LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
- Net sales of $181 million compared to $199 million in the first
quarter of 2022
- Net income of $16 million compared to $59 million in the first
quarter of 2022; Adjusted net income of $19 million as compared to
$62 million in the first quarter of 2022
- EPS of $0.21 compared to $0.66 for the first quarter of 2022;
Adjusted EPS(1) of $0.25 compared to $0.69 in the first quarter of
2022
- Adjusted EBITDA(1) of $51 million compared to $101 million in
the first quarter of 2022
- Cash Flow from Operations of $59 million and Capital
Expenditures of $18 million
- Total cash and short-term investments of approximately $426
million as of March 31, 2023
- Trailing twelve-month total recordable injury rate of 0.87 as
of March 31, 2023
- Achieved a milestone in our El Dorado CCS project by filing a
Class VI sequestration well permit
Mark Behrman, LSB’s President and CEO, stated, “We generated a
healthy increase in sales volumes relative to the first quarter of
last year. This improvement reflects the benefits of the
reliability investments we made in our facilities in 2022 along
with our successful commercial initiatives. However, the stronger
volumes were more than offset by lower product selling prices
resulting largely from a decline in natural gas prices in Europe,
which reached all-time highs during 2022 and drove ammonia prices
to record levels. After declining steadily for the past six months,
we believe that prices for ammonia and related products are at or
near a bottom, bolstered by the significant increase in fertilizer
demand we've seen recently. We expect the pricing stabilization
coupled with continued strong operating performance by our
facilities to benefit our second quarter 2023 financial
results."
Mr. Behrman continued, "Despite the pricing headwinds in the
first quarter, we continued to generate solid free cash flow which
further strengthened our balance sheet. Our current financial
position gives us the flexibility to create value for shareholders
in multiple ways including investments in the growth of the
business and potential debt reduction and/or additional share
repurchases. Additionally, we are more excited than ever about our
blue and green ammonia projects that we have underway, and other
potential projects that we are exploring. The groundswell of
interest in the use of ammonia as a clean fuel and as a carrier for
hydrogen continues to build. Our vision is to be at the forefront
of this energy transition, which we expect to result in a
meaningful reduction to global CO2 emissions, including those of
our company, while at the same time representing an attractive
opportunity for us to generate significant incremental
profitability and shareholder value."
(1) This is a Non-GAAP measure. Refer to the Non-GAAP
Reconciliation section.
First Quarter Results Overview
Three Months Ended March 31,
Product (Gross Sales in $000's)
2023
2022
% Change
AN & Nitric Acid
$
58,272
$
71,800
(19
)%
Urea ammonium nitrate (UAN)
46,590
56,569
(18
)%
Ammonia
63,415
59,342
7
%
Other
12,687
11,270
13
%
Total Net Sales
$
180,964
$
198,981
(9
)%
Comparison of 2023 to 2022 quarterly periods:
- Net sales declined during the quarter driven by lower pricing
for all of our products and the impact of extremely cold weather
that caused the Cherokee facility to be down for the first half of
January. The headwind of lower pricing and Cherokee downtime was
partially offset by higher sales volumes for ammonia and UAN.
- The year-over-year decline in operating income and adjusted
EBITDA primarily resulted from lower selling prices and higher
natural gas feedstock prices, partially offset by higher sales
volumes.
The following tables provide key sales metrics for our
products:
Three Months Ended March 31,
Key Product Volumes (short tons sold)
2023
2022
% Change
AN & Nitric Acid
122,745
144,517
(15
)%
Urea ammonium nitrate (UAN)
113,026
100,153
13
%
Ammonia
88,997
60,725
47
%
324,768
305,395
6
%
Average Selling Prices (price per short
ton) (A)
AN & Nitric Acid
$
417
$
438
(5
)%
Urea ammonium nitrate (UAN)
$
379
$
553
(31
)%
Ammonia
$
703
$
961
(27
)%
(A) Average selling prices represent “net back” prices which are
calculated as sales less freight expenses divided by product sales
volume in tons.
Three Months Ended March 31,
2023
2022
% Change
Average Benchmark Prices (price per
ton)
Tampa Ammonia (MT) Benchmark
$
728
$
1,206
(40
)%
NOLA UAN
$
318
$
569
(44
)%
Input Costs
Average natural gas cost/MMBtu
$
5.66
$
4.74
19
%
Financial Position and Capital Expenditures
As of March 31, 2023, our total liquidity was approximately $488
million, including $426 million in cash and short-term investments
and approximately $62 million of availability under our Working
Capital Revolver. Total long-term debt, including the $9 million
current portion, was $711 million on March 31, 2023 compared to
$712 million on December 31, 2022.
Interest expense for the first quarter of 2023 was $12 million
compared to $10 million in the first quarter of 2022.
Capital expenditures were approximately $18 million for the
first quarter of 2023. For the full year 2023, total capital
expenditures are expected to be between $60 million to $80 million
which includes maintenance and margin enhancement investments.
Market Outlook
Nitrogen fertilizer prices moderated in recent months, largely
reflecting a decline in European production costs. Natural gas
prices in Europe have dropped due to a reduction in demand
primarily related to warmer than expected temperatures throughout
Europe this past winter and a reduction in industrial demand. The
lower natural gas costs have enabled numerous European ammonia
facilities to resume operations, increasing global supply for
nitrogen products. With that said, natural gas costs in Europe
remain significantly higher than those in the U.S. and European
operators remain the high cost, or marginal producers, with
production costs substantially higher than those in the U.S.
In addition to the lower production costs for European producers
as compared to a year ago, the decline in fertilizer prices
reflects the impact of a delay in this season's spring fertilizer
application in many corn growing regions of the U.S. due to cold
and wet weather. Nitrogen prices have also been pressured by lower
demand for ammonia from Asian industrial markets as well as from
phosphate producers. Despite these factors, nitrogen pricing
remains at attractive levels and appears to have stabilized with
potential for improvement as 2023 progresses, given an increasingly
favorable demand outlook.
U.S. corn stock/use ratios sit near multi-year lows due, in
part, to persistent dry conditions in South America, along with
areas of the U.S. and Europe. As a result, corn prices remain
significantly above 10-year averages which, combined with lower
input costs relative to last year, should incentivize farmers to
plant additional acres and maximize yield through the current
planting season. Recent USDA projections call for approximately 92
million acres of corn to be planted in the U.S. this year, up from
approximately 88.6 million acres planted last year. We expect this
to translate into strong demand for nitrogen fertilizers in the
coming weeks and, ultimately, improved pricing as inventory levels
decline.
Our industrial business has been robust and demand for our
products is steady. Nitric acid demand is stable as the demand
impacts of high inflation in the U.S. has been offset by global
producers shifting production from international facilities to
their U.S. operations in order to take advantage of lower domestic
input costs. Demand for AN for use in mining applications is robust
due to attractive market fundamentals for quarrying and aggregate
production and U.S. metals.
Conference Call
LSB’s management will host a conference call covering the first
quarter results on Wednesday, May 3, 2023 at 10:00 am ET / 9:00 am
CT to discuss these results and recent corporate developments.
Participating in the call will be President & Chief Executive
Officer, Mark Behrman and Executive Vice President & Chief
Financial Officer, Cheryl Maguire. Interested parties may
participate in the call by dialing (877) 407-6176 / (201) 689-8451.
Please call in 10 minutes before the conference is scheduled to
begin and ask for the LSB conference call. To coincide with the
conference call, LSB will post a slide presentation at
www.lsbindustries.com on the webcast section of the Investor tab of
our website.
To listen to a webcast of the call, please go to the Company’s
website at www.lsbindustries.com at least 15 minutes prior to the
conference call to download and install any necessary audio
software. If you are unable to listen live, the conference call
webcast will be archived on the Company’s website.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma,
manufactures and sells chemical products for the agricultural,
mining, and industrial markets. The Company owns and operates
facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor,
Oklahoma, and operates a facility for a global chemical company in
Baytown, Texas. LSB’s products are sold through distributors and
directly to end customers primarily throughout the United States.
Committed to improving the world by setting goals that will reduce
our environmental impact on the planet and improve the quality of
life for all of its people, the Company is well positioned to play
a key role in the reduction of global carbon emissions through its
planned carbon capture and sequestration, and zero carbon ammonia
strategies. Additional information about LSB can be found on its
website at www.lsbindustries.com.
Forward-Looking
Statements
Statements in this release that are not historical are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements, which are subject to known and unknown risks,
uncertainties and assumptions about us, may include projections of
our future financial performance including the effects of the
COVID-19 pandemic and anticipated performance based on our growth
and other strategies and anticipated trends in our business. These
statements are only predictions based on our current expectations
and projections about future events. There are important factors
that could cause our actual results, level of activity, performance
or actual achievements to differ materially from the results, level
of activity, performance or anticipated achievements expressed or
implied by the forward-looking statements. Significant risks and
uncertainties may relate to, but are not limited to, business and
market disruptions related to the COVID-19 pandemic, market
conditions and price volatility for our products and feedstocks, as
well as global and regional economic downturns, including as a
result of the COVID-19 pandemic, that adversely affect the demand
for our end-use products; disruptions in production at our
manufacturing facilities and other financial, economic,
competitive, environmental, political, legal and regulatory
factors. These and other risk factors are discussed in the
Company’s filings with the Securities and Exchange Commission
(SEC).
Moreover, we operate in a very competitive and rapidly changing
environment. New risks and uncertainties emerge from time to time,
and it is not possible for our management to predict all risks and
uncertainties, nor can management assess the impact of all factors
on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Although we
believe the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
level of activity, performance or achievements. Neither we nor any
other person assumes responsibility for the accuracy or
completeness of any of these forward-looking statements. You should
not rely upon forward-looking statements as predictions of future
events. Unless otherwise required by applicable laws, we undertake
no obligation to update or revise any forward-looking statements,
whether because of new information or future developments.
See Accompanying Tables
LSB Industries, Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
March 31,
2023
2022
(In Thousands, Except Per Share
Amounts)
Net sales
$
180,964
$
198,981
Cost of sales
139,359
108,251
Gross profit
41,605
90,730
Selling, general and administrative
expense
9,867
10,935
Other expense (income), net
1,203
(176
)
Operating income
30,535
79,971
Interest expense, net
12,212
9,955
Non-operating other expense (income),
net
(3,476
)
135
Income before provision for income
taxes
21,799
69,881
Provision for income taxes
5,898
11,115
Net income
15,901
58,766
Income per common share:
Basic:
Net income
$
0.21
$
0.66
Diluted:
Net income
$
0.21
$
0.65
Adjusted Net Income and Adjusted
EPS(1)
Net income
$
15,901
$
58,766
Adjustments
2,876
3,630
Adjusted net income
$
18,777
$
62,396
Net income per common share, excluding
adjustments
$
0.25
$
0.69
(1)
This is a Non-GAAP measure. Refer to the
Non-GAAP Reconciliation section.
LSB Industries, Inc.
Condensed Consolidated Balance
Sheets
(Information at March 31, 2023
is unaudited)
March 31,
December 31,
2023
2022
(In Thousands)
Assets
Current assets:
Cash and cash equivalents
$
48,949
$
63,769
Short-term investments
376,882
330,553
Accounts receivable
60,251
75,494
Allowance for doubtful accounts
(693
)
(699
)
Accounts receivable, net
59,558
74,795
Inventories:
Finished goods
28,102
28,893
Raw materials
1,530
1,990
Total inventories
29,632
30,883
Supplies, prepaid items and other:
Prepaid insurance
12,271
17,429
Precious metals
14,474
13,323
Supplies
28,570
27,501
Other
9,491
8,346
Total supplies, prepaid items and
other
64,806
66,599
Total current assets
579,827
566,599
Property, plant and equipment, net
842,925
848,661
Other assets:
Operating lease assets
21,321
22,682
Intangible and other assets, net
1,697
1,877
23,018
24,559
$
1,445,770
$
1,439,819
LSB Industries, Inc.
Condensed Consolidated Balance
Sheets (continued)
(Information at March 31, 2023
is unaudited)
March 31,
December 31,
2023
2022
(In Thousands)
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
68,341
$
78,182
Short-term financing
10,168
16,134
Accrued and other liabilities
43,617
38,470
Current portion of long-term debt
8,544
9,522
Total current liabilities
130,670
142,308
Long-term debt, net
702,071
702,733
Noncurrent operating lease liabilities
13,460
14,896
Other noncurrent accrued and other
liabilities
522
522
Deferred income taxes
69,095
63,487
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value; 150 million
shares authorized, 91.2 million shares issued
9,117
9,117
Capital in excess of par value
497,216
497,179
Retained earnings
214,993
199,092
721,326
705,388
Less treasury stock, at cost:
Common stock, 15.0 million shares (14.9
million shares at December 31, 2022)
191,374
189,515
Total stockholders' equity
529,952
515,873
$
1,445,770
$
1,439,819
Non-GAAP Reconciliations
This news release includes certain “non-GAAP financial measures”
under the rules of the Securities and Exchange Commission,
including Regulation G. These non-GAAP measures are calculated
using GAAP amounts in our consolidated financial statements.
EBITDA and Adjusted EBITDA
Reconciliation
EBITDA is defined as net income (loss) plus interest expense and
interest income, net, less gain on extinguishment of debt, plus
depreciation and amortization (D&A) (which includes D&A of
property, plant and equipment and amortization of intangible and
other assets), plus provision (benefit) for income taxes. Adjusted
EBITDA is reported to show the impact of non-cash stock-based
compensation, one time/non-cash or non-operating items-such as,
one-time income or fees, loss (gain) on sale of a business and/or
other property and equipment, certain fair market value (FMV)
adjustments, and consulting costs associated with reliability and
purchasing initiatives (Initiatives). We historically have
performed turnaround activities on an annual basis; however, we
have moved towards extending turnarounds to a two or three-year
cycle. Rather than being capitalized and amortized over the period
of benefit, our accounting policy is to recognize the costs as
incurred. Given these turnarounds are essentially investments that
provide benefits over multiple years, they are not reflective of
our operating performance in a given year.
We believe that certain investors consider EBITDA a useful means
of measuring our ability to meet our debt service obligations and
evaluating our financial performance. In addition, we believe that
certain investors consider adjusted EBITDA as more meaningful to
further assess our performance. We believe that the inclusion of
supplementary adjustments to EBITDA is appropriate to provide
additional information to investors about certain items.
EBITDA and adjusted EBITDA have limitations and should not be
considered in isolation or as a substitute for net income,
operating income, cash flow from operations or other consolidated
income or cash flow data prepared in accordance with GAAP. Because
not all companies use identical calculations, this presentation of
EBITDA and adjusted EBITDA may not be comparable to a similarly
titled measure of other companies. The following table provides a
reconciliation of net income (loss) to EBITDA and adjusted EBITDA
for the periods indicated. Adjusted EBITDA margin is calculated by
taking adjusted EBITDA divided by Net Sales.
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
LSB Consolidated ($ In
Thousands)
Three Months Ended March 31,
2023
2022
Net income
$
15,901
$
58,766
Plus:
Interest expense and interest income,
net
8,731
9,955
Net loss on extinguishments of debt
—
113
Depreciation and amortization
17,604
17,507
Provision for income taxes
5,898
11,115
EBITDA
$
48,134
$
97,456
Stock-based compensation
719
803
Legal fees (Leidos)
273
342
Loss (gain) on disposal of assets
1,890
(46
)
Turnaround costs
(6
)
2,531
Adjusted EBITDA
$
51,010
$
101,086
LSB Industries, Inc.
Non-GAAP Reconciliations
(continued)
(in thousands, except per
share amounts)
Three Months Ended
March 31,
2023
2022
Numerator:
Net income
$
15,901
$
58,766
Adjustments:
Stock-based compensation
719
803
Legal fees (Leidos)
273
342
Loss (gain) on disposal of assets
1,890
(46
)
Turnaround costs
(6
)
2,531
Net income, excluding
adjustments
$
18,777
$
62,396
Denominator:
Adjusted weighted-average shares for
basic net income per share and for adjusted net income per
share(1)
75,807
88,421
Adjustment:
Unweighted shares, including unvested
restricted stock subject to forfeiture
409
1,691
Outstanding shares, net of treasury, at
period end for adjusted net income per share, excluding other
adjustments
76,216
90,112
Basic net income per common
share
$
0.21
$
0.66
Net income per common share, excluding
adjustments
$
0.25
$
0.69
(1) Excludes the weighted-average shares of unvested restricted
stock that are subject to forfeiture
Ammonia, AN, Nitric Acid, UAN Sales
Price Reconciliation
The following table provides a reconciliation of total
identified net sales as reported under GAAP in our consolidated
financial statements reconciled to netback sales which is
calculated as net sales less freight and other non-netback costs.
We believe this provides a relevant industry comparison among our
peer group.
Three Months Ended March 31,
2023
2022
(In Thousands)
Ammonia, AN, Nitric Acid, UAN net
sales
$
168,277
$
187,712
Less freight and other
11,754
10,609
Ammonia, AN, Nitric Acid, UAN netback
sales
$
156,523
$
177,103
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230502006088/en/
Cheryl Maguire, Executive Vice President & CFO (405)
510-3524 Fred Buonocore, CFA, Vice President of Investor Relations
(405) 510-3550 fbuonocore@lsbindustries.com
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