LSB Industries, Inc. Reports Record Operating Results for the 2022 Fourth Quarter and Full Year

Rhea-AI Summary

LSB Industries, Inc. (NYSE: LXU) reported Q4 2022 results with net sales of $234 million, up from $190 million in Q4 2021. Adjusted EBITDA reached $105 million compared to $90 million last year, with adjusted EPS increasing to $0.90 from $0.72. For full-year 2022, net sales were $902 million, nearly doubling from $556 million in 2021, and adjusted EBITDA was $415 million vs. $191 million. The company repurchased 5.6 million shares in Q4 and completed a total $175 million stock buyback program. LSB plans further investments and aims for continued profitability amid a favorable nitrogen pricing environment.

Positive

• Net sales increased by 23% YoY to $234 million in Q4 2022.
• Full-year net sales grew 62% to $902 million vs. $556 million in 2021.
• Adjusted EBITDA for Q4 2022 was $105 million, a 17% increase YoY.
• Total liquidity reached approximately $460 million as of December 31, 2022.
• Successful completion of a $175 million stock repurchase program, enhancing shareholder value.

Negative

• Lower sales volumes due to a turnaround at the Pryor facility and weather-related shutdown at the Cherokee facility.
• Increased natural gas costs, which rose by 57% YoY, potentially affecting margins.

OKLAHOMA CITY--(BUSINESS WIRE)-- LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the fourth quarter ended December 31, 2022.

Fourth Quarter 2022 Highlights

• Net sales of $234 million compared to $190 million in the fourth quarter of 2021
• Adjusted EBITDA⁽¹⁾ of $105 million compared to $90 million in the fourth quarter of 2021
• Adjusted EPS⁽¹⁾ of $0.90 compared to $0.72 in the fourth quarter of 2021
• Cash Flow from Operations of $86 million and Capital Expenditures of $13 million
• Repurchased approximately 5.6 million shares during the fourth quarter

Full Year 2022 Highlights

• Net sales of $902 million compared to $556 million in the full year 2021
• Adjusted EBITDA⁽¹⁾ of $415 million compared to $191 million in the full year 2021
• Adjusted EPS⁽¹⁾ of $3.09 compared to $0.85 in the full year 2021
• Cash Flow from Operations of $346 million and Capital Expenditures of $46 million
• Total liquidity of approximately $460 million as of December 31, 2022
• Successfully completed major turnarounds at two facilities
• Completed $175 million stock repurchase program of approximately 13.2 million shares during the full year 2022 at an average price of approximately $13 per share leaving shares outstanding as of December 31, 2022 of 76.3 million

“Our fourth quarter capped off the most profitable year in our company's history," stated Mark Behrman, LSB’s President and CEO. “Our strategic commercial initiatives, optimizing our sales mix to maximize margins, combined with favorable positioning across our end markets, enabled us to capitalize on the robust pricing environment as evidenced by our selling prices in the fourth quarter. As a result, we delivered strong top and bottom-line growth for the quarter and full year. Additionally, we generated significant cash flow and further enhanced our liquidity and net leverage position, providing greater financial flexibility to pursue our multi-year growth plan.”

“LSB's transformation continued in 2022. In addition to $175 million in accretive share repurchases, we executed two secondary offerings for our largest shareholder, which allowed us to broaden our shareholder base, create more liquidity in our common stock and increase our profile with the investment community. We continued to invest significantly in our manufacturing assets, completing major turnarounds at both our El Dorado and Pryor facilities and have already seen the benefits from those investments. Lastly, with respect to our sustainability efforts, we launched our clean energy strategy, announcing a low carbon 'blue' ammonia project at our El Dorado facility and a zero carbon 'green' ammonia project at our Pryor facility."

Mr. Behrman continued, "We are excited about our opportunities in the coming year. While moderating from 2022 peak levels, selling prices for our products remain above historical averages and we expect to see an increase in corn and wheat acres planted this spring. As such, we expect another year of strong profitability and cash flow. We expect to make additional investments in our facilities as we progress towards our zero-safety incident and 95% on-stream rate goals and will continue to review using our cash to either reduce our debt or to repurchase additional stock. We also expect to formalize and announce plans to commence debottlenecking projects at one or more of our facilities, increasing our production capacity and enhancing margins in the coming years. Finally, we anticipate taking meaningful steps in our blue and green ammonia projects that will move us closer to our CO₂ emission reduction goals, while at the same time, providing us with incremental profitability."

Mr. Behrman concluded, "We are highly enthusiastic about both our near-term and multi-year prospects for driving shareholder value through a variety of company-specific initiatives that are largely independent of commodity market pricing trends."

Fourth Quarter Results Overview

		Three Months Ended December 31,
Product (Gross Sales in $000's)		2022			2021			% Change
AN & Nitric Acid		$	81,576		$	74,725		9	%
Urea ammonium nitrate (UAN)			55,449			50,269		10	%
Ammonia			83,144			53,146		56	%
Other			13,485			12,088		12	%
		$	233,654		$	190,228		23	%

Comparison of 2022 to 2021 quarterly periods:

• Net sales increased during the quarter driven by stronger pricing for all of our products. The benefit of stronger pricing was partially offset by lower sales volumes related to the turnaround at our Pryor facility and the impact of extremely cold weather that caused the Cherokee facility to shut down during the final week of the quarter.
• The year-over-year improvement in operating income and adjusted EBITDA primarily resulted from higher selling prices, partially offset by higher natural gas feedstock prices and lower sales volumes.

The following tables provide key sales metrics for our products:

		Three Months Ended December 31,
Key Product Volumes (short tons sold)		2022			2021			% Change
AN & Nitric Acid			157,104			181,467		(13	)%
Urea ammonium nitrate (UAN)			102,912			126,476		(19	)%
Ammonia			84,100			74,801		12	%
			344,116			382,744		(10	)%
Average Selling Prices (price per short ton) (A)
AN & Nitric Acid		$	464		$	354		31	%
Urea ammonium nitrate (UAN)		$	522		$	382		37	%
Ammonia		$	978		$	701		40	%
(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 December 31,
		2022			2021			% Change
Average Benchmark Prices (price per ton)
Tampa Ammonia (MT) Benchmark		$	1,116		$	851		31	%
NOLA UAN		$	533		$	530		1	%
Input Costs
Average natural gas cost/MMBtu		$	6.95		$	4.42		57	%

Financial Position and Capital Expenditures

As of December 31, 2022, our total liquidity was approximately $460 million, including $394 million in cash and short-term investments and approximately $64 million of availability under our Working Capital Revolver. Total long-term debt, including the $10 million current portion, was $712 million on December 31, 2022 compared to $528 million on December 31, 2021.

Interest expense for the fourth quarter of 2022 was $12 million, in-line with the fourth quarter of 2021.

During the fourth quarter we repurchased approximately 5.6 million shares of the Company’s stock at an average price of approximately $13 per share. Shares were repurchased under the Company's stock repurchase plan which was approved by our Board of Directors in May 2022 at $50 million, expanded by the Board to $100 million in August 2022 and to $175 million in October 2022. We completed the full amount of the repurchase plan over the course of 2022.

Capital expenditures were approximately $13 million for the fourth quarter of 2022. 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 coupled with the seasonal pause in demand that typically precedes the start of the spring planting season. Despite these factors, nitrogen pricing remains significantly above 10-year averages and appears likely to remain above these averages for 2023 due to the following:

U.S. corn stock/use ratios are at their lowest levels in a decade. Key factors include the impact on global corn supplies of dry conditions in South America, the Western U.S. and parts of Europe during 2022. As a result, corn prices remain near 10-year highs suggesting that farmers will likely be incentivized to plant additional acres and maximize yield through the coming planting season in order to capitalize on the favorable economics. Subject to supportive weather we expect this to translate into strong demand and above historic average pricing for nitrogen fertilizers in the coming planting season.

Additionally, natural gas prices in Europe have dropped in recent months due to a reduction in demand primarily related to warmer than expected temperatures throughout the continent this winter and a reduction in industrial production. The drop in feedstock costs has enabled numerous European ammonia facilities to resume operations. Despite lower gas costs, natural gas costs in Europe remain significantly higher than those in the U.S. and European operators remain the marginal producers, with production costs substantially higher than those in the U.S.

With respect to industrial markets, demand remains generally stable with domestic end-use markets continuing to be stronger than those in Europe and Asia. Inflation and other economic pressures are impacting some parts of the chemical manufacturing industry, while mining activity remains strong. Additionally, recent announcements from automotive manufacturers and suppliers indicate that some degree of improvement in auto production could unfold during 2023, which would be beneficial to demand for nitric acid.

Sales Volume Outlook

Estimated sales volumes for the full year 2023 are as follows:

Products	Full Year 2023 Sales*(tons)	Full Year Actual 2022 Sales (tons)
AN & Nitric Acid	590,000 – 610,000	589,000
Urea Ammonium Nitrate (UAN)	530,000 – 550,000	449,000
Ammonia	330,000 – 350,000	276,000
*2023 sales volumes forecast reflects no planned turnarounds as compared to turnarounds at the El Dorado and Pryor facilities during 2022.

Conference Call

LSB’s management will host a conference call covering the fourth quarter results on Thursday, February 23, 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								Twelve Months Ended
		December 31,								December 31,
		2022				2021				2022				2021
		(In Thousands, Except Per Share Amounts)
Net sales		$	233,654			$	190,228			$	901,711			$	556,239
Cost of sales			141,070				111,764				553,344				417,260
Gross profit			92,584				78,464				348,367				138,979
Selling, general and administrative expense			9,717				9,090				39,428				38,028
Other expense (income), net			184				(314	)			561				(97	)
Operating income			82,683				69,688				308,378				101,048
Interest expense, net			12,372				11,760				46,827				49,378
Net loss on extinguishments of debt			—				20,259				113				10,259
Non-operating other expense (income), net			(2,456	)			(44	)			(8,083	)			2,422
Income before benefit for income taxes			72,767				37,713				269,521				38,989
Provision (benefit) for income taxes			6,897				(4,369	)			39,174				(4,556	)
Net income			65,870				42,082				230,347				43,545
Dividends on convertible preferred stocks			—				73				—				298
Dividends on Series E redeemable preferred stock			—				—				—				29,914
Accretion of Series E redeemable preferred stock			—				—				—				1,523
Deemed dividend on Series E and Series F redeemable preferred stocks			—				—				—				231,812
Net income (loss) attributable to common stockholders		$	65,870			$	42,009			$	230,347			$	(220,002	)
Basic:
Net income (loss)		$	0.84			$	0.49			$	2.72			$	(4.40	)
Diluted:
Net income (loss)		$	0.83			$	0.47			$	2.68			$	(4.40	)
Adjusted Net Income and Adjusted EPS(1)
Adjusted net income attributable to common stockholders, excluding Exchange Transaction		$	65,870			$	42,009			$	230,347			$	43,247
Other adjustments			5,698				23,005				35,706				32,721
Adjusted net income attributable to common stockholders, excluding Exchange Transaction and other adjustments		$	71,568			$	65,014			$	266,053			$	75,968
Adjusted net income per common share, excluding Exchange Transaction and other adjustments		$	0.90			$	0.72			$	3.09			$	0.85
(1) This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section.

LSB Industries, Inc. Consolidated Balance Sheets (Information at December 31, 2022 is unaudited)
		December 31,
		2022				2021
		(In Thousands)
Assets
Current assets:
Cash and cash equivalents		$	63,769			$	82,144
Short-term investments			330,553				—
Accounts receivable			75,494				86,902
Allowance for doubtful accounts			(699	)			(474	)
Accounts receivable, net			74,795				86,428
Inventories:
Finished goods			28,893				14,688
Raw materials			1,990				1,895
Total inventories			30,883				16,583
Supplies, prepaid items and other:
Prepaid insurance			17,429				14,244
Precious metals			13,323				14,945
Supplies			27,501				26,558
Other			8,346				2,234
Total supplies, prepaid items and other			66,599				57,981
Total current assets			566,599				243,136
Property, plant and equipment, net			848,661				858,480
Other assets:
Operating lease assets			22,682				27,317
Intangible and other assets, net			1,877				3,907
			24,559				31,224
		$	1,439,819			$	1,132,840

LSB Industries, Inc. Consolidated Balance Sheets (continued) (Information at December 31, 2022 is unaudited)
		December 31,
		2022				2021
		(In Thousands)
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	78,182			$	49,458
Short-term financing			16,134				12,716
Accrued and other liabilities			38,470				33,301
Current portion of long-term debt			9,522				9,454
Total current liabilities			142,308				104,929
Long-term debt, net			702,733				518,190
Noncurrent operating lease liabilities			14,896				19,568
Other noncurrent accrued and other liabilities			522				3,030
Deferred income taxes			63,487				26,633
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			497,179				493,161
Retained earnings (accumulated deficit)			199,092				(31,255	)
			705,388				471,023
Less treasury stock, at cost:
Common stock, 14.9 million shares (1.4 million shares at December 31, 2021)			189,515				10,533
Total stockholders' equity			515,873				460,490
		$	1,439,819			$	1,132,840

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 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.

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 ($ In Thousands)		Three Months Ended December 31,						Year Ended December 31,
		2022			2021			2022			2021
Net income		$	65,870		$	42,082		$	230,347		$	43,545
Plus:
Interest expense, net			9,908			11,760			41,407			49,378
Net loss on extinguishments of debt		-				20,259			113			10,259
Depreciation and amortization			17,117			17,619			68,019			69,943
Provision (benefit) for income taxes			6,897			(4,369	)		39,174			(4,556	)
EBITDA		$	99,792		$	87,351		$	379,060		$	168,569
Stock-based compensation			936			1,187			4,025			5,516
Change of Control		-			-			-				3,223
Noncash (gain) on natural gas contracts		-			-			-				(1,205	)
Legal fees (Leidos)			200			296			1,114			1,894
Loss on disposal of assets			391			133			1,219			823
Fair market value adjustment on preferred stock embedded derivatives		-			-			-				2,258
Turnaround costs			4,171			1,130			29,235			9,953
Adjusted EBITDA		$	105,490		$	90,097		$	414,653		$	191,031

LSB Industries, Inc. Non-GAAP Reconciliations (continued) (in thousands, except per share amounts)
		Three Months Ended						Twelve Months Ended
		December 31,						December 31,
		2022			2021			2022			2021
Numerator:
Net income (loss) attributable to common stockholders		$	65,870		$	42,009		$	230,347		$	(220,002	)
Adjustments for Exchange Transaction:
Dividend requirements on Series E Redeemable Preferred			-			-			-			29,914
Deemed dividend on Series E and Series F Redeemable Preferred			-			-			-			231,812
Accretion of Series E Redeemable Preferred			-			-			-			1,523
Adjusted net income attributable to common stockholders, excluding Exchange Transaction			65,870			42,009			230,347			43,247
Other Adjustments:
Stock-based compensation			936			1,187			4,025			5,516
Change of control			-			-			-			3,223
Noncash gain on natural gas contracts			-			-			-			(1,205	)
Legal fees (Leidos)			200			296			1,114			1,894
Loss on disposal of assets			391			133			1,219			823
FMV adjustment on preferred stock embedded derivative			-			-			-			2,258
Turnaround costs			4,171			1,130			29,235			9,953
Net loss on extinguishment of debt			-			20,259			113			10,259
Adjusted net income attributable to common stockholders, excluding Exchange Transaction and other adjustments		$	71,568		$	65,014		$	266,053		$	75,968
Denominator:
Adjusted weighted-average shares for basic net income per share and for adjusted net income per share, excluding Exchange Transaction (1)			78,224			86,507			84,753			49,963
Adjustment:
Unweighted shares, including unvested restricted stock subject to forfeiture			859			3,286			1,250			39,830
Outstanding shares, net of treasury, at period end for adjusted net income per share, excluding Exchange Transaction and other adjustments			79,083			89,793			86,003			89,793
Basic net income (loss) per common share		$	0.84		$	0.49		$	2.72		$	(4.40	)
Adjusted net income per common share, excluding Exchange Transaction		$	0.84		$	0.49		$	2.72		$	0.87
Adjusted net income per common share, excluding Exchange Transaction and other adjustments		$	0.90		$	0.72		$	3.09		$	0.85
Adjusted Net Income and Adjusted EPS(1)
Adjusted net income attributable to common stockholders, excluding Exchange Transaction		$	65,870		$	42,009		$	230,347		$	43,247
Other adjustments			5,698			23,005			35,706			32,721
Adjusted net income		$	71,568		$	65,014		$	266,053		$	75,968
Adjusted net income per common share, excluding Exchange Transaction and other adjustments		$	0.90		$	0.72		$	3.09		$	0.85
(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 December 31,
		2022			2021
		(In Thousands)
Ammonia, AN, Nitric Acid, UAN Net sales		$	220,170		$	178,140
Less freight and other			11,344			13,233
Ammonia, AN, Nitric Acid, UAN netback sales		$	208,826		$	164,907

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230222005947/en/

Cheryl Maguire, Executive Vice President & CFO

(405) 510-3524

Fred Buonocore, CFA, Vice President of Investor Relations

(405) 510-3550

fbuonocore@lsbindustries.com

Source: LSB Industries, Inc.

FAQ

What were LSB Industries' fourth quarter results for 2022?

LSB Industries reported Q4 2022 net sales of $234 million, adjusted EBITDA of $105 million, and adjusted EPS of $0.90.

How did LSB Industries perform in the full year 2022?

In 2022, LSB reported total net sales of $902 million, up from $556 million in 2021, along with adjusted EBITDA of $415 million.

What is the current liquidity position of LSB Industries?

As of December 31, 2022, LSB Industries had a total liquidity of approximately $460 million.

How many shares did LSB Industries repurchase in Q4 2022?

LSB Industries repurchased approximately 5.6 million shares at an average price of $13 per share during Q4 2022.

What are the sales volume estimates for LSB Industries in 2023?

For 2023, estimated sales volumes include 590,000-610,000 tons for AN & Nitric Acid, 530,000-550,000 tons for UAN, and 330,000-350,000 tons for Ammonia.