LSB Industries(US:LXU)2025-07-30 20:16PART I – Financial Information Financial Statements Unaudited condensed financial statements for LSB Industries, Inc. as of June 30, 2025, show decreased assets and cash flow, with net sales up but net income significantly down year-over-year Condensed Consolidated Balance Sheets Total assets decreased to $1.128 billion by June 30, 2025, from $1.187 billion at year-end 2024, driven by reduced cash and investments, while liabilities also fell and equity slightly rose | Balance Sheet Items | June 30, 2025 (Thousands of USD) | December 31, 2024 (Thousands of USD) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $5,614 | $20,230 | | Short-term investments | $119,278 | $163,971 | | Total current assets | $255,212 | $309,714 | | Total assets | $1,128,083 | $1,187,188 | | Liabilities & Equity | | | | Total current liabilities | $96,511 | $135,634 | | Long-term debt, net | $446,370 | $476,163 | | Total liabilities | $632,283 | $695,548 | | Total stockholders' equity | $495,800 | $491,640 | Condensed Consolidated Statements of Operations Q2 2025 net sales increased to $151.3 million, but net income sharply declined to $3.0 million from $9.6 million year-over-year, a trend also seen in the six-month period due to higher cost of sales | Metric (Thousands of USD, Except Per Share) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $151,296 | $140,073 | $294,728 | $278,277 | | Gross profit | $23,173 | $27,415 | $37,557 | $49,693 | | Operating income | $10,493 | $14,403 | $14,961 | $25,663 | | Net income | $3,006 | $9,555 | $1,366 | $15,178 | | Diluted EPS | $0.04 | $0.13 | $0.02 | $0.21 | Condensed Consolidated Statements of Cash Flows Net cash from operations for the six months ended June 30, 2025, significantly decreased to $25.0 million from $65.5 million year-over-year, with investing cash also down and financing cash used for debt repurchases | Cash Flow Activity (Thousands of USD) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $25,001 | $65,489 | | Net cash provided by investing activities | $4,826 | $168,786 | | Net cash used by financing activities | $(44,443) | $(118,973) | | Net (decrease) increase in cash | $(14,616) | $115,302 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, business nature, long-term debt, debt repurchases, disaggregated net sales by product, and environmental commitments, with the company operating as a single chemical manufacturing segment - The company manufactures and sells chemical products including ammonia, ammonium nitrate (HDAN/LDAN), urea ammonia nitrate (UAN), and various acids from four facilities21 Product Net Sales | Product Net Sales (Thousands of USD) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | AN & Nitric Acid | $61,707 | $58,442 | $119,325 | $106,877 | | Urea ammonium nitrate (UAN) | $52,262 | $42,808 | $96,127 | $84,000 | | Ammonia | $26,830 | $28,448 | $60,102 | $67,978 | | Other | $10,497 | $10,375 | $19,174 | $19,422 | | Total net sales | $151,296 | $140,073 | $294,728 | $278,277 | - During Q2 2025, the company repurchased $32.4 million in principal of its Senior Secured Notes for $32.1 million, resulting in a small loss on extinguishment of debt of $0.1 million, compared to a $1.9 million gain on debt extinguishment in Q2 20245455 - As of June 30, 2025, the company had remaining performance obligations of approximately $126.6 million, with 56% expected to be recognized as revenue from 2025 through 202789 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses 2025 initiatives, including safety, product optimization, and low carbon ammonia, noting Q2 results were impacted by higher natural gas costs despite increased sales, with sufficient liquidity and projected capital expenditures Overview and Key Initiatives LSB focuses on chemical manufacturing for agricultural and industrial markets, with 2025 initiatives centered on EHS, product optimization, and developing low carbon ammonia, including a CO2 capture project at El Dorado - Key 2025 initiatives include: - Investing in EHS and reliability to improve plant performance - Optimizing product mix and distribution to enhance profitability and stability - Developing low carbon ammonia to capitalize on growing demand for hydrogen-based energy sources101 - The company is pursuing a low carbon ammonia project at its El Dorado Facility with Lapis Carbon Solutions, aiming to be operational by the end of 2026, expected to capture 400,000 to 500,000 metric tons of CO2 annually and qualify for Section 45Q tax credits103105106 Results of Operations Q2 2025 net sales increased 8% to $151.3 million due to higher UAN pricing and volumes, but gross profit fell 15% to $23.2 million and operating income decreased 27% to $10.5 million due to higher natural gas costs Key Financial Metrics | Metric (Millions of USD) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Net Sales | $151.3M | $140.1M | +8% | | Gross Profit | $23.2M | $27.4M | -15% | | Operating Income | $10.5M | $14.4M | -27% | | Net Income | $3.0M | $9.6M | -68% | Product Sales Volumes | Product Sales Volumes (Tons) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | AN & Nitric Acid | 161,509 | 147,619 | +9% | | Urea ammonium nitrate (UAN) | 151,807 | 137,499 | +10% | | Ammonia | 66,069 | 72,294 | -9% | Average Selling Prices | Average Selling Prices (USD per Ton) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | AN & Nitric Acid | $382 | $396 | -4% | | Urea ammonium nitrate (UAN) | $344 | $311 | +11% | | Ammonia | $406 | $394 | +3% | - The average cost of natural gas, a primary feedstock, increased significantly to $3.37 per MMBtu in Q2 2025 from $1.92 per MMBtu in Q2 2024, negatively impacting gross profit123 Liquidity and Capital Resources As of June 30, 2025, liquidity included $124.9 million in cash and investments, with net cash from operations at $25.0 million for six months, and projected 2025 capital expenditures of $80-$90 million, deemed sufficient for future needs Capitalization | Capitalization (Millions of USD) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, cash equivalents & short-term investments | $124.9 | $184.2 | | Total long-term debt, net | $452.6 | $485.2 | | Total stockholders' equity | $495.8 | $491.6 | - Projected capital expenditures for the full year 2025 are estimated to be between $80 million and $90 million, with $60 million to $65 million allocated to sustaining production168 - During the first six months of 2025, the company repurchased $32.4 million in principal of its Senior Secured Notes for approximately $32.1 million to deleverage the balance sheet177 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks primarily from commodity price fluctuations, especially natural gas, and interest rate changes on its Revolving Credit Facility, which had no outstanding borrowings as of June 30, 2025 - The company's primary market risks are related to commodity price fluctuations for its products and raw materials, especially natural gas193 - Interest rate risk is associated with the variable-rate Revolving Credit Facility, which had no outstanding borrowings as of June 30, 2025194 Controls and Procedures As of June 30, 2025, the CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025195 PART II – Other Information Legal Proceedings The company is subject to various legal proceedings and claims in the ordinary course of business, with further details in Note 5 of the financial statements - The company is involved in various legal actions in the ordinary course of business, with further details provided in Note 5 of the financial statements204 Risk Factors The company's business is sensitive to adverse economic cycles, inflation, and global market conditions, with trade policies and tariffs potentially impacting product prices, input costs, and customer demand - The company's business is sensitive to adverse economic cycles, and a prolonged deterioration of global market conditions could have a material adverse effect on its financial results206 - Trade policies and tariffs from the U.S. and other countries could negatively impact the selling prices of products, increase costs, and reduce demand for agricultural and consumer goods209210 Unregistered Sales of Equity Securities and Use of Proceeds On May 15, 2025, 83,800 restricted stock units were issued to non-employee directors as compensation under the 2025 Long-Term Incentive Plan, exempt from registration - On May 15, 2025, an aggregate of 83,800 restricted stock units were issued to non-employee directors as compensation for their board service211 Other Information On June 11, 2025, Executive Vice President and General Counsel Michael J. Foster adopted a Rule 10b5-1 trading plan to sell up to 30,000 shares of common stock between September 2025 and September 2026 - An executive officer, Michael J. Foster, adopted a Rule 10b5-1 trading plan on June 11, 2025, to sell up to 30,000 shares of common stock213 Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, incentive plan agreements, and CEO/CFO certifications