebates, make-whole provisions, other pricing concessions, and short-fall charges.  We estimate these amounts based on the expected amount to be provided to customers, which result in a transaction price adjustment reducing revenue (net sales) with the offset increasing contract or refund liabilities.  These estimates are based on historical experience, anticipated performance, and our best judgment at the time.  We reassess these estimates on a quarterly basis.

The aforementioned constraints over transaction prices in conjunction with the variable consideration included in our material contracts prevent a practical assignment of a specific dollar amount to performance obligations at the beginning and end of the period.  Therefore, we have applied the variable consideration allocation exception.

Future revenues to be earned from the satisfaction of performance obligations will be recognized when control transfers as goods are loaded and weighed or services are performed over the remaining duration of our contracts.  

Recently Issued Accounting Pronouncements

ASU 2020-04 In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential accounting burden associated with transitioning away from reference rates such as LIBOR that are expected to be discontinued.  This ASU provides exceptions and optional expedients for applying GAAP to contract modifications, hedging relationships, and other transactions that reference LIBOR or other reference rates to be discontinued as a result of reference rate reform.  They do not apply to modifications made or hedges entered into or evaluated after December 31, 2022, unless the hedging relationships existed as of that date and optional expedients for them were elected and retained through the end of the hedging relationship.  This ASU became effective upon issuance.  We continue to evaluate the effect of this ASU and plan to utilize this relief for our debt agreement that include LIBOR rates.

ASU 2019-12 In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which affects general principles within Topic 740, Income Taxes.  The amendments of ASU 2019-12 are meant to simplify and reduce the cost of accounting for income taxes.  The ASU removes certain exceptions to the general framework and also seeks to simplify and/or clarify accounting for income taxes by adding certain requirements that would simplify GAAP for financial statement preparers.  The effective date of ASU 2019-12 is fiscal years (and interim periods within those fiscal years) beginning after December 15, 2020.  Early adoption is permitted but requires simultaneous adoption of all provisions of the new standard.  We continue to evaluate the effect of our pending adoption of this ASU on our consolidated financial statements and related disclosures at this time.

 

10


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

2. Loss Per Common Share

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

 

 

(Dollars In Thousands, Except Per Share Amounts)

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(19,452

)

 

$

(11,540

)

Adjustments for basic net loss per common share:

 

 

 

 

 

 

 

 

Dividend requirements on Series E Redeemable

   Preferred

 

 

(8,307

)

 

 

(7,256

)

Dividend requirements on Series B Preferred

 

 

(60

)

 

 

(60

)

Dividend requirements on Series D Preferred

 

 

(15

)

 

 

(15

)

Accretion of Series E Redeemable Preferred

 

 

(504

)

 

 

(496

)

Numerator for basic and dilutive net loss per common

   share - net loss attributable to common stockholders

 

$

(28,338

)

 

$

(19,367

)

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

Denominator for basic and dilutive net loss per

   common share - adjusted weighted-average

   shares (1)

 

 

28,176,205

 

 

 

27,959,024

 

 

 

 

 

 

 

 

 

 

Basic and dilutive net loss per common share

 

$

(1.01

)

 

$

(0.69

)

 

 

(1)

Excludes the weighted-average shares of unvested restricted stock that are contingently issuable.

The following weighted-average shares of securities were not included in the computation of diluted net loss per common share as their effect would have been antidilutive:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Restricted stock and stock units

 

 

1,206,856

 

 

 

930,386

 

Convertible preferred stocks

 

 

916,666

 

 

 

916,666

 

Series E Redeemable Preferred - embedded derivative

 

 

303,646

 

 

 

303,646

 

Stock options

 

 

124,000

 

 

 

124,000

 

 

 

 

2,551,168

 

 

 

2,274,698

 

 

3. Current and Noncurrent Accrued and Other Liabilities

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Accrued interest

 

$

18,896

 

 

$

7,091

 

Current portion of operating lease liabilities

 

 

4,781

 

 

 

4,066

 

Accrued payroll and benefits

 

 

4,415

 

 

 

5,385

 

Deferred revenue

 

 

3,118

 

 

 

3,443

 

Accrued death and other executive benefits

 

 

2,556

 

 

 

2,564

 

Other

 

 

11,932

 

 

 

9,149

 

 

 

 

45,698

 

 

 

31,698

 

Less noncurrent portion

 

 

5,154

 

 

 

6,214

 

Current portion of accrued and other liabilities

 

$

40,544

 

 

$

25,484

 

 

11


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

4. Long-Term Debt

Our long-term debt consists of the following: 

 

 

 

March 31,

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In Thousands)

 

Working Capital Revolver Loan, with a current interest

   rate of 3.75% (A)

 

$

30,000

 

 

$

 

Senior Secured Notes due 2023 (B)

 

 

435,000

 

 

 

435,000

 

Secured Promissory Note due 2021, with an interest

   rate of 5.25% (C)

 

 

3,882

 

 

 

4,746

 

Secured Promissory Note due 2023, with a current interest

   rate of 5.17% (D)

 

 

12,210

 

 

 

12,705

 

Secured Financing due 2023, with an interest

   rate of 8.32% (E)

 

 

12,804

 

 

 

13,476

 

Secured Loan Agreement due 2025, with an interest

   rate of 8.75% (F)

 

 

7,789

 

 

 

5,219

 

Other

 

 

150

 

 

 

159

 

Unamortized discount, net of premium and debt issuance

  costs

 

 

(11,333

)

 

 

(12,261

)

 

 

 

490,502

 

 

 

459,044

 

Less current portion of long-term debt

 

 

9,665

 

 

 

9,410

 

Long-term debt due after one year, net

 

$

480,837

 

 

$

449,634

 

1

(A) Our revolving credit facility (the “Working Capital Revolver Loan”) provides for advances up to $75 million, based on specific percentages of eligible accounts receivable and inventories and up to $10 million of letters of credit, the outstanding amount of which reduces the available for borrowing under the Working Capital Revolver Loan.  At March 31, 2020, our available borrowings under our Working Capital Revolver Loan were approximately $20.5 million, based on our eligible collateral, less outstanding letters of credit.  The maturity date of the Working Capital Revolver Loan is February 26, 2024.  The Working Capital Revolver Loan also provides for a springing financial covenant (the “Financial Covenant”), which requires that, if the borrowing availability is less than 10.0% of the total revolver commitments, then the borrowers must maintain a minimum fixed charge coverage ratio of not less than 1.00 to 1.00.  The Financial Covenant, if triggered, is tested monthly.  

(B) On April 25, 2018, LSB completed the issuance and sale of $400 million aggregate principal amount of its 9.625% Senior Secured Notes due 2023 (the “Notes”), pursuant to an indenture (the “Indenture”), dated as of April 25, 2018.  The Notes were issued at a price equal to 99.509% of their face value.  

On June 21, 2019, LSB completed the issuance and sale of $35 million aggregate principal amount of its 9.625% Senior Secured Notes due 2023 (the “New Notes”).  The New Notes were issued pursuant to the Indenture (the Notes together with the New Notes, the “Senior Secured Notes”).  The New Notes were issued at a price equal to 102.125% of their face value, plus accrued interest from May 1, 2019 to June 21, 2019.

The Senior Secured Notes mature on May 1, 2023.  Interest is to be paid semiannually in arrears on May 1st and November 1st.

(C) El Dorado Chemical Company (EDC), one of our subsidiaries, is party to a secured promissory note due in March 2021.  Principal and interest are payable in monthly installments.

(D) El Dorado Ammonia L.L.C. (“EDA”), one of our subsidiaries, is party to a secured promissory note due in May 2023.  Principal and interest are payable in equal monthly installments with a final balloon payment of approximately $6.1 million.

(E) EDC is party to a secured financing arrangement with an affiliate of LSB Funding L.L.C. (“LSB Funding”).  Principal and interest are payable in 48 equal monthly installments with a final balloon payment of approximately $3 million due in June 2023.

(F) EDC is party to a secured loan agreement with an affiliate of LSB Funding, which provided for available borrowings (the “Interim Loan”) during the construction of certain equipment (the “Interim Loan Period”), subject to certain conditions.  During the Interim Loan Period, interest only was payable in monthly installments.  Effective February 28, 2020, the Interim Loan Period ended, and the Interim Loan was replaced by a secured promissory note due in March 2025.  Under the terms of the note, principal and interest are payable in 60 equal monthly installments.

 

12


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

5. Commitments and Contingencies

Natural Gas Purchase CommitmentsAt March 31, 2020, certain of our natural gas contracts qualify as normal purchases under GAAP and thus are not mark-to-market, which contracts included volume purchase commitments with fixed costs of approximately 11.5 million MMBtus of natural gas.  These contracts extend through December 2020 at a weighted-average cost of $1.85 per MMBtu ($21.2 million) and a weighted-average market value of $1.75 per MMBtu ($20.1 million).

Legal Matters - Following is a summary of certain legal matters involving the Company:

A. Environmental Matters

Our facilities and operations are subject to numerous federal, state and local environmental laws and to other laws regarding health and safety matters (collectively, the “Environmental and Health Laws”), many of which provide for certain performance obligations, substantial fines and criminal sanctions for violations.  Certain Environmental and Health Laws impose strict liability as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released.  We may be required to remediate contaminated properties currently or formerly owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken.  

In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety effects of our operations.

There can be no assurance that we will not incur material costs or liabilities in complying with such laws or in paying fines or penalties for violation of such laws. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us.  The Environmental and Health Laws and related enforcement policies have in the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products.  Further, a number of our facilities are dependent on environmental permits to operate, the loss or modification of which could have a material adverse effect on their operations and our financial condition.

Historically, significant capital expenditures have been incurred by our subsidiaries in order to comply with the Environmental and Health Laws, and significant capital expenditures are expected to be incurred in the future.  We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at our facilities should we discontinue the operations of a facility.

As of March 31, 2020, our accrued liabilities for environmental matters totaled $183,000 relating primarily to the matters discussed below.  It is reasonably possible that a change in the estimate of our liability could occur in the near term.   

1. Discharge Water Matters

Each of our manufacturing facilities generates process wastewater, which may include cooling tower and boiler water quality control streams, contact storm water and miscellaneous spills and leaks from process equipment.  The process water discharge, storm-water runoff and miscellaneous spills and leaks are governed by various permits generally issued by the respective state environmental agencies as authorized and overseen by the U.S. Environmental Protection Agency.  These permits limit the type and amount of effluents that can be discharged and control the method of such discharge.  In October 2017, PCC filed a Permit Renewal Application for its Non-Hazardous Injection Well Permit at the Pryor Facility.  Although the Injection Well Permit expired in 2018, PCC continues to operate the injection well pending the Oklahoma Department of Environmental Quality (“ODEQ”) action on the Permit Renewal Application.  PCC and ODEQ are engaged in ongoing discussions related to the renewal of the injection well to address the wastewater stream.

Our El Dorado Facility is subject to a National Pollutant Discharge Elimination System (“NPDES”) permit issued by the Arkansas Department of Environmental Quality (“ADEQ”) in 2004.  In 2010, the ADEQ issued a draft NPDES permit renewal for the El Dorado Facility, which contained more restrictive discharge limits than the previous 2004 permit.  In August 2017, ADEQ issued a final NPDES permit with new dissolved mineral limits.  EDC filed an appeal in September 2017 and a Permit Appeal Resolution (“PAR”) was signed in July 2018.  EDC is in compliance with the revised permit limits agreed upon in the PAR.

In November 2006, the El Dorado Facility entered into a Consent Administrative Order (“CAO”) that recognizes the presence of nitrate contamination in the shallow groundwater.  The CAO required EDC to perform semi-annual groundwater monitoring, continue operation of a groundwater recovery system, submit a human health and ecological risk assessment, and submit a remedial action plan.

 

13


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

5.  Commitments and Contingencies (continued)

The risk assessment was submitted in August 2007.  In February 2015, the ADEQ stated that El Dorado Chemical was meeting the requirements of the CAO and should continue semi-annual monitoring.  Subsequent to the PAR mentioned previously, a new CAO was signed in October 2018, which required an Evaluation Report of the data and effectiveness of the groundwater remedy for nitrate contamination.  In February 2019, the Evaluation Report was submitted to the ADEQ and the ADEQ approved the report in August 2019.

No liability has been established at March 31, 2020, in connection with this ADEQ matter.

2. Other Environmental Matters

In 2002, certain of our subsidiaries sold substantially all of their operating assets relating to a Kansas chemical facility (the “Hallowell Facility”) but retained ownership of the real property where the facility is located.  Our subsidiary retained the obligation to be responsible for, and perform the activities under, a previously executed consent order to investigate the surface and subsurface contamination at the real property and develop a corrective action strategy based on the investigation.  In addition, certain of our subsidiaries agreed to indemnify the buyer of such assets for these environmental matters.

As the successor to a prior owner of the Hallowell Facility, Chevron Environmental Management Company (“Chevron”) has agreed in writing, within certain limitations, to pay and has been paying one-half of the costs of the investigation and interim measures relating to this matter as approved by the Kansas Department of Health and Environment (the “KDHE”), subject to reallocation.

Our subsidiary and Chevron have retained an environmental consultant to prepare and perform a corrective action study work plan as to the appropriate method to remediate the Hallowell Facility.  The proposed strategy includes long-term surface and groundwater monitoring to track the natural decline in contamination.  The KDHE is currently evaluating the corrective action strategy, and, thus, it is unknown what additional work the KDHE may require, if any, at this time.

We accrued our allocable portion of costs primarily for the additional testing, monitoring and risk assessments that could be reasonably estimated, which is included in our accrued liabilities for environmental matters discussed above.  The estimated amount is not discounted to its present value.  As more information becomes available, our estimated accrual will be refined.

B. Other Pending, Threatened or Settled Litigation

In 2013, an explosion and fire occurred at the West Fertilizer Co. (“West Fertilizer”) located in West, Texas, causing death, bodily injury and substantial property damage.  West Fertilizer is not owned or controlled by us, but West Fertilizer was a customer of EDC, and purchased AN from EDC from time to time.  LSB and EDC received letters from counsel purporting to represent subrogated insurance carriers, personal injury claimants and persons who suffered property damages informing LSB and EDC that their clients are conducting investigations into the cause of the explosion and fire to determine, among other things, whether AN manufactured by EDC and supplied to West Fertilizer was stored at West Fertilizer at the time of the explosion and, if so, whether such AN may have been one of the contributing factors of the explosion.  Initial lawsuits filed named West Fertilizer and another supplier of AN as defendants.

In 2014, EDC and LSB were named as defendants, together with other AN manufacturers and brokers that arranged the transport and delivery of AN to West Fertilizer, in the case styled City of West, Texas vs. CF Industries, Inc., et al., in the District Court of McLennan County, Texas.  The plaintiffs allege, among other things, that LSB and EDC were negligent in the production and marketing of fertilizer products sold to West Fertilizer, resulting in death, personal injury and property damage.  EDC retained a firm specializing in cause and origin investigations with particular experience with fertilizer facilities, to assist EDC in its own investigation.  LSB and EDC placed its liability insurance carrier on notice, and the carrier is handling the defense for LSB and EDC concerning this matter.

Our product liability insurance policies have aggregate limits of general liability totaling $100 million, with a self-insured retention of $250,000, which retention limit has been met relating to this matter.  In August 2015, the trial court dismissed plaintiff’s negligence claims against us, and EDC based on a duty to inspect but allowed the plaintiffs to proceed on claims for design defect and failure to warn.

Subsequently, we and EDC have entered into confidential settlement agreements (with approval of our insurance carriers) with several plaintiffs that had claimed wrongful death and bodily injury and insurance companies asserting subrogation claims for damages from the explosion.  A portion of these settlements have been paid by the insurer as of March 31, 2020.  While these settlements resolve the claims of a number of the claimants in this matter for us, we continue to be party to litigation related to this explosion by other plaintiffs, in addition to indemnification or defense obligations we may have to other defendants.  We continue to defend these lawsuits vigorously and we are unable to estimate a possible range of loss at this time if there is an adverse outcome in this matter as to EDC.  As of March 31, 2020, no liability reserve has been established in connection with this matter, except for the unpaid portion of the settlement agreements that are covered by insurance as discussed above.

14


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

5.  Commitments and Contingencies (continued)

In 2015, we and EDA received formal written notice from Global Industrial, Inc. (“Global”) of Global’s intention to assert mechanic liens for labor, service, or materials furnished under certain subcontract agreements for the improvement of the new ammonia plant (“Ammonia Plant”) at our El Dorado Facility.  Global is a subcontractor of Leidos Constructors, LLC (“Leidos”), the general contractor for EDA for the construction for the Ammonia Plant.  Leidos terminated the services of Global with respect to their work performed at our El Dorado Facility.

LSB and EDA intend to pursue recovery of any damage or loss caused by Global’s work performed through their contract with Leidos at our El Dorado Facility.  In March 2016, EDC and we were served a summons in a case styled Global Industrial, Inc. d/b/a Global Turnaround vs. Leidos Constructors, LLC et al., in the Circuit court of Union County, Arkansas, wherein Global seeks damages under breach of contract and other claims. At the time of the summons, our accounts payable included invoices totaling approximately $3.5 million related to the claims asserted by Global but such invoices were not approved by Leidos for payment.  We have requested indemnification from Leidos under the terms of our contracts which they have denied.  As a result, we are seeking reimbursement of legal expenses from Leidos under our contracts.  We also seek damages from Leidos for their wrongdoing during the expansion, including breach of contract, fraud, gross negligence, professional negligence and gross negligence.

On September 25, 2018, the Court bifurcated the case into: (1) Global’s claims against Leidos and LSB, and (2) the cross-claims between Leidos and LSB.  Part (1) of the case was tried in the Court during the fall of 2018 and the Court rendered an interim judgment in March 2020 and issued its final judgment on April 23, 2020.  In summary, the judgment awarded Global (i) approximately $7.4 million (amount includes the $3.5 million discussed above) for labor, service, and materials furnished relating to the Ammonia Plant, (ii) approximately $1.3 million for prejudgment interest, and (iii) a claim of lien on certain property and the foreclosure of the lien to satisfy these obligations.  In addition, post-judgment interest will accrue at the annual rate of 4.25% until paid.   As a result of the judgment during the first quarter of 2020, we accounted for the following:

 

accrued an additional $3.9 million in accounts payable, which offset amount was capitalized as PP&E, since such costs directly related to the construction of the Ammonia Plant;

 

recognized additional depreciation expense of $0.5 million associated with the amount above capitalized to PP&E, which offset amount was a credit to PP&E (accumulated depreciation);

 

accrued prejudgment and post-judgment interest totaling $1.3 million in accrued interest, which offset amount was classified as interest expense.

We intend to appeal the judgment and will request a stay of the judgment pending appeal.

LSB intends to vigorously prosecute its claims against Leidos in Part (2) of the matter.  Due to the impact from the coronavirus (“COVID-19”) pandemic, the Trial date for Part (2) of the matter has been delayed until September 2020.

We are also involved in various other claims and legal actions (including matters involving gain contingencies).  It is possible that the actual future development of claims could be different from our estimates but, after consultation with legal counsel, we believe that changes in our estimates will not have a material effect on our business, financial condition, results of operations or cash flows.

6.  Derivatives, Hedges and Financial Instruments

For the periods presented, the following significant instruments are accounted for on a fair value basis:

Natural Gas Contracts

During the first quarter of 2020, we entered into certain forward natural gas contracts (“natural gas contracts”), which are accounted for on a mark-to-market basis.  We are utilizing these natural gas contracts as economic hedges for risk management purposes but are not designated as hedging instruments.  At March 31, 2020, our natural gas contracts included 2.6 million MMBtu of natural gas and extend through January 2021 (none at December 31, 2019).  The valuations of the natural gas contracts are classified as Level 2.  At March 31, 2020, the valuation inputs included the contractual weighted-average cost of $2.01 per MMBtu and the weighted-average market value of $1.81 per MMBtu.  For the three months ended March 31, 2020, we recognized a loss of $0.7 million (classified as cost of sales), which includes an unrealized loss of $0.5 million (none for the three months ended March 31, 2019).  The cash flows relating to these natural contracts are included in cash flows from operating activities.


15


LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

6.  Derivatives, Hedges and Financial Instruments (continued)

Embedded Derivative

As discussed in Note 8, certain embedded features (“embedded derivative”) relating to the redemption of the Series E Redeemable Preferred, which includes certain contingent redemption features and the participation rights value have been bifurcated from the Series E Redeemable Preferred and recorded as a liability. At March 31, 2020 and December 31, 2019, we estimate that the contingent redemption features have fair value since we estimate that it is probable that a portion of the shares of this preferred stock would be redeemed prior to October 25, 2023.  For certain other embedded features, we estimated no fair value based on our assessment that there is a remote probability that these features will be exercised.

The fair value of the embedded derivative was valued using discounted cash flow models and primarily based on the difference in the present value of estimated future cash flows with no redemptions prior to October 25, 2023 compared to certain redemptions deemed probable during the same period and applying the effective dividend rate of the Series E Redeemable Preferred. In addition, at March 31, 2020 and December 31, 2019, the fair value of the embedded derivative included the valuation of the participation rights, which was based on the equivalent of 303,646 shares of our common stock at $2.10 and $4.20 per share, respectively.

The valuations of the embedded derivative are classified as Level 3.  This derivative is valued using market information, management’s redemption assumptions, the underlying number of shares as defined in the terms of the Series E Redeemable Preferred, and the market price of our common stock.

For the three months ended March 31, 2020 and 2019, we recognized an unrealized gain of approximately $0.6 million and an unrealized loss of $0.2 million, respectively, due to the change in fair value of the embedded derivative.  These unrealized gains and losses are included in non-operating income and expense.

The following details our liabilities that are measured at fair value on a recurring basis at March 31, 2020 and December 31, 2019:

 

 

 

 

 

 

Fair Value Measurements at

March 31, 2020 Using

 

 

 

 

 

Description

 

Total Fair

Value at

March 31,

2020

 

 

Quoted Prices

in Active

Markets for

Identical

Contracts

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)(1)

 

 

Total Fair

Value at

December 31,

2019

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities - Current and noncurrent accrued and

   other liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas contracts

 

$

527

 

 

$

 

 

$

527

 

 

$

 

 

$

 

Embedded derivative

 

$

447

 

 

$

 

 

$

 

 

$

447

 

 

$

1,084

 

Total

 

$

974

 

 

$

 

 

$

527

 

 

$

447

 

 

$

1,084

 

 

(1)

There was no Level 3 transfer activity for the three months ended March 31, 2020 and 2019.

Other Financial Instr