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LSB Industries, Inc. Reports Results For The 2012 Second Quarter

Stocks in this article: LXU

LSB Industries, Inc. (NYSE: LXU) announced today results for the second quarter ended June 30, 2012.

Second Quarter 2012 Financial Highlights Compared to Second Quarter 2011:

  • Sales were $209.3 million compared to $235.6 million;
  • Operating income was $42.3 million compared to $48.3 million;
  • Net income and net income applicable to common shareholders were $26.0 million compared to $28.6 million; and
  • Diluted earnings per common share were $1.11 compared to $1.22.

Discussion of Second Quarter of 2012:

The $26.3 million decrease in consolidated sales was primarily the result of a $17.5 million or 11.2% decrease in Chemical Business’ sales and a $9.6 million or 12.5% decrease in Climate Control Business’ sales.

Our consolidated operating income was $42.3 million for the second quarter of 2012 compared to $48.3 million for the same period in 2011. The $6.0 million decrease in operating income includes $3.6 million in our Chemical Business and $1.9 million in our Climate Control Business. Additionally, the second quarter of 2011 included an insurance recovery of $8.6 million (recorded as a reduction to cost of sales) relating to a business interruption claim relating to our Chemical Business.

  • The Chemical Business’ sales and operating income were adversely affected by unplanned downtime events:
    • We estimate the Pryor, Oklahoma chemical plant (the “Pryor Facility”) lost approximately 70,000 tons of potential urea ammonia nitrate (“UAN”) sales due to the unplanned downtime of its urea reactor. The impact of the lost UAN production was partially offset by the continued production and sales of anhydrous ammonia, primarily into its agricultural markets. We estimate the unplanned downtime at the Pryor Facility reduced the Chemical Business’ operating income, including lost absorption and gross profit margins, by approximately $10 million during the quarter. The urea reactor was returned to service in July 2012.
    • The El Dorado, Arkansas chemical plant (“El Dorado Facility”) lost all nitric and sulfuric acid production on May 15, 2012 when a reactor in its 98% concentrated nitric acid plant (“DSN plant”) exploded destroying the DSN plant and damaging the other three regular concentration nitric acid plants and the sulfuric acid plant. Without acid production for the remainder of the second quarter, all production at the El Dorado Facility was lower than would have been expected resulting in lost absorption and gross profit margins. We estimate that the event reduced the Chemical Business’ operating income for the second quarter by approximately $7 million. Currently, two of the three regular concentration nitric acid plants are back in production and the third plant is expected to be back in production by the end of August. Repairs to the sulfuric acid plant should be complete and production of sulfuric acid should restart in the fourth quarter.
  • The decrease in the Climate Control Business’ operating income was primarily due to lower sales volume.

First Six Months 2012 Financial Highlights Compared to First Six Months 2011:

  • Sales were $399.5 million compared to $413.1 million;
  • Operating income was $65.4 million compared to $82.3 million;
  • Net income was $40.3 million compared to $49.5 million;
  • Net income applicable to common shareholders was $40.0 million compared to $49.2 million; and
  • Diluted earnings per common share were $1.72 compared to $2.12.

The $13.6 million decrease in sales included a $4.7 million decrease in the Chemical Business and a $10.5 million decrease in the Climate Control Business. The decrease in consolidated operating income for the period was the result of decreases in the Chemical and Climate Control Businesses’ operating income of $12.3 million and $4.5 million, respectively.

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