8-K
LSB INDUSTRIES, INC. (LXU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 23, 2022
LSB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-7677 | 73-1015226 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (IRS Employer<br><br><br>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 or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
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 |
| Preferred Stock Purchase Rights | N/A | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On February 23, 2022, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the fourth quarter ended December 31, 2021. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On February 24, 2022, at 10:00 a.m. (Eastern time) / 9:00 a.m. (Central time), the Company will hold a conference call broadcast live over the Internet to discuss the financial results of the fourth quarter ended December 31, 2021.
The information contained in this Item 2.02 of this Form 8-K and the Exhibit 99.1 attached hereto are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Act of 1934 (as amended), or otherwise subject to the liabilities of such section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (as amended), except as shall be expressly set forth by specific reference to this Item 2.02 in such filing.
| Item 9.01 | Exhibits. |
|---|
(d) Exhibits.
| Exhibit<br>Number | Description |
|---|---|
| 99.1 | Press Release issued by LSB Industries, Inc. dated February 23, 2022, titled “LSB Industries, Inc. Reports Record Operating Results for the 2021 Fourth Quarter and Full Year”. |
| 104 | Cover Page Interactive Data File (embedded within the XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 23, 2022
| LSB INDUSTRIES, INC. | |
|---|---|
| By: | /s/ Cheryl A. Maguire |
| Name: | Cheryl A. Maguire |
| Title: | Executive Vice President and Chief Financial Officer |
3
lxu-ex991_6.htm
Exhibit 99.1
LSB INDUSTRIES, INC. REPORTS RECORD OPERATING RESULTS
FOR THE 2021 FOURTH QUARTER AND FULL YEAR
Achieves All-Time Highest Quarterly and Full Year EBITDA in Company History
Well Positioned for Robust Growth in 2022
Strong Liquidity Position Provides Flexibility to Invest in Organic and Inorganic Growth Initiatives
Expects to Announce Blue and Green Energy Projects in Coming Months
OKLAHOMA CITY, Oklahoma…February 23, 2022…LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the fourth quarter ended December 31, 2021.
Fourth Quarter 2021 Highlights
| • | Net sales of $190.2 million compared to $88.9 million in the fourth quarter of 2020 |
|---|---|
| • | Adjusted EBITDA^(^^1^^)^ of $90.1 million compared to $10.4 million in the fourth quarter of 2020 |
| --- | --- |
| • | Adjusted EBITDA^(1)^ margin of 47.4% compared to 11.7% in the fourth quarter of 2020 |
| --- | --- |
| • | Adjusted EPS^(1)^ of $0.72 in the fourth quarter of 2021 |
| --- | --- |
| • | Completed debt refinancing resulting in significant reduction in cost of capital and increase in liquidity |
| --- | --- |
Full Year 2021 Highlights
| • | Net sales of $556.2 million compared to $351.3 million in full year 2020 |
|---|---|
| • | Adjusted EBITDA^(^^1^^)^ of $191.0 million compared to $65.5 million in full year 2020 |
| --- | --- |
| • | Adjusted EBITDA^(1)^ margin of 34.3% compared to 18.6% in full year 2020 |
| --- | --- |
| • | Adjusted EPS^(1)^ of $0.85 in the full year 2021 |
| --- | --- |
| • | Cash Flow from Operations of $87.6 million and Capital Expenditures of $35.1 million |
| --- | --- |
| • | Total liquidity of approximately $143 million as of December 31, 2021 |
| --- | --- |
“We delivered record results and substantial growth in net sales and adjusted EBITDA in both the fourth quarter and full-year 2021,” stated Mark Behrman, LSB Industries President and CEO. “Our strong performance reflects a confluence of positive factors including favorable trends in product selling prices coupled with our ability to operate our facilities reliably, along with the benefits of our successful commercial initiatives over the past several years. We believe that given the current favorable grain prices, and the expectation that they will continue throughout 2022, combined with crop inventories at multi-year lows, farmer income will remain robust supporting strong pricing for the year.”
| ^(^^1^ | ^)^ This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section |
|---|
^_______________________________________________________________________________________________________________________________^
Mr. Behrman continued, “With the free cash flow generated in 2021, our significantly lower cost of capital and greater liquidity following our October 2021 debt refinancing, we are extremely excited to have the financial flexibility to pursue a number of earnings and cash flow growth opportunities. In addition, in 2022 we will intensify our focus on planning and implementing our decarbonization activities including the production of low carbon/no carbon ammonia and expect to have an announcement regarding our path forward on these initiatives in the coming months.”
Fourth Quarter Results Overview
| Three Months Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||||
| (Dollars in thousands) | ||||||||
| Net Sales by Market Sector | Net <br>Sales | Net<br><br><br>Sales | %<br><br><br>Change | |||||
| Agricultural | 101,979 | 54% | 41,595 | 47% | 145% | |||
| Industrial | 69,693 | 36% | 35,887 | 40% | 94% | |||
| Mining | 18,556 | 10% | 11,421 | 13% | 63% | |||
| 190,228 | 88,903 | 114% |
All values are in US Dollars.
Comparison of 2021 to 2020 quarterly periods:
| • | Net sales of our agricultural products increased during the quarter driven by stronger pricing for UAN, HDAN and ammonia. |
|---|---|
| • | Net sales of our industrial and mining products increased as a result of higher pricing related to a rise in the Tampa ammonia benchmark price, to which many of our industrial contracts are tied. Industrial sales further benefited from the continued ramp up of a new nitric acid offtake agreement along with general strength in the U.S. economy. |
| --- | --- |
| • | The year-over-year improvement in operating income and adjusted EBITDA primarily resulted from higher selling prices combined with greater sales volumes of upgraded product, partially offset by higher natural gas feedstock prices. |
| --- | --- |
The following tables provide key sales metrics for our Agricultural products:
| Three Months Ended December 31, | |||
|---|---|---|---|
| Product (tons sold) | 2021 | 2020 | % Change |
| Urea ammonium nitrate (UAN) | 126,476 | 131,665 | (4) % |
| High density ammonium nitrate (HDAN) | 76,206 | 70,987 | 7 % |
| Ammonia | 17,140 | 28,293 | (39) % |
| Other | 1,733 | 2,997 | (42) % |
| 221,555 | 233,942 | (5) % | |
| Average Selling Prices (price per ton) ^(A)^ | |||
| --- | --- | --- | --- |
| UAN | $ 382 | $ 132 | 189 % |
| HDAN | $ 439 | $ 159 | 176 % |
| Ammonia | $ 757 | $ 210 | 260 % |
(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 and Mining products:
| Three Months Ended December 31, | |||
|---|---|---|---|
| Product (tons sold) | 2021 | 2020 | % Change |
| Ammonia | 57,661 | 68,483 | (16) % |
| AN, Nitric Acid, Other | 140,567 | 124,238 | 13 % |
| 198,228 | 192,721 | 3 % | |
| Tampa Ammonia Benchmark<br><br><br>(price per metric ton) | $ 851 | $ 239 | 256 % |
| Input Costs | |||
| Average natural gas cost/MMBtu | $ 4.42 | $ 2.46 | 80 % |
Financial Position and Capital Expenditures
As of December 31, 2021, our total liquidity was approximately $143 million, including $82.1 million in cash and approximately $61.3 million of borrowing availability under our Working Capital Revolver. Total liquidity today exceeds $180 million. Total long-term debt, including the $9.5 million current portion, was $527.6 million on December 31, 2021 compared to $484.2 million on December 31, 2020.
Interest expense for the fourth quarter of 2021 was $11.8 million compared to $12.6 million for the same period in 2020. On October 14, 2021 we closed on an offering of $500 million of senior secured notes due 2028, bearing an interest rate of 6.250%. The proceeds of this offering were used to redeem our $435 million of 9.625% senior notes that were due to mature in 2023, with the balance being used to enhance the liquidity of our balance sheet and for general corporate purposes. Our fourth quarter 2021 interest expense reflects higher costs associated with the refinance of our 9.625% senior secured notes. Going forward, we expect our quarterly interest expense on our current debt to be approximately $9.2 million.
Capital expenditures were approximately $35.1 million for the full year of 2021. For the full year 2022, total capital expenditures related to environmental, health and safety and plant investments are expected to be approximately $50 million with another $15 million earmarked for identified growth initiatives.
Outlook
Demand for agricultural products is expected to remain robust in 2022 after a very strong 2021. Corn futures currently indicate that corn prices should remain in the $6.00 per bushel range well into 2022, a level that should translate into strong farmer income and promote significant demand for fertilizers as farmers seek to maximize yield in order to capitalize on the anticipated strong pricing environment for corn. Factors supporting strong domestic corn prices include U.S. ethanol demand which currently sits near pre-pandemic levels, as well as the impact of dry conditions in South America and the Western U.S. which have constricted global corn supplies.
With respect to our industrial business, The Conference Board is forecasting full year 2022 GDP expansion of 3.5%. This represents a healthy rate of economic growth that we expect to result in continued strong demand for our products. Sales volumes of our nitric acid continue to increase driven by homebuilding, with housing starts near 15-year highs, as well as power generation and the continued ramp of the large,
multi-year contract we commenced in the first quarter of 2021. This is partially offset by the continued impact of the microprocessor shortage on automobile production and sales, although consumer demand for new cars appears to be strong. The strength in the Tampa ammonia price also has positive implications for our industrial business as a number of industrial chemical contracts are indexed to the Tampa ammonia price.
Natural gas prices remain a significant, predominantly positive, factor for both sides of our business in 2022. While domestic gas prices are at multi-year high levels, prices are below their October 2021 peak. Importantly, the increase in our natural gas feedstock costs relative to early 2021 is a fraction of the increase in the selling prices for our products over that same period. We expect this to translate into continued year-over-year margin expansion over the course of the year. Additionally, significantly elevated gas costs in Europe, which are currently nearly $25/MMBtu on an MMBtu equivalent, resulted in European ammonia producers taking production offline for several months. This constraint to the global ammonia supply continues to serve as a support level for current high prices for ammonia and ammonia derivative products here in the U.S.
As a result of these factors, we are increasingly optimistic about our ability to deliver continued strong sales and adjusted EBITDA levels in 2022, which combined with our lower cost capital structure should enable us to generate consistent positive free cash flow that we plan to invest in bottom line growth initiatives.
Volume Outlook
We expect overall sales volume in 2022 to be higher than that of 2021, however, with planned turnarounds scheduled at both our Pryor and El Dorado facilities, volumes of certain products will likely be down year-over-year, as indicated below. Additionally, our 2022 forecast for product volumes reflects a shift in mix as we implement our strategy to sell increased volumes of higher margin products. Estimated volumes for the full year 2022 are as follows:
| Products | Full Year 2022 Sales* (tons) | Full Year Actual<br><br><br>2021 Sales (tons) |
|---|---|---|
| Agriculture: | ||
| UAN | 450,000 – 470,000 | 440,000 |
| HDAN | 220,000 – 240,000 | 266,000 |
| Ammonia | 50,000 – 70,000 | 70,000 |
| Industrial, Mining and Other: | ||
| Ammonia | 230,000 – 250,000 | 234,000 |
| AN, Nitric, and Other | 430,000 – 450,000 | 442,000 |
| Sulfuric Acid | 135,000 – 155,000 | 136,000 |
*2022 sales volumes forecast reflects turnaround of approximately 30 days for the Pryor and El Dorado facilities during the third quarter versus one turnaround at the Cherokee facility in 2021.
Conference Call
LSB’s management will host a conference call covering the fourth quarter results on Thursday, February 24, 2022 at 10:00 am ET / 9:00 am CT to discuss these results and recent corporate developments.
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; our ability to complete the preferred stock exchange transaction on the terms disclosed or at all 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
| Company Contact:<br><br><br>Cheryl Maguire, Executive Vice President & CFO<br><br><br>(405) 510-3524<br><br><br><br><br><br>Fred Buonocore, CFA, Vice President of Investor Relations<br><br><br>(405) 510-3550<br><br><br>fbuonocore@lsbindustries.com |
|---|
LSB Industries, Inc.
Condensed Consolidated Statement of Operations
| Three Months Ended | Twelve Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2021 | 2020 | 2021 | 2020 | |||||
| (In Thousands, Except Per Share Amounts) | ||||||||
| Net sales | $ | 190,228 | $ | 88,903 | $ | 556,239 | $ | 351,316 |
| Cost of sales | 111,764 | 92,368 | 417,260 | 334,268 | ||||
| Gross profit (loss) | 78,464 | (3,465) | 138,979 | 17,048 | ||||
| Selling, general and administrative expense | 9,090 | 6,506 | 38,028 | 32,084 | ||||
| Other expense (income), net | (314) | 259 | (97) | 499 | ||||
| Operating income (loss) | 69,688 | (10,230) | 101,048 | (15,535) | ||||
| Interest expense, net | 11,760 | 12,606 | 49,378 | 51,115 | ||||
| Net loss on extinguishments of debt | 20,259 | - | 10,259 | - | ||||
| Non-operating other expense (income), net | (44) | 597 | 2,422 | 10 | ||||
| Income (loss) before benefit for income taxes | 37,713 | (23,433) | 38,989 | (66,660) | ||||
| Benefit for income taxes | (4,369) | (1,741) | (4,556) | (4,749) | ||||
| Net income (loss) | 42,082 | (21,692) | 43,545 | (61,911) | ||||
| Dividends on convertible preferred stocks | 73 | 75 | 298 | 300 | ||||
| Dividends on Series E redeemable preferred stock | - | 9,297 | 29,914 | 35,182 | ||||
| Accretion of Series E redeemable preferred stock | - | 509 | 1,523 | 2,026 | ||||
| Deemed dividend on Series E and Series F<br><br><br>redeemable preferred stocks | - | - | 231,812 | - | ||||
| Net income (loss) attributable to common stockholders | $ | 42,009 | $ | (31,573) | $ | (220,002) | $ | (99,419) |
| Basic income (loss) per common share | $ | 0.49 | $ | (0.86) | $ | (4.40) | $ | (2.71) |
| Diluted income (loss) per common share | $ | 0.47 | $ | (0.86) | $ | (4.40) | $ | (2.71) |
| Adjusted Net Income and Adjusted EPS ^(1)^ | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Adjusted net income (loss) attributable to common stockholders, excluding Exchange Transaction | $ | 42,009 | $ | (21,767) | $ | 43,247 | $ | (62,211) |
| Other adjustments | 23,005 | 3,334 | 32,721 | 10,181 | ||||
| Adjusted net income (loss) | $ | 65,014 | $ | (18,433) | $ | 75,968 | $ | (52,030) |
| Adjusted net income (loss) per common share Excluding Exchange Transaction and Other Adjustments (1) | $ | 0.72 | $ | (0.49) | $ | 0.85 | $ | (1.37) |
| ^(^^1^^)^This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section | ||||||||
| --- |
LSB Industries, Inc.
Consolidated Balance Sheets
| December 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| (In Thousands) | ||||||
| Assets | ||||||
| Current assets: | ||||||
| Cash and cash equivalents | $ | 82,144 | $ | 16,264 | ||
| Accounts receivable | 86,902 | 42,929 | ||||
| Allowance for doubtful accounts | (474 | ) | (378 | ) | ||
| Accounts receivable, net | 86,428 | 42,551 | ||||
| Inventories: | ||||||
| Finished goods | 14,688 | 17,778 | ||||
| Raw materials | 1,895 | 1,795 | ||||
| Total inventories | 16,583 | 19,573 | ||||
| Supplies, prepaid items and other: | ||||||
| Prepaid insurance | 14,244 | 12,315 | ||||
| Precious metals | 14,945 | 6,787 | ||||
| Supplies | 26,558 | 25,288 | ||||
| Other | 2,234 | 6,802 | ||||
| Total supplies, prepaid items and other | 57,981 | 51,192 | ||||
| Total current assets | 243,136 | 129,580 | ||||
| Property, plant and equipment, net | 858,480 | 891,198 | ||||
| Other assets: | ||||||
| Operating lease assets | 27,317 | 26,403 | ||||
| Intangible and other assets, net | 3,907 | 6,121 | ||||
| 31,224 | 32,524 | |||||
| $ | 1,132,840 | $ | 1,053,302 |
LSB Industries, Inc.
Consolidated Balance Sheets (continued)
| 2020 | |||||
| Liabilities and Stockholders' Equity | |||||
| Current liabilities: | |||||
| Accounts payable | 49,458 | $ | 46,551 | ||
| Short-term financing | 12,716 | 13,576 | |||
| Accrued and other liabilities | 33,301 | 30,367 | |||
| Current portion of long-term debt | 9,454 | 16,801 | |||
| Total current liabilities | 104,929 | 107,295 | |||
| Long-term debt, net | 518,190 | 467,389 | |||
| Noncurrent operating lease liabilities | 19,568 | 19,845 | |||
| Other noncurrent accrued and other liabilities | 3,030 | 6,090 | |||
| Deferred income taxes | 26,633 | 30,939 | |||
| Commitments and contingencies | — | — | |||
| Redeemable preferred stocks: | |||||
| Series E 14% cumulative, redeemable Class C preferred stock, no par value,<br> no shares issued or outstanding at December 31, 2021; (210,000 shares<br> issued; 139,768 outstanding; aggregate liquidation preference<br> 278 million at December 31, 2020) | — | 272,101 | |||
| Series F redeemable Class C preferred stock, no par value, no shares<br> issued or outstanding at December 31, 2021; (1 share issued and<br> outstanding; aggregate liquidation preference of 100<br> at December 31, 2020) | — | — | |||
| Stockholders' equity: | |||||
| Series B 12% cumulative, convertible preferred stock, 100 par value;<br> no shares issued or outstanding at December 31, 2021; (20,000 shares<br> issued and outstanding; aggregate liquidation preference 3.3 million<br> at December 31, 2020) | — | 2,000 | |||
| Series D 6% cumulative, convertible Class C preferred stock, no par value;<br> no shares issued or outstanding at December 31, 2021; (1 million shares<br> issued and outstanding; aggregate liquidation preference 1,3 million<br> December 31, 2020) | — | 1,000 | |||
| Common stock, .10 par value; 150 million shares authorized, 91.1 million<br> shares issued (75 million shares authorized, 39.9 million shares issued<br> at December 31, 2020) | 9,117 | 3,993 | |||
| Capital in excess of par value | 493,161 | 197,350 | |||
| Accumulated deficit | (31,255 | ) | (41,487 | ) | |
| 471,023 | 162,856 | ||||
| Less treasury stock, at cost: | |||||
| Common stock, 1.4 million shares (2.1 million shares at December 31, 2020) | 10,533 | 13,213 | |||
| Total stockholders' equity | 460,490 | 149,643 | |||
| 1,132,840 | $ | 1,053,302 |
All values are in US Dollars.
LSB Industries, Inc.
Non-GAAP Reconciliations
This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements.
EBITDA and Adjusted EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense, less gain (loss) on extinguishment of debt, plus depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization of intangible and other assets), plus provision (benefit) for income taxes. Adjusted EBITDA is reported to show the impact of one time/non-cash or non-operating items-such as, loss (gain) on sale of a business and/or 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.
We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. In addition, we believe that certain investors consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items.
EBITDA and adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the periods indicated. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share
Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share have been adjusted for the impact of the closing of the Exchange Transaction on September 27, 2021 as well as the one time/non-cash or non-operating items referred to in the above section relating to Adjusted EBITDA.
LSB Industries, Inc.
Non-GAAP Reconciliations (continued)
| LSB Consolidated | Three Months Ended December 31, | Twelve Months Ended December 31, | |
|---|---|---|---|
| 2021 | 2021 | 2020 | |
| ( in Thousands) | |||
| Net Income (loss) | 42,082 | $43,545 | ($61,911) |
| Plus: | |||
| Interest expense | 11,760 | 49,378 | 51,115 |
| Depreciation and amortization | 17,619 | 69,943 | 70,841 |
| Loss on extinguishment of debt | 20,259 | 10,259 | - |
| Benefit for income taxes | (4,369) | (4,556) | (4,749) |
| EBITDA | 87,351 | $168,569 | $55,296 |
All values are in US Dollars.
| Stock-based compensation | 1,187 | 134 | 5,516 | 1,761 |
|---|---|---|---|---|
| Unrealized loss (gain) on commodity contracts | - | 1,743 | (1,205) | 1,205 |
| Legal fees (Leidos) | 296 | 572 | 1,894 | 5,715 |
| Loss on disposal of assets | 133 | 312 | 823 | 921 |
| Fair market value adjustment on preferred stock embedded derivatives | - | 562 | 2,258 | (55) |
| Consulting costs associated with reliability and purchasing initiatives | - | (20) | - | 558 |
| Change of Control | - | - | 3,223 | - |
| Turnaround costs | 1,130 | 31 | 9,953 | 76 |
| Adjusted EBITDA | $90,097 | $10,446 | $191,031 | $65,477 |
| Adjusted EBITDA Margin | 47.4% | 11.7% | 34.3% | 18.6% |
LSB Industries, Inc.
Non-GAAP Reconciliations (continued)
| Three Months Ended | Twelve Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
| December 31, | December 31, | |||||||
| 2021 | 2021 | 2020 | ||||||
| (In Thousands, Except Per Share Amounts) | ||||||||
| Numerator: | ||||||||
| Net income (loss) attributable to common stockholders | $ | 42,009 | $ (31,573) | $ | $ (220,002) | $ | $ (99,419) | |
| Adjustments for Exchange Transaction: | ||||||||
| Dividend requirements on Series E <br> Redeemable Preferred | - | 9,297 | 29,914 | 35,182 | ||||
| Deemed dividend on Series E and Series F <br> Redeemable Preferred | - | - | 231,812 | - | ||||
| Accretion of Series E Redeemable Preferred | - | 509 | 1,523 | 2,026 | ||||
| Adjusted net income (loss) attributable to <br> common stockholders, excluding Exchange<br> Transaction | 42,009 | (21,767) | 43,247 | (62,211) | ||||
| Other Adjustments: | ||||||||
| Stock-based compensation | 1,187 | 134 | 5,516 | 1,761 | ||||
| Change of control | - | - | 3,223 | - | ||||
| Noncash loss (gain) on natural gas contracts | - | 1,743 | (1,205) | 1,205 | ||||
| Legal fees (Leidos) | 296 | 572 | 1,894 | 5,715 | ||||
| Loss on disposal of assets | 133 | 312 | 823 | 921 | ||||
| FMV adjustment on preferred stock embedded<br> derivative | - | 562 | 2,258 | (55) | ||||
| Consulting costs associated with reliability and <br> purchasing initiatives | - | (20) | - | 558 | ||||
| Turnaround costs | 1,130 | 31 | 9,953 | 76 | ||||
| Net loss on extinguishments of debt | 20,259 | - | 10,259 | - | ||||
| Adjusted net income (loss) attributable to<br> common stockholders, excluding Exchange<br> Transaction and other adjustments | $ | 65,014 | $ (18,433) | $ | $ 75,968 | $ | $ (52,030) | |
| Denominator: | ||||||||
| Adjusted weighted-average shares for basic <br> net income (loss) per share and for adjusted net<br> income (loss) per share, excluding<br> Exchange Transaction (1) | 86,507 | 36,685 | 49,963 | 36,664 | ||||
| Adjustment: | ||||||||
| Unweighted shares, including unvested restricted <br> stock subject to forfeiture | 3,286 | 1,166 | 39,830 | 1,187 | ||||
| Outstanding shares, net of treasury, at period end <br> for adjusted net income (loss) per share, <br> excluding Exchange Transaction and other <br> adjustments | 89,793 | 37,851 | 89,793 | 37,851 | ||||
| Basic net income (loss) per common share | $ | 0.49 | $ (0.86) | $ | $ (4.40) | $ | $ (2.71) | |
| Adjusted net income (loss) per common share, <br> excluding Exchange Transaction | $ | 0.49 | $ (0.59) | $ | $ 0.87 | $ | $ (1.70) | |
| Adjusted net income (loss) per common share, <br> excluding Exchange Transaction and other <br> adjustments | $ | 0.72 | $ (0.49) | $ | $ 0.85 | $ | $ (1.37) |
All values are in US Dollars.
| (1) | Excludes the weighted-average shares of unvested restricted stock that are subject to forfeiture |
|---|
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, | ||
|---|---|---|---|
| 2021 | 2021 | 2020 | |
| ( in thousands) | |||
| Agricultural net sales | 101,979 | $ 264,502 | $ 180,036 |
| Less freight | 4,489 | 14,188 | 15,967 |
| Agricultural netback sales | 97,490 | $ 250,314 | $ 164,069 |
All values are in US Dollars.
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