LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the fourth quarter ended December 31,
2020.
Fourth Quarter and Full Year 2020 Highlights
- Record total recordable injury rate (TRIR) of 1.06 for 2020, an
improvement of 58% compared to 2019
- Net sales of $88.9 million reflects a 31% increase from
stronger sales volumes, partially offset by a 11% decrease from
weaker pricing relative to the prior year fourth quarter
- Adjusted EBITDA(1) of $10.4 million reflects a $16.3 million
benefit from stronger production and sales volumes, partially
offset by a $9.6 million net impact from weaker pricing and $2.2
million from COVID-19’s impact on demand, relative to the prior
year fourth quarter
- Full year production volume records for ammonia of 827,000 tons
and for UAN of 501,000 tons
- 64% increase in fertilizer sales volumes, including a 105%
increase in UAN sales volumes, versus the fourth quarter of
2019
- Total liquidity of approximately $58 million as of December 31,
2020
“We delivered fourth quarter 2020 results largely in-line with
our expectations headed into the period,” stated Mark Behrman, LSB
Industries’ President and CEO. “Our substantial year-over-year
increase in production volume more than offset the continued
pricing headwinds on fertilizer sales and the pandemic-related
impact on industrial and mining demand that we experienced during
the quarter. Despite the challenges we faced across our end
markets, we still generated a 44% year-over-year increase in
adjusted EBITDA for the period.”
“The fourth quarter capped off our best year of operating
performance across our three facilities in our company’s history.
We delivered record production volumes for ammonia and UAN for full
year 2020, reflecting a return on the investments we’ve made in
plant reliability and product upgrading capabilities over the last
several years as well as our focus on continuous improvement in our
manufacturing operations. We also benefitted from the absence of
any turnaround activity in 2020 as compared to 2019. Overall, we
were pleased with the performance of our plants in 2020 and believe
that we will generate further improvement in operating rates and
production volumes in 2021.”
Mr. Behrman continued, “Favorable dynamics for U.S. agriculture
have translated into higher prices for a variety of crops,
including corn, wheat and cotton, which has prompted an increase in
demand and selling prices for fertilizers. In fact, since
mid-January we have seen a significant increase in selling prices
for all the nitrogen fertilizers we sell. We expect that the
benefit of these higher selling prices will have some impact on our
first quarter financial results and be fully reflected in our
second quarter. Regarding our industrial business, we have seen a
steady rebound in demand since the lows experienced in the early
part of the pandemic. However, many sectors are not yet operating
at pre-pandemic levels and while we don’t expect that to
significantly impact our industrial sales volumes due to our strong
sales efforts, it is still putting selling price pressure on
certain of our products. We are hopeful that as COVID-19 vaccines
are increasingly distributed, overall demand in the marketplace
will get back to pre-pandemic levels putting less pressure on
selling prices on certain products.”
Mr. Behrman concluded, “Regarding our outlook for 2021, we
expect to deliver year-over-year improvement in production and
sales volumes which we believe will translate into improved
adjusted EBITDA and cash flow for the year. We believe that with
the strengthening of fertilizer market dynamics, our anticipated
improvement in our financial performance and the current favorable
credit market environment, we will have an opportunity to refinance
our existing debt at more favorable terms, which would provide us
with greater financial flexibility to pursue growth initiatives.
“
“Lastly, consistent with the global focus on reducing carbon
emissions, we are currently working on developing a strategy to
enter the clean energy market through the production of “green
ammonia.” We view this as a growth platform for our business and
believe that current ammonia producers are best positioned to be
leaders in this market as it develops, due to our ability to
leverage our existing knowledge in ammonia manufacturing, handling,
storage and logistics. We are very excited about the opportunities
ahead of us in 2021 and look forward to providing updates on key
initiatives and developments as we move through the year.”
(1) This is a Non-GAAP measure. Refer to
the Non-GAAP Reconciliation section.
Three Months Ended December
31,
2020
2019
(Dollars in thousands)
Net Sales by Market
Sector
Net Sales
Sector Mix
Net Sales
Sector Mix
% Change
Agricultural
$
41,595
47
%
$
32,851
45
%
27
%
Industrial
35,887
40
%
34,064
46
%
5
%
Mining
11,421
13
%
6,981
9
%
64
%
$
88,903
$
73,896
20
%
Comparison of 2020 to 2019 quarterly periods:
- Net sales of our agricultural products increased during the
quarter relative to the prior year period driven by stronger
volumes for all of our products, particularly UAN, which benefited
from higher production at our Pryor facility resulting from the
installation of a new Urea reactor in the fourth quarter of 2019
and the absence of turnaround activity in the 2020 fourth quarter
compared to the prior year period; in November of 2019, Pryor was
down for two weeks as a turnaround was concluded. Partially
offsetting the increased production volume was continued weaker
pricing for HDAN, UAN and agricultural ammonia.
- Net sales of our industrial and mining products, other than
Nitric acid, increased modestly as several key end markets for our
products, including automotive, home building, power generation,
and mining markets have been gradually recovering, although not yet
reaching pre-pandemic levels. Nitric Acid sales continue to be
impacted by pandemic related market weakness.
- The year-over-year change in operating loss and adjusted EBITDA
was primarily the result of the higher volumes and improved fixed
cost absorption partially offset by weaker selling prices,
particularly for agricultural products.
The following tables provide key sales metrics for our
Agricultural products:
Three Months Ended December
31,
Product (tons
sold)
2020
2019
% Change
Urea ammonium nitrate (UAN)
131,665
64,298
105
%
High density ammonium nitrate (HDAN)
70,987
58,603
21
%
Ammonia
28,293
17,071
66
%
Other
2,997
2,516
19
%
233,942
142,488
64
%
Average Selling
Prices (price per ton) (A)
UAN
$
132
$
161
(18
)%
HDAN
$
159
$
201
(21
)%
Ammonia
$
210
$
253
(17
)%
(A) Average selling prices represent “net
back” prices which are calculated as sales less freight expenses
divided by product sales volume in tons.
The following table indicates the volumes sold of our major
Industrial products:
Three Months Ended December
31,
Product (tons
sold)
2020
2019
% Change
Ammonia
68,483
64,868
6
%
Nitric acid
29,270
29,594
(1
)%
Other Industrial Products
14,369
9,839
46
%
112,122
104,301
7
%
Tampa Ammonia Benchmark (price per metric
ton)
$
239
$
255
(6
)%
The following table indicates the volumes sold of our major
Mining products:
Three Months Ended December
31,
Product (tons
sold)
2020
2019
% Change
LDAN/HDAN/AN solution
44,970
29,015
55
%
Input
Costs
Average natural gas cost/MMBtu
$
2.46
$
2.47
0
%
Financial Position and Capital Expenditures
As of December 31, 2020, our total cash position was $16.3
million. Additionally, we had approximately $41.8 million of
borrowing availability under our Working Capital Revolver giving us
total liquidity of approximately $58.0 million. Total long-term
debt, including the current portion, was $484.2 million at December
31, 2020 compared to $459.0 million at December 31, 2019. The
increase in long-term debt primarily reflects the refinance of
ammonia storage assets completed during the third quarter. The
aggregate liquidation value of the Series E Redeemable Preferred at
December 31, 2020, inclusive of accrued dividends of $138.2
million, was $278.0 million.
Interest expense for the fourth quarter of 2020 was $12.6
million compared to $12.1 million for the same period in 2019.
Capital expenditures were approximately $8.2 million in the
fourth quarter of 2020. For the full year of 2021, total capital
expenditures related to capital work to be performed in 2021 are
expected to be approximately $30 million, inclusive of investments
for margin enhancement purposes.
Volume Outlook
The Company’s outlook for sales volumes for the full year 2021
are as follows:
Products
Full
Year 2021 Sales*
(tons)
Full
Year Actual
2020
Sales (tons)
Agriculture:
UAN
480,000 – 500,000
499,000
HDAN
280,000 – 300,000
293,000
Ammonia
70,000 – 90,000
97,000
Industrial, Mining and Other:
Ammonia
240,000 – 260,000
269,000
AN, Nitric, and Other
400,000 – 420,000
303,000
Sulfuric Acid
145,000 – 165,000
146,000
*2021 sales volumes forecast reflects
turnaround of approximately 30 days for the Cherokee facility
during the third quarter versus no turnarounds at any of the three
facilities in 2020.
Conference Call
LSB’s management will host a conference call covering the fourth
quarter results on Thursday, February 25, 2021 at 10:00 a.m.
ET/9:00 a.m. 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 (201) 493-6739. 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
and parts of Mexico and Canada. Additional information about the
Company 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.
Financial Highlights
Three and Twelve Months Ended
December 31,
December 31,
December 31,
Three Months Ended
Twelve Months Ended
2020
2019
2020
2019
(In Thousands, Except Per Share
Amounts)
Net sales
$
88,903
$
73,896
$
351,316
$
365,070
Cost of sales
92,368
86,173
334,268
360,085
Gross profit (loss)
(3,465
)
(12,277
)
17,048
4,985
Selling, general and administrative
expense
6,506
9,467
32,084
34,172
Other expense, net
259
9,532
499
9,904
Operating loss
(10,230
)
(31,276
)
(15,535
)
(39,091
)
Interest expense, net
12,606
12,080
51,115
46,389
Non-operating other expense (income),
net
597
(534
)
10
(1,139
)
Loss before benefit for income taxes
(23,433
)
(42,822
)
(66,660
)
(84,341
)
Benefit for income taxes
(1,741
)
(15,108
)
(4,749
)
(20,924
)
Net loss
(21,692
)
(27,714
)
(61,911
)
(63,417
)
Dividends on convertible preferred
stocks
75
75
300
300
Dividends on Series E redeemable preferred
stock
9,297
8,120
35,182
30,729
Accretion of Series E redeemable preferred
stock
509
502
2,026
1,995
Net loss attributable to common
stockholders
$
(31,573
)
$
(36,411
)
$
(99,419
)
$
(96,441
)
Basic and dilutive net loss per common
share
$
(1.12
)
$
(1.30
)
$
(3.53
)
$
(3.44
)
LSB Industries, Inc.
Consolidated Balance
Sheets
December 31,
2020
2019
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
16,264
$
22,791
Accounts receivable
42,929
40,203
Allowance for doubtful accounts
(378
)
(261
)
Accounts receivable, net
42,551
39,942
Inventories:
Finished goods
17,778
21,738
Raw materials
1,795
1,573
Total inventories
19,573
23,311
Supplies, prepaid items and other:
Prepaid insurance
12,315
11,837
Precious metals
6,787
5,568
Supplies
25,288
24,689
Other
6,802
2,735
Total supplies, prepaid items and
other
51,192
44,829
Total current assets
129,580
130,873
Property, plant and equipment, net
891,198
936,474
Other assets:
Operating lease assets
26,403
15,330
Intangible and other assets, net
6,121
5,812
32,524
21,142
$
1,053,302
$
1,088,489
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
December 31,
2020
2019
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
46,551
$
58,477
Short-term financing
13,576
9,929
Accrued and other liabilities
30,367
25,484
Current portion of long-term debt
16,801
9,410
Total current liabilities
107,295
103,300
Long-term debt, net
467,389
449,634
Noncurrent operating lease liabilities
19,845
11,404
Other noncurrent accrued and other
liabilities
6,090
6,214
Deferred income taxes
30,939
35,717
Commitments and contingencies (Note 8)
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 $277,982,000 ($242,800,000 at December
31, 2019)
272,101
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 $3,265,000 ($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 $1,312,000 ($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 (31,283,210
shares at December 31, 2019)
3,128
3,128
Capital in excess of par value
198,215
196,833
Retained earnings (accumulated
deficit)
(41,487
)
57,632
162,856
260,593
Less treasury stock, at cost:
Common stock, 2,074,565 shares (2,009,566
shares at December 31, 2019)
13,213
13,266
Total stockholders' equity
149,643
247,327
$
1,053,302
$
1,088,489
LSB Industries,
Inc. Non-GAAP Reconciliation
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 Reconciliation
EBITDA is defined as net income (loss) plus interest expense,
plus loss on extinguishment of debt, plus depreciation and
amortization (D&A) (which includes D&A of property, plant
and equipment and amortization of intangible and other assets),
plus provision for income taxes. 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.
EBITDA has 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 may not be comparable to
a similarly titled measure of other companies. The following table
provides a reconciliation of net income (loss) to EBITDA for the
periods indicated.
LSB
Consolidated ($ in thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Net loss
$
(21,692
)
$
(27,714
)
$
(61,911
)
$
(63,417
)
Plus:
Interest expense
12,606
12,080
51,115
46,389
Depreciation and amortization
17,939
17,064
70,841
69,574
Benefit for income taxes
(1,741
)
(15,108
)
(4,749
)
(20,924
)
EBITDA
$
7,112
$
(13,678
)
$
55,296
$
31,622
LSB Industries, Inc. Non-GAAP Reconciliation
(continued)
Adjusted EBITDA
Adjusted EBITDA is reported to show the impact of one
time/non-cash or non-operating items-such as, loss (gain) on sale
of a business and other property and equipment, one-time income or
fees, certain fair market value (FMV) adjustments, non-cash
stock-based compensation, 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. As a result, we believe it is more meaningful for investors
to exclude them from our calculation of adjusted EBITDA used to
assess our performance. We believe that the inclusion of
supplementary adjustments to EBITDA is appropriate to provide
additional information to investors about certain items. The
following tables provide reconciliations of EBITDA excluding the
impact of the supplementary adjustments.
LSB
Consolidated ($ in thousands)
Three Months Ended December
31,
Twelve Months Ended December 31,
2020
2019
2020
2019
EBITDA:
$
7,112
$
(13,678
)
$
55,296
$
31,622
Stock-based compensation
134
421
1,761
2,220
Severance costs
—
615
—
615
Unrealized loss on commodity
contracts
1,743
—
1,205
—
Legal fees (Leidos)
572
3,843
5,715
9,601
Loss on disposal of assets and
other
312
10,564
921
11,221
FMV adjustment on preferred stock
embedded derivatives
562
(437
)
(55
)
(558
)
Consulting costs associated with
Initiatives
(20
)
502
558
1,414
Turnaround costs
31
5,373
76
13,210
Adjusted EBITDA
$
10,446
$
7,203
$
65,477
$
69,345
Agricultural Sales Price
Reconciliation
The following table provides a reconciliation of total
agricultural net sales as reported under GAAP in our consolidated
financial statement reconciled to netback sales which is calculated
as net sales less freight expenses. We believe this provides a
relevant industry comparison among our peer group.
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Agricultural net sales ($ in
thousands)
$
41,595
$
32,851
$
180,036
$
187,641
Less freight
4,328
3,956
15,967
14,727
Agricultural netback sales
$
37,267
$
28,895
$
164,069
$
172,914
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224005982/en/
Company Contact: Mark Behrman, President & CEO Cheryl
Maguire, Executive Vice President & CFO (405) 235-4546
Investor Contact: The Equity Group Inc. Fred
Buonocore, CFA (212) 836-9607 Mike Gaudreau (212) 836-9620
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