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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 21, 2005
LSB INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-7677 73-1015226
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
16 South Pennsylvania Avenue, Oklahoma City, Oklahoma 73107
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 235-4546
Not applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2.):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting materials pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On November 21, 2005 LSB Industries, Inc. (the "Company") issued a press release
to report its financial results for the quarter ended September 30, 2005, and to
announce that it will conduct a conference call to discuss the second quarter
results on December 5, 2005, beginning at 10:30am central time. The press
release is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
The information in this Form 8-K and the Exhibit attached hereto is being
furnished under Item 9 and shall not be deemed "filed" for purposes of Section
18 of the Securities Act of 1934 (as amended), or otherwise subject to the
liabilities of such section, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933 (as amended), except as shall be
expressly set forth by specific reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit Number Description
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99.1 Press release dated November 21, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Dated: November 21, 2005 LSB INDUSTRIES, INC.
By: /s/ Jim D. Jones
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Jim D. Jones,
Senior Vice President,
Corporate Controller and Treasurer
(Principal Accounting Officer)
Exhibit 99.1
LSB INDUSTRIES, INC. ANNOUNCES ITS THIRD QUARTER RESULTS AND RESTATEMENT OF
2004 AUDITED FINANCIAL STATEMENTS AND AMENDMENT TO UNAUDITED FINANCIAL
STATEMENTS FOR QUARTERS ENDED MARCH 31, 2005 AND JUNE 30, 2005
OKLAHOMA CITY, Nov. 21 /PRNewswire-FirstCall/ -- LSB Industries, Inc.
(Amex: LXU), whose common stock is traded on the American Stock Exchange under
the symbol LXU, reported net income of $1.7 million and $5.1 million for the
three and nine months ended September 30, 2005, respectively.
Results for three months ended September 30, 2005 and 2004
Net sales for the three months ended September 30, 2005 and 2004 were
$105.2 million and $92.2 million, respectively, an increase of $13.0 million.
For the three months ended September 30, 2005, the Company reported net
income of $1.7 million. After deducting $.6 million for preferred stock dividend
requirements, which were not paid, net income applicable to common stock was
$1.1 million, or $.07 per share fully diluted.
For the three months ended September 30, 2004, the Company reported net
income of $3.4 million, as restated. The results for the third quarter 2004
included certain non-recurring items including a $4.4 million gain from early
extinguishment of debt and $1.4 million provision for loss on notes receivable
from a French manufacturer of HVAC equipment.
After deducting $.6 million for preferred stock dividend requirements,
which were not paid, net income applicable to common stock was $2.8 million, or
$.18 per share fully diluted for the three months ended September 30, 2004, as
restated.
Results for nine months ended September 30, 2005 and 2004
For the nine months ended September 30, 2005, the Company reported net
income of $5.1 million. After deducting $1.7 million for dividend requirements
on outstanding preferred stocks which were not paid, net income applicable to
common stock for 2005 was $3.5 million, or $.23 per share fully diluted,
compared to net income applicable to common stock for the same period last year
of $3.1 million, or $.20 per share fully diluted, as restated.
For the nine months ended September 30, 2004, the Company reported net
income of $4.8 million as restated including a $4.4 million gain on
extinguishment of debt, $1.1 million in losses related to the French company,
including $.5 million cumulative effect of accounting change due to the
consolidation of the French company through June 30, 2004 and $1.4 provision for
loss on notes receivable from the French Company.
Commenting on the third quarter results, Jack E. Golsen, Chairman and
CEO, stated that in the Climate Control Business new orders for our water source
heat pumps, geothermal heat pumps, hydronic fan coils and large custom air
handlers used in commercial and residential new building construction and
renovations during the third quarter continued at a strong pace and the backlog
of orders are at an all-time high.
The Chemical Business reported improved results due primarily to
improved margins on certain products produced at our El Dorado, AR facility
offset in part by increases in the cost of natural gas at the Cherokee, AL
facility that could not be totally passed-through in the selling prices as well
as the disruptions in September at Cherokee related to hurricane Katrina.
Restatement of 2004 Audited Financial Statements and Amendments to Form
10Qs
Tony M. Shelby, CFO, noted that, as described in Note-1 of the Notes to
the Statements of Income contained in this press release, as part of the
Securities and Exchange Commission's ("SEC") requirements to periodically review
reports filed by issuers under the Securities Exchange Act of 1934, we have
received comments from the SEC regarding our annual report on Form 10K for year
ended December 31, 2004 ("2004 Form 10K") and our quarterly reports on Form 10Q
for quarters ended March 31, 2005 and June 30, 2005 ("2005 Forms 10Q").
As a result of comments from the SEC, we have agreed with the SEC to
restate and amend our 2004 Form 10K and our 2005 Forms 10Q as described in
detail in Note-1 of Notes to the Statements of Income contained in this press
release.
Conference Call
LSB will host a conference call covering the third quarter 2005 results.
You are invited to listen to the call that will be broadcast live over the
Internet on December 5, 2005, at 10:30 am central time. Log on at
http://www.lsb-okc.com or by telephone at dial-in number: 1-800-565-0813.
The Company is a manufacturing, marketing, and engineering company with
activities on a world wide basis. The Company's principal business activities
consist of the manufacture and sale of commercial and residential climate
control products, the manufacture and sale of chemical products for the mining,
agricultural and industrial markets, the provision of specialized engineering
services, and other activities. The Company's common stock is listed on the AMEX
under the symbol LXU and the Series 2 preferred stock is listed for trading on
the Over the Counter Bulletin Board under the symbol LSBPD.
LSB Industries, Inc.
Condensed Consolidated Statements of Income
(unaudited)
Nine Months and Three Months Ended September 30, 2005 and 2004
(As restated for 2004, see Note 1)
(In thousands, except per share amounts)
Nine Months Three Months
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2005 2004 2005 2004
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Net sales $ 301,370 $ 279,822 $ 105,181 $ 92,243
Cost of sales 251,368 237,692 87,448 77,628
Gross profit 50,002 42,130 17,733 14,615
Selling, general
and administrative 39,806 37,970 13,653 12,595
Other expense 148 484 (29) 290
Other income (2,243) (445) (688) (128)
Operating income 12,291 4,121 4,797 1,858
Interest expense 8,627 4,700 2,799 1,671
Provision for loss
on notes receivable --- 1,447 --- 1,447
Gain on extinguishment of debt --- (4,400) --- (4,400)
Non-operating other
income, net (1,525) (2,424) (67) (87)
Income from continuing operations
before provisions for income
taxes, equity in earnings of
affiliate and cumulative effect
of accounting change 5,189 4,798 2,065 3,227
Provisions for income taxes (84) (4) (84) ---
Equity in earnings of affiliate 554 498 187 171
Income from continuing
operations before cumulative
effect of accounting change 5,659 5,292 2,168 3,398
Loss from discontinued
operations (512) --- (512) ---
Cumulative effect
of accounting change --- (536) --- ---
Net income $ 5,147 $ 4,756 $ 1,656 $ 3,398
Preferred stock dividends (1,671) (1,700) (554) (566)
Net income applicable
to common stock (Note 11) $ 3,476 $ 3,056 $ 1,102 $ 2,832
Income per common share:
Basic:
Income from continuing
operations before
cumulative effect
of accounting change $ .30 $ .28 $ .12 $ .22
Loss from discontinued
operations (.04) --- (.04) ---
Cumulative effect
of accounting change --- (.04) --- ---
Net income $ .26 $ .24 $ .08 $ .22
Diluted:
Income from continuing
operations before
cumulative effect
of accounting change $ .26 $ .24 $ .10 $ .18
Loss from discontinued
operations (.03) --- (.03) ---
Cumulative effect
of accounting change --- (.04) --- ---
Net income $ .23 $ .20 $ .07 $ .18
(See accompanying notes)
LSB Industries, Inc.
Notes to Unaudited Financial Highlights
Nine Months and Three Months Ended September 30, 2005 and 2004
(unaudited)
Note 1: As part of the Securities and Exchange Commission's ("SEC")
requirements to periodically review reports filed by issuers under
the Securities Exchange Act of 1934, we have received comments from
the SEC regarding our annual report on Form 10K for year ended
December 31, 2004 ("2004 Form 10K") and our quarterly reports on
Form 10Q for quarters ended March 31, 2005 and June 30, 2005 ("2005
Forms 10Q").
As a result of comments from the SEC, we have agreed with the SEC
to restate and amend our 2004 Form 10K and our 2005 Forms 10Q as
follows:
* Amend our 2004 audited Consolidated Statements of Income
contained in our 2004 Form 10K to reclassify other income
relating to the sale of assets and other expense relating to the
impairment of certain assets and certain other reclassifications
from non-operating to operating income. These reclassifications
will not change or affect "net income" reflected in our
Consolidated Statement of Income in our 2004 Form 10K.
* Amend our 2005 Condensed Consolidated Statements of Income
contained in our 2005 Forms 10Q to reclassify a gain resulting
from the sale of certain operating assets and certain other
reclassifications from non-operating to operating income. These
reclassifications will not change or affect "net income"
reflected in our Statement of Income in our 2005 Forms 10Q.
* Restate our audited 2004 financial statements contained in our
2004 Form 10K to disclose a change from LIFO to FIFO method of
accounting for certain inventory of heat pump products within
our Climate Control segment in accordance with Accounting
Principles Board Opinion No. 20. The effect for the three years
in the period ended December 31, 2004 will be to decrease
reported net income in 2004 and 2003 by $503,000 and $198,000,
respectively and increase 2002 net income by $23,000. The effect
of this restatement increases stockholders' equity by $678,000
at December 31, 2001. There will be no effect on the balance
sheet at December 31, 2004 resulting from this restatement. We
did not disclose this change in our 2004 financial statements
contained in the 2004 Form 10K since we believed that this was
not a material change pursuant to Staff Accounting Bulletin 99.
The effect of this restatement will reduce net income contained
in our 2004 Consolidated Statement of Income from $1.9 million
to $1.4 million. In addition, the effect will change the 2004
results of operations reflected in our 2005 Forms 10Q by
reducing net income by $125,000 for the three months ended March
31, 2004 (from a net loss of $.1 million to a net loss of $.2
million) and reducing net income by $250,000 for the six months
ended June 30, 2004 (from net income of $1.6 million to net
income of $1.4 million). The effect of this restatement reduces
net income by $375,000 for the nine months ended September 30,
2004, as reflected below.
We will be revising our disclosure controls and procedures
reports contained in our 2004 Form 10K and our 2005 Forms 10Q to
remove any qualifying language to the effectiveness of such
disclosure controls and procedures and to discuss the facts and
circumstances surrounding the above described restatements and
amendments and how such restatements and amendments impacted our
CEO's and CFO's original conclusions regarding effectiveness of
our disclosure controls and procedures and concluded that our
disclosure controls and procedures were not effective.
We intend to file our amended 2004 Form 10K/A and 2005 Forms
10Q/A in accordance with the above discussion on or before
December 31, 2005. As a result of the restatement to our 2004
audited financial statements for $503,000, due to the change in
the method of accounting for certain inventory from LIFO to
FIFO, our 2004 audited financial statements should therefore no
longer be relied upon.
This release includes our restated financial statements for the
nine and three month periods ended September 30, 2004 as though
we have filed our amended 2004 10K/A and 2005 Forms 10Q/A.
Note 2: Beginning in October 2004, results of operations were adversely
affected as a result of a mechanical failure of one of the four
nitric acid plants at the El Dorado, Arkansas plant. The plant was
restored to normal production in June 2005. We filed claims for
damage with our property insurance companies for $4.5 million, net
of $1 million deductible. As of September 30, 2005 we recognized
insurance recoveries of $2.3 million under our replacement cost
property insurance policy relating to this property damage claim.
The effect of this property insurance recovery to the accompanying
statements of income was $1.0 million and $.6 million for the nine
and three-month periods ended September 30, 2005, which was
classified as other income. The insurers are contesting a portion
of the remaining claim. Additional recoveries upon final resolution
will be recognized when agreed to by our insurers.
Additionally, our business interruption insurance policy contains a
forty-five day waiting period before covering losses resulting from
business interruptions. We have filed a claim for recovery of the
business interruption losses related to this incident. The claim is
for $5.3 million, net of the forty-five day waiting period.
Recoveries relating to this business interruption will be
recognized when agreed to by our insurers.
Note 3: During the first quarter of 2004, we recognized a gain of $1.8
million from the sale of certain assets purchased in 2003.
In September 2004, we completed a $50 million term loan. A portion
of the proceeds were used to pay-off the loans and accrued interest
of $36.8 million under a Financing Agreement. Due to the repayment
of the Financing Agreement prior to the maturity date of June 30,
2005, we recognized $4.4 million as a gain on extinguishment of
debt in the third quarter 2004.
Included in other income for the first nine months of 2005 is $1.2
million in insurance proceeds upon the death of one of the
Company's executives from certain key man life insurance policies
in excess of the present value of the Company's obligations for
benefits.
Note 4: Effective March 31, 2004, we were required under FASB
Interpretation No. 46 "Consolidation of Variable Interest
Entities", to consolidate the assets, liabilities and results of
operations of the parent company of a French manufacturer of HVAC
equipment in our consolidated financial statements from March 31,
2004 forward. As a result, in 2004:
* we recorded a cumulative effect of accounting change of
$.5 million and
* we included in our operating results for the nine months ended
September 30, 2004, net sales of $3.8 million and an operating
loss of $.6 million of the parent company of the French
manufacturer.
In the third quarter of 2004, based on our assessment of the parent
company and the French manufacturer's actual and projected
liquidity and results of operations, we concluded that notes
receivable from the parent were not recoverable and, as a result,
effective July 1, 2004, we forgave the balance owed pursuant to the
notes receivable in exchange for, among other things, an extension
of the expiration date of a subsidiary's option to acquire the
stock of the parent company of the French manufacturer. As a result
of the cancellation, we no longer had a variable interest in this
entity and were no longer required to consolidate this entity.
Note 5: In December 2002, in connection with the sale of substantially
all of the operating assets of Slurry Explosives Company ("Slurry")
and Universal Technical Corporation ("UTeC"), which was accounted
for as discontinued operations, UTeC leased the facility from which
it conducted the manufacturing business, "the Facility" to the
buyer under a triple net long-term lease agreement. However, Slurry
retained the obligation to be responsible for, and perform the
activities, under an existing Consent Order. In addition, certain
of our subsidiaries agreed to indemnify the buyer of such assets
for these environmental matters. Representatives of a prior owner
agreed to pay for one- half of the costs of the investigation and
remediation of the Facility site on an interim, non-binding basis.
During October 2005, representatives of Slurry and a prior owner
met with the KDHE and proposed to remove the bulk of contaminated
soil at the Facility site, which was orally agreed to by the KDHE,
subject to approval of a written work plan submitted to the KDHE.
As a result, a provision of $.5 million was recorded for our share
of these costs for the nine and three month periods ended September
30, 2005 which we classified as discontinued operations. There are
no income tax benefits related to these expenses.
Note 6: Net income applicable to common stock is computed by adjusting
net income by the amount of preferred stock dividends requirements.
Basic net income per common share is based upon net income
applicable to common stock and the weighted average number of
common shares outstanding during each period. Diluted income per
share is based on the weighted average number of common shares and
dilutive common equivalent shares outstanding and the assumed
conversion of dilutive convertible securities outstanding.
Note 7: Information about the Company's operations in different industry
segments for the nine months and three months ended September, 2005
and 2004 is detailed on the following page.
LSB INDUSTRIES, INC.
Notes to Unaudited Financial Highlights
Nine Months and Three Months Ended September 30, 2005 and 2004
(Unaudited)
Nine Months Three Months
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2005 2004 2005 2004
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(as restated) (as restated)
(In thousands)
Net sales:
Climate Control $ 117,002 $ 107,596 $ 41,507 $ 37,614
Chemical 179,703 167,717 62,179 52,945
Other 4,665 4,509 1,495 1,684
$ 301,370 $ 279,822 $ 105,181 $ 92,243
Gross profit:
Climate Control $ 35,191 $ 33,722 $ 13,205 $ 11,775
Chemical 13,217 7,005 4,002 2,257
Other 1,594 1,403 526 603
$ 50,002 $ 42,130 $ 17,733 $ 14,615
Operating income
(loss):
Climate Control $ 10,282 $ 10,591 $ 4,344 $ 4,133
Chemical 6,925 (276) 2,492 (109)
General corporate expenses
and other business
operations, net (4,916) (6,194) (2,039) (2,166)
12,291 4,121 4,797 1,858
Interest expense (8,627) (4,700) (2,799) (1,671)
Provision for loss
on notes receivable --- (1,447) --- (1,447)
Gain from extinguishment
of debt --- 4,400 --- 4,400
Non-operating
other income, net 1,525 2,424 67 87
Income from continuing operations
before provisions for income taxes,
equity in earnings of affiliate
and cumulative effect
of accounting change $ 5,189 $ 4,798 $ 2,065 $ 3,227
Notes:
Gross profit by industry segment represents net sales less cost of sales.
Gross profit classified as "Other" relates to industrial machinery and
components.
Our chief operating decision maker uses operating income (loss) by industry
segment for purposes of making decisions which include resource allocations
and performance evaluations.
Operating income (loss) by industry segment represents gross profit by
industry segment less selling, general and administrative expenses ("SG&A")
incurred by each industry segment plus other income and other expense
earned/incurred by each industry segment before general corporate expenses
and other business operations, net. General corporate expenses and other
business operations, net consist of unallocated portions of gross profit,
SG&A, other income and other expense.
General corporate expenses and other business operations, net are not
allocated to our Climate Control and Chemical Businesses since these items
are not included in the operating results reviewed by our chief operating
decision makers for purposes of making decisions as discussed above.
SOURCE LSB Industries, Inc.
-0- 11/21/2005
/CONTACT: Tony M. Shelby, Chief Financial Officer of LSB Industries,
Inc., +1-405-235-4546; or Leslie A. Schupak, ext. 205, or Joe Mansi, ext. 207,
both of KCSA, +1-212-682-6300, for LSB Industries, Inc./
/Web site: http://www.lsb-okc.com /
