What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-04-30 · 192 added, 112 removed, 372 unchanged (45% of the section changed)

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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.

and other parts of North America.

Our products are sold through distributors and directly to end customers primarily throughout the United States and other parts of North America.

Key Operating Initiatives for 2025

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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.

We will continue evaluating 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.

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▪ 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.

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

This project was completed during the second 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.

▪ Expansion of our urea capacity at our Pryor Facility, to enable us 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 led to increased UAN sales volumes during the first half of 2025.

• Evaluate Acquisitions of Strategic Assets or Companies.

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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.

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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

by the end of 2026.

Lapis, as the majority owner of the CCS 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.

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

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.

In June 2025, Lapis completed the drilling of a stratigraphic injection well at the El Dorado site and has been gathering data

to support the EPA in its continuing technical review of our Class VI application.

Once the project receives EPA approval, we intend to use this well for CO 2 injections.

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

Second quarter 2025 results were impacted by natural gas input costs, which were higher than they were in the second 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%.

Additionally, second quarter 2025 results benefited from higher UAN prices relative to the prior year second quarter.

Ammonia prices currently reflect reduced supply from the Middle East, robust demand in the United States, and higher cost of production in Europe.

Global ammonia inventories appear balanced, however, and as the year progresses, pricing may 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.

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 global supply with limited inventory in the United States distribution channel;

the demand pull of a strong Spring 2025 corn planting season with the United States Department of Agriculture (“USDA”) currently expecting 95 million acres of corn to be planted, up 5% from the 2024 planting season;

and a reduced pace of import flow into the United States.

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

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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.

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

Economic uncertainty continues to be 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.”

Shift in Production Mix

Over the last several months, we commenced the process of transitioning our production of HDAN, an agricultural/fertilizer product, to ANS, a product used in industrial and mining applications.

We expect this transition to be complete and production of HDAN to cease later in the third quarter of 2025.

This transition is consistent with our strategy to shift a portion of our sales mix from agricultural sales made at spot market pricing, which can be volatile, towards sales covered under multi-year contracts where we pass through the cost of natural gas feedstock.

With the discontinuation of HDAN production, we will also close our agricultural retail location in Elkhart, TX, as its primarily purpose was to sell the HDAN we produced.

The process to close this retail location commenced at the beginning of the third quarter of 2025 and will be substantially complete by quarter-end.

Key Industry Factors

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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 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 April 2025 estimates are associated with the corn market:

According to the World Agricultural Supply and Demand Estimates Report dated July 11, 2025 (the “July Report”), farmers planted approximately 95.2 million acres of corn in the 2025 planting season, up 5.1% compared to the 2024 planting season.

According to the July Report, the USDA estimates the United States ending stocks for the 2025 Harvest will be approximately 42.2 million metric tons, a 24.1% increase from the 2024 Harvest.

The USDA's expected yield per acre for the 2025 Harvest is 181.0 bushels, up approximately 0.9% from a year ago.

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

(2025 Harvest)

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(2023 Harvest)

April Report (1)

July Report (1)

Area Planted (Million acres)

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World Ending Stocks (Million metric tons)

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

Information obtained from the July Report for the 2026/2025 (“2026 Crop”), 2024/2025 ("2025 Crop") and 2023/2024 (“2024 Crop”) corn marketing years.

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

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Represents the percentage change between the 2026 Crop amounts compared to the 2024 Crop amounts.

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.

The current USDA corn outlook for the United States calls for smaller supplies, domestic use, and ending stocks.

Corn beginning stocks are down reflecting an increase in exports partly offset by lower feed and residual use.

With supply falling more than use, ending stocks are down 90 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 the remainder of 2025.

Industrial Products

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

Three Months Ended March 31,

Three Months Ended June 30,

Natural gas volumes (MMBtu in millions)

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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.

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

Ammonia Production

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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 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.

Consolidated Results of the Second Quarter of 2025

Our consolidated net sales for the second quarter of 2025 were $151.3 million compared to $140.1 million for the same period in 2024.

Our consolidated operating income for the second quarter of 2025 was $10.5 million compared to $14.4 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 First Quarter

Items Affecting Comparability of Results of the Second Quarter

Selling Prices

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.

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

(Loss) Gain on Extinguishment of Senior Secured Notes

During the second quarter of 2025 we repurchased $32.4 million in principal amount of our Senior Secured Notes due 2028 (“Senior Secured Notes”) for approximately $32.1 million, which was accounted for as an extinguishment of debt.

Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.

During the second quarter of 2024 we repurchased $63.7 million in principal amount of our Senior Secured Notes for approximately $60.9 million.

Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt of approximately $1.9 million.

Plant, Property and Equipment Impairments

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.

For the three months ended June 30, 2025 and 2024, we recorded asset write-downs primarily related to assets no longer in use in the amount of $2.5 million and $1.5 million, respectively.

These write-downs are included in “Other expense, net” on our condensed consolidated statements of operations.

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.

The following is a discussion and analysis of our condensed consolidated results of operations for the three months ended June 30, 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 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,

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

The following table sets forth certain financial information for the three months ended June 30, 2025 and 2024, 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 June 30,

(Dollars In Thousands)

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Selling, general and administrative expense

Other (income) expense, net

Other expense, net

Operating income

Interest expense, net

Gain on extinguishment of debt

Loss (gain) on extinguishment of debt

Non-operating other income, net

(Benefit) provision for income taxes

Net (loss) income

Provision for income taxes

Other information:

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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,

Three Months Ended June 30,

Product (tons sold)

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Urea ammonium nitrate (UAN)

Three Months Ended March 31,

Three Months Ended June 30,

Gross Average Selling Prices (price per ton)

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Urea ammonium nitrate (UAN)

Three Months Ended March 31,

Three Months Ended June 30,

Average Benchmark Prices (price per ton)

Tampa Ammonia Benchmark

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.

Net sales increased during the second quarter of 2025 compared to the prior year period driven by the impact of improved pricing for UAN and ammonia, as well as higher sales volumes for UAN and for our AN & Nitric Acid product group.

Partially offsetting this increase were lower ammonia sales volumes and a lower average price within our AN & Nitric Acid product group.

As noted in the table above, we recognized a gross profit of $23.2 million for the second quarter of 2025 compared to $27.4 million for the same period in 2024, or a $4.2 million decrease.

Overall, our gross profit percentage was 15.3% compared to 19.6% 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.

Our adjusted gross profit percentage decreased to 30.7% for the second quarter of 2025 from 35.4% for the second quarter of 2024.

Our gross profit for the second quarter of 2025 was lower compared to the same period of 2024 primarily due to higher natural gas costs and higher depreciation due to recent investments in our facilities.

These cost increases were partially offset by higher net sales and lower Turnaround expenses.

Selling, General and Administrative

Our SG&A expenses were $9.8 million for the second quarter of 2025, a decrease of $1.7 million compared to the same period in 2024.

The net decrease was primarily driven by decreases in professional fees, insurance and other miscellaneous expenses items, partially offset by an increase in payroll related expenses.

Other expense, net

Other expense, net for the second quarter of 2025 consisted primarily of asset write-downs, which were lower in 2024 compared to 2025.

Interest Expense

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

Interest expense for the second quarter of 2025 was $7.9 million compared to $8.4 million for the same period in 2024.

The decrease was primarily due to a lower outstanding balance on our Senior Secured Notes as a result of repurchases.

(Loss) Gain on Extinguishment of Debt

During the second quarter of 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 million, which was accounted for as an extinguishment of debt.

Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.

During the second quarter of 2024, we repurchased $63.7 million in principal amount of our Senior Secured Notes for approximately $60.9 million.

Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt of approximately $1.9 million.

Non-operating Other Income, net

Non-operating other income, net for the second quarter of 2025 was $1.5 million compared to $2.9 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 including cash equivalents, was lower during the second quarter of 2025 compared to the second quarter of 2024.

Provision for Income Taxes

The provision for income taxes for the second quarter of 2025 was $1.1 million compared to $1.3 million for the same period of 2024.

The resulting effective tax rate for the second quarter of 2025 was a provision on pre-tax income of 26.5% compared to 11.6% for the same period of 2024.

For the second quarter of 2025, the effective tax rate was higher than the statutory rate primarily due to nondeductible compensation expense and state taxes.

For the second quarter of 2024, the effective tax rate is lower than the statutory rate primarily due to nondeductible compensation and deferred benefits from state tax law changes.

See discussion in Note 7.

Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024

The following table contains certain financial information for the six months ended June 30, 2025 and 2024, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:

Six Months Ended June 30,

(Dollars In Thousands)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Total net sales

Gross profit:

Adjusted gross profit (1)

Depreciation and amortization (2)

Turnaround expense

Total gross profit

Selling, general and administrative expense

Other expense, net

Operating income

Interest expense, net

Loss (gain) on extinguishment of debt

Non-operating other income, net

Provision for income taxes

Other information:

Gross profit 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.

Six Months Ended June 30,

Product (tons sold)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Six Months Ended June 30,

Gross Average Selling Prices (price per ton)

AN & Nitric Acid

Urea ammonium nitrate (UAN)

Six Months Ended June 30,

Average Benchmark Prices (price per ton)

Tampa Ammonia Benchmark

Net sales of our primary products increased during the first half of 2025 compared to the prior year period driven by the impact of higher volumes for UAN and our AN & Nitric Acid product group and improved pricing for UAN and ammonia.

Partially offsetting this increase was lower pricing for our AN & Nitric Acid product group and lower ammonia sales volumes.

Additionally, we benefited from a healthy increase in downstream upgraded product production volumes.

As noted in the table above, we recognized a gross profit of $37.6 million for the first half of 2025 compared to $49.7 million for the same period in 2024, a $12.1 million reduction.

Overall, our gross profit percentage was 12.7% compared to a gross profit percentage of 17.9% for the same period in 2024.

Our adjusted gross profit percentage was 28.1% for the first half of 2025 compared to 32.3% for the same period in 2024.

Our gross profit for the first half of 2025 was lower compared to the same period of 2024 primarily due to higher natural gas costs and higher depreciation due to recent investments in our facilities.

These cost increases were partially offset by higher net sales.

Selling, General and Administrative

Our SG&A expenses were $20.0 million for the first half of 2025, a decrease of $1.8 million compared to the same period in 2024.

The net decrease was primarily driven by decreases in professional fees, insurance and other miscellaneous expenses items, partially offset by an increase in payroll related expenses.

Interest Expense

Interest expense for the first half of 2025 was $16.0 million compared to $18.1 million for the same period in 2024.

The decrease primarily related to reduced interest expense as a result of repurchases of Senior Secured Notes made during 2024 and the second quarter of 2025.

(Loss) gain on Extinguishment of Debt

During the first half of 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 million, which was accounted for as an extinguishment of debt.

Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.

During the first half 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.

Other Expense, net

Other expense, net during the first half of 2025 and 2024 consisted primarily of asset write-downs related to assets no longer being used in operations.

The asset write downs were lower in the first half of 2025 compared to the first half of 2024 while the write-downs in the first half of 2024 were partially offset by higher short-term rental income from railcar subleases.

Non-operating Other Income, net

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 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.

Non-operating other income, net for the first half of 2025 was $3.2 million compared to $6.5 million for the same period of 2024, primarily related to interest income earned during both periods from our short-term investments.

Provision for Income Taxes

The provision for income taxes for the first half of 2025 was $0.8 million compared to $1.9 million for the same period of 2024.

The resulting effective tax rate for the first half 2025 was 37.0% compared to 10.9% for the same period of 2024.

For the first half of 2025, the effective tax rate is higher than the statutory rate primarily due to nondeductible compensation expense and state taxes.

For the first half of 2024, the effective tax rate is lower than the statutory rate primarily due to nondeductible compensation and deferred benefits from state tax law changes.

See discussion in Note 7.

LIQUIDITY AND CAPITAL RESOURCES

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

The following table summarizes our cash flow activities for the six months ended June 30:

(In Thousands)

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Net Cash Flow from Operating Activities

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.

Net cash provided by operating activities was $25.0 million for the first six months of 2025 compared to $65.5 million for the same period of 2024, a change of $40.5 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 $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 provided by investing activities was $4.8 million for the first six months of 2025 compared to $168.8 million for the same period of 2024, a change of $164.0 million.

For the first six months of 2025, the net cash provided by investing activities primarily related to proceeds from short-term investments of $154.6 million, partially offset by purchases of short-term investments of $110.3 million and expenditures for property, plant and equipment of $39.3 million.

For the first six months ended 2024, the net cash provided by investing activities primarily related to proceeds from short-term investments of $236.5 million, partially offset by purchases of short-term investments of $34.7 million and expenditures for property, plant and equipment of $33.0 million.

Net Cash Flow from Financing Activities

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.

Net cash used by financing activities was $44.4 million for the first six months of 2025 compared to $119.0 million for the same period of 2024, a change of $74.5 million.

For the first six months of 2025, the net cash used by financing activities primarily consisted of repurchases of our Senior Secured Notes of $32.1 million, payments on our Secured Financing due 2025 and short-term financing of $11.3 million and $1.2 million for tax withholding obligations related to the vesting of equity awards.

For the first six months of 2024, the net cash used by financing activities primarily consisted of repurchases of our Senior Secured Notes of $92.2 million, payments on our Secured Financing due 2025 and short-term financing of $11.8 million, repurchases of $12.0 million of common stock and $2.2 million for tax withholding obligations related to the vesting of equity awards.

Capitalization

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

The following table summarizes our total cash and cash equivalents, short-term investments, long-term debt and stockholders’ equity as of June 30, 2025 and December 31, 2024:

June 30, 2025

December 31, 2024

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Total stockholders' equity

_____________________________

(1) See discussion contained in Note 4.

(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.

(2) Debt issuance costs as of June 30, 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.

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

As of June 30, 2025, our Revolving Credit Facility was undrawn and had approximately $46 million of availability.

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

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

As of June 30, 2025, we had approximately $124.9 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.

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The amounts involved may be material.

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

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

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

As of June 30, 2025, no trigger event had occurred.

Loan Agreements

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

Senior Secured Notes due 2028 – LSB had $446.1 million aggregate principal amount of Senior Secured Notes outstanding as of June 30, 2025.

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

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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 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.

Revolving Credit Facility – At June 30, 2025, our Revolving Credit Facility was undrawn and had approximately $46 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.”

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Most of our railcar leases are classified as operating leases.

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.

Capital Expenditures – First Six Months of 2025

For the first six months of 2025, capital expenditures relating to property, plant and equipment were $39.3 million.

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

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

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

Equity and Debt Repurchases

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

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

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.

Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the SEC.

Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the Securities and Exchange Commission (the “SEC”).

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

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

During the six months ended June 30, 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 March 31, 2025, we did not repurchase any of our Senior Secured Notes.

During the six months ended June 30, 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 million, which was accounted for as an extinguishment of debt.

The debt repurchase was intended as a means to deleverage our balance sheet and reduce future interest costs while maintaining a balanced capital allocation strategy that provides an appropriate level of liquidity to fund our operations and future growth opportunities.

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 $0.9 million for the first three months ended March 31, 2025 in connection with environmental projects.

As a result, our expenses were $1.9 million for the first six months ended June 30, 2025 in connection with environmental projects.

For the remainder of 2025, we expect to incur expenses ranging from $2.1 million to $2.3 million in connection with additional environmental projects.

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

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.

As of June 30, 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

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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 March 31, 2025, could change in the near term.

It is also reasonably possible that the estimates and assumptions utilized as of June 30, 2025, could change in the near term.

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

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The following table reconciles gross profit to adjusted gross profit.

Three Months Ended March 31,

Three Months Ended June 30,

Reconciliation of Gross Profit to Adjusted Gross Profit:

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

At June 30, 2025, we had no embedded losses associated with sales commitments with firm sales prices.

Commodity Price Risk

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

At June 30, 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 March 31, 2025, we had no outstanding borrowings on this credit facility and no other variable rate borrowings.

As of June 30, 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.

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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 March 31, 2025.

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 March 31, 2025, 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 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.

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 June 30, 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 June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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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