What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-30 · 167 added, 166 removed, 398 unchanged (46% of the section changed)

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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.

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 “LSB,” “we,” “us,” “our” and the “Company” refer to LSB Industries, Inc.

and its consolidated subsidiaries.

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• Investing to improve Environmental, Health & Safety and Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality.

▪ 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 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.

We have been investing and plan to continue to invest additional capital at all three of our facilities during 2025 to build upon the success we have had in implementing enhanced safety programs during the last several years.

▪ We prioritize high safety standards that not only enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant performance.

We remain focused on our safety programs to move closer to attaining zero injuries.

We have been investing and plan to continue to invest additional capital at all three of our facilities during 2025 to build upon the progress we have had in implementing enhanced safety programs during the last several years.

▪ We have multiple initiatives underway focused on continuing to improve the reliability of our plants as we advance towards our ammonia on-stream operating rate target and increase our production volumes of ammonia and other downstream products.

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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.

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.

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 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.

We may evaluate opportunities to acquire strategic assets or companies where we believe those acquisitions will enhance the value of the Company and provide attractive returns.

We may consider assets and companies that can provide us with geographic expansion, extend an existing product line, add one or more new product lines, leverage our existing ammonia production capabilities, or complement our existing business lines, among other accretive opportunities.

Recent Business Developments

Advanced Low Carbon Ammonia Initiatives

From time to time, we evaluate opportunities to acquire strategic assets or companies where we believe those acquisitions will enhance our value and provide attractive returns to our stockholders.

We also consider assets and companies that can provide us with geographic expansion, extend an existing product line, add one or more new product lines, leverage our existing ammonia production capabilities, or complement our existing business lines, among other accretive opportunities.

Summary of Low Carbon Ammonia Initiatives

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.

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 late 2026.

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

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

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.

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, 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.

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.

Market Outlook

Demand for our industrial products remains consistent despite global economic concerns.

Nitric acid demand has been robust, reflecting strong domestic production driven by proposed anti-dumping duties on imported methylene diphenyl diisocyanate (MDI) (for which nitric acid is a raw material in its production process), import tariffs and the resilience of the U.S.

Demand for AN for use in mining applications is robust across all commodities, particularly metals, with copper and gold in limited supply globally.

Gold and copper prices are at or near historical highs with strong outlooks for future demand to underpin current production levels and potential new projects that increase production volumes.

Demand for AN is also benefiting from quarrying/aggregate production for infrastructure upgrade and expansion.

These factors should continue to support AN demand through the remainder of 2025 and into 2026.

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.

Ammonia prices currently reflect constrained global inventories resulting from reduced supply from the Middle East, higher cost of production in Europe and delays to the start-up of new production capacity.

Supply constraints are expected to continue through the end of 2025, however, this could change and pricing may be impacted by the start-up of new production capacity in both the U.S.

and internationally, with at least one new world scale plant expected to come online before the end of 2025.

Pricing for ammonia derivative fertilizer products has been strong.

UAN prices have strengthened above year-ago levels, reflecting steady exports, lower imports and strong demand, resulting in tight U.S.

supply fundamentals and below average distribution channel inventory levels throughout the U.S.

which are expected to remain into 2026.

UAN prices have also been positively impacted by robust global demand for urea.

Corn market dynamics appear supportive of strong fertilizer demand.

The United States Department of Agriculture’s (“USDA”) recent revision of domestic spring planting season estimates to approximately 98 million planted acres of corn, up 9% from 2024, is not expected to hinder demand for the fall program, which remains subject to seasonal weather outcomes.

The outlook for U.S.

corn calls for a small increase in stocks to use as a result of strong 2025 plantings and harvest expectations.

We expect to see a reduction in planted acres in 2026 closer to recent averages of 91 million to 93 million acres underpinning nitrogen fertilizer demand levels in line with recent years.

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 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.

According to the World Agricultural Supply and Demand Estimates Report dated September 12, 2025 (the “September Report”), farmers planted approximately 98.7 million acres of corn in the 2025 planting season, up 8.9% compared to the 2024 planting season.

According to the September Report, the USDA estimates the U.S.

ending stocks for the 2025 Harvest will be approximately 53.6 million metric tons, a 59.1% increase from the 2024 Harvest.

The USDA's expected yield per acre for the 2025 Harvest is 186.7 bushels, up approximately 4.1% from a year ago.

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

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

(2025 Harvest)

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(2023 Harvest)

July Report (1)

September Report (1)

Area Planted (Million acres)

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World Ending Stocks (Million metric tons)

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

Information obtained from the September 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 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.

The current USDA corn outlook for the U.S.

calls for greater supplies, larger exports, and a slight reduction in ending stocks.

Corn beginning stocks are higher based on a lower use forecast for the 2024 Harvest, with reductions in imports and corn used for ethanol partially offset by an increase in exports.

Corn production for the 2025 Harvest is forecast at 16.8 billion bushels.

If realized, harvested area would be the highest since 1933 and planted area of 98.7 million acres the highest since 1936.

Industrial Products

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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 consumer spending levels.

Nitric acid demand has been robust, reflecting strong domestic production.

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

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

Three Months Ended June 30,

Three Months Ended September 30,

Natural gas volumes (MMBtu in millions)

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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 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.

Consolidated Results of the Third Quarter of 2025

Our consolidated net sales for the third quarter of 2025 were $155.4 million compared to $109.2 million for the same period in 2024.

Our consolidated operating income for the third quarter of 2025 was $15.6 million compared to an operating loss of $24.4 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 Second Quarter

Items Affecting Comparability of Results of the Third Quarter

Shift in Production Mix

Earlier this year, we commenced the process of transitioning our production of fertilizer grade ammonium nitrate (“HDAN”), an agricultural/fertilizer product, to ANS, a product used in industrial and mining applications.

This transition was completed and the Company ceased production of HDAN during the third quarter of 2025.

This transition from HDAN to ANS 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.

Selling Prices

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.

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

Turnaround Activities (2024 only)

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 2024 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.

Plant, Property and Equipment Impairments

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.

For the three months ended September 30, 2025 and 2024, we recorded asset write-downs primarily related to assets no longer in use in the amount of $0.4 million and $5.6 million, respectively.

These write-downs are included in “Other (income) 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 June 30, 2025 and 2024.

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

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

The following table sets forth certain financial information for the three months ended September 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 September 30,

(Dollars In Thousands)

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Total net sales

Gross profit:

Gross profit (loss):

Adjusted gross profit (1)

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Turnaround expense

Total gross profit

Total gross profit (loss)

Selling, general and administrative expense

Other expense, net

Operating income

Other (income) expense, net

Operating income (loss)

Interest expense, net

Loss (gain) on extinguishment of debt

Non-operating other income, net

Provision for income taxes

Provision (benefit) for income taxes

Net income (loss)

Other information:

Gross profit percentage (3)

Gross profit (loss) percentage (3)

Adjusted gross profit percentage (3)

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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 June 30,

Three Months Ended September 30,

Product (tons sold)

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Urea ammonium nitrate (UAN)

Three Months Ended June 30,

Three Months Ended September 30,

Gross Average Selling Prices (price per ton)

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Urea ammonium nitrate (UAN)

Three Months Ended June 30,

Three Months Ended September 30,

Average Benchmark Prices (price per ton)

Tampa Ammonia Benchmark

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 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.

Net sales increased compared to the prior year period due to the favorable impact of both higher prices and higher volumes.

Improved plant reliability in the manufacturing of our AN & Nitric Acid product group as well as an absence of Turnarounds in the third quarter of 2025 drove an increase in sales volumes across all our product groups, with UAN having the most significant increase.

Improved pricing, particularly on UAN, also contributed to the increase in net sales in the third quarter of 2025.

As noted in the table above, we recognized a gross profit of $25.5 million for the third quarter of 2025 compared to a gross loss of $7.9 million for the same period in 2024, or a $33.5 million increase.

Overall, our gross profit percentage was 16.4% compared to gross loss percentage of 7.3% for the same period in 2024.

Our adjusted gross profit percentage increased to 29.6% for the third quarter of 2025 from 22.9% for the third quarter of 2024.

Our gross profit for the third quarter of 2025 was higher compared to the same period of 2024 primarily due to increased sales and lower Turnaround expenses partially offset by higher cost of sales, which were driven largely by an increase in natural gas costs.

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.

Our SG&A expenses were relatively flat for the third quarter of 2025 compared to the same period of 2024.

Increases in payroll-related expenses were offset by decreases in professional fees, insurance and other miscellaneous expenses

Other (income) expense, net

Other expense, net for the third quarter of 2024 consisted primarily of asset write-downs.

Interest Expense

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

Interest expense for the third quarter of 2025 was $7.4 million compared to $8.1 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.

Non-operating other income, net for the third quarter of 2025 was $1.4 million compared to $2.7 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 third quarter of 2025 compared to the third quarter of 2024.

Provision (Benefit) for Income Taxes

The provision for income taxes for the third quarter of 2025 was $2.5 million compared to a benefit for income taxes of $4.5 million for the same period of 2024.

The resulting effective tax rate for the third quarter of 2025 was a provision on pre-tax income of 26.3% compared to a benefit on pre-tax loss of 15.0% for the same period of 2024.

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

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

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,

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The following table contains certain financial information for the nine months ended September 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:

Nine Months Ended September 30,

(Dollars In Thousands)

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Non-operating other income, net

Provision for income taxes

Provision (benefit) for income taxes

Net income (loss)

Other information:

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Six Months Ended June 30,

Nine Months Ended September 30,

Product (tons sold)

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Urea ammonium nitrate (UAN)

Six Months Ended June 30,

Nine Months Ended September 30,

Gross Average Selling Prices (price per ton)

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Urea ammonium nitrate (UAN)

Six Months Ended June 30,

Nine Months Ended September 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.

Net sales of our primary products increased during the first nine months 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.

As noted in the table above, we recognized a gross profit of $63.1 million for the first nine months of 2025 compared to $41.7 million for the same period in 2024, a $21.4 million increase.

Overall, our gross profit percentage was 14.0% compared to a gross profit percentage of 10.8% 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.

Our adjusted gross profit percentage was 28.6% for the first nine months of 2025 compared to 29.7% for the same period in 2024.

Our gross profit for the first nine months of 2025 was higher compared to the prior year period primarily due to higher net sales and lower Turnaround expenses.

Partially offsetting these increases were higher natural gas costs and higher depreciation due to recent investments in our facilities.

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.

Our SG&A expenses were $30.3 million for the first nine months of 2025, a decrease of $1.6 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.

Interest expense for the first nine months of 2025 was $23.3 million compared to $26.2 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.

During the first nine months 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.

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.

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.

Other expense, net during the first nine months 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 nine months of 2025 compared to the first nine months of 2024.

In addition, the write-downs in the first nine months of 2024 were partially offset by short-term rental income from railcar subleases.

Non-operating Other Income, net

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.

Non-operating other income, net for the first nine months of 2025 was $4.6 million compared to $9.1 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 2025 compared to 2024.

Provision (Benefit) for Income Taxes

The provision for income taxes for the first nine months of 2025 was $3.3 million compared to a benefit for income taxes $2.6 million for the same period of 2024.

The resulting effective tax rate for the first nine months of was 28.2% compared to 20.5% for the same period of 2024.

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

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

See discussion in Note 7.

LIQUIDITY AND CAPITAL RESOURCES

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

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

(In Thousands)

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Net Cash Flow from Operating Activities

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 provided by operating activities was $77.6 million for the first nine months of 2025 compared to $82.6 million for the same period of 2024, a change of $5 million.

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

Net Cash Flow from Investing Activities

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 used by investing activities was $16.9 million for the first nine months of 2025 compared to $18.4 million for the same period of 2024, a change of $1.4 million.

For the first nine months of 2025, the net cash provided by investing activities primarily related to proceeds from short-term investments of $211.4 million, partially offset by purchases of short-term investments of $171.8 million and expenditures for property, plant and equipment of $56.3 million.

For the first nine months of 2024, the net cash used by investing activities primarily related to purchases of short-term investments of $190.6 million and expenditures for property, plant and equipment of $64.1 million, partially offset by proceeds from short-term investments of $236.5 million.

Net Cash Flow from Financing Activities

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.

Net cash used by financing activities was $52.9 million for the first nine months of 2025 compared to $123.0 million for the same period of 2024, a change of $70.1 million.

For the first nine 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 $19.3 million and $1.2 million for tax withholding obligations related to the vesting of equity awards.

For the first nine months of 2024, the net cash used by financing activities primarily consisted 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.

Capitalization

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

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

September 30, 2025

December 31, 2024

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(1) See discussion contained in Note 4.

(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.

(2) During the third quarter of 2025, we made the final balloon payment of approximately $5 million on a $30 million 60-month secured financing arrangement with an affiliate of Eldridge Industries, L.L.C.

(“Eldridge”).

(3) Debt issuance costs as of September 30, 2025 and December 31, 2024 of approximately $0.5 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 June 30, 2025, our Revolving Credit Facility was undrawn and had approximately $46 million of availability.

As of September 30, 2025, our Revolving Credit Facility was undrawn and had approximately $45 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.

For the full year of 2025, we expect capital expenditures to be approximately $80 million, with spending focus on sustaining production, as well as 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 June 30, 2025, we had approximately $124.9 million of cash and short-term investments.

As of September 30, 2025, we had approximately $152.0 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 including the full repayment of the Secured Financing due 2025 in August 2025.

Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements.

However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity.

To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.

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 June 30, 2025, no trigger event had occurred.

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

Loan Agreements

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

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

Secured Financing due 2025 – During the third quarter of 2025, we made the final balloon payment of approximately $5 million on a 60-month, $30 million secured financing arrangement with an affiliate of Eldridge.

Revolving Credit Facility – At September 30, 2025, our Revolving Credit Facility was undrawn and had approximately $45 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 Six Months of 2025

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

Capital Expenditures – First Nine Months of 2025

For the first nine months of 2025, capital expenditures relating to property, plant and equipment were $56.3 million.

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

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

During the six months ended June 30, 2025, we did not repurchase any of our shares of common stock.

During the nine months ended September 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 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.

During the nine months ended September 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.

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

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

As a result, our expenses were $3.2 million for the first nine months ended September 30, 2025 in connection with environmental projects.

For the remainder of 2025, we expect to incur expenses ranging from $0.9 million to $1.2 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 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.

As of September 30, 2025, we have agreed to indemnify the sureties for payments, up to $10.2 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 June 30, 2025, could change in the near term.

It is also reasonably possible that the estimates and assumptions utilized as of September 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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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.

We define adjusted gross profit as gross profit (loss) 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.

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.

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The following table reconciles gross profit to adjusted gross profit.

Three Months Ended June 30,

Reconciliation of Gross Profit to Adjusted Gross Profit:

Three Months Ended September 30,

Nine Months Ended September 30,

(In Thousands)

Gross profit:

(In Thousands)

Reconciliation of Gross Profit (Loss) to Adjusted Gross Profit:

Gross profit (loss)

Depreciation and amortization

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

At September 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 June 30, 2025, we had no outstanding natural gas contracts which are subject to derivative accounting requirements.

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

As of September 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 June 30, 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 June 30, 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 June 30, 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 September 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 September 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