What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-30 · 195 added, 367 removed, 289 unchanged (66% of the section changed)

Management’s Discussion and Analysis o f Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with a review of the other Items included in this Form 10-Q and our September 30, 2024 condensed consolidated financial statements included elsewhere in this report.

A reference to a “Note” relates to a note in the accompanying notes to the condensed consolidated financial statements.

This MD&A reflects our operating results, unless otherwise noted.

Certain statements contained in this MD&A may be deemed to be forward-looking statements.

See “Special Note Regarding Forward-Looking Statements.”

LSB is headquartered in Oklahoma City, Oklahoma and we manufacture and sell chemical products for the agricultural, industrial and mining markets.

We own and operate three multi-plant facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma and operate a facility on behalf of Covestro in Baytown, Texas.

This discussion is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results.

Investors should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included in “ Item 1.

Financial Statements .” Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in “ Item 1.

Financial Statements—Notes to Condensed Consolidated Financial Statements .” Certain statements contained in this discussion may be deemed to be forward-looking statements.

See “ Special Note Regarding Forward-Looking Statements .” Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in our Annual Report on Form 10-K for the year ended December 31, 2024, particularly in the section entitled “ Risk Factors .” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to LSB Industries, Inc.

and its consolidated subsidiaries.

LSB is headquartered in Oklahoma City, Oklahoma and we manufacture and sell chemical products for the agricultural and industrial markets.

We own and operate three multi-plant facilities in Cherokee, Alabama (the “Cherokee Facility”), El Dorado, Arkansas (the “El Dorado Facility”) and Pryor, Oklahoma (the “Pryor Facility”) and operate a facility on behalf of Covestro in Baytown, Texas (the “Baytown Facility”).

Our products are sold through distributors and directly to end customers primarily throughout the U.S.

4 unchanged sentences

▪ We believe that our operational progress over the past several years represents proof that high safety standards not only enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant performance.

In 2023 our Total Recordable Injury Rate was 0.33, a significant improvement from previous years.

In 2025, we remain focused on our efforts to further the progress we have made with our safety programs to move closer to attaining zero injuries.

3 unchanged sentences

Additionally, our product quality program continues to focus on providing products to our customers that meet our quality standards.

• Continue Optimization and Increase the Breadth of Distribution of our Product Mix.

• Continued Optimization and Increase the Breadth of Distribution of our Product Mix.

We have initiatives underway to increase the distribution of our products within our industrial end markets, among other product mix optimization strategies.

We believe that these initiatives and strategies, combined with continued expansion of our customer relationships, the robust market analysis capabilities we have developed, and the establishment of in-market tank storage and distribution terminals, will make us more effective in identifying and capitalizing on the most profitable distribution opportunities for our products, while making our financial results more stable and predictable.

Additionally, we are advancing several capital improvement projects with the intention of increasing our sales volumes of higher value downstream products resulting in improvements in our overall profit margins.

• Development of Low Carbon Ammonia and Clean Energy Projects.

Additionally, we have completed and are advancing several capital improvement projects with the intention of increasing our sales volumes of higher value downstream products resulting in improvements in our overall profit margins.

• Development of Low Carbon Ammonia and Other Products.

The reduction of greenhouse gas emissions, particularly related to carbon dioxide, has been and we expect will increasingly become a global environmental priority.

2 unchanged sentences

If low carbon ammonia were to be adopted for these and other energy needs globally, some studies have indicated that future demand could increase from current levels of global annual production of ammonia.

As a result, we are currently continuing to evaluate and develop projects that could enable us to become a producer and marketer of low-carbon ammonia and other derivative products.

These include a low-carbon ammonia project at our El Dorado facility in collaboration with Lapis Energy and a low-carbon ammonia project on the Houston Ship Channel in conjunction with INPEX Corporation (“INPEX”), Air Liquide Group (“Air Liquide”) and Vopak Exolum Houston LLC (f/k/a Vopak Moda Houston LLC), a joint venture between Royal Vopak and Exolum (“Vopak Exolum”).

Low carbon ammonia is produced using natural gas and conventional processes but includes an additional stage where the carbon dioxide emissions are captured and permanently stored in deep underground rock formations.

The resulting low carbon emission product, we believe, can be sold at a premium to power generation, marine, industrial, mining and agricultural customers seeking to reduce their carbon footprint and potentially capitalize on government incentives.

We believe we are well-positioned to capitalize on this opportunity and become a market leader given our potential to retrofit our existing plants, which we believe can reduce our time to market for low-carbon ammonia and also reduce the upfront capital expenditures necessary to enable us to produce this product.

Additionally, we are collaborating with other energy-related companies to develop greenfield projects where we expect to mitigate risk through shared investment of capital as well as by negotiating potential offtake agreements from customers for the output of these plants.

We believe that the resulting low carbon emission product can be sold at a premium to conventional ammonia, to customers seeking to reduce their carbon footprint, particularly in the power generation, marine, industrial, mining and agricultural end markets.

Additionally, we believe that producers of low carbon ammonia will be eligible for government incentives aimed at promoting carbon capture and sequestration (“CCS”).

We believe we are well-positioned to capitalize on this opportunity given our potential to retrofit our existing plants, which we believe can reduce our time to market for low carbon ammonia and also reduce the upfront capital expenditures necessary to enable us to produce this product.

We are currently pursuing projects that could enable us to become a producer and marketer of low carbon ammonia and other derivative products.

These projects include a low carbon ammonia project at our El Dorado Facility in collaboration with Lapis Carbon Solutions (“Lapis”) that we expect to be operational by the end of 2026.

In January 2025, we achieved pre-certification status under the Fertilizer Institute’s Verified Ammonia Carbon Intensity program.

This is a voluntary certification of the carbon footprint of ammonia production at a specific facility, from well to production gate.

Our El Dorado ammonia plant is one of four North American plants to have received such a status.

• Evaluate and Pursue Organic Capacity Expansion.

1 unchanged sentence

Initial feasibility studies have pointed to potentially attractive returns for some of these projects.

However, given the current high-cost environment and limited resources, coupled with our outlook for moderating selling prices, we have elected to put the El Dorado expansion projects on hold for the current year.

We plan to reevaluate these projects in 2025 to determine our prospects of moving forward with one or more of them in the future.

• We have recently undertaken several smaller projects that we expect to enhance our profitability beginning in the fourth quarter of 2024.

However, given the current high-cost environment and limited resources, coupled with our outlook for moderating selling prices, during 2024 we elected to put the El Dorado expansion projects on hold.

We plan to reevaluate these projects over the course of 2025 to determine our prospects of moving forward with one or more of them in the future.

• During 2024, we undertook several smaller projects that we expect to enhance our profitability during 2025.

These projects include:

▪ Construction of additional AN solution storage and new AN solution rail loading capability at our El Dorado Facility to significantly increase the volume of AN solution sales and increase product optionality at the site.

▪ Construction of 5,000 tons of additional nitric acid storage at our El Dorado facility to help us optimize our product sales mix;

We expect this project to be completed in the third quarter of 2025;

▪ Construction of 5,000 tons of additional nitric acid storage at our El Dorado Facility was completed in the latter part of 2024 to help us optimize our product sales mix;

▪ Expansion of our urea capacity at our Pryor Facility, to enable to use a portion of the facility’s ammonia output to upgrade to approximately 75,000 additional tons of UAN per year.

This project was completed in late 2024 and we expect it to lead to increased UAN sales volumes during 2025.

• Evaluate Acquisitions of Strategic Assets or Companies.

3 unchanged sentences

Advanced Low Carbon Ammonia Initiatives

In May 2024, we announced an agreement to supply up to 150,000 short tons per year of low carbon ammonium nitrate solution (“ANS”) to Freeport Minerals Corporation (“Freeport”).

LSB will supply the ANS from its El Dorado, Arkansas facility for 5 years commencing January 1, 2025, with a phasing in of the low carbon contracted volume.

Freeport intends to use the low carbon ANS purchased from LSB for its United States copper mining operations.

In October 2023, we announced a collaboration with INPEX, Air Liquide and Vopak Exolum to conduct a pre-FEED for the development of a large-scale, low-carbon ammonia production and export project on the Houston Ship Channel.

If the development proceeds, the project’s first phase is targeted to produce more than 1.1 million metric tons per year of low-carbon ammonia by early 2029, with options for future production expansions.

The parties completed a feasibility study on the project during the first quarter of 2023 and the proposed facility’s location on the Houston Ship Channel, the second largest petrochemical corridor in the world, leverages existing infrastructure assets.

Vopak Exolum has invested in storage and handling infrastructure for bulk liquid products and currently operates an ammonia terminal that includes storage tanks and a newbuild dock with multiple deep-water berths.

The project also has access to utilities and would be near multiple pipelines that could supply raw materials like natural gas and water.

The project partners will bring complementary expertise to the production, operation, storage and export for the advancement of low-carbon ammonia production in the US:

• Air Liquide, a world leader in industrial gas production, and INPEX, Japan’s largest energy exploration and production company, would collaborate on low-carbon hydrogen production.

Air Liquide would supply its Autothermal Reforming (“ATR”) technology, an ideal solution for large-scale hydrogen production projects, combined with its proprietary carbon capture technology.

The combination of ATR technology with carbon capture aims to capture at least 95% of direct CO 2 emissions from hydrogen production with approximately 1.6 million metric tons per year of CO 2 captured and permanently sequestered from this project.

Air Liquide would also be responsible for onsite nitrogen and oxygen production, using its proprietary Air Separation Unit technology.

• INPEX and LSB would collaborate on low-carbon ammonia production.

LSB led the selection of KBR Inc.

as the ammonia loop technology provider, and will lead the pre-FEED, engineering, procurement and construction of the facility.

LSB would also be responsible for the day-to-day operation of the ammonia loop.

• INPEX and LSB would sell the low-carbon ammonia and finalize off-take agreements with the numerous parties that have expressed interest and could also further partner in the project.

The ammonia from this facility is intended to be used as a clean fuel for power generation, a hydrogen carrier, an industrial chemical feedstock, and as a marine fuel in a variety of domestic and international markets.

INPEX, with stakes in both hydrogen and ammonia production, will likely be the largest investor in the overall project across the entire value chain, from production to export.

• Vopak Exolum currently operates ammonia storage and handling infrastructure from its Very Large Gas Carriers-capable deepwater berth located in the deepest part of the Houston Ship Channel.

Vopak Exolum will maintain its ownership of the existing infrastructure and plans to build additional storage capacity as required to handle the low-carbon ammonia production from the proposed new facility.

In May 2023, we entered into a non-binding memorandum of understanding (the "MOU") with Amogy Inc.

(“Amogy”) aimed at developing the adoption of low-carbon ammonia as a marine fuel, initially for the U.S.

inland waterways transportation sector.

Through joint efforts, we and Amogy will focus on advancing the understanding, utilization, and advocacy of low-carbon ammonia as a sustainable fuel.

Pursuant to the MOU, the companies will collaborate on the evaluation and development of a pilot program that integrates our low-carbon ammonia and Amogy’s ammonia-to-power solution.

Upon successful completion of the evaluation and pilot program, the companies expect to further collaborate at a larger-scale, including exploration of opportunities for development of an end-to-end supply chain of low-carbon ammonia and deployment of Amogy technology across multiple applications, including maritime vessels.

The evaluation and pilot program includes potential engagement with other parties across the ammonia value chain.

We will also collaborate on various advocacy, education, and outreach efforts regarding the use of ammonia as a fuel.

In April 2022, we entered into an agreement with Lapis Energy to develop a project to capture and sequester CO 2 at our El Dorado, Arkansas facility.

In May 2024, we announced an agreement to supply, for a five-year period commencing January 1, 2025, up to 150,000 short tons per year of low carbon ammonium nitrate solution (“ANS”) to Freeport Minerals Corporation (“Freeport”).

In early 2025 we began supplying conventional ANS to Freeport from our El Dorado Facility, and expect to phase in the low carbon contracted volume in the next year.

Freeport intends to use the low carbon ANS purchased from us for its United States copper mining operations.

In October 2023, we announced a collaboration with INPEX Corporation and Air Liquide Group to conduct a preliminary front end engineering design (“pre-FEED”) study for the development of a large-scale, low carbon ammonia production and export project on the Houston Ship Channel.

Initially targeted to produce more than 1.1 million metric tons per year of low carbon ammonia beginning in 2029, the pre-FEED study was completed in the fourth quarter of 2024.

Given the impact of U.S.

tariff-related price increases and other global economic uncertainties on costs, coupled with a slower-than-anticipated ramp-up of low carbon ammonia demand, we have decided to put a pause on the project.

In April 2022, we entered into an agreement with Lapis to develop a project to capture and sequester CO 2 at our El Dorado Facility.

Lapis, backed by Cresta Fund Management, a Dallas-based middle-market infrastructure investment firm, will invest the majority of the capital required for project development.

The project is expected to be completed and operational in 2026, subject to the approval of a Class VI permit, at which time CO 2 injections are expected to begin.

The project is expected to be completed and operational by the end of 2026, subject to the approval of a Class VI permit, at which time CO 2 injections are expected to begin.

Once operational, the project at the El Dorado site will initially capture and sequester approximately 400,000 to 500,000 metric tons of CO 2 per year in underground saline aquifers.

The sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured and sequestered.

Lapis, as the majority owner of the carbon capture and sequestration equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO 2 captured and sequestered beginning in 2026.

Once in operation, the sequestered CO 2 is expected to reduce LSB’s overall scope 1 GHG emissions by approximately 25% from current levels.

In addition, sequestering approximately 400,000 to 500,000 metric tons of CO 2 annually is expected to enable LSB to produce approximately 305,000 to 380,000 metric tons of low-carbon ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia.

In February 2023, a key milestone was achieved in the advancement of our low-carbon ammonia project at El Dorado by filing a pre-construction Class VI permit application with the U.S.

Environmental Protection Agency (the “EPA”).

Lapis, as the majority owner of the carbon capture and sequestration equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO 2 captured and sequestered

by the end of 2026.

Once in operation, the sequestered CO 2 is expected to reduce our overall scope 1 GHG emissions by approximately 25% from current levels.

In addition, sequestering approximately 400,000 to 500,000 metric tons of CO 2 annually is expected to enable us to produce approximately 305,000 to 380,000 metric tons of low carbon ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia.

In February 2023, a key milestone was achieved in the advancement of our low carbon ammonia project at El Dorado by filing a pre-construction Class VI permit application with the United States Environmental Protection Agency (the “EPA”).

The EPA recognized the application as complete in March 2023 and is currently in the review process.

Higher Ammonia Prices and Lower Natural Gas Input Costs Partially Offset by Impact of Planned Turnaround of Pryor Facility

Third quarter results benefited from higher ammonia selling prices and lower natural gas feedstock costs relative to the third quarter of 2023.

Sales volumes of our products decreased in the third quarter of 2024 as compared to the same quarter of 2023 due to lower sales volumes of UAN and ammonia as a result of the Turnaround performed at our Pryor facility during the period.

Ammonia prices have strengthened over the past several months supported by a combination of global factors, including:

and West-of-Suez supply-demand dynamics driven by global supply disruptions;

geopolitical concerns over conflict in the Middle East leading to higher natural gas feedstock costs for European ammonia producers;

extended turnarounds, outages and limited spot availability across the Middle East, North Africa and Trinidad that have reduced global inventories;

ongoing disruptions in the Suez Canal limiting ammonia imports into Europe from the Middle East;

and the delayed startup of new production capacity in the U.S.

Gulf and export terminal in Russia.

We expect ammonia pricing to moderate in the fourth quarter of 2024 and into 2025 for a variety of reasons, including:

the anticipated start-up of new production capacity in both the U.S.

and internationally;

an increase in Russian exports;

and continued muted demand for nitrogen products from the global industrial sector, particularly in Asia.

Upside to our pricing expectations could be driven by a variety of factors, including:

an increase in energy prices;

a strengthening Chinese economy driving increased industrial market demand;

further delays in new production capacity coming online;

gas curtailments in regions exporting ammonia;

a lower interest rate environment;

and supportive weather dynamics.

Demand for our industrial products is stable despite persistent global economic challenges.

Nitric acid demand has been steady, reflecting the strength of the U.S.

economy and robust consumer spending levels.

Higher Ammonia Prices and AN and UAN Sales Volumes Offset by Higher Natural Gas Input Costs

First quarter 2025 results were impacted by natural gas input costs, which were higher than they were in the first quarter and full year of 2024.

Partially offsetting the impact of higher natural gas prices were increased sales volumes of AN and UAN.

Additionally, first quarter 2025 results benefited from higher ammonia prices relative to the prior year first quarter.

Ammonia prices have declined over the past several months, largely as a result of lower natural gas input costs in Europe, the global ammonia market’s marginal producer region.

Lower European natural gas prices reflect expectations that Russia and Ukraine may reach a peace agreement following more than three years of armed conflict, which could lead to an increased flow of Russian natural gas into Europe.

Ammonia prices may also be impacted by the start-up of new production capacity in both the United States and internationally, with at least one new world scale plant expected to come online during 2025.

While ammonia prices have weakened over the past several months, pricing for ammonia derivative fertilizer products has been strong.

Both urea and UAN prices are currently well above year-ago levels, reflecting a variety of factors including tight supply with limited inventory in the United States distribution channel;

expectations for a strong Spring 2025 corn planting season with the USDA currently expecting 95 million acres of corn to be planted, up 5% from 2024;

and tariffs on nitrogen fertilizers imported from countries outside of the United States, such as Trinidad, which are now being taxed at 10%.

Demand for our industrial products is stable despite global economic concerns.

Nitric acid demand has been steady, reflecting the resilience of the U.S.

economy and consumer spending levels.

Demand for AN for use in mining applications has been bolstered by positive exposure to copper, gold and iron ore, as well as continued attractive market fundamentals for aggregate production relating to infrastructure construction.

While some degree of economic uncertainty persists, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.

With respect to trends in our agricultural markets, corn prices have rebounded from earlier in 2024 reflecting recent revisions by the U.S.

Department of Agriculture (“USDA”) for smaller than previously estimated U.S.

corn supplies and a modest decline in ending stocks;

increases in U.S.

corn exports and corn used for ethanol production;

and production challenges in international growing regions.

While currently above lows from earlier in 2024, corn prices sit below year-ago levels due largely to the impact on corn supply of the multi-year high U.S.

corn harvest in 2023.

Additionally, the USDA is currently estimating that U.S.

farmers planted approximately 90.7 million acres of corn during the Spring 2024 planting season, down from 2023, but at a level that would increase corn supplies.

Economic uncertainty has recently been heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs.

However, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base which is almost entirely located in the United States, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.

See a more detailed discussion below under “Key Industry Factors.”

7 unchanged sentences

Additionally, changes in corn prices, as well as soybean, cotton and wheat prices, can affect the number of acres of corn planted in a given year and the number of acres planted will drive the level of nitrogen fertilizer consumption, likely affecting prices.

According to the World Agricultural Supply and Demand Estimates Report dated October 11, 2024 (“October Report”), farmers planted approximately 90.7 million acres of corn in 2024, down 4.1% compared to the 2023 planting season.

In addition, the USDA estimates the U.S.

ending stocks for the 2024 Harvest will be approximately 50.8 million metric tons, a 13.6% increase from the 2023 Harvest.

According to the World Agricultural Supply and Demand Estimates Report dated April 10, 2025 (the “April Report”), farmers planted approximately 90.6 million acres of corn in 2024, down 4.2% compared to the 2023 planting season.

According to the April Report, the USDA estimates the United States ending stocks for the 2024 Harvest will be approximately 37.2 million metric tons, a 17.0% decrease from the 2023 Harvest.

The USDA's expected yield for the 2024 Harvest is 179.3, up approximately 1.1% from a year ago.

The following October 2024 estimates are associated with the corn market:

The following April 2025 estimates are associated with the corn market:

(2024 Harvest)

1 unchanged sentence

(2022 Harvest)

October Report (1)

April Report (1)

Area Planted (Million acres)

3 unchanged sentences

World Ending Stocks (Million metric tons)

Information obtained from the October Report for the 2024/2025 ("2025 Crop"), 2023/2024 (“2024 Crop”) and 2022/2023 (“2023 Crop”) corn marketing years.

Information obtained from the April Report for the 2024/2025 ("2025 Crop"), 2023/2024 (“2024 Crop”) and 2022/2023 (“2023 Crop”) corn marketing years.

The marketing year is the twelve-month period during which a crop normally is marketed.

3 unchanged sentences

Represents the percentage change between the 2025 Crop amounts compared to the 2023 Crop amounts.

The current USDA corn outlook for the U.S.

calls for smaller supplies, larger exports, and reduced ending stocks .

Corn production is forecast up on increased yield.

Yield is increased to 183.8 bushels an acre, harvested area is unchanged and beginning stocks were lowered with total use raised slightly lowering ending stocks.

From a demand perspective, corn prices have declined since early 2023 due largely to rising stocks-to-use ratios.

The current USDA corn outlook for the United States calls for increased exports, lower feed and residual use, and smaller ending stocks.

Exports were raised 100 million bushels reflecting the pace of sales and shipments to date and relatively competitive U.S.

With no other use changes, ending stocks are down 75 million bushels from the previous month’s report.

From a demand perspective, we believe that corn prices will remain at a level that will further support demand for fertilizers during 2025.

Industrial Products

2 unchanged sentences

Nitric acid demand has been steady, reflecting the strength of the U.S.

economy and robust consumer spending levels.

economy and consumer spending levels.

Our sales prices generally vary with the market price of ammonia or natural gas, as applicable, in our pricing arrangements with customers.

1 unchanged sentence

Economic uncertainty has recently been heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs.

Natural Gas Prices

7 unchanged sentences

The following table shows the volume of natural gas purchased and the average cost per MMBtu:

Three Months Ended September 30,

Three Months Ended March 31,

Natural gas volumes (MMBtu in millions)

2 unchanged sentences

Costs for transporting nitrogen-based products can be significant relative to their selling price.

We continue to evaluate the recent rising costs of freight domestically.

As a result of increases in demand for available rail, truck and barge options to transport product, primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins if we are unable to fully pass through these costs to our customers.

Additionally, continued truck driver shortages could impact our ability to fulfill customer demand.

We continue to evaluate the rising costs of freight domestically.

As a result of increases in demand for available rail, truck and barge options to transport product, primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins, where we are unable to fully pass through these costs to our customers.

Additionally, truck driver shortages could impact our ability to fulfill customer demand.

As a result, we continue to evaluate supply chain efficiencies to reduce or counter the impact of higher logistics costs.

2 unchanged sentences

Consistent, reliable and safe operations at our chemical plants are critical to our financial performance and results of operations.

The financial effects of planned downtime at our plants, including Turnarounds, are mitigated through a diligent planning process that considers the availability of resources to perform the needed maintenance and other factors.

The financial effects of planned downtime at our plants, including a planned major maintenance activity (each such activity, a “Turnaround”) is mitigated through a diligent planning process that considers the availability of resources to perform the needed maintenance and other factors.

Unplanned downtime of our plants typically results in lost contribution margin from lost sales of our products, lost fixed cost absorption from lower production of our products and increased costs related to repairs and maintenance.

All Turnarounds result in lost contribution margin, lost fixed cost absorption and increased repair and maintenance costs, which are expensed as incurred.

Our El Dorado Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2025.

However, we planned a short plant outage in July 2024 to perform a catalyst change to get back to maximum production rates.

Our Pryor Facility has completed its scheduled full plant Turnaround which commenced during the third quarter of 2024.

Our Cherokee Facility commenced its scheduled ammonia plant Turnaround during the fourth quarter.

Following those Turnarounds, they are expected to be on a two-year and three-year ammonia plant Turnaround cycle, respectively

All Turnarounds result in lost contribution margin from lost sales of our products, lost fixed cost absorption from lower production of our products and increased costs related to repairs and maintenance, which repair and maintenance costs are expensed as incurred.

The next ammonia plant Turnaround is currently planned for our El Dorado Facility in the first half of 2026.

We completed Turnarounds at both our Pryor Facility and Cherokee Facility in the latter half of 2024.

Following those Turnarounds, the next Pryor Facility Turnaround is currently planned for 2027, with the Cherokee Facility ammonia Turnaround currently planned for 2028.

Ammonia Production

3 unchanged sentences

Forward Sales Contracts

We use forward sales of our fertilizer products to optimize our asset utilization, planning process and production scheduling.

These sales are made by offering customers the opportunity to purchase product on a forward basis at prices and delivery dates that are agreed upon, with dates typically occurring within 90 days.

In certain instances, we may use forward sales of our fertilizer products to optimize our asset utilization, planning process and production scheduling.

These sales are made by offering customers the opportunity to purchase product on a forward basis at prices and delivery dates that are agreed upon, with delivery dates typically occurring within 12 months.

We use this program to varying degrees during the year depending on market conditions and our view of changing price environments.

Fixing the selling prices of our products months in advance of their ultimate delivery to customers typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment.

Consolidated Results of the Third Quarter of 2024

Our consolidated net sales for the third quarter of 2024 were $109.2 million compared to $114.3 million for the same period in 2023.

Our consolidated operating loss for the third quarter of 2024 was $24.4 million compared to operating loss of $9.5 million for the same period in 2023.

Consolidated Results of the First Quarter of 2025

Our consolidated net sales for the first quarter of 2025 were $143.4 million compared to $138.2 million for the same period in 2024.

Our consolidated operating income for the first quarter of 2025 was $4.5 million compared to $11.3 million for the same period in 2024.

The items impacting our operating results are discussed in more detail below and under “Results of Operations.”

Items Affecting Comparability of Results of the Third Quarter

Items Affecting Comparability of Results of the First Quarter

Selling Prices

For the third quarter of 2024, average selling prices for our ammonia increased while other pricing remained flat compared to the third quarter of 2023.

As discussed above under “Recent Business Developments,” prices have strengthened over the past several months supported by a combination of global factors, including:

tight supply-demand dynamics driven by global supply disruptions;

geopolitical concerns over conflict in the Middle East leading to higher natural gas feedstock costs;

extended turnarounds, outages and limited spot availability reducing global inventories;

ongoing disruptions in the Suez Canal limiting ammonia imports into Europe from the Middle East;

and the delayed startup of new production capacity in the U.S.

Gulf and export terminal in Russia.

Turnaround Activities (2024 only)

As discussed above, we performed major Turnaround activities at our Pryor Facility in the third quarter of 2024.

Additionally, we planned and executed a minor planned outage at our El Dorado Facility during July to change the catalyst in the ammonia plant to maximize production rates.

When such activities are performed, overall results are negatively impacted.

This impact includes lost contribution margin from lost sales, lost fixed cost absorption from lower production, and increased costs associated with repairs and maintenance.

In addition, Turnaround related costs may be incurred in periods earlier than the actual outage of the plant for activities such as planning and procurement of materials.

For the first quarter of 2025, average selling prices for ammonia and AN increased while the average selling price for UAN decreased compared to the first quarter of 2024.

Gain on Extinguishment of Senior Secured Notes

During the first quarter of 2024, we repurchased $32.9 million of our Senior Secured Notes due 2028 (the “Senior Secured Notes”) through open market transactions for approximately $31.3 million.

As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $1.1 million.

Plant, Property and Equipment Impairments

For the three months ended September 30, 2024 and 2023, we recorded impairments on assets the Company has or intends to abandon in the amount of $5.4 million and $0.2 million, respectively.

For the nine months ended September 30, 2024 and 2023, we recorded asset impairments of $6.8 million and $2.1 million, respectively.

These impairment losses are included in Other expense (income), net on our condensed consolidated statements of operations.

For the three months ended March 31, 2025 and 2024, we recorded asset write-downs primarily related to assets no longer in use in the amount of $0.1 million and $1.5 million, respectively.

These write-downs are included in Other expense (income), net on our condensed consolidated statements of operations.

Results of Operations

The following Results of Operations should be read in conjunction with our condensed consolidated financial statements for the three months ended September 30, 2024 and 2023 and accompanying notes and the discussions under “Overview” and “Liquidity and Capital Resources” included in this MD&A.

We present the following information about our results of operations.

The following is a discussion and analysis of our condensed consolidated results of operations for the three months ended March 31, 2025 and 2024.

Net sales to unaffiliated customers are reported in the condensed consolidated financial statements and gross profit represents net sales less cost of sales.

Net sales are reported on a gross basis with the cost of freight being recorded in cost of sales.

Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023

The following table contains certain financial information:

Three Months Ended September 30,

(Dollars In Thousands)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Total net sales

Gross (loss) profit:

Adjusted gross profit (1)

Depreciation and amortization (2)

Turnaround expense

Total gross (loss)

Selling, general and administrative expense

Other expense (income), net

Operating (loss)

Interest expense, net

Non-operating other income, net

Benefit for income taxes

Other information:

Gross loss percentage (3)

Adjusted gross profit percentage (3)

Property, plant and equipment expenditures

_____________________________

N/M-Not meaningful.

(1) Represents a non-GAAP measure since the amount excludes unallocated depreciation, amortization and Turnaround expenses.

(2) Represents amount classified as cost of sales.

(3) As a percentage of the total net sales.

The following tables provide key operating metrics for the fertilizer and major industrial products:

Three Months Ended September 30,

Product (tons sold)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Three Months Ended September 30,

Gross Average Selling Prices (price per ton)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Three Months Ended September 30,

Average Benchmark Prices (price per ton)

Tampa Ammonia Benchmark

Net sales decreased during the third quarter of 2024 compared to the prior year period driven by the impact of lower volumes for UAN and ammonia, and to a lesser extent, lower selling prices for acids relative to the third quarter of 2023.

Also impacting sales volumes was the planned Turnaround activity completed during the third quarter at our Pryor Facility.

Partially offsetting this decrease was improved pricing for ammonia and increased acid sales volumes.

Demand for our industrial products is stable despite continued global economic challenges.

In some cases, our contractual agreements with industrial customers specify minimum volumes and our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand.

As noted in the table above, we recognized a gross loss of $7.9 million for the third quarter of 2024 compared to a gross loss of $3.4 million for the same period in 2023, or a $4.6 million increase.

Overall, our gross loss percentage was (7.3)% compared to a gross loss percentage of (3.0)% for the same period in 2023.

Our adjusted gross profit percentage increased to 22.9% for the third quarter of 2024 from 12.1% for the third quarter of 2023.

Our overall gross loss for the third quarter of 2024 is primarily lower compared to the same period of 2023 due to lower sales prices and overall volume for our products, planned Turnaround expenses and higher depreciation partially offset by lower natural gas costs.

Selling, General and Administrative

Our SG&A expenses were $10.0 million for the third quarter of 2024, an increase of $1.5 million compared to the same period in 2023.

The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in insurance, depreciation and amortization and other miscellaneous expenses.

Interest Expense

Interest expense for the third quarter of 2024 was $8.1 million compared to $7.2 million for the same period in 2023.

The increase primarily relates to the reversal of the previous judgment awarded to Global in the litigation discussed in Note 5 during the third quarter of 2023.

The increase was partially offset by reduced interest expense during the third quarter of 2024 as a result of the lower outstanding balances on our 6.25% Senior Secured Notes (due to recent repurchases) and on our Secured Financing due 2025 (due to repayments).

Other Expense (income), net

Other expense (income), net during the third quarter of 2024 and 2023 primarily relates to impairment losses from disposal or abandonment of assets no longer being used in operations offset by short-term rental income from railcar subleases.

The losses were higher and rental income was lower in the current quarter compared to the prior year quarter.

Non-operating Other Income, net

Non-operating other income, net for the third quarter of 2024 was $2.7 million compared to $3.7 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.

Benefit provision for Income Taxes

The benefit for income taxes for the third quarter of 2024 was $4.5 million and the benefit for income taxes for the same period of 2023 was $5.2 million.

The resulting effective tax rate for the third quarter of 2024 was 15.0% compared to 40.5% for the same period of 2023.

For the third quarter of 2024, the effective tax rate is lower than the statutory rate primarily due to change in valuation allowance and nondeductible compensation.

For the third quarter of 2023, the effective tax rate is greater than the statutory rate primarily due to the impact of state taxes, valuation allowances, and other discrete items.

See discussion in Note 7.

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023

The following table contains certain financial information:

Nine Months Ended September 30,

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

The following table sets forth certain financial information, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:

Three Months Ended March 31,

(Dollars In Thousands)

8 unchanged sentences

Selling, general and administrative expense

Other expense (income), net

Other (income) expense, net

Operating income

13 unchanged sentences

(3) As a percentage of the total net sales.

The following tables provide key operating metrics for the fertilizer and major industrial products:

Nine Months Ended September 30,

The following tables provide key operating metrics for the fertilizer and major industrial products, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:

Three Months Ended March 31,

Product (tons sold)

1 unchanged sentence

Urea ammonium nitrate (UAN)

Nine Months Ended September 30,

Three Months Ended March 31,

Gross Average Selling Prices (price per ton)

1 unchanged sentence

Urea ammonium nitrate (UAN)

Nine Months Ended September 30,

Three Months Ended March 31,

Average Benchmark Prices (price per ton)

Tampa Ammonia Benchmark

Net sales of our primary products decreased during the first nine months of 2024 compared to the prior year period driven by the impact of lower selling prices relative to the first nine months of 2023 for all of our products and lower sales volumes for ammonia.

Partially offsetting weaker pricing was an increase in UAN sales volume driven by strong demand for fertilizers enhanced by our strategic commercial efforts.

As noted in the table above, we recognized a gross profit of $41.7 million for the first nine months of 2024 compared to $74.3 million for the same period in 2023, or a $32.6 million reduction.

Overall, our gross profit percentage was 10.8% compared to a gross profit percentage of 16.1% for the same period in 2023.

Our adjusted gross profit percentage was 29.7% for the first nine months of 2024 and compared to 27.3% for the same period in 2023.

Our overall gross profit for the first nine months of 2024 is lower compared to the same period of 2023 by overall lower sales prices for our products and higher planned Turnaround expenses partially offset by lower natural gas costs.

Selling, General and Administrative

Our SG&A expenses were $31.9 million for the first nine months of 2024, an increase of $4.1 million compared to the same period in 2023.

The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in expense relating to insurance, other miscellaneous expenses and depreciation and amortization expenses.

Net sales increased during the first quarter of 2025 compared to the prior year period driven by the impact of higher volumes for AN and UAN and improved pricing for AN and ammonia relative to the first quarter of 2024.

Partially offsetting this increase was lower pricing for UAN and lower ammonia sales volumes.

As noted in the table above, we recognized a gross profit of $14.4 million for the first quarter of 2025 compared to $22.3 million for the same period in 2024, or a $7.9 million decrease.

Overall, our gross profit percentage was 10.0% compared to 16.1% for the same period in 2024.

Our adjusted gross profit percentage decreased to 25.4% for the first quarter of 2025 from 29.2% for the first quarter of 2024.

Our overall gross profit for the first quarter of 2025 was lower compared to the same period of 2024 primarily due to higher natural gas costs, higher depreciation and turnaround expenses.

Other (income) expense, net

Other (income), net for the first quarter of 2025 consisted primarily of short-term rental income from railcar subleases and other miscellaneous income, partially offset by asset write-downs.

The write-downs and rental income were higher in 2024 compared to 2025.

Interest Expense

Interest expense for the first nine months of 2024 was $26.3 million compared to $31.2 million for the same period in 2023.

The decrease primarily relates to reduced interest expense as a result of the repurchase of our 6.25% Senior Secured Notes made beginning in the second quarter of 2023 and during 2024 along with a lower outstanding principal balance our Secured Financing due 2025.

Interest expense for the first quarter of 2025 was $8.1 million compared to $9.7 million for the same period in 2024.

The decrease relates to lower outstanding balances on our Senior Secured Notes (due to repurchases) and our Secured Financing due 2025 (defined below) (due to repayments).

Gain on Extinguishment of Debt

During the first nine months of 2024, we repurchased $96.6 million of our Senior Secured Notes through open market transactions for approximately $92.2 million.

As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $3.0 million.

During the first half of 2023, we repurchased $125.0 million of our Senior Secured Notes through open market transactions for approximately $114.3 million.

During the first quarter of 2024, we repurchased $32.9 million of our Senior Secured Notes through open market transactions for approximately $31.3 million.

As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $1.1 million.

Other Expense (income), net

Other expense, net during the first nine months of 2024 and 2023 consists primarily of impairment losses from disposal or abandonment of assets no longer being used in operations partially offset by short-term rental income from railcar subleases.

The losses were higher and rental income was lower in the current year compared to the prior year.

Non-operating Other Income, net

Non-operating other income, net for the first nine months of 2024 was $9.1 million compared to $10.9 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.

Non-operating other income, net for the first quarter of 2025 was $1.7 million compared to $3.6 million for the same period of 2024, primarily related to interest income earned during both periods from our short-term investments.

Our average short-term investments balance was lower during the first quarter of 2025 compared to the first quarter of 2024.

(Benefit) provision for Income Taxes

The benefit for income taxes for the first nine months of 2024 was $2.6 million compared to the provision for income taxes of $3.6 million for the same period of 2023.

The resulting effective tax rate for the first nine months of 2024 was 20.5% compared to 9.8% for the same period of 2023.

For the first nine months of 2024, the effective tax rate is lower than the statutory rate primarily due to change in valuation allowance and nondeductible compensation, partially offset by state tax law changes.

For the nine months of 2023, the effective tax rate is less than the statutory rate primarily due to deferred benefits from state tax law changes, partially offset by state taxes.

The benefit for income taxes for the first quarter of 2025 was $0.3 million compared to a provision of $0.6 million for the same period of 2024.

The resulting effective tax rate for the first quarter of 2025 was a benefit on pre-tax loss of 14.7% compared to a provision on pre-tax income of 9.7% for the same period of 2024.

For the first quarter of 2025, the effective tax rate was lower than the statutory rate primarily due to changes in valuation allowance and nondeductible compensation, partially offset by state taxes.

For the first quarter of 2024, the effective tax rate was lower than the statutory rate primarily due to nondeductible compensation and state taxes.

See discussion in Note 7.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flow activities for the nine months ended September 30:

The following table summarizes our cash flow activities for the three months ended March 31:

(In Thousands)

3 unchanged sentences

Net Cash Flow from Operating Activities

Net cash provided by operating activities was $82.6 million for the first nine months of 2024 compared to $120.5 million for the same period of 2023, a change of $37.9 million.

The decrease was primarily a result of a reduction in net sales, partially offset by lower cost of sales and lower cash interest paid.

Net cash provided by operating activities was $6.8 million for the first three months of 2025 compared to $24.1 million for the same period of 2024, a change of $17.3 million.

The decrease was primarily a result of higher cost of sales, changes in working capital and lower interest income on our short-term investments.

Net Cash Flow from Investing Activities

Net cash used by investing activities was $18.4 million for the first nine months of 2024 compared to net cash provided of $21.5 million for the same period of 2023, a change of $39.9 million.

For the first nine months of 2024, the net cash used primarily relates to purchases of short-term investments of $190.6 million and expenditures for PP&E of $64.1 million partially offset by proceeds from short-term investments of $236.5 million.

For the first nine months of 2023, the net cash provided primarily relates to proceeds from short-term investments of $293.3 million, partially offset by purchases of short-term investments of $230.7 million and expenditures for PP&E of $41.0 million.

Net cash used by investing activities was $5.3 million for the first three months of 2025 compared to net cash provided by investing activities of $47.9 million for the same period of 2024, a change of $53.2 million.

For the first three months of 2025, the net cash used primarily related to purchases of short-term investments of $49.0 million and expenditures for property, plant and equipment of $20.9 million, partially offset by proceeds from short-term investments of $64.5 million.

For the first three months of 2024, the net cash provided primarily related to proceeds from short-term investments of $100.9 million, partially offset by purchases of short-term investments of $34.7 million and expenditures for property, plant and equipment of $18.3 million.

Net Cash Flow from Financing Activities

Net cash used by financing activities was $123.0 million for the first nine months of 2024 compared to net cash used of $159.0 million for the same period of 2023, a change of $36.0 million.

For the first nine months of 2024, the net cash used primarily consists of repurchases of our 6.25% Senior Secured Notes of $92.2 million, payments on other long-term debt and short-term financing of $15.9 million and repurchases of $14.2 million of common stock.

For the first nine months of 2023, the net cash used primarily consists of repurchases of our 6.25% Senior Secured Notes of $114.3, payments on other long-term debt and short-term financing of $24.3 million and $20.4 million for the repurchases of common stock.

Net cash used by financing activities was $6.8 million for the first three months of 2025 compared to net cash used of $44.5 million for the same period of 2024, a change of $37.8 million.

For the first three months of 2025, the net cash used primarily consisted of payments on other long-term debt and short-term financing of $5.6 million and $1.2 million for tax withholding obligations related to the vesting of equity awards.

For the first three months of 2024, the net cash used primarily consisted of repurchases of our Senior Secured Notes of $31.3 million, payments on other long-term debt and short-term financing of $5.8 million, payments of $5.4 million for the purchase of treasury stock and $1.8 million for tax withholding obligations related to the vesting of equity awards.

Capitalization

The following is our total cash and cash equivalents, short-term investments, long-term debt and stockholders’ equity as of September 30, 2024 and December 31, 2023, respectively:

September 30, 2024

The following table summarizes our total cash and cash equivalents, short-term investments, long-term debt and stockholders’ equity as of March 31, 2025 and December 31, 2024:

March 31, 2025

December 31, 2024

12 unchanged sentences

(1) See discussion contained in Note 4.

(2) Debt issuance costs as of September 30, 2024 and December 31, 2023 of approximately $0.8 million and $0.5 million, respectively, relating to our Revolving Credit Facility are not included in Unamortized debt issuance cost.

They are included in our condensed consolidated balance sheet in Intangible and other assets, net.

We currently have a revolving credit facility pursuant to that credit agreement, dated December 21, 2023, between us and the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent (the “Revolving Credit Facility”), with a borrowing base up to an initial maximum of $75 million, with an option to increase the maximum by an additional $25 million (which amount is uncommitted).

(2) Debt issuance costs as of March 31, 2025 and December 31, 2024 of approximately $0.6 million and $0.6 million, respectively, relating to our Revolving Credit Facility are not included in Unamortized debt issuance costs.

These costs are included in our condensed consolidated balance sheets in Intangible and other assets, net.

We currently have a revolving credit facility pursuant to a credit agreement, dated December 21, 2023, between us and the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent (the “Revolving Credit Facility”), with a borrowing base up to an initial maximum of $75 million, with an option to increase the maximum by an additional $25 million (which amount is uncommitted).

Availability under the Revolving Credit Facility is subject to a borrowing base and an availability block of $7.5 million which is applied against the $75 million initially reducing the maximum (which can be removed by us at our sole discretion, subject to the satisfaction of certain conditions).

The Revolving Credit Facility provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $10 million, with the outstanding amount of any such letters of credit reducing availability for borrowings.

As of September 30, 2024, our Revolving Credit Facility was undrawn and had approximately $34 million of availability.

See Note 4 for further discussion on the facility.

For the full year of 2024, we expect capital expenditures to be approximately $65 million to $85 million.

This capital spending is primarily planned for reliability and maintenance capital projects.

As of March 31, 2025, our Revolving Credit Facility was undrawn and had approximately $40 million of availability.

See Note 4 for further discussion of the Revolving Credit Facility.

For the full year of 2025, we expect capital expenditures to be approximately $80 million to $90 million of which $60 million to $65 million is expected to be spent on sustaining production, with the remainder spent on growth initiatives.

From time to time, when the Company exceeds the funding threshold in our natural gas purchase commitments, the Company is required to fund cash collateral to our counterparty.

As of September 30, 2024, we had approximately $199.4 million of cash and short-term investments.

As of March 31, 2025, we had approximately $163.5 million of cash and short-term investments.

From time to time, we may seek to deploy capital through common stock repurchases or the early redemption of outstanding debt.

1 unchanged sentence

The amounts involved may be material.

We believe that the combination of our cash and cash equivalents, short-term investments, the availability on our Revolving Credit Facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next twelve months.

We believe that the combination of our cash and cash equivalents, short-term investments, the availability under our Revolving Credit Facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next twelve months.

Compliance with Long - Term Debt Covenants

1 unchanged sentence

The Revolving Credit Facility does not include financial covenant requirements unless a defined covenant trigger event has occurred and is continuing.

As of September 30, 2024, no trigger event had occurred.

As of March 31, 2025, no trigger event had occurred.

Loan Agreements

Senior Secured Notes due 2028 – LSB has $478.4 million aggregate principal amount of the 6.25% Senior Secured Notes outstanding as of September 30, 2024.

Interest is to be paid semiannually in arrears on May 15 th and October 15 th , maturing October 15, 2028.

Secured Financing due 2025 – We are a party to a $30 million secured financing arrangement with an affiliate of Eldridge.

Senior Secured Notes due 2028 – LSB has $478.4 million aggregate principal amount of Senior Secured Notes outstanding as of March 31, 2025.

Interest is to be paid semiannually in arrears on May 15 th and October 15 th.

The Senior Secured Notes mature on October 15, 2028.

Secured Financing due 2025 – We are a party to a $30 million secured financing arrangement with an affiliate of Eldridge (the “Secured Financing due 2025”).

Principal and interest are payable in 60 equal monthly installments with a final balloon payment of approximately $5 million due in August 2025.

Revolving Credit Facility – At September 30, 2024, our Revolving Credit Facility was undrawn and had approximately $34 million of availability, based on our eligible collateral, less outstanding letters of credit as of that date.

Revolving Credit Facility – At March 31, 2025, our Revolving Credit Facility was undrawn and had approximately $40 million of availability, based on our eligible collateral, less outstanding letters of credit as of that date.

Also see discussion above under “Compliance with Long-Term Debt Covenants.”

1 unchanged sentence

Most of our railcar leases are classified as operating leases.

Capital Expenditures – First Nine Months of 2024

For the first nine months of 2024, capital expenditures relating to PP&E were $64.1 million.

Capital Expenditures – First Three Months of 2025

For the first three months of 2025, capital expenditures relating to property, plant and equipment were $20.9 million.

The capital expenditures were funded primarily from cash and working capital.

See discussion above under “Capitalization” for our expected capital expenditures.

See discussion above under “Capitalization” for our total expected capital expenditures for 2025.

Equity and debt repurchases

In May 2023, our Board authorized a $150 million stock repurchase program.

The program is intended as a means to maximize shareholder value by returning capital to shareholders.

The program is intended as a means to maximize stockholder value by returning capital to stockholders.

Under the repurchase program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions.

1 unchanged sentence

The repurchase program does not obligate us to purchase any particular number or type of securities.

During the three months ended September 30, 2024, we did not repurchase any of our outstanding common stock.

During the nine months ended September 30, 2024, we repurchased approximately 1.5 million shares of common stock at an average cost of $8.13 per share for a total of approximately $12.1 million.

Total repurchase authority remaining under the repurchase program was approximately $109 million as of September 30, 2024.

During the three months ended March 31, 2025, we did not repurchase any of our shares of common stock.

The repurchase program may be suspended, terminated or modified at any time for any reason.

During the three months ended September 30, 2024, we did not repurchase any of our Senior Secured Notes.

During the nine months ended September 30, 2024, we repurchased $96.6 million in principal amount of our Senior Secured Notes for approximately $92.2 million.

During the three months ended March 31, 2025, we did not repurchase any of our Senior Secured Notes.

Expenses Associated with Environmental Regulatory Compliance

We are subject to specific federal and state environmental compliance laws, regulations and guidelines.

As a result, our expenses were $4.0 million for the first nine months ended September 30, 2024 in connection with environmental projects.

As a result, our expenses were $0.9 million for the first three months ended March 31, 2025 in connection with environmental projects.

For the remainder of 2025, we expect to incur expenses ranging from $3.2 million to $3.4 million in connection with additional environmental projects.

However, it is possible that the actual costs could be significantly different than our estimates.

We believe fertilizer products sold to the agricultural industry are seasonal, while sales into the industrial sectors generally are less susceptible to seasonal fluctuations.

We believe sales of fertilizer products to the agricultural industry are seasonal, while sales into the industrial sectors generally are less susceptible to seasonal fluctuations.

The selling seasons for fertilizer products are primarily during the spring and fall planting seasons, which typically extend from March through June and from September through November in the geographical markets where we distribute the majority of our fertilizer products.

4 unchanged sentences

These insurance bonds primarily represent guarantees of future performance of our subsidiaries.

As of September 30, 2024, we have agreed to indemnify the sureties for payments, up to $9.7 million, made by them in respect of such bonds.

All of these insurance bonds are expected to expire or be renewed in 2024.

As of March 31, 2025, we have agreed to indemnify the sureties for payments, up to $10.3 million, made by them in respect of such bonds.

New Accounting Pronouncements

1 unchanged sentence

Critical Accounting Policies and Estimates

See “Critical Accounting Policies and Estimates,” Item 7 of our 2023 Form 10-K.

See “Critical Accounting Policies and Estimates,” Item 7 of our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025 (the “2024 Form 10-K”).

In addition, the preparation of financial statements requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosures of contingencies and fair values, including, but not limited to, various environmental and legal matters, including matters discussed under footnote A of Note 5.

1 unchanged sentence

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.

We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be

We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be realized.

Significant judgment is applied in evaluating the need for and the magnitude of appropriate valuation allowances against deferred tax assets.

It is also reasonably possible that the estimates and assumptions utilized as of September 30, 2024, could change in the near term.

It is also reasonably possible that the estimates and assumptions utilized as of March 31, 2025, could change in the near term.

Actual results could differ materially from these estimates and judgments, as additional information becomes known.

Non-GAAP Financial Measures

Management uses adjusted gross profit as a supplemental measure to review and assess the performance of our core business operations and for planning purposes.

We define adjusted gross profit as gross profit excluding depreciation and amortization and Turnaround expenses included in our cost of sales, which we believe are not reflective of our operating performance in a given period.

Adjusted gross profit is a metric that provides investors with greater transparency to the information used by management in its financial and operational decision-making.

We believe this metric is useful to investors because it facilitates comparisons of our core business operations across periods on a consistent basis.

Management believes that the non-GAAP measure presented in this Form 10-Q, when viewed in combination with our results prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”), provides a more complete understanding of the factors and trends affecting our business and performance.

Adjusted gross profit is not a measure of financial performance under U.S.

GAAP, and should not be considered a substitute for gross profit, which we consider to be the most directly comparable U.S.

GAAP measure.

Adjusted gross profit has limitations as an analytical tool, and when assessing our operating performance, investors should not consider adjusted gross profit in isolation, or as a substitute for gross profit prepared in accordance with U.S.

Adjusted gross profit may not be comparable to similarly titled measures of other companies and other companies may not calculate such measure in the same manner as we do.

The following table reconciles gross profit to adjusted gross profit.

Three Months Ended March 31,

Reconciliation of Gross Profit to Adjusted Gross Profit:

(In Thousands)

Gross profit:

Depreciation and amortization

Turnaround expenses

Adjusted gross profit

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Act.

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Quantitative and Qualitat ive Disclosures about Market Risk

3 unchanged sentences

As a result, we could be exposed to embedded losses should our product costs exceed the firm sales prices at the end of a reporting period.

At September 30, 2024, we had no embedded losses associated with sales commitments with firm sales prices.

At March 31, 2025, we had no embedded losses associated with sales commitments with firm sales prices.

Commodity Price Risk

2 unchanged sentences

Generally, these contracts are considered normal purchases because they provide for the purchase of natural gas that will be delivered in quantities expected to be used over a reasonable period of time in the normal course of business, and as such, are exempt from derivative accounting requirements.

At September 30, 2024, we had no outstanding natural gas contracts which are subject to derivative accounting requirements.

At March 31, 2025, we had no outstanding natural gas contracts which are subject to derivative accounting requirements.

Interest Rate Risk

We may be exposed to variable interest rate risk with respect to our Revolving Credit Facility when there are outstanding borrowings.

As of September 30, 2024, we had no outstanding borrowings on this credit facility and no other variable rate borrowings.

As of March 31, 2025, we had no outstanding borrowings on this credit facility and no other variable rate borrowings.

We currently do not hedge our interest rate risk associated with our variable interest loan.

2 unchanged sentences

These include controls and procedures designed to ensure that this information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of September 30, 2024.

Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of September 30, 2024, at the reasonable assurance level.

There were no changes to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of March 31, 2025.

There were no changes to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

4 unchanged sentences

The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “may,” “could,” and similar expressions identify Forward-Looking Statements.

Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, many of which are difficult to predict and are generally outside the Company’s control, that could cause actual results to differ materially from those expressed in, or implied of projected by, such forward-looking statements.

Forward-Looking Statements contained herein, and the associated risks, uncertainties, assumptions and other important factors include, but are not limited to, the following:

All Forward-Looking Statements speak only as of the date on which they are made.

Forward-Looking Statements contained herein include, but are not limited to:

• our ability to invest in projects that will generate the best returns for our stockholders;

1 unchanged sentence

• the outlook of our chemical products and related markets;

• our ability to successfully leverage our existing business platform and portfolio of assets to produce low carbon products and execute our strategy to become a leader in the energy transition in the chemical industry;

• our ability to successfully leverage our existing business platform and portfolio of assets to produce low carbon products and execute our advanced low carbon ammonia initiatives, including our strategy to become a leader in the energy transition in the chemical industry;

• the amount, timing and effect on the nitrogen market from current nitrogen expansion projects;

4 unchanged sentences

• our ability to broaden the distribution of our products, including our ability to leverage our nitric acid production capacity at our El Dorado Facility;

• our ongoing initiatives to increase the distribution of our products within our industrial end markets;

• the execution and success of our advanced low-carbon ammonia initiatives;

• our expectations regarding future ammonia pricing;

1 unchanged sentence

• changes in domestic fertilizer production;

• the increasing output and capacity of our existing production facilities;

• production volumes at our production facilities;

• the increasing output, capacity and production volumes of our existing production facilities;

• our ability to moderate risk inherent in agricultural markets;

5 unchanged sentences

• our belief as to whether we have sufficient sources for materials and components;

• our beliefs regarding our estimates and contingencies with respect claims and legal actions in the ordinary course of our business and their effect on our business, financial condition, results of operations or cash flows;

• annual natural gas requirements;

4 unchanged sentences

• expenses in connection with environmental projects;

• the effect of litigation and other contingencies, including the potential financial penalties associated with the NOV from ADEQ regarding wastewater discharges from our El Dorado Facility;

• the increase in interest expense;

• our ability to comply with debt servicing and covenants;

• the effect of litigation, legal actions and other contingencies on our business, financial condition, results of operations or cash flows, including the potential financial penalties associated with the NOV from ADEQ regarding wastewater discharges from our El Dorado Facility;

• our ability to comply with debt servicing and covenants, including our beliefs as to whether we can meet all required covenant tests for the next twelve months;

• our ability to meet debt maturities or redemption obligations when due;

• the impact of our repurchase program on our stock price and cash reserves.

• the effects of the ongoing COVID-19 pandemic and related response;

• our beliefs as to whether we can meet all required covenant tests for the next twelve months.

While we believe, the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance such expectations will prove to have been correct.

5 unchanged sentences

• increased competitive pressures;

• adverse effects of increases in prices of raw materials;

• changes in federal, state and local laws and regulations, or in the interpretation of such laws and regulations;

9 unchanged sentences

• the loss of any significant customer;

• increases in cost to maintain internal controls over financial reporting;

• increases in cost to maintain internal control over financial reporting;

• changes in operating strategy or development plans;

2 unchanged sentences

• adverse results in our contingencies including pending litigation;

• unplanned downtime at one or more of our chemical facilities;

• changes in production rates at any of our chemical plants;

• unplanned downtime at one or more of our facilities;

• changes in production rates at any of our facilities;

• an inability to obtain necessary raw materials and purchased components;

9 unchanged sentences

• reduction in acres planted for crops requiring fertilizer;

• decreases in duties for products we sell resulting in an increase in imported products into the U.S.;

• decreases in duties for products we sell resulting in an increase in imported products into the United States;

• adverse effects from regulatory policies, including tariffs;

5 unchanged sentences

• global supply chain disruptions;

• other factors described in the MD&A contained in this report;

• other factors described in “Risk Factors” in our Form 10-K for the year ended December 31, 2023.

• other factors described in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report;

• other factors described in Item 1A.

Risk Factors in our Form 10-K for the year ended December 31, 2024.

Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements.

Except to the extent required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the Forward-Looking Statements contained herein to reflect future events or developments.

The following is a list of terms used in this report.

The Arkansas Department of Environmental Quality.

Ammonium nitrate.

Accounting Standard Updates.

AutoThermal Reforming.

A consent administrative order.

Cherokee Facility

Our chemical production facility located in Cherokee, Alabama.

Chevron Environmental Management Company.

The novel coronavirus disease of 2019.

El Dorado Ammonia L.L.C.

(now merged into LSB Chemical, L.L.C.

a subsidiary of LSB Industries, Inc.).

El Dorado Chemical Company (now merged into LSB Chemical, L.L.C.

a subsidiary of LSB Industries, Inc.).

El Dorado Facility

Our chemical production facility located in El Dorado, Arkansas.

Eldridge Industries, L.L.C.

Environmental and Health Laws

Numerous federal, state and local environmental, health and safety laws.

Environmental Use Control.

Financial Accounting Standards Board.

Front end engineering design.

Global Industrial, Inc., a subcontractor asserting mechanics liens for work rendered to the Company.

Hallowell Facility

A chemical facility previously owned by two of our subsidiaries located in Kansas.

High density ammonium nitrate prills used in the agricultural industry.

Internal Revenue Service.

The Kansas Department of Health and Environment.

Low density ammonium nitrate prills used in the mining industry.

Leidos Constructors L.L.C.

LSB Industries, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Million British thermal units.

Memorandum of understanding.

A note in the accompanying notes to the condensed consolidated financial statements.

October Report

The World Agricultural Supply and Demand Estimates Report dated October 11, 2024.

The Oklahoma Department of Environmental Quality.

Plant, property and equipment.

Pryor Facility

Our chemical production facility located in Pryor, Oklahoma.

Securities and Exchange Commission.

Secured Financing due 2025

A secured financing arrangement between EDA and an affiliate of Eldridge which matures in August 2025.

Senior Secured Notes

The senior secured notes issued on October 14, 2021 and the senior secured notes issued March 8, 2022, taken together both due on October 15, 2028 with a stated interest rates of 6.25% maturing in October 2028.

Selling, general and administrative expense.

A unit of weight equal to 2,000 pounds.

A planned major maintenance activity.

Urea ammonium nitrate.

United States.

Generally Accepted Accounting Principles.

United States Department of Agriculture.

Revolving Credit Facility

Our secured revolving credit facility pursuant to that credit agreement, dated December 21, 2023, between us and the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent.

Corn crop marketing year (September 1 - August 31), which began in 2022 and ended in 2023 and primarily relates to corn planted and harvested in 2022.

Corn crop marketing year (September 1 - August 31), which began in 2023 and will end in 2024 and primarily relates to corn planted and harvested in 2023.

Corn crop marketing year (September 1 - August 31), which began in 2024 and will end in 2025 and primarily relates to corn planted and harvested in 2024.

OTHER INFORMATION

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis