LSB Industries, Inc. Reports Results for the 2013 First Quarter

LSB Industries, Inc. Reports Results for the 2013 First Quarter

Repairs Completed and Production Resumed at Pryor and Cherokee Facilities

Management Optimistic About Second Half of 2013

OKLAHOMA CITY, Okla.--(BUSINESS WIRE)-- LSB Industries, Inc. (NYS: LXU) announced today results for the quarter ended March 31, 2013.

First Quarter 2013 Financial Highlights Compared to First Quarter 2012:

• Net sales were $150.7 million compared to $190.2 million, a $39.5 million decrease.

• Operating loss was $0.2 million compared to operating income of $23.1 million.

• Net loss was $0.1 million compared to $14.3 million of net income.

• Net loss applicable to common stockholders was $0.4 million compared to net income applicable to common shareholders of $14.0 million.

• Diluted loss per common share was $0.02 compared to earnings per common share of $0.61 income per share.

Repairs Completed at Pryor, Oklahoma and Cherokee, Alabama Facilities:

As previously announced, our Pryor, OK chemical production facility ("Pryor Facility") commenced operations at its principal ammonia plant during late April 2013, following planned and unplanned downtime to complete modifications and repairs. Additionally, our Cherokee, AL chemical production facility ("Cherokee Facility") resumed ammonia production last week and is currently increasing production rates, following unplanned downtime to repair the damage caused by a pipe rupture.

Discussion of First Quarter of 2013:

The $39.5 million decline in comparable quarter sales included a decrease of $46.7 million in our Chemical Business partially offset by $7.5 million increase in our Climate Control Business.

Our consolidated operating loss was $0.2 million for the first quarter of 2013 compared to operating income of $23.1 million for the same period of 2012. The decrease in operating results of $23.3 million primarily relates to a decrease in our Chemical Business partially offset by a slight increase in our Climate Control Business. In addition, our general corporate expense and other business operations net expenses decreased slightly.

First Quarter - Chemical Business:

Our Chemical Business sales for the first quarter of 2013 were $77.5 million, a decrease of $46.7 million compared to the same period of 2012, which includes reductions of $27.8 million in agricultural product sales, $11.8 million in industrial acids and other products sales, and $8.9 million in mining product sales.

As previously reported, during 2012, our Chemical Business encountered a number of significant issues including an explosion in one of our nitric acid plants at the El Dorado, AR facility (the "El Dorado Facility") in May, a pipe rupture at the Cherokee Facility in November that damaged the ammonia plant and mechanical issues at the Pryor Facility, all resulting in lost production and significant adverse effects on our sales, operating results and cash flow during the first quarter of 2013.

The Chemical Business' operating loss for the first quarter of 2013 was $3.8 million compared to operating income of $20.3 million for the same period of 2012. The decrease in operating performance is attributable to unabsorbed overhead costs associated with the lost production and the profit margins on lost sales resulting from the downtime and ongoing issues at certain of our chemical facilities, as mentioned above.

For the first quarter of 2013, we estimate that the cumulative negative effect on our pre-tax income from these incidents and issues, net of insurance recoveries recognized, was in the range of $40 million to $49 million, including lost absorption and gross profit margins, based on current market conditions.

In March 2013, our insurance carriers approved advance payments relating to the Cherokee Facility's business interruption insurance claim totaling $15 million which was applied against recoverable costs (primarily attributable to additional expenses associated with purchased product sold or used in products while our Cherokee Facility is being repaired). For the 2013 first quarter, $10.1 million of the insurance recovery was recorded as a reduction to cost of sales. The balance of the recovery was deferred.

We estimate that the monthly negative effect on operating results at our El Dorado Facility will approximate $1 million to $2 million until the new 65% strength nitric acid plant and the 98% concentrator are constructed with production planned to begin during the first half of 2015. It should be noted that the regular nitric acid plants, which represent approximately 80% of the El Dorado Facility's production capacity and the sulfuric acid plant have been back in operation since the third quarter of 2012.

Excluding the impact of business interruption insurance recoveries, we estimate that the monthly negative effect on operating results at the Cherokee Facility was approximately $8 million to $9 million prior to restarting the ammonia plant in early May 2013. Also we estimate that the monthly adverse effect on the Pryor Facility's operating results in 2013 prior to restarting of the ammonia plant in late April 2013 was approximately $8 million to $9 million.

First Quarter - Climate Control Business:

Our Climate Control sales for the first quarter of 2013 were $70.3 million, or approximately $7.5 million higher than the same period of 2012, and included a $3.4 million increase in geothermal and water source heat pump sales, a $2.6 million increase in hydronic fan coil sales and a $1.5 million increase in other HVAC sales. From a market sector perspective, the increase included a $9.4 million improvement in commercial/institutional sales partially offset by a decline of $1.9 million in residential product sales. The improvement in the commercial/institutional sector of our business is primarily attributable to higher customer order intake in the current and preceding periods for our commercial/institutional products in most of our product lines. We believe the decline in residential product sales is due to a reduced consumer interest in energy savings as a result of relatively stable/low electricity and natural gas prices, as well as the continued lower level of construction in the single-family residential sectors we serve (high end custom housing).

Bookings of new product orders were $67.5 million in the first quarter of 2013, compared to $66.9 million in the 2012 fourth quarter and $62.9 million in the first quarter of 2012. As compared to the fourth quarter of 2012, orders for commercial/institutional products increased 2.5% and orders for residential products decreased 5.1%. The decrease in residential orders reflects the softness in the single-family geothermal market, for both replacement units and new construction. At March 31, 2013, the backlog of confirmed customer product orders was $57.3 million compared to $55.5 million at December 31, 2012 and $47.4 million at March 31, 2012.

CEO's Remarks :

Jack Golsen, LSB's Board Chairman and CEO stated, "The past two quarters have been challenging for us as we have worked hard to deal with certain reliability issues in our chemical operations. Now that we have restarted all of the affected facilities after having repaired the mechanical problems, upgraded certain equipment and systems, and augmented our reliability and safety measures, we believe our Chemical Business is well positioned to capitalize on solid market fundamentals for our products. Looking ahead, as we move forward with the planned investment at our El Dorado facility, we feel confident that we can significantly increase our profitability."

Mr. Golsen continued, "On the Climate Control side of our business, where we hold strong market shares for a variety of innovative products, the increase in construction activity has helped improve our results. We expect this trend to continue through the balance of the year and into 2014."

Mr. Golsen concluded, "Overall, we anticipate significantly better results in the second half of the year. Considering the fact that all of our chemical facilities are now back in operation, the steps we have taken to improve their reliability, and the strong market position of many of our Climate Control Business' products in the face of an improving end market environment, we are optimistic about the balance of 2013 and future years for both of our businesses."

Conference Call

LSB's management will host a conference call covering the first quarter results on Tuesday, May 7, 2013 at 11:00 am EDT/10:00 am CDT to discuss these results and recent corporate developments. Participating in the call will be Board Chairman and CEO, Jack E. Golsen; President and COO, Barry H. Golsen; and Executive Vice President and CFO, Tony M. Shelby. Interested parties may participate in the call by dialing 201-493-6739. Please call in ten minutes before the conference is scheduled to begin and ask for the LSB conference call. To coincide with the conference call, LSB will post a slide presentation at www.lsbindustries.com on the Investors tab of the website.

To listen to a webcast of the call, please go to the Company's website at www.lsbindustries.com at least 15 minutes before the conference call to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company's website. We suggest listeners use Microsoft Explorer as their web browser.

LSB Industries, Inc.

LSB Industries is a manufacturing, marketing and engineering company. Our principal business activities, through our subsidiaries, are the manufacture and sale of chemical products for agriculture, industrial, mining, quarry and construction uses, as well as the manufacture and sale of a broad range of heating, ventilation and air conditioning products used in commercial, institutional and residential buildings.

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements generally are identifiable by use of the words "believe," "expects," "intends," "anticipates," "plans to," "estimates," "projects" or similar expressions, and such forward-looking statements include, but are not limited to: that the monthly negative effect on operating results will approximate $1 million to $2 million at the El Dorado Facility until the new plants begin production during the first half of 2015; production rate increases at Cherokee; that we can significantly increase our profitability; expected construction trends that will improve our Climate Control Businesses will continue through the balance of the year and into 2014; we anticipate significantly better results in the second half of the year and, we are optimistic about the balance of 2013 and future years for both of our businesses. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to, general economic conditions, continuing reduction in the commercial and residential construction industry, weather conditions, acceptance by the market of our Climate Control products, acceptance of our technology, changes to federal legislation or adverse regulations that negatively impact our industries or markets, available working capital, ability to finance our investments, and other factors set forth under "Risk Factors" in Item 1A of Part 1 and under "A Special Note Regarding Forward-Looking Statements" contained in the Form 10-K for year ended December 31, 2012, for discussions of a variety of factors which could cause the future outcome to differ materially from the forward-looking statements contained in this report.