Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $9 million for Q3 2023, a significant decline from the record $50 million in Q3 2022, primarily due to lower market prices for nitrogen products and reduced nitric acid production [14][15][8] - Year-to-date cash flow from operations reached approximately $120 million, with capital expenditures of $41 million, resulting in nearly $80 million of free cash flow and a conversion rate of over 70% [16][60] - The company expects capital expenditures for Q4 2023 to be between $15 million and $20 million, with total CapEx for the year around $60 million [16] Business Line Data and Key Metrics Changes - Demand for ammonium nitrate in mining applications remains strong, driven by infrastructure projects and the growth of electric vehicles [13] - Sales volumes of nitric acid and derivative products were somewhat lower, but the company managed to meet most customer commitments by purchasing nitric acid or transporting products from other facilities [34][8] Market Data and Key Metrics Changes - Corn prices have decreased from recent highs of $7 per bushel to around $5, which is still considered healthy and incentivizes farmers to plant more corn [2][12] - Nitrogen prices are firming up, with Tampa ammonia currently at $625 per metric ton, a significant increase from the low of $285 per metric ton in July [36] - The company anticipates that average fertilizer prices, particularly nitrogen fertilizer prices, in 2024 will be higher than in 2023 [108] Company Strategy and Development Direction - The company is focused on expanding its El Dorado facility with an estimated cost of $400 million, with the USDA proposing to fund 25% of the project costs [10][30] - LSB Industries is advancing several core growth projects, including a partnership with INPEX and Air Liquide to develop a low-carbon ammonia production facility [19][29] - The company is prioritizing blue ammonia projects over green ammonia due to current market conditions and regulatory uncertainties [42][43] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment with Q3 results but remains optimistic about strong fertilizer demand due to lower farm input costs and the goal of maximizing yields [8][12] - The company expects a good fall ammonia run and anticipates healthy demand for fertilizer across the board in 2024 [107][108] - Management noted that the pricing challenges faced in 2023 have not deterred their long-term growth strategy and they continue to generate positive free cash flow [60] Other Important Information - The company has a stockholder rights plan to protect certain tax attributes [25] - The trailing 12-month total recordable injury rate was 0.34, reflecting the company's commitment to safety [26] - The company is in discussions with potential off-takers for its ammonia production and expects to finalize agreements as they progress through the pre-FEED phase [73][87] Q&A Session Summary Question: Can you provide more granularity on the Houston Ship Channel projects? - Management indicated that the project cost is estimated between $500 million and $750 million, with a potential 50/50 ownership structure with INPEX [62][47] Question: How has the UAW strike impacted nitric acid volumes? - Management stated there has been no impact on nitric acid volumes, as the strikes were short-lived [112] Question: What are the trends for nitric acid into year-end? - Management expects strong demand for nitric acid, with healthy market conditions continuing [87] Question: When do you expect to have off-take agreements for blue ammonia? - Management is currently in discussions and anticipates moving into the feed phase by the second quarter of 2025 [73] Question: What is the outlook for ammonia pricing in Q1 2024? - Management expects a significant increase in ammonia pricing for Q1 2024, as they have not sold anything forward [80]

Financial Performance - Q3 2023 net sales decreased year-over-year due to continued pricing weakness[53] - Q3 2023 Adjusted EBITDA was $9 million, down from $50 million in Q3 2022[23, 53] - Adjusted EBITDA margin decreased to 8% in Q3 2023, compared to 27% in Q3 2022[53, 61] - The company reported a net loss of $7.725 million for the three months ended September 2023[34] Market Overview - Corn supply is expected to decline modestly due to lower production[8] - Nitrogen prices have risen in recent months[8] - Tampa ammonia price settled at $625 per metric ton for November, up from $285 in July[18] - UAN (NOLA) spot price was $260 per short ton on October 27, 2023, compared to $553 per short ton on October 27, 2022[21] - Natural gas (NYMEX Spot Price) was $3.16 per MMBtu on October 27, 2023, compared to $5.19 per MMBtu on October 27, 2022[21] Strategic Initiatives - The company has a Stockholder Rights Plan in place to preserve substantial Net Operating Losses (NOLs)[3, 13] - The Rights Plan is designed to prevent an "ownership change" that could limit the use of NOLs[57] - LSB Industries is collaborating with INPEX, Air Liquide, and Vopak Moda to develop a world-scale blue ammonia production and export facility on the Houston Ship Channel[16, 31] - Expected production of 1.1 million metric tons of blue ammonia per year and sequestration of approximately 1.6 million metric tons of CO2[41]

```markdown PART I – Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for LSB Industries, Inc. as of September 30, 2023, reveal decreased sales and profitability [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from **$1.44 billion** to **$1.29 billion**, liabilities from **$924 million** to **$759 million**, and equity slightly increased | Balance Sheet Items | Sep 30, 2023 (In Thousands) | Dec 31, 2022 (In Thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $437,249 | $566,599 | | **Total Assets** | $1,292,206 | $1,439,819 | | **Total Current Liabilities** | $99,684 | $142,308 | | **Long-Term Debt, net** | $577,173 | $702,733 | | **Total Liabilities** | $759,462 | $924,046 | | **Total Stockholders' Equity** | $532,744 | $515,873 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 2023 reported a **net loss of $7.7 million**, a significant decline from **$2.3 million net income** in Q3 2022, due to lower net sales | Metric (In Thousands, Except Per Share) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $114,287 | $184,273 | $461,096 | $668,057 | | **Gross (Loss) Profit** | $(3,386) | $22,129 | $74,251 | $255,783 | | **Operating (Loss) Income** | $(9,499) | $13,066 | $48,532 | $225,695 | | **Net (Loss) Income** | $(7,726) | $2,312 | $33,270 | $164,477 | | **Diluted EPS** | $(0.10) | $0.03 | $0.44 | $1.86 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$120.5 million** from **$259.2 million**, with investing activities providing **$21.5 million** | Cash Flow Activity (In Thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $120,522 | $259,182 | | **Net cash provided (used) by investing activities** | $21,506 | $(392,948) | | **Net cash (used) provided by financing activities** | $(158,973) | $71,257 | | **Net (decrease) increase in cash** | $(16,945) | $(62,509) | | **Cash and cash equivalents at end of period** | $46,824 | $19,635 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies, debt, and legal matters, including a **$150 million** stock repurchase program and **$125 million** debt repurchase - The company manufactures and sells chemical products including ammonia, ammonium nitrate (AN), urea ammonium nitrate (UAN), and various acids for agricultural, industrial, and mining markets across four facilities[24](index=24&type=chunk) - A **$150 million** stock repurchase program was authorized in May 2023, with **$132 million** remaining as of September 30, 2023, and approximately **60,000 shares** repurchased during Q3 2023[28](index=28&type=chunk) - In Q2 2023, the company repurchased **$125 million** in principal of its Senior Secured Notes for approximately **$114.3 million**, recognizing a gain on debt extinguishment of about **$8.6 million**[50](index=50&type=chunk) | Net Sales by Product (In Thousands) | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | AN & Nitric Acid | $46,026 | $66,161 | $173,859 | $234,103 | | Urea ammonium nitrate (UAN) | $30,090 | $50,459 | $117,585 | $184,014 | | Ammonia | $26,823 | $52,075 | $129,850 | $200,861 | | Other | $11,348 | $15,578 | $39,802 | $49,079 | | **Total net sales** | **$114,287** | **$184,273** | **$461,096** | **$668,057** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A details operational and financial performance, attributing Q3 decline to lower product selling prices despite stronger volumes [Overview and Key Initiatives](index=18&type=section&id=Overview) Focuses on improving EHS and reliability, optimizing product mix, and developing low-carbon ammonia projects, including a Houston collaboration - Key 2023 initiatives include: - Improving facility reliability towards a **95% ammonia on-stream operating rate** - Broadening product distribution and optimizing product mix - Developing a strategy for low-carbon (blue and green) ammonia opportunities - Evaluating organic capacity expansion and strategic acquisitions[98](index=98&type=chunk) - The company is collaborating on a large-scale, low-carbon ammonia production and export project on the Houston Ship Channel, targeting over **1.1 million metric tons per year** by the end of 2027[100](index=100&type=chunk) - A project to capture and sequester over **450,000 metric tons of CO2 annually** at the El Dorado facility is underway, with a Class VI permit application filed with the EPA, enabling production of over **375,000 metric tons of blue ammonia**[103](index=103&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q3 2023 net sales fell **38%** to **$114.3 million**, resulting in an operating loss due to significantly lower average selling prices | Financial Metric (In Thousands) | Q3 2023 | Q3 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Net Sales** | $114,287 | $184,273 | $(69,986) | (38)% | | **Gross (Loss) Profit** | $(3,386) | $22,129 | $(25,515) | (115)% | | **Operating (Loss) Income** | $(9,499) | $13,066 | $(22,565) | N/A | | **Net (Loss) Income** | $(7,726) | $2,312 | $(10,038) | N/A | | Q3 Sales Volume & Pricing | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Ammonia Tons Sold** | 88,986 | 55,825 | 59% | | **Ammonia Avg. Price/Ton** | $301 | $933 | (68)% | | **UAN Tons Sold** | 118,135 | 115,352 | 2% | | **UAN Avg. Price/Ton** | $255 | $437 | (42)% | | Financial Metric (In Thousands) | Nine Months 2023 | Nine Months 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Net Sales** | $461,096 | $668,057 | $(206,961) | (31)% | | **Gross Profit** | $74,251 | $255,783 | $(181,532) | (71)% | | **Operating Income** | $48,532 | $225,695 | $(177,163) | N/A | | **Net Income** | $33,270 | $164,477 | $(131,207) | N/A | [Liquidity and Capital Resources](index=29&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of September 30, 2023, the company had **$317.5 million** in cash and investments, with **$120.5 million** from operations | Capitalization (In Millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $46.8 | $63.8 | | Short-term investments | $270.7 | $330.6 | | **Total cash & investments** | **$317.5** | **$394.4** | | Total long-term debt, net | $582.7 | $712.3 | | Total stockholders' equity | $532.7 | $515.9 | - Expected capital expenditures for the full year 2023 are approximately **$60 million to $65 million**, primarily for reliability and maintenance projects[168](index=168&type=chunk) - During the first nine months of 2023, the company repurchased **$125.0 million** in principal of its Senior Secured Notes and approximately **1.8 million shares** of common stock for **$17.8 million**[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Exposed to market risks from commodity price fluctuations (ammonia, natural gas) and interest rate changes, with no current variable-rate debt - The company is exposed to commodity price risk for its products and raw materials, particularly ammonia and natural gas, whose prices fluctuate with market supply and demand[187](index=187&type=chunk) - Interest rate risk is primarily related to the variable-rate revolving credit facility, which had no outstanding borrowings as of September 30, 2023[188](index=188&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, at a reasonable assurance level[189](index=189&type=chunk) PART II – Other Information [Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 5 of the financial statements for detailed information on environmental matters and other litigation - The company refers to Note 5 of the financial statements for a detailed discussion of its legal matters, including commitments and contingencies[200](index=200&type=chunk) [Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes from the risk factors previously disclosed in the company's Form 10-K for the year ended December 31, 2022 - There are no material changes from the risk factors disclosed in the company's 2022 Form 10-K[201](index=201&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q3 2023, **59,911 shares** were repurchased at **$9.78 per share**, with **$132.2 million** remaining in the program | Period | Total Shares Purchased | Average Price Paid per Share | Value Remaining in Program | | :--- | :--- | :--- | :--- | | July 1 – July 31, 2023 | 59,911 | $9.78 | $132,195,998 | | **Total Q3 2023** | **59,911** | **$9.78** | **$132,195,998** | [Other Information](index=38&type=section&id=Item%205.%20Other%20Information) Board member Barry H. Golsen entered a Rule 10b5-1 trading plan to potentially sell up to **576,047 shares** between December 2023 and December 2024 - On September 14, 2023, board member Barry H. Golsen entered into a Rule 10b5-1 trading plan to potentially sell up to **576,047 shares** of common stock, with sales under the plan occurring from December 15, 2023, to December 31, 2024[204](index=204&type=chunk) [Exhibits](index=39&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act - This section lists the exhibits filed with the Form 10-Q, including the CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002[206](index=206&type=chunk) ```

July 27, 2023 Q2'23 Overview – Healthy Volume Increase Offset by Lower Prices Return of capital to shareholders through the repurchase of $125 million of debt and 1.8 million shares of common stock | --- | --- | |--------------------------------------------|------------------------------------------------------------------------------------| | | | | have recently begun to increase | Nitrogen price trends have hit an inflection point and | | Tampa ammonia price settled at $295/MT for | August, up $10/MT; fir ...

Financial Data and Key Metrics Changes - The company generated adjusted EBITDA of $47 million and adjusted EPS of $0.25 in Q2 2023, which was slightly below expectations due to a significant decline in selling prices and lower UAN sales volumes compared to the previous year [11][14] - Cash flow from operations was $44 million with capital expenditures of $14 million, resulting in $30 million of free cash flow and a free cash flow conversion rate of approximately 64% [12] - Total debt at the end of Q2 was $584 million, with a net debt to trailing 12-month EBITDA leverage ratio of approximately 1x [13] Business Line Data and Key Metrics Changes - The average ammonia onstream rate for Q2 2023 was reported to be progressing towards a 95% onstream rate, reflecting improvements in operational reliability [6] - Sales volumes were higher in Q2 2023 compared to the previous year due to stronger ammonia operating rates and successful commercial initiatives [14] Market Data and Key Metrics Changes - Corn prices remain above multi-year averages, supporting strong fertilizer demand as the next planting season approaches [9] - Demand for industrial products, particularly nitric acid, is stable as global producers shift production to U.S. operations to take advantage of lower input costs [10] Company Strategy and Development Direction - The company is balancing investments in growth with returning capital to shareholders, having repurchased $175 million of common stock last year and $125 million of debt in Q2 2023 [7][8] - A capacity expansion project at the El Dorado site has been submitted for USDA funding consideration, with the potential for the USDA to fund up to 25% of the total project cost [9][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges of declining selling prices but expressed confidence in operational improvements and capital allocation strategies [19] - The company expects continued price appreciation for nitrogen products in the fourth quarter, driven by demand factors [18] Other Important Information - The company is advancing its low-carbon ammonia initiatives, including projects for blue and green ammonia, and has entered discussions with potential off-takers [19] - The company will participate in several upcoming industry conferences, indicating ongoing engagement with investors and stakeholders [30] Q&A Session Summary Question: Clarification on Q3 guidance - Management indicated that Q3 is expected to see a sequential decline similar to the previous year, with a significant drop from Q2 [25][28] Question: Update on El Dorado project - Management confirmed that the project is under consideration for USDA funding, with a public comment period currently open [26] Question: Cost tracking and inflation impact - Management acknowledged that costs are higher this year due to general inflation and investments in technical talent to improve reliability and safety [29] Question: Demand for nitric acid - Management noted stable demand for nitric acid, with contracts ensuring payment despite variability in customer production [42] Question: Pre-buying behavior of farmers - Management observed a shift towards just-in-time buying among farmers, but still expects a fair amount of pre-buying due to strong prices [46]

Environmental Initiatives - The company is developing projects to produce blue and green ammonia, with blue ammonia expected to capture and sequester over 450,000 metric tons of CO2 annually, potentially increasing production to over 375,000 metric tons of blue ammonia [97]. - The company has entered into a non-binding MOU with Amogy Inc. to develop low-carbon ammonia as a marine fuel, focusing on the U.S. inland waterways transportation sector [99]. - The company achieved a key milestone in its blue ammonia project by filing a pre-construction Class VI permit application with the EPA, recognized as complete in March 2023 [97]. Financial Performance - Consolidated net sales for Q2 2023 were $165.8 million, a decrease of 42% compared to $284.8 million in Q2 2022 [125]. - Average selling prices for key products decreased significantly, with ammonia prices dropping by 67% from $1,184 per ton in Q2 2022 to $388 per ton in Q2 2023 [135]. - Gross profit for Q2 2023 was $36.0 million, down 75% from $142.9 million in Q2 2022, resulting in a gross profit percentage of 21.7% compared to 50.2% in the prior year [138]. - Total net sales for the first half of 2023 were $346.8 million, a decrease of 28% compared to $483.8 million in the same period of 2022 [145]. - Adjusted gross profit for the first half of 2023 was $112.0 million, down 59% from $273.3 million in the first half of 2022 [145]. - Net income for the first half of 2023 was $41.0 million, a decline of 75% compared to $162.2 million for the same period in 2022 [145]. Production and Capacity - Ammonia production is targeted at approximately 830,000 to 850,000 tons for 2023, reflecting investments in plant reliability [123]. - The company is evaluating organic capacity expansion opportunities across all facilities, with potential projects expected to enhance annual profitability [100]. - The company has a three-year ammonia plant turnaround cycle, with the next planned for Q3 2024 [122]. Market Dynamics - The U.S. corn market dynamics are favorable, with corn prices above 10-year averages, which may support stronger fertilizer pricing in late 2023 and early 2024 [106]. - The company expects nitrogen pricing to stabilize near current levels, with anticipated demand increases as the 2024 planting season approaches [105]. - The USDA estimates a 62% increase in U.S. ending stocks for the 2023 harvest, indicating a potential impact on fertilizer demand [111]. Cost Management and Investments - The company plans to invest in improving Environmental, Health & Safety and Reliability at its facilities, aiming for a 95% ammonia on-stream operating rate to enhance profitability [95]. - The company is evaluating supply chain efficiencies to mitigate rising transportation costs impacting margins [120]. - Capital expenditures for 2023 are expected to be between $60 million and $80 million, primarily for reliability and maintenance projects [167]. Debt and Cash Management - The company repurchased $125 million in principal amount of Senior Secured Notes for approximately $114.3 million, recognizing a gain on extinguishment of approximately $8.6 million [127]. - Total long-term debt as of June 30, 2023, was $583.6 million, down from $712.3 million at the end of 2022 [166]. - Net cash provided by operating activities was $102.9 million for the first half of 2023, down from $220.8 million in the first half of 2022, a change of $117.9 million [159]. - Net cash provided by investing activities was $30.2 million for the first half of 2023, a significant improvement from net cash used of $341.9 million in the same period of 2022 [162]. - The company has approximately $55.4 million of availability on its undrawn Working Capital Revolver Loan as of June 30, 2023 [167]. - As of June 30, 2023, the company had approximately $314 million in cash and short-term investments [169].

PART I – Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Q1 2023, showing decreased net sales and net income Condensed Consolidated Balance Sheets (Unaudited) | (In Thousands) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total current assets** | $579,827 | $566,599 | | **Total assets** | $1,445,770 | $1,439,819 | | **Total current liabilities** | $130,670 | $142,308 | | **Long-term debt, net** | $702,071 | $702,733 | | **Total stockholders' equity** | $529,952 | $515,873 | Condensed Consolidated Statements of Operations (Unaudited) | (In Thousands, Except Per Share) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Net sales** | $180,964 | $198,981 | | **Gross profit** | $41,605 | $90,730 | | **Operating income** | $30,535 | $79,971 | | **Net income** | $15,901 | $58,766 | | **Diluted EPS** | $0.21 | $0.65 | Condensed Consolidated Statements of Cash Flows (Unaudited) | (In Thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $59,247 | $85,492 | | **Net cash used by investing activities** | ($63,379) | ($97,514) | | **Net cash (used) provided by financing activities** | ($10,688) | $184,177 | | **Net (decrease) increase in cash** | ($14,820) | $172,155 | - The company manufactures and sells chemical products including ammonia, ammonium nitrate (AN), urea ammonium nitrate (UAN), and various acids for agricultural, industrial, and mining applications[24](index=24&type=chunk) Disaggregated Net Sales by Product Type (Unaudited) | (In Thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | AN & Nitric Acid | $58,272 | $71,800 | | Urea ammonium nitrate (UAN) | $46,590 | $56,569 | | Ammonia | $63,415 | $59,342 | | Other | $12,687 | $11,270 | | **Total net sales** | **$180,964** | **$198,981** | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) MD&A for Q1 2023, discussing lower prices, higher volumes, natural gas cost impacts, and key strategic initiatives [Overview and Key Initiatives](index=17&type=section&id=Overview%20and%20Key%20Initiatives) Key initiatives for 2023 focus on EHS, plant reliability, product distribution, mix, and low-carbon ammonia - Key initiatives include improving EHS and reliability, broadening product distribution, optimizing product mix, and developing a strategy for low-carbon ammonia[94](index=94&type=chunk) - The company is evaluating debottlenecking projects to increase production capacity and is continuously assessing strategic acquisition opportunities[99](index=99&type=chunk) [Recent Business Developments](index=18&type=section&id=Recent%20Business%20Developments) LSB signed agreements for low/no-carbon ammonia projects, with Q1 2023 sales volumes offset by lower selling prices - Entered an agreement with Lapis Energy to develop a carbon capture project at the El Dorado facility to produce over **375,000 metric tons of blue ammonia annually** The EPA accepted the pre-construction Class VI permit application in March 2023[96](index=96&type=chunk) - Partnered with Thyssenkrupp and Bloom Energy to develop a project to produce approximately **30,000 metric tons of green ammonia per year** at the Pryor facility[97](index=97&type=chunk) - In Q1 2023, higher sales volumes were more than offset by lower selling prices, primarily due to a decline in European natural gas costs which allowed European ammonia facilities to resume operations[98](index=98&type=chunk)[99](index=99&type=chunk) [Consolidated Results of Operations](index=21&type=section&id=Consolidated%20Results%20of%20Operations) Q1 2023 net sales decreased 9% to $181.0 million, operating income fell 62% to $30.5 million, due to lower prices and higher gas costs Q1 2023 vs Q1 2022 Financial Performance | (In Thousands) | Q1 2023 | Q1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total net sales** | $180,964 | $198,981 | ($18,017) | (9%) | | **Gross profit** | $41,605 | $90,730 | ($49,125) | (54%) | | **Operating income** | $30,535 | $79,971 | ($49,436) | (62%) | | **Net income** | $15,901 | $58,766 | ($42,865) | (73%) | Q1 Sales Volume and Average Selling Prices (YoY Change) | Product | Sales Volume Change | Avg. Selling Price Change | | :--- | :--- | :--- | | AN & Nitric Acid | (15%) | (4%) | | UAN | +13% | (27%) | | Ammonia | +47% | (27%) | - The decrease in gross profit was primarily driven by lower sales prices, partially offset by higher sales volumes of ammonia and UAN Profitability was also negatively impacted by higher average natural gas costs (**$5.66/MMBtu** in Q1 2023 vs. **$4.74/MMBtu** in Q1 2022)[115](index=115&type=chunk)[133](index=133&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2023, company held $425.8 million cash/investments, Q1 operating cash flow $59.2 million, expects $60-80 million capex Capitalization Summary | (In Millions) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $48.9 | $63.8 | | Short-term investments | $376.9 | $330.6 | | **Total cash & investments** | **$425.8** | **$394.4** | | **Total long-term debt, net** | **$710.6** | **$712.3** | | **Total stockholders' equity** | **$530.0** | **$515.9** | - Expected capital expenditures for the full year 2023 are approximately **$60 million to $80 million**, mainly for reliability and maintenance capital projects[148](index=148&type=chunk) - The company believes that cash on hand, short-term investments, availability on its revolving credit facility, and cash flow from operations will be sufficient to fund liquidity needs for the next twelve months[149](index=149&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risks include commodity price fluctuations (natural gas, ammonia), forward sales, and interest rates - The company is exposed to commodity price risk as a substantial portion of its products and raw materials are commodities whose prices fluctuate with market supply and demand[167](index=167&type=chunk) - As of March 31, 2023, there were no embedded losses associated with forward sales commitments with firm sales prices[166](index=166&type=chunk) - Interest rate risk is limited as there were no outstanding borrowings on the variable-rate revolving credit facility as of March 31, 2023[168](index=168&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) CEO/CFO concluded disclosure controls effective as of March 31, 2023, with no material changes to internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023[169](index=169&type=chunk) - No changes to internal control over financial reporting occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[169](index=169&type=chunk) PART II – Other Information [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) Company subject to various legal proceedings, including environmental, West Fertilizer explosion, and contractual disputes - For a detailed discussion of legal matters, the report refers to Note 5—Commitments and Contingencies—Legal Matters in the Notes to the Condensed Consolidated Financial Statements[180](index=180&type=chunk) - Key legal matters discussed in Note 5 include ongoing environmental compliance and remediation, litigation related to the West Fertilizer Co explosion in 2013, and a dispute with contractor Leidos over the El Dorado Ammonia Plant expansion[50](index=50&type=chunk)[65](index=65&type=chunk)[69](index=69&type=chunk) [Risk Factors](index=32&type=page&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the company's 2022 Form 10-K - There are no material changes from the risk factors disclosed in the company's 2022 Form 10-K[181](index=181&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is reported as not applicable for the period - Not applicable[182](index=182&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) Index of exhibits filed with Form 10-Q, including corporate governance documents and CEO/CFO certifications - The report includes an index of exhibits, listing documents such as the Restated Certificate of Incorporation, Bylaws, and CEO/CFO certifications pursuant to the Sarbanes-Oxley Act[184](index=184&type=chunk)

Financial Data and Key Metrics Changes - The company generated adjusted EBITDA of $51 million in Q1 2023, down from $101 million in Q1 2022, primarily due to lower selling prices for nitrogen products [12][13] - The net debt to trailing 12-month EBITDA leverage ratio was less than one times, significantly below the target leverage ratio of below 2.5 times in a normalized pricing environment [6][39] - Cash flow from operations was $59 million, with capital expenditures of $18 million, resulting in free cash flow of $41 million and a free cash flow conversion rate of over 80% [39] Business Line Data and Key Metrics Changes - The industrial business demand remained steady, with stable nitric acid demand and strong demand for AN in mining applications due to infrastructure growth and electric vehicle production [5] - Despite a decline in market prices for nitrogen products, production and sales volume increased compared to the previous year, attributed to investments in facilities and improved operational reliability [9][40] Market Data and Key Metrics Changes - Domestic and worldwide stock-to-use ratios for corn are at multi-year lows, with expectations for corn prices to remain high due to low planting ratios [4][10] - The NOLA UAN benchmark pricing was approximately $275 per ton in Q2 2023, lower than the realized prices for Q1 2023, while the Tampa ammonia benchmark price settled at $380 per metric ton in May, down from an average of $728 per metric ton in Q1 2023 [14] Company Strategy and Development Direction - The company aims to achieve zero recordable injuries and environmental releases, with a target of 95% capacity utilization for ammonia plants [16] - Future project feasibility studies are expected to be completed by the end of Q2 2023, with potential investment decisions not anticipated until the second half of 2024 [17][18] - The company is focusing on blue and green ammonia projects to lead in decarbonizing the industry, which are expected to enhance profitability and shareholder value [45][46] Management's Comments on Operating Environment and Future Outlook - Management expects a strong year-over-year increase in production and sales volume, despite lower selling prices, leading to healthy profitability and cash flow for 2023 [11][19] - The company anticipates that the spring planting season will drive higher overall sales volumes in Q2 2023 compared to Q2 2022, offsetting some price declines [15] - Management noted that while product selling prices have decreased, they believe prices are at or near a bottom, particularly for ammonia [41] Other Important Information - The company had approximately $426 million in cash and short-term investments at the end of Q1 2023, with plans for potential stock buybacks discussed in the upcoming board meeting [39][76] - The company will participate in several upcoming conferences, including the Goldman Sachs Leveraged Finance Conference and the Wells Fargo Industrial Conference [20] Q&A Session Summary Question: Pricing outlook for Q2 and beyond - Management acknowledged that it would be challenging for realized pricing in Q2 to exceed Q1 levels, but stabilizing prices could help in the second half of the year [22] Question: Volume expectations due to delayed season - Management does not foresee an impact on overall volume targets, expecting farmers to make up nitrogen shortfalls [23] Question: Natural gas hedging and pricing sensitivity - Management confirmed that 90% of natural gas needs are hedged, with expectations for gas prices around $3.40 per MMBtu for Q2 and $370 for the second half of the year [41][79] Question: Inventory levels and market conditions - Management indicated that inventory levels are in line with the previous year, with some length in the ammonia market but tighter conditions for urea and UAN [63] Question: Future capital allocation plans - Management is considering stock buybacks and debt reduction as part of their capital allocation strategy, with no major capital decisions expected until H2 2024 [76][77]

EPS $0.21 $0.66 Adjusted EPS1 $0.25 $0.69 Q1 2023 EARNINGS PRESENTATION Statements in this presentation 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 grow ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number: 1-7677 LSB INDUSTRIES, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 73-1015226 (State of o ...