What changed in this filing

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Item 1. Business

2022-02-24 compared with 2021-02-25 · 143 added, 133 removed, 648 unchanged (30% of the section changed)

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We manufacture and market chemical products for the agricultural, industrial and mining markets.

We own and operate facilities in El Dorado, Arkansas (the “El Dorado Facility”) , Cherokee, Alabama (the “Cherokee Facility”) , and Pryor, Oklahoma (the “Pryor Facility”), and we operate a facility on behalf of a global chemical company in Baytown, Texas (the “Baytown Facility”).

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

Our products are sold through distributors and directly to end customers throughout the United States and parts of Mexico and Canada.

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Our strategy calls for further development of industrial customers who assume the volatility risk associated with the raw material costs and mitigate the effects of seasonality in the agricultural sector.

Our strategy also includes evaluating acquisitions of strategic assets or companies, mergers with other companies and investment in additional production capacity where we believe those acquisitions, mergers or expansion of production capacity will enhance the value of the Company and provide appropriate returns.

Our strategy also includes evaluating and pursuing acquisitions of strategic assets or companies, mergers with other companies and investment in additional production capacity where we believe those acquisitions, mergers or expansion of production capacity will enhance the value of the Company and provide appropriate returns.

Key Operating Initiatives for 2022

As discussed in more detail under “Key Operating Initiatives for 2022” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) contained in Item 7 of this report, we believe our future results of operations and financial condition will depend significantly on our ability to successfully implement the following key initiatives:

Continue Focusing on Becoming a “Best in Class” Chemical Plant Operator with respect to Safe, Reliable Operations that Produce the Highest Quality Product.

Continue Broadening the Distribution of our Products.

Development of a Strategy to Capitalize on Ammonia Opportunities in a Renewable Energy Focused Economy.

Improving Our Capital Structure and Overall Cost of Capital.

Evaluate Acquisition of Strategic Assets or Companies.

COVID-19 Pandemic

All of the facilities we operate have been designated as essential critical infrastructure based on guidelines issued by the United States Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.

Since we produce fertilizer products used by the agriculture industry, as well as chemical products required in a variety of industrial manufacturing processes, LSB has been determined to be a critical service provider, and therefore, our facilities have remained operational despite the government mandated operational limitations or business closings resulting from the federal, state and local government responses to the evolving global health crisis resulting from the COVID-19 pandemic.

Management has taken significant measures to ensure the health and safety of our employees and our business continuity during this challenging situation.

For our personnel at our manufacturing facilities and retail agricultural centers, we have developed plans and procedures that have allowed them to operate in a safe manner in order to protect them, their families, our vendors and our customers.

These include daily health screenings, including temperature checks and questionnaires, use of proper personal protection equipment, regular disinfection and cleaning of equipment and workspaces, social distancing, working from home where appropriate and quarantining of employees according to specific protocols.

We intend to maintain our discipline in this regard for however long the current health risk persists.

T he nitrogen chemical industry was under pressure during most of 2020 .

As a result of the global economic downturn caused by the COVID-19 pandemic and the resultant decline in energy prices, industry operating rates increased globally, resulting in greater supply and lower fertilizer pricing.

Pricing for all major agricultural product categories was impacted by the continued oversupply of ammonia in our primary end markets, along with increased imports of some of our downstream products.

Industrial and mining sales volume declined as a result of pandemic-related weakness in demand in several of our end markets.

Looking ahead to 2021, while much of the U.S.

economy has a least partially reopened, uncertainty remains with respect to our various end markets.

On the agricultural side, the corn market has recently experienced some positive indicators as discussed below under “Agricultural Market Conditions.” However, improvements in fertilizer pricing could be tempered from higher natural gas costs and additional imported fertilizers.

With respect to industrial and mining sales volume, we are seeing gradual improvement in demand for nitric acid, industrial ammonia and ammonium nitrate as sectors such as automotive manufacturing, home building, and copper mining have increased activity.

Also see discussion below under “Industrial and Mining Products” concerning a new long-term nitric acid supply contract with a customer.

On the liquidity front, as of December 31, 2020, we had approximately $58.1 million of combined cash and borrowing capacity, which, we believe, provides us with ample liquidity to fund our operations and meet our current obligations.

Investing in Safety and Reliability at our Facilities to further our Progress Towards Becoming a “Best in Class” Chemical Plant Operator Supplying our Customers with Products of the Highest Quality.

Continue Broadening the Distribution and Optimization of our Product mix.

Development and Implementation of a Strategy to Capitalize on Low Carbon Ammonia and Clean Energy Opportunities .

Pursue Acquisition of Strategic Assets or Companies.

As for our liquidity, we had approximately $143.5 million of combined cash and borrowing capacity at the end of 2021, which we believe provides us with ample liquidity to fund our operations and meet our current obligations.

Also see discussions under “Liquidity and Capital Resources” of our MD&A.

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These factors can affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect product margins.

Looking forward to 2021, favorable dynamics for U.S.

agriculture have translated into higher prices to date for a variety of crops, including corn, which has prompted an increase in demand for fertilizers by farmers seeking to maximize yields in the coming spring planting season.

Favorable grower income in 2020, coupled with significant increase in Chinese imports of agricultural commodities, lower ending U.S.

corn inventory levels, and drought conditions in South America have pushed commodity prices, including corn, to their highest level in over seven years.

According to certain industry sources, the estimated corn acres to be planted in 2021 is between 92 to 94 million.

These factors have resulted in a price rally for fertilizers over the last several months which we expect will continue through the spring planting season.

See discussion above concerning the COVID-19 pandemic under “Our Strategy.”

Looking forward to 2022, corn prices for the vast majority of 2021 remained above levels not seen since 2014, and at current prices exceeding $6 per bushel, are significantly above the $4 per bushel level that we believe represents a very favorable level for farmers to earn significant income on their crops.

The strong corn prices over the past year have been driven, in part, by a rebound in the production of ethanol, a gasoline additive that represents approximately 40% of total U.S.

corn use annually, as miles driven have returned to near pre-pandemic levels.

Also supporting the strong corn pricing over the past year has been Chinese demand for corn for use as feed for swine as part of the nation’s efforts to rebuild its swine production in the wake of a virus that dramatically reduced its swine population several years ago.

This demand for feed is expected to remain robust as China has moved to large institutional hog farms which consume significant quantities of corn.

Globally, corn supplies have been constrained by drought conditions in South America and the Western U.S., which has served to further bolster corn prices.

Early forecasts point to U.S.

corn acreage to be planted in the 2022-2023 planting season to be approximately 90 to 92 million acres, modestly lower than the 2021-2022 estimate of 93.4 million acres, but still at a very healthy level to support strong demand for fertilizers.

Agricultural Products

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These factors can affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect product margins.

During 2020, we completed a key storage project that will allow us to further maximize our production of HDAN at our El Dorado Facility, which we expect to enable us to achieve higher production, a lower cost per ton and increased sales of that product during periods of more attractive pricing.

We develop our market position in these areas by emphasizing high quality products, customer service and technical advice.

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Additionally, changes in natural gas prices and demand in renewable power sources, such as wind and solar in the electrical generation sector, will impact demand for our mining products and impact competition within the other sectors of this market.

Looking forward to 2021, we are seeing gradual recovery in these end markets.

As COVID-19 vaccines are increasingly distributed, demand for our products from sectors like automotive manufacturing and power generation is expected to recover to pre-pandemic levels.

We expect strong metals mining prices will drive strong demand for our mining products as producers push to extract as much as possible.

As it relates to the coal mining, the U.S.

Energy Information Administration (“EIA”) is projecting an increase in production driven by a forecasted increase in natural gas prices for electricity generators, making coal more competitive in the electric power sector.

See discussion above concerning the COVID-19 pandemic under “Our Strategy.”

Looking forward to 2022, selling prices have continued to improve as the supply of ammonia remains tight due to strong global demand, curtailed global supply due to rising natural gas prices, numerous global unplanned outages and lower than expected product imports.

As a result, the Tampa Ammonia benchmark price increased to, and remains at multi-year high levels, which has translated into higher selling prices for our products as many of our industrial contracts are indexed to this benchmark price.

Demand trends for the industrial products we sell, primarily nitric acid and ammonia, have remained robust despite disruptions to certain end markets, such as auto manufacturing which has been constrained due to a shortage of microprocessors, as activity in other markets, such as homebuilding and power generation has remained strong.

In addition, our sales of nitric acid increased steadily throughout 2021 pursuant to the new long-term nitric acid supply contract discussed below.

Demand for our mining products continues to improve as quarry and construction activity has been elevated due to robust levels of residential, commercial and civil infrastructure buildout along with strong demand for precious metals, including expectations for rising copper production to support the growing domestic production of electronic vehicles.

Industrial and Mining Products

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Under the agreement, EDC will supply between 70,000 to 100,000 tons of nitric acid annually.

The initial contract term began in January 2021 and extends through 2027 but includes automatic one-year renewal terms.

The initial contract term began in January 2021 and extends through 2027 and includes automatic one-year renewal terms.

In addition, EDC and Koch Fertilizer LLC (“Koch Fertilizer”) are parties to an ammonia purchase and sale agreement, under which Koch Fertilizer agreed to purchase, with minimum purchase requirements, a portion of the ammonia that is in excess of EDC’s internal needs.

The term of the agreement runs until June 2023, with annual renewal options thereafter.

We operate the Baytown Facility on behalf of a global chemical company, and we believe it is one of the largest and most technologically advanced nitric acid manufacturing units in the U.S.

We operate the Baytown Facility on behalf of Covestro and we believe it is one of the largest and most technologically advanced nitric acid manufacturing units in the U.S.

We operate and maintain this facility pursuant to a long-term operating contract.

The term of this agreement runs until June 202 2 with options for renewal .

The term of this agreement runs until October 2029 with options for renewal .

Our industrial products sales volumes are dependent upon general economic conditions primarily in the housing, automotive, and paper industries.

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Our industrial business competes based upon service, price and location of production and distribution sites, product quality and performance and provides inventory management as part of the value-added services offered to certain customers.

See our discussion concerning a new contract to capture and sell carbon dioxide out our El Dorado Facility under “Key Operating Initiatives for 2021” in our MD&A.

We also produce and sell LDAN, HDAN and AN solution to the mining industry, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, for metals mining, and to a lesser extent, for coal mining.

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Periodically, we enter into volume purchase commitments and/or forward contracts to lock in the cost of certain of the expected natural gas requirements primarily to match quantities needed to produce product that has been sold forward.

At December 31, 2020, we had natural gas contracts of approximately 11.1 million MMBtus, representing approximately 37% of our annual usage, at an average cost of $2.70 per MMBtu.

These contracts extend through December 2021.

At December 31, 2021, we had natural gas contracts of approximately 5.4 million MMBtus, at an average cost of $4.53 per MMBtu.

These contracts extend through March 2022.

See further discussion relating to the outlook for our business under “Key Industry Factors .

We operate in a highly co mpetitive market with many other larger chemical companies, such as Austin Powder Company:

CF Industries Holdings, Inc., Chemtrade Logistics L.L.C.;

Cornerstone Chemical, OCI Partners NV, Dyno Nobel, a subsidiary of Incitec Pivot Limited, The Gavilon Group, Helm AG, Koch Industries, Norfalco, Nutrien, Orica Limited;

Praxair, Inc., Quad Chemical Corporation, and Trammo Inc.

(some o f whom are our customers), many of whom have greater financial and other resources than we do.

We operate in a highly co mpetitive market with many other larger chemical companies, such as Austin Powder Company, CF Industries Holdings, Inc., Chemtrade Logistics L.L.C.;

Cornerstone Chemical, Eco Services Operation Corp., a subsidiary of PQ Holding Group, OCI Partners NV, Dyno Nobel, a subsidiary of Incitec Pivot Limited, The Gavilon Group, Helm AG, Koch Industries, Norfalco, Nutrien, Orica Limited;

Praxair, Inc., Quad Chemical Corporation, Southern States Chemical, Trammo Inc.

and Veolia North America (some o f whom are our customers), many of whom have greater financial and other resources than we do.

We believe that competition within the markets we serve is primarily based upon service, price, location of production and distribution sites, and product quality and performance.

Human Capital Management

See discussion above concerning the COVID-19 pandemic under “Our Strategy.”

As of December 31, 2020, we employed 573 persons, 188 of whom are represented by unions under agreements, including agreements being negotiated, that expire in July 2021 through November 2022.

As of December 31, 2021, we employed 545 persons, 180 of whom are represented by unions under agreements , including agreements being negotiated, that expire in July 2022 through July 2024.

We believe we have good relationships with our employees.

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Additionally, we conduct benefit surveys annually in an effort to ensure that any changes to benefits are improvements or add value for employees.

Each of our business units conducts roundtable

discussions to develop action plans to improve the work environment .

Each of our business units conducts roundtable discussions to develop action plans to improve the work environment.

We have continued to increase our communication efforts with employees, which our workforce has recognized favorably .

Health and Safety – Our Health and Safety Management System continues to build to establish a consistent approach to enhance the work environment and culture at each business unit.

Health and Safety – Our Health and Safety Management System continues to build to establish a consistent approach to enhance the work environment, culture and compliance at each business unit.

This system is guided by a newly formed executive committee that provides focus and priority to compliance and industry best practices that protect our employees while performing work within our operations.

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We use leading and lagging metrics, such as near miss tracking, assigning potential risk consequences to events, incident tracking, and releases to monitor our performance and effectiveness across our operations and individual business teams .

Events are investigated based on risk using root cause analysis tools and corrective actions are tracked to ensure prevention.

In addition, the management system includes periodic third-party audits and internal self-assessment to continuously improve.

Like many other companies, we have experienced challenges resulting from the COVID-19 pandemic and have focused energy and effort on protecting our employees and their families from potential virus exposure while continuing safe and compliant operations.

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Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us.

These laws and regulations (including enforcement policies thereunder) have in the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products.

Historically, our subsidiaries have incurred significant expenditures in order to comply with these laws and regulations and are reasonably expected to do so in the future.

These laws and regulations (including enforcement policies thereunder) have

in the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products.

Historically, our subsidiaries have incurred significant expenditures in order to comply with the se laws and regulations and are reasonably expected to do so in the future .

We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at our chemical facilities should we discontinue the operations of a facility .

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Risks Relating to Our Liquidity

We may not be able to generate sufficient cash to service our debt and may be required to take other actions to satisfy the obligations under our debt agreements or to redeem our preferred stock, which may not be successful.

Our ability to make scheduled payments on our debt obligations and our ability to satisfy the redemption obligations for our Series E cumulative redeemable Class C preferred stock (“ Series E Redeemable Preferred”) depends on our financial condition and operating performance, prevailing economic and competitive conditions, and certain financial, business and other factors, some of which may be beyond our control.

We may not be able to maintain a level of cash flows sufficient to pay the principal and interest on our debt, including the $435 million principal amount of our Senior Secured Notes (the “Senior Secured Notes”), or the outstanding amount of the Working Capital Revolver Loan or to pay the cumulative dividends and redemption payment on the Series E Redeemable Preferred should the holder choose to redeem it on or after October 25, 2023, that applicable optional redemption date with respect thereto.

If cash flows and capital resources are insufficient to fund our debt, dividend or preferred stock redemption obligations, we could face substantial liquidity problems and will need to seek additional capital through the issuance of debt, the issuance of equity, asset sales or a combination of the foregoing.

If we are unsuccessful, we will need to reduce or delay investments and capital expenditures, or to dispose of other assets or operations, seek additional capital, or restructure or refinance debt or redeemable equity.

These alternative measures may not be successful, may not be completed on economically attractive terms, or may not be adequate for us to meet our debt or preferred stock redemption obligations when due.

Additionally, our debt agreements and the operating agreements associated with our Series E Redeemable Preferred limit the use of the proceeds from many dispositions of assets or operations.

As a result, we may not be permitted to use the proceeds from these dispositions to satisfy our debt or preferred stock redemption obligations.

We may not be able to generate sufficient cash to service our debt and may be required to take other actions to satisfy the obligations under our debt agreements, which may not be successful.

Our ability to make scheduled payments on our debt obligations depends on our financial condition and operating performance, prevailing economic and competitive conditions, and certain financial, business and other factors, some of which may be beyond our control.

We may not be able to maintain a level of cash flows sufficient to pay the principal and interest on our debt, including the $500 million principal amount of our 6.250% Senior Secured Notes due 2028 (the “New Notes”).

If cash flows and capital resources are insufficient to fund our debt obligations, we could face substantial liquidity problems and will need to seek additional capital through the issuance of debt, the issuance of equity, asset sales or a combination of the foregoing.

If we are unsuccessful, we will need to reduce or delay investments and capital expenditures, or to dispose of other assets or operations, seek additional capital, or restructure or refinance debt.

These alternative measures may not be successful, may not be completed on economically attractive terms, or may not be adequate for us to meet our debt obligations when due.

Additionally, our debt agreements limit the use of the proceeds from many dispositions of assets or operations.

As a result, we may not be permitted to use the proceeds from these dispositions to satisfy our debt obligations.

If we cannot make scheduled payments on our debt, we will be in default and the outstanding principal and interest on our debt could be declared to be due and payable, in which case we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations.

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Any future transactions by us, including the issuance of additional debt, the sale of any operating assets, or any other transaction to manage our liquidity, could result in temporary or permanent downgrades of our credit ratings.

Our substantial indebtedness level, including dividend requirements relating to our preferred stock, could limit our financial and operating activities, and adversely affect our ability to incur additional debt to fund future needs.

We currently have a substantial amount of indebtedness, as well as dividend and redemption requirements relating to our preferred stock.

Our substantial indebtedness level could limit our financial and operating activities, and adversely affect our ability to incur additional debt to fund future needs.

We currently have a substantial amount of indebtedness.

As a result, this level could, among other things:

require us to dedicate a substantial portion of our cash flow to the payment of principal, interest and dividends, thereby reducing the funds available for operations and future business opportunities;

require us to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing the funds available for operations and future business opportunities;

make it more difficult for us to satisfy our obligations, including our repurchase obligations;

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Any of the foregoing could adversely affect our liquidity, operating results and financial condition.

Our debt agreements and our preferred stock contain covenants and restrictions that could restrict or limit our financial and business operations.

Our debt agreements and the Exchange Agreement contain covenants and restrictions that could restrict or limit our financial and business operations.

A breach of these covenants or restrictions could result in an event of default under one or more of our debt agreements or contracts at different entities within our capital structure, including as a result of cross acceleration or default provisions.

Our debt agreements and our preferred stock contain various covenants and other restrictions that, among other things, limit flexibility in operating our businesses.

A breach of any of these covenants or restrictions could result in a significant portion of our debt

becoming due and payable or could result in significant contractual liability.

Our debt agreements and the Exchange Agreement contain various covenants and other restrictions that, among other things, limit flexibility in operating our businesses.

A breach of any of these covenants or restrictions could result in a significant portion of our debt becoming due and payable or could result in significant contractual liability.

These covenants and other restrictions limit our ability to, among other thin gs:

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pay dividends on, repurchase or make distributions in respect of capital stock, make other restricted payments;

or make investments;

make investments or certain capital expenditures;

sell or transfer assets;

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LSB is a holding company and depends, in large part, on receiving funds from its subsidiaries to fund our indebtedness.

Because LSB is a holding company and operations are conducted through its subsidiaries, LSB’s ability to meet its obligations depends, in large part, on the operating performance and cash flows of its subsidiaries and the ability of its subsidiaries to make distributions and pay dividends to LSB.

LSB is a holding company with no significant operations or material assets other than the equity interests it holds in its subsidiaries and conducts all of its operations through its subsidiaries.

As a result, LSB’s ability to meet its obligations depends, in large part, on the operating performance and cash flows of its subsidiaries, which will be affected by general economic, industry, financial, competitive, operating and other factors beyond our control, and the ability of its subsidiaries to make distributions and pay dividends to LSB.

Each of LSB’s subsidiaries is a separate and distinct legal entity and, under certain circumstances, legal and contractual restrictions, as well as the financial condition and operating requirements of such subsidiaries, may limit LSB’s ability to obtain cash from its subsidiaries.

Any payment of dividends, distributions, loans or advances to LSB by its subsidiaries could also be subject to taxes or restrictions on dividends or transfers under applicable local law in the jurisdictions in which LSB’s subsidiaries operate.

Risks Relating to Our Business

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Legislative, regulatory, judicial or social influences related to the COVID-19 pandemic may affect our financial performance and our ability to conduct our business.

In addition, an extended period of remote work arrangements due to the COVID-19 pandemic could exacerbate cybersecurity risks.

An extended period of remote work arrangements due to the COVID-19 pandemic could exacerbate cybersecurity risks.

Our business depends on the proper functioning and availability of our information technology platform, including communications and data processing systems.

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Security breaches could expose us to a risk of loss or misuse of our information, litigation and potential liability.

The Omicron variant of COVID-19 began to spread rapidly across the globe in the fourth quarter of fiscal year 2021 and began to affect our business, as well as our customers’ and suppliers’ business in similar ways as the initial surge of COVID-19.

In addition, inflation and supply chain disruptions, in part exacerbated by the spread of the Omicron variant, have impacted companies and consumers in the United States.

We have begun to experience increased inventory shipping costs and could see annual price increases from some of our vendors.

In light of these trends, our management has taken, and will continue to take, a number of steps aimed to mitigate the impact of the Omicron variant, supply chain disruptions and inflation.

As the COVID-19 pandemic continues to impact communities, our business operations could be disrupted or delayed, and our business, financial condition, and results of operations could be adversely affected.

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Regardless of the cause, if any of these unusual weather events occur during the primary seasons for sales of our agricultural products (March-June and September-November), this could have a material adverse effect on our agricultural sales and our financial condition and results of operations .

Climate Change may adversely affect our business .

Over the course of the past several years, global climate conditions have become increasingly inconsistent, volatile and unpredictable.

Many of the regions in which we do business have experienced excessive moisture, cold, drought and/or heat of an unprecedented nature at various times of the year.

In some cases, these conditions have either reduced or obviated the need for our products, particularly in the agriculture space, whether pre-plant, at-plant, post-emergent or at harvest.

Due to the unpredictable nature of these conditions, growers and distributors appear to have become increasingly conservative in procurement practices and the accumulation of inventory.

Further, the random nature of climactic change has made it increasingly difficult to forecast market demand and, consequently, financial performance, from year-to-year.

There is no guarantee that climate change will abate in the near future, and it is possible that such change will continue to hinder our ability to forecast sales performance with accuracy and otherwise adversely affect our financial performance.

Our business and customers are sensitive to adverse economic cycles.

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An increase of imported agricultural products could adversely affect our business.

Russia and Ukraine both have substantial capacity to produce and export fertilizers.

Russia, Ukraine and Trinidad have substantial capacity to produce and export fertilizers.

Producers in these countries also benefit from below-market prices for natural gas, due to government regulation and other factors.

Imports into the U.S.

from those countries has increased over the last twelve months.

In addition, producers in China have substantial capacity to produce and export urea.

Depending on various factors, including prevailing prices from other exporters, the price of coal, and the price of China’s export tariff, higher volumes of urea from China could be imported into the U.S.

Depending on various factors, including prevailing prices from other exporters, the price of coal, and the price of China’s export tariff, higher volumes of urea from China

could be imported into the U.S.

at prices that could have an adverse effect on the selling prices of other nitrogen products, including the nitrogen products we manufacture and sell .

A substantial portion of our sales is dependent upon a limited number of customers.

For 2020, eight customers accounted for approximately 42% of our consolidated net sales.

For 2021, ten customers accounted for approximately 47% of our consolidated net sales.

The loss of, or a material reduction in purchase levels by, one or more of these customers could have a material adverse effect on our busi ness, results of operations, financial condition and liquidity if we are unable to replace a customer with other sales on substantially similar terms.

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Under our forward sales programs, customers generally make an initial cash down payment at the time of order and pay the remaining portion of the contract sales under their usual invoice terms when the performance obligation is satisfied.

Forward sales improve our liquidity due to the cash payments received from customers in advance of shipment of the product and allow us to

improve our production scheduling and planning and the utilization of our manufacturing and distribution assets.

Forward sales improve our liquidity due to the cash payments received from customers in advance of shipment of the product and allow us to improve our production scheduling and planning and the utilization of our manufacturing and distribution assets.

Any cash payments received in advance from customers in connection with forward sales are reflected on our consolidated balance sheets as a current liability until the related performance obligations are satisfied, which can take up to several months.

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Our sales and profits are heavily affected by the costs and availability of primary raw materials.

These primary raw materials are subject to considerable price volatility.

These primary raw materials are typically subject to considerable price volatility, and recent global supply chain disruptions and increased inflation in the United States have led to further heightened volatility.

Historically, when there have been rapid increases in the cost of these primary raw materials, we have sometimes been unable to timely increase our sales prices to cover all of the higher costs incurred.

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Any disruption in the supply of natural gas and other key components could result in lost production or delayed shipments.

The price of natural gas in North America and worldwide has been volatile in recent years and has declined on average due in part to the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques, such as hydraulic fracturing and horizontal drilling.

The price of natural gas in North America and worldwide has been volatile in recent years and had declined on average due in part to the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques, such as hydraulic fracturing and horizontal drilling.

However, recent disruptions in the global supply chain and increased inflation in the United States have led to reduced availability and increased prices of natural gas in the fourth quarter of fiscal year 2021, and they may continue to have an impact in the near term in fiscal year 2022.

Future production of natural gas from shale formations could be reduced by regulatory changes that restrict drilling or hydraulic fracturing or increase its cost or by reduction in oil exploration and development prompted by lower oil prices and resulting in production of less associated natural gas.

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Additionally, the International Swaps and Derivative Association master netting arrangements for most of our derivative instruments contain credit-risk-related contingent features, such as cross-default and/or acceleration provisions and credit support requirements.

In the event of certain defaults or a credit ratings downgrade, our counterparty may request early termination and net settlement of certain derivative trades or may require us to collateralize derivatives in a net

liability position.

At other times we may not utilize derivatives or derivative strategies to hedge certain risks or to reduce the financial exposure of price volatility.

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Compromises to our information systems could have an adverse effect on our business, results of operations, liquidity and financial condition .

We may engage in certain strategic transactions which may adversely affect our financial condition.

An important part of our business strategy is the acquisition of strategic assets or companies.

Our management is currently evaluating and pursing certain such opportunities, and from time to time separately provides indications of interest in respect of similar transactions, which may be significant.

Any such discussions may or may not result in the consummation of a transaction, and we may not be able to identify or complete any of these potential acquisitions.

We cannot predict the effect, if any, that any announcement or consummation of a transaction would have on the price of our securities.

While the documents governing our indebtedness include certain restrictions on our ability to finance any acquisitions of new assets, such restrictions contain various exceptions and limitations.

There is no guarantee that any such transactions will be successful or, even if consummated, improve our operating results.

We may incur costs, breakage fees or other expenses in connection with any such transactions or may not be able to obtain the necessary financing for such transactions on acceptable terms.

Accordingly, any such transactions may ultimately have a material adverse effect on our operating results.

In addition, any future acquisitions could present a number of risks, including:

the risk of using management time and resources to pursue acquisitions that are not successfully completed;

the risk of incorrect assumptions regarding the future results of acquired operations or business;

the risk of failing to integrate the operations or management of any acquired operations or assets successfully and timely;

the risk of diversion of management’s attention from existing operations or other priorities.

If we are unsuccessful in integrating acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected.

Risks Relating to Legal, Regulatory and Compliance Matters

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The manufacture and distribution of chemical products are activities that entail health, safety and environmental risks and impose obligations under health, safety and environmental laws and regulations, many of which provide for substantial fines and potential criminal sanctions for violations.

Although we believe we have established processes to monitor, review and manage our businesses to comply with the numerous

health, safety and environmental laws and regulations, we previously were , and in the future, may be, subject to fines, penalties and sanctions for violations and substantial expenditures for cleanup costs and other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of effluents at or from our chemical facilities.

Although we believe we have established processes to monitor, review and manage our businesses to comply with the numerous health, safety and environmental laws and regulations, we previously were, and in the future, may be, subject to fines, penalties and sanctions for violations and substantial expenditures for cleanup costs and other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of effluents at or from our chemical facilities.

Further, a number of our chemical facilities are dependent on environmental permits to operate, the loss or modification of which could have a material adverse effect on their operations and our results of operation and financial condition.

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President Obama issued an executive order addressing the safety and security of chemical facilities in response to recent incidents involving chemicals such as the explosion at West, Texas.

The President directed federal agencies to

enhance existing regulations and make recommendations to the U.S.

The President directed federal agencies to enhance existing regulations and make recommendations to the U.S.

Congress to develop new laws that may affect our business.

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The Occupational Safety and Health Administration (“OSHA”) is likewise considering changes to its Process Safety Management standards.

In addition, DHS, the EPA, and the Bureau of Alcohol, Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling, and management of AN.

In addition, DHS, the

EPA, and the Bureau of Alcohol, Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling, and management of AN.

While these actions may result in additional regulatory requirements or changes to our operators, it is difficult to predict at this time how these and any other possible regulations, if and when adopted, will affect our business, operations, liquidity or financial results.

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Furthermore, our reputation could be damaged if we violate climate change laws or regulations.

We cannot predict how future laws and regulations, or future

interpretations of current laws and regulations, related to climate change will affect our business, results of operations, liquidity and financial condition.

We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations, liquidity and financial condition.

Lastly, the potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate.

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Certain of our stockholders control a significant amount of our voting stock, and their interests could conflict with interests of other stockholders.

LSB Funding LLC (“LSB Funding”), our largest voting shareholder, owned 4,069,324 shares of common stock and one share of Series F redeemable Class C preferred stock (the “Series F Redeemable Preferred”), which has voting rights equal to 456,225 shares of common stock, which together represents approximately 15.3% of the voting power of our common stock and the Series F Redeemable Preferred as of December 31, 2020.

Golsen”), Barry H.

Golsen and certain of their related parties (collectively, the “Golsen Holders”) owned as of December 31, 2020, an aggregate of 2,531,810 shares of our common stock and 686,855 shares of our voting preferred stock (673,360 of which shares have 0.875 votes per share, or 589,190 votes), which together vote as a class and represent approximately 10.5% of the voting power (prior to conversion of the shares of voting preferred) of our issued and outstanding voting securities as of that date.

The series of preferred represented by the 13,495 shares of voting preferred is convertible into an aggregate of 449,835 shares of our common stock.

Pursuant to a Board Representation and Standstill Agreement, as amended, entered into in connection with LSB Funding’s purchase of preferred stock in, LSB Funding has the right to designate two directors on our Board, and the Golsen Holders have the right to appoint two directors on our Board, subject to reduction in each case in certain circumstances.

LSB Funding LLC (“LSB Funding”), our largest voting shareholder, owned approximately 54 million shares of our common stock, which represent approximately 61% of the vo ting power of our common stock as of December 31, 2021, an aggregate of approximately 50 million shares of which were issued to LSB Funding in connection with the Exchange Transaction and the Special Dividend.

As a result, LSB Funding could significantly influence our business and affairs if it chooses to use its significant voting power to do so.

For instance, LSB Funding would be able to significantly affect most matters brought before the stockholders, including the election of all directors and the approval of mergers and other business combination transactions.

Pursuant to a Board Representation and Standstill Agreement, as amended, LSB Funding has the right to designate three directors on our Board, subject to reduction in certain circumstances.

This is in addition to their ability to vote generally in the election of directors.

As a result, each of LSB Funding and the Golsen Holders have significant influence over the election of directors to our Board.

The interests of LSB Funding and the Golsen Holders may conflict with interests of other stockholders (as well as with each other).

As a result of the voting power and board designation rights of LSB Funding and the Golsen Holders, the ability of other stockholders to influence our management and policies could be limited.

As a result, LSB Funding has significant influence over the election of directors to our Board.

The interests of LSB Funding may conflict with interests of other stockholders.

As a result of the voting power and board designation rights of LSB Funding, the ability of other stockholders to influence our management and policies could be limited.

We are subject to a variety of factors that could discourage other parties from attempting to acquire us.

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Certain of our preferred stock series and debt instruments also provide special rights in a change of control, including in some cases the ability to be repaid in full or redeemed.

We have authorized and unissued (including shares held in treasury) 45,791,355 shares of common stock and 4,090,231 shares of preferred stock as of December 31, 2020.

We have authorized and unissued (including shares held in treasury) approximately 60.2 million shares of common stock and approximately 5.2 million shares of preferred stock as of December 31, 2021.

These unissued shares could be used by our management to make it more difficult, and thereby discourage an attempt to acquire control of us.

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the stockholders of the corporation amend its articles of incorporation or by-laws electing not to be governed by this provision.

We have not paid dividends on our outstanding common stock in many years.

We have not paid cash dividends on our outstanding common stock in many years.

We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash dividends on our outstanding common stock in the near future.

Although our Board of Directors (the “Board”) has not made a decision whether or not to pay dividends on our common stock in 2021, it is unlikely we will pay dividends on our common stock until we have repaid or refinanced our debt and our preferred stock.

In addition, there are certain limitations contained in our loan and securities purchase agreements that may limit our ability to pay dividends on our outstanding common stock.

Our Board of Directors (the “Board”) has not made a decision whether or not to pay dividends on our common stock in 2022.

In addition, there are certain limitations contained in our loan agreements that may limit our ability to pay dividends on our outstanding common stock.

Future issuances or potential issuances of our common stock or preferred stock could adversely affect the price of our common stock and our ability to raise funds in new stock offerings and could dilute the percentage ownership or voting power of our common stockholders.

Future sales of substantial amounts of our common stock, preferred stock or equity-related securities in the public market, or the issuance of a substantial amount of our common stock as the result of the conversion of our outstanding convertible preferred stocks, or the perception that such sales or conversions could occur, could adversely affect prevailing trading prices of our common stock and could dilute the value of common stock held by our existing stockholders.

No prediction can be made as to the effect, if any, that future sales of common stock, preferred stock, or equity-related securities, conversions of our outstanding preferred stocks into shares of common stock, or the availability of shares of common stock for future sale will have on the trading price of our common stock.

Such future sales or conversions could also significantly reduce the percentage ownership and voting power of our existing common stockholders.

Future sales of substantial amounts of our common stock, preferred stock or equity-related securities in the public market, or the perception that such sales could occur, could adversely affect prevailing trading prices of our common stock and could dilute the value of common stock held by our existing stockholders.

No prediction can be made as to the effect, if any, that future sales of common stock, preferred stock, or equity-related securities, or the availability of shares of common stock for future sale will have on the trading price of our common stock.

Such future sales could also significantly reduce the percentage ownership and voting power of our existing common stockholders.

General Risk Factors

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and the failure of certain key suppliers could increase our exposure to disruptions in supply or to financial losses.

We also may experience declining demand and falling prices for

some of our products due to our customers’ reluctance to replenish inventories.

We also may experience declining demand and falling prices for some of our products due to our customers’ reluctance to replenish inventories.

The overall impact of a global economic downturn or reduced overall global trade on us is difficult to predict, and our business could be materially adversely impacted.

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our ab ility to meet debt maturities or redemption obligations when due;

the effects of the ongoing COVID-19 pandemic and relate response;

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

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

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increased competitive pressures;

adverse effects on increases in prices of raw materials;

adverse effects of increases in prices of raw materials;

changes in federal, state and local laws and regulations, especially environmental regulations or the American Reinvestment and Recovery Act, or in the interpretation of such;

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volatility of natural gas prices;

weather conditions;

price increases resulting from increased inflation;

weather conditions, including the effects of climate change;

increases in imported agricultural products;

global supply chain disruptions;

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

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Asset retirement obligation.

Accounting Standard Codification.

Accounting Standard Update.

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Chevron Environmental Management Company.

Change of Control

Covestro L.L.C.

The novel coronavirus disease of 2019.

Coffeyville Resources Nitrogen Fertilizers, LLC.

Depreciation, depletion and amortization.

Coffeyville Resources Nitrogen Fertilizers, L.L.C.

Depreciation and amortization.

Diesel Exhaust Fluid.

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Environmental Use Control.

Exchange Agreement

A Securities Exchange Agreement between LSB Funding L.L.C.

and affiliate of Eldridge L.L.C.

Exchange Transaction

The exchange of shares of the Series E and Series F Redeemable Preferred for shares of common stock pursuant to the Exchange Agreement.

Financial Accounting Standards Board.

Financial Covenant

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Golsen, Barry H.

Golsen and certain of their related parties identified as beneficial owners of our securities.

Golsen and certain of their related parties, as defined in the Board Representation and Standstill Agreement, as amended.

Hallowell Facility

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High density ammonium nitrate prills used in the agricultural industry.

A loan agreement between EDC and a lender with up to $7.5 million of available borrowing for the construction of certain equipment.

Interim Loan Period

The time period covered by the Interim Loan for certain equipment construction between EDC and a lender.

Internal Revenue Service.

LSB Funding L.L.C., the holder of all of the shares of the Series E and Series F Redeemable Preferred.

The agreement governing the 6.25% Senior Secured Notes.

The Kansas Department of Health and Environment.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations found in Item 7 of this report.

The notes issued on June 21, 2019 with an interest rate of 9.625%, which mature in May 2023.

The senior secured notes issued on October 14, 2021 with an interest rate of 6.250%, which mature in October 2028.

Net Operating Loss.

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

The notes issued on April 28, 2018 with an interest rate of 9.625%, which mature in May 2023.

National Pollutant Discharge Elimination.

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The Oklahoma Department of Environmental Quality.

Occupational Safety and Health Administration.

The notes issued on April 28, 2018 with an interest rate of 9.625%, which mature in May 2023.

Permit Appeal Resolution

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Our chemical production facility located in Pryor, Oklahoma.

LSB Funding L.L.C.

Retirement Date

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which matures in June 2023.

Secured Financing due 2025

Secured Financing Agreement due 2025

A secured financing arrangement between EDA and an affiliate of LSB Funding L.L.C.

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Secured Promissory Note due 2021

A secured promissory note between EDC and a lender which matures in March 2021.

Secured Promissory Note due 2023

A secured promissory note between EDA and a lender which was paid off during August 2020 with a portion of the proceeds from the Secured Financing due 2025.

A secured promissory note between EDC and a lender which, matured in March 2021.

Senior Secured Notes

The Senior Secured Notes due on May 1, 2023 with a stated interest rate of 9.625%.

Senior secured notes with a stated interest rate of 9.625%, which were redeemed in October 2021.

Series B Preferred

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Series E Redeemable Preferred

The 14% Series E Redeemable Preferred stock with participating rights and liquidating distributions based on a certain number of shares of our common stock, including the amended terms discussed in Note 10 to the Consolidated Financial Statements.

The 14% Series E Redeemable Preferred stock with participating rights and liquidating distributions based on a certain number of shares of our common stock.

Series F Redeemable Preferred

The Series F Redeemable Preferred stock with one share to vote as a single class on all matters with our common stock equal to 456,225 shares of our common stock, including the amended terms discussed in Note 10 to the Consolidated Financial Statements.

The Series F Redeemable Preferred stock with one share to vote as a single class on all matters with our common stock equal to 456,225 shares of our common stock.

Selling, general and administrative expense.

Special Dividend

A stock split in the form of a common stock dividend declared by our Board.

Special Meeting

Meeting of our stockholders held during the third quarter of 2021.

Transition Agreement

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Golsen and LSB, dated June 30, 2017.

Total shareholder return.

A planned major maintenance activity.

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West Fertilizer Company.

Working Capital

Revolver Loan

Working Capital Revolver Loan

Our secured revolving credit facility.

9 unchanged sentences

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-K

Item 1. Business