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Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

LSB INDUSTRIES, INC. REPORTS RESULTS FOR THE

2013 FOURTH QUARTER

OKLAHOMA CITY, Oklahoma…February 27, 2014… LSB Industries, Inc. (“LSB”) (NYSE: LXU) today announced results for the fourth quarter and full year ended December 31, 2013.

Consolidated Fourth Quarter 2013 Financial Highlights Compared to 2012:

 

    Net sales were $149.0 million compared to $177.1 million;

 

    Operating income was $70.2 million, which included $76.2 million in business interruption and property damage insurance recoveries compared to $18.4 million, which included insurance recoveries of $7.3 million;

 

    Net income applicable to common shareholders was $37.3 million, or $1.58 per diluted share, compared to $11.6 million, or $0.49;

 

    Excluding insurance recoveries, the 2013 fourth quarter adjusted net loss applicable to common shareholders was $8.0 million, or $0.35 per diluted share; and

 

    EBITDA was $78.5 million compared to $24.3 million.

Consolidated Full Year 2013 Financial Highlights Compared to 2012:

 

    Net sales for 2013 were $679.3 million compared to $759.0 million;

 

    Operating income was $105.3 million, which included $94.6 million in insurance recoveries compared to $95.7 million, which included insurance recoveries of $7.3 million;

 

    Net income applicable to common shareholders was $54.7 million, or $2.33 per diluted share in 2013 compared to $58.3 million, or $2.49;

 

    Excluding insurance recoveries, the 2013 adjusted net loss applicable to common shareholders was $2.8 million, or a loss of $0.13 per diluted share; and

 

    EBITDA was $132.9 million as compared to $117.3 million in 2012.

Jack Golsen, LSB’s Board Chairman and CEO stated, “During 2013, we took action to enhance the Company’s operations, particularly at our chemical facilities, which should position LSB for sales growth and profitability improvement. Full year 2013 results in our Chemical Business reflect downtime during the first half of the year at our Cherokee Facility and intermittently throughout the year and for most of the fourth quarter at our Pryor Facility. Our Climate Control Business performed well during 2013 with gross margins up, driven by better product mix, lower raw material costs and improved overhead absorption related to the higher sales volumes. Looking ahead to 2014, we will continue to focus on implementing our multi-year capital investment plans at El Dorado and Pryor and capitalizing on the strength of our end-markets to create value for shareholders.”

Chemical Business Fourth Quarter 2013 Compared to Fourth Quarter 2012:

 

    Net sales were $77.7 million compared to $105.3 million;

 

    Sales of agricultural, industrial and mining chemicals were $27.7 million, $32.7 million and $14.2 million, compared to $40.3 million, $39.2 million and $24.3 million, respectively;

 

    Segment operating income was $67.5 million, which included $76.2 million of insurance recoveries, as compared to $15.1 million, which included $7.3 million of insurance recoveries.


The decrease in Chemical Business net sales and operating income, excluding insurance recoveries, was largely attributable to unplanned downtime at the Pryor Facility while repairs were made to the facility’s primary ammonia plant. As a result of the downtime, Pryor’s ammonia production and sales for the quarter were nominal. The estimated adverse effect on operating income from the lost production resulting from the unplanned downtime was $23 million to $29 million in the fourth quarter.

With respect to agricultural chemical sales, our Chemical Business sold an aggregate 88.7 thousand tons of urea ammonium nitrate solutions (UAN), ammonium nitrate (AN), anhydrous ammonia, and other products (fertilizer blends and specialty chemicals) during the fourth quarter of 2013 as compared to 97.6 thousand tons in the same period of 2012. The following tables provide further information on our agricultural sales and feedstock costs:

 

Fourth Quarter Agricultural Chemical Volume, Pricing and Feedstock Cost Data

 

Product

   2013 Volume
(Tons)
     2013 Avg. Price
Per Ton
     2012 Volume
(Tons)
     2012 Avg. Price
Per Ton
 

UAN

     53,463       $ 239         58,446       $ 295   

AN

     20,003       $ 292         16,775       $ 385   

Anhydrous Ammonia

     10,679       $ 446         18,204       $ 655   

Other

     4,562         n/a         4,165         n/a   

Average natural gas cost: $3.78 per MMBtu, excluding hedging activity

Average cost for purchased ammonia: $454 per ton

 

Full Year Agricultural Chemical Volume, Pricing and Feedstock Cost Data

 

Product

   2013 Volume
(Tons)
     2013 Avg. Price
Per Ton
     2012 Volume
(Tons)
     2012 Avg. Price
Per Ton
 

UAN

     254,012       $ 266         261,870       $ 300   

AN

     144,074       $ 365         158,073       $ 412   

Anhydrous Ammonia

     48,011       $ 492         87,016       $ 557   

Other

     26,276         n/a         27,861         n/a   

Average natural gas cost: $3.84 per MMBtu, excluding hedging activity

Average cost for purchased ammonia: $545 per ton

Climate Control Business Fourth Quarter 2013 Compared to Fourth Quarter 2012:

 

    Net sales were $67.5 million compared to $67.9 million;

 

    Segment operating income was $6.0 million compared to $5.8 million.

New orders for Climate Control products were $58.8 million in the fourth quarter of 2013 compared to $64.6 million for the third quarter of 2013; and $66.8 million for the fourth quarter of 2012. At December 31, 2013, backlog was $39.7 million compared to $55.5 million at December 31, 2012.

 

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Segment sales by product category and end market are summarized in the tables below:

 

Fourth Quarter Climate Control Sales by

Product Category and End Market ($ millions)

 

Product Category

   2013      2012  

Heat pumps

   $ 45.7       $ 39.4   

Fan coils

   $ 15.7       $ 13.5   

HVAC Other

   $ 6.1       $ 15.0   

End Market

   2013      2012  

Residential

   $ 12.8       $ 11.4   

Commercial/Institutional

   $ 54.7       $ 56.5   

 

Full Year Climate Control Sales by

Product Category and End Market ($ millions)

 

Product Category

   2013      2012  

Heat pumps

   $ 183.8       $ 162.7   

Fan coils

   $ 64.5       $ 55.8   

HVAC Other

   $ 36.7       $ 47.7   

End Market

   2013      2012  

Residential

   $ 48.3       $ 46.9   

Commercial/Institutional

   $ 236.7       $ 219.3   

Cash Flow and Financial Position

Cash flow from operating activities was $8.8 million for the fourth quarter of 2013 and $54.1 million for 2013 compared to $26.1 million and $99.5 million, respectively, in 2012. Capital expenditures were $43.6 million and $157.4 million in the fourth quarter and year of 2013, respectively, compared to $31.0 million and $92.6 million in 2012.

Total debt was $463.0 million at December 31, 2013, up from $72.4 million at December 31, 2012 reflecting the August 2013 issuance of $425 million of 7.75% senior secured notes. These funds are primarily earmarked for major expansion projects at the El Dorado Facility. During the fourth quarter of 2013, we received the necessary permits to proceed with the expansion projects at the El Dorado Facility which include an ammonia production plant; a new 65% strength nitric acid plant and concentrator to replace the lost production from the DSN plant explosion; and for other support infrastructure. The total expected cost of these projects is $428 million to $498 million and are expected to be completed by the end of 2015. Upon completion, these investments are estimated to generate incremental EBITDA of $90 million to $100 million per year. Interest expense for the fourth quarter and year of 2013 was $7.3 million and $14.0 million, respectively, compared to $0.4 million and $4.2 million in 2012. Additional interest capitalized in the fourth quarter and year of 2013 was $1.8 million and $4.0 million, respectively.

Industry Perspective / Outlook

Mr. Golsen continued, “In our Chemical Business, our key end markets remain historically strong. The industry outlook for planting levels is high and we continue to see favorable pricing for growers. As a result, we see robust worldwide demand for fertilizers, which should positively impact sales volumes for our agricultural products. Industrial products remain a significant market for our Chemical Business and we are pleased to see that market indicators are forecasting growth for the next few years.

 

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“In Climate Control, leading indicators point to solid growth in commercial and institutional construction, as well as, residential housing starts over the next three years. We are anticipating an improvement in all the major sectors we serve, especially housing and education. We have been investing in our Climate Control operations, which we expect to translate into expanding profitability as sales improve.

Mr. Golsen concluded, “Overall, the outlooks for both Chemical and Climate Control end markets are favorable, and we remain focused on executing effectively, and investing in the efficiency of our operations in order to deliver improved results.”

Conference Call

LSB’s management will host a conference call covering the fourth quarter and full year results on Thursday, February 27, 2014 at 11:00 am ET/10:00 am CT to discuss these results and recent corporate developments. Participating in the call will be Board Chairman and CEO, Jack E. Golsen; President and COO, Barry H. Golsen; and Executive Vice President and CFO, Tony M. Shelby. Interested parties may participate in the call by dialing 201 493-6739. Please call in ten 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 Investor Info tab.

To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes before 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. We suggest listeners use Microsoft Explorer as their web browser.

LSB Industries, Inc.

LSB is a manufacturing and marketing company. LSB’s principal business activities consist of the manufacture and sale of commercial and residential climate control products, such as geothermal and water source heat pumps, hydronic fan coils, modular geothermal chillers and large custom air handlers; and, the manufacture and sale of chemical products for the agricultural, mining and industrial markets.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements generally are identifiable by use of the words “believe,” “expects,” “intends,” “plans to,” “estimates,” “projects” or similar expressions, and such forward-looking statements include, but are not limited to, implementing capital investment plans; capitalizing on the strength of our end markets to create value for shareholders; industry outlook for our Chemical Business; favorable pricing for growers; strong demand worldwide for fertilizers; growth for our industrial chemical products; solid growth in our Climate Control market; and expanding profitability as sales improve in our Climate Control operations. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to, general economic conditions; weather conditions; lack of growth in the commercial and residential construction industry; acceptance by the market of our geothermal heat pump products, acceptance of our technology; increase competitive pressures, domestically and foreign; price increases for raw materials; loss of significant customer; changes to federal legislation or adverse regulations; available working capital; ability to install necessary equipment and renovations at the El Dorado Facility and the Pryor Facility in a timely manner; receipt in a timely manner of production equipment; problems with production equipment; and other factors set forth under “Risk Factors” and “A Special Note Regarding Forward-Looking Statements”, a discussion of a variety of factors which could cause the future outcome to differ materially from the forward-looking statements contained in this report and in the Form 10-K for year ended December 31, 2013.

 

COMPANY CONTACT:   Investor Relations Contact:
Tony M. Shelby, Chief Financial Officer   Fred Buonocore CFA (212) 836-9607
(405) 235-4546   Linda Latman (212) 836-9609
  The Equity Group Inc.

See Accompanying Tables

 

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LSB Industries, Inc.

Unaudited Financial Highlights

Years and Three Months Ended December 31, 2013 and 2012

 

     Year Ended
December 31,
    Three Months Ended
December 31,
 
     2013     2012     2013     2012  
     (in thousands, except per share amounts)  

Net sales

   $ 679,287      $ 759,031      $ 149,035      $ 177,137   

Cost of sales

     535,731        575,295        118,469        136,767   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     143,556        183,736        30,566        40,370   

Selling, general and administrative expense

     100,674        89,988        25,989        24,000   

Provisions for (recoveries of) losses on accounts receivable

     478        (214     296        (29

Property insurance recoveries in excess of losses incurred

     (66,255     —          (66,255     —     

Other expense (income), net

     3,351        (1,693     359        (1,962
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     105,308        95,655        70,177        18,361   

Interest expense, net

     13,986        4,237        7,324        437   

Loss on extinguishment of debt

     1,296        —          —          —     

Non-operating other income, net

     (100     (281     (90     (11
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before provisions for income taxes and equity in earnings of affiliate

     90,126        91,699        62,943        17,935   

Provisions for income taxes

     35,421        33,594        25,454        6,484   

Equity in loss (earnings) of affiliate

     (436     (681     16        (171
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     55,141        58,786        37,473        11,622   

Net loss from discontinued operations

     179        182        130        62   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     54,962        58,604        37,343        11,560   

Dividends on preferred stocks

     300        300        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income applicable to common stock

   $ 54,662      $ 58,304      $ 37,343      $ 11,560   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares:

      

Basic

     22,465        22,360        22,520        22,402   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     23,597        23,539        23,624        23,570   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per common share:

      

Basic:

      

Income from continuing operations

   $ 2.44      $ 2.62      $ 1.67      $ 0.52   

Net loss from discontinued operations

     (0.01     (0.01     (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 2.43      $ 2.61      $ 1.66      $ 0.52   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted:

      

Income from continuing operations

   $ 2.34      $ 2.50      $ 1.59      $ 0.49   

Net loss from discontinued operations

     (0.01     (0.01     (0.01     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 2.33      $ 2.49      $ 1.58      $ 0.49   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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LSB Industries, Inc.

Unaudited Financial Highlights

Years and Three Months Ended December 31, 2013 and 2012

 

     Year Ended
December 31,
    Three Months Ended
December 31,
 
     2013     2012     2013     2012  
     (in thousands)  

Net sales:

        

Chemical

   $ 380,669      $ 477,813      $ 77,652      $ 105,262   

Climate Control

     285,018        266,171        67,528        67,885   

Other (1)

     13,600        15,047        3,855        3,990   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 679,287      $ 759,031      $ 149,035      $ 177,137   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit: (2)

        

Chemical

   $ 46,165      $ 97,692      $ 7,049      $ 18,903   

Climate Control

     92,907        80,981        22,354        20,089   

Other (1)

     4,484        5,063        1,163        1,378   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 143,556      $ 183,736      $ 30,566      $ 40,370   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income: (3)

        

Chemical

   $ 87,784      $ 82,101      $ 67,525      $ 15,078   

Climate Control

     30,386        25,834        5,999        5,827   

Other (1)

     1,699        2,091        501        598   

General corporate expenses (4)

     (14,561     (14,371     (3,848     (3,142
  

 

 

   

 

 

   

 

 

   

 

 

 
     105,308        95,655        70,177        18,361   

Interest expense, net

     13,986        4,237        7,324        437   

Loss on extinguishment of debt

     1,296        —          —          —     

Non-operating other income, net

        

Chemical

     (1     (1     —          —     

Climate Control

     (1     (1     (1     —     

Corporate and other business operations

     (98     (279     (89     (11

Provisions for income taxes

     35,421        33,594        25,454        6,484   

Equity in loss (earnings) of affiliate— Climate Control

     (436     (681     16        (171
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

   $ 55,141      $ 58,786      $ 37,473      $ 11,622   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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LSB Industries, Inc.

Notes to Unaudited Financial Highlights

Years and Three Months Ended December 31, 2013 and 2012

 

(1) Sales, gross profit and operating income classified as “Other” relates primarily to the sales of industrial machinery and related components.

 

(2) Gross profit by business segment represents net sales less cost of sales.

 

(3) Our chief operating decision makers use operating income by business segment for purposes of making decisions, which include resource allocations and performance evaluations. Operating income by business segment represents gross profit by business segment less selling, general and administrative expense (“SG&A”) incurred by each business segment plus other income and other expense earned/incurred by each business segment before general corporate expenses.

 

(4) General corporate expenses consist of SG&A, other income and other expense that are not allocated to one of our business segments.

 

7


LSB Industries, Inc.

Consolidated Balance Sheets

 

     December 31,
2013
     December 31,
2012
 
     (in thousands)  

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 143,750       $ 98,020   

Restricted cash

     —           31   

Accounts receivable, net

     80,570         82,801   

Inventories:

     

Finished goods

     29,163         36,851   

Work in progress

     2,838         3,576   

Raw materials

     23,871         24,546   
  

 

 

    

 

 

 

Total inventories

     55,872         64,973   

Supplies, prepaid items and other:

     

Prepaid insurance

     15,073         10,049   

Precious metals

     14,927         13,528   

Supplies

     13,523         9,855   

Prepaid income taxes

     12,644         —     

Other

     3,867         2,266   
  

 

 

    

 

 

 

Total supplies, prepaid items and other

     60,034         35,698   

Deferred income taxes

     13,613         3,224   
  

 

 

    

 

 

 

Total current assets

     353,839         284,747   

Property, plant and equipment, net

     416,801         281,871   

Other assets:

     

Noncurrent restricted cash

     80,974         —     

Noncurrent restricted investments

     209,990         —     

Debt issuance costs, net

     8,027         876   

Other, net

     13,466         9,118   
  

 

 

    

 

 

 

Total other assets

     312,457         9,994   
  

 

 

    

 

 

 
   $ 1,083,097       $ 576,612   
  

 

 

    

 

 

 

 

8


LSB Industries, Inc.

Consolidated Balance Sheets (continued)

 

     December 31,
2013
     December 31,
2012
 
     (in thousands)  

Liabilities and Stockholders’ Equity

     

Current liabilities:

     

Accounts payable

   $ 61,775       $ 68,333   

Short-term financing

     13,749         9,254   

Accrued and other liabilities

     49,107         34,698   

Current portion of long-term debt

     9,262         4,798   
  

 

 

    

 

 

 

Total current liabilities

     133,893         117,083   

Long-term debt

     453,705         67,643   

Noncurrent accrued and other liabilities

     17,086         16,369   

Deferred income taxes

     66,698         21,020   

Commitments and contingencies

     

Stockholders’ equity:

     

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

     2,000         2,000   

Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued and outstanding

     1,000         1,000   

Common stock, $0.10 par value; 75,000,000 shares authorized, 26,846,470 shares issued (26,731,360 at December 31, 2012)

     2,685         2,673   

Capital in excess of par value

     167,550         165,006   

Retained earnings

     266,854         212,192   
  

 

 

    

 

 

 
     440,089         382,871   

Less treasury stock at cost:

     

Common stock, 4,320,462 shares

     28,374         28,374   
  

 

 

    

 

 

 

Total stockholders’ equity

     411,715         354,497   
  

 

 

    

 

 

 
   $ 1,083,097       $ 576,612   
  

 

 

    

 

 

 

 

9


LSB Industries, Inc.

Non-GAAP Reconciliation

(In Millions, except per share amounts) (unaudited)

This news release includes the measures “EBITDA”, “adjusted net loss applicable to common stock” and “adjusted loss per diluted share”. These measures are deemed “non-GAAP financial measure” under the rules of the SEC, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements. These non-GAAP financial measures have limitations and should not be considered in isolation or as a substitute for net 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, these presentations of EBITDA, adjusted net loss applicable to common stock, and adjusted loss per diluted share may not be comparable to similarly titled measures of other companies.

EBITDA Reconciliations

EBITDA is defined as net income (loss) plus interest expense, depreciation, depletion and amortization of property plant and equipment, amortization of other assets, less interest included in amortization, plus provisions for income taxes plus loss from discontinued operations. 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. The following table provides a reconciliation of net income to EBITDA for the periods indicated.

 

     Twelve Months Ended
December 31,
    

Three Months Ended

December 31,

 
LSB Industries, Inc. Consolidated    2012      2013      2012      2013  

Net income

   $ 58.6       $ 55.0       $  11.6       $  37.3   

Plus:

           

Interest expense

     4.2         14.0         0.4         7.3   

Depreciation, depletion and amortization

     20.7         28.4         5.8         8.3   

Provisions for income taxes

     33.6         35.3         6.5         25.5   

Loss from discontinued operations

     0.2         0.2         0.0         0.1   
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 117.3       $ 132.9       $ 24.3       $ 78.5   
  

 

 

    

 

 

    

 

 

    

 

 

 

(continued)

 

10


LSB Industries, Inc.

Non-GAAP Reconciliation (continued)

(In Millions, except per share amounts) (unaudited)

 

Adjusted Net Loss Applicable to Common Stock and Diluted Earnings per Share

Excluding Insurance Recoveries

Adjusted net loss applicable to common stock and adjusted loss per diluted share are reported to show the impact of the insurance recoveries. We believe that the inclusion of supplementary adjustments to the GAAP measures, net income applicable to common stock and diluted income per common share, are appropriate to provide additional information to investors about certain unusual items that are not expected to reoccur in the future. The following table provides a reconciliation of net income applicable to common stock to adjusted net loss applicable to common stock excluding the impact of the insurance recoveries. The following table also calculates the loss per diluted share of the adjusted net loss applicable to common stock.

 

LSB Industries, Inc. Consolidated    Twelve Months
Ended
12/31/2013
    Three Months
Ended
12/31/2013
 

Net income applicable to common stock

   $ 54.7      $ 37.3   

Less:

    

Insurance recoveries

     94.6        76.2   

Income tax provision related to insurance recoveries

     (37.1     (30.9
  

 

 

   

 

 

 

After tax effect of insurance recoveries

     57.5        45.3   
  

 

 

   

 

 

 

Adjusted net loss applicable to common stock

   $ (2.8   $ (8.0
  

 

 

   

 

 

 

Weighted-average diluted common shares

     22.465        22.520   
  

 

 

   

 

 

 

Adjusted loss per diluted share

   $ (0.13   $ (0.35
  

 

 

   

 

 

 

 

11