[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
||
For
the quarterly period ended June
30, 2007
|
|||
OR
|
|||
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
||
For
the transition period from
_____________to______________
|
|||
Commission
file
number 1-7677
|
|||
LSB
Industries, Inc.
|
|||
Exact
name of Registrant as specified in its charter
|
|||
Delaware
|
73-1015226
|
||
State
or other jurisdiction of
incorporation
or organization
|
I.R.S.
Employer Identification No.
|
||
16
South Pennsylvania
Avenue, Oklahoma City, Oklahoma 73107
|
|||
Address
of
principal executive offices
(Zip
Code)
|
|||
(405)
235-4546
|
|||
Registrant's
telephone number, including area code
|
|||
__ None _ ___
|
|||
Former
name, former address and former fiscal year, if changed since last
report.
|
|
||
PART
I - Financial Information
|
Page
|
|
Item
1.
|
4
|
|
Item
2.
|
39
|
|
Item
3.
|
61
|
|
Item
4.
|
62
|
|
63
|
||
PART
II - Other Information
|
||
Item
1.
|
65
|
|
Item
1A.
|
66
|
|
Item
2.
|
67
|
|
Item
3.
|
67
|
|
Item
4.
|
68
|
|
Item
5.
|
69
|
|
Item
6.
|
69
|
June
30,
2007
|
December
31,
2006
|
(In
Thousands)
|
Assets
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
30,575
|
$
|
2,255
|
|||
Restricted
cash
|
309
|
2,479
|
|||||
Accounts
receivable, net
|
78,608
|
67,571
|
|||||
Inventories:
|
|||||||
Finished
goods
|
22,608
|
20,252
|
|||||
Work
in process
|
2,892
|
3,205
|
|||||
Raw
materials
|
20,659
|
21,992
|
|||||
Total
inventories
|
46,159
|
45,449
|
|||||
Supplies,
prepaid items and other:
|
|||||||
Prepaid
insurance
|
1,612
|
3,443
|
|||||
Precious
metals
|
10,389
|
6,406
|
|||||
Supplies
|
3,656
|
3,424
|
|||||
Other
|
1,666
|
1,468
|
|||||
Total
supplies, prepaid items and other
|
17,323
|
14,741
|
|||||
Total
current assets
|
172,974
|
132,495
|
|||||
Property,
plant and equipment, net
|
78,453
|
76,404
|
|||||
Other
assets:
|
|||||||
Noncurrent
restricted cash
|
565
|
1,202
|
|||||
Debt
issuance and other debt-related costs, net
|
5,771
|
2,221
|
|||||
Investment
in affiliate
|
3,365
|
3,314
|
|||||
Goodwill
|
1,724
|
1,724
|
|||||
Other,
net
|
2,547
|
2,567
|
|||||
Total
other assets
|
13,972
|
11,028
|
|||||
$
|
265,399
|
$
|
219,927
|
June
30,
2007
|
December
31,
2006
|
(In
Thousands)
|
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
37,364
|
$
|
42,870
|
|||
Short-term
financing and drafts payable
|
936
|
2,986
|
|||||
Accrued
and other liabilities
|
23,742
|
26,816
|
|||||
Current
portion of long-term debt
|
2,729
|
11,579
|
|||||
Total
current liabilities
|
64,771
|
84,251
|
|||||
Long-term
debt
|
121,738
|
86,113
|
|||||
Noncurrent
accrued and other liabilities
|
6,554
|
5,929
|
|||||
Contingencies
(Note 12)
|
|||||||
Stockholders'
equity:
|
|||||||
Series
B 12% cumulative, convertible preferred stock, $100 par value;
20,000 shares issued and outstanding; aggregate liquidation preference
of $3,770,400 ($3,650,400 in 2006)
|
2,000
|
2,000
|
|||||
Series
2 $3.25 convertible, exchangeable Class C preferred stock, $50
stated value; 211,595 shares issued (517,402 in 2006); aggregate
liquidation preference of $15,528,102 ($37,836,070 in 2006)
|
10,580
|
25,870
|
|||||
Series
D 6% cumulative, convertible Class C preferred stock, no par
value; 1,000,000 shares issued; aggregate liquidation
preference
of $1,300,000
|
1,000
|
1,000
|
|||||
Common
stock, $.10 par value; 75,000,000 shares authorized, 23,291,033
shares issued (20,215,339 in 2006)
|
2,329
|
2,022
|
|||||
Capital
in excess of par value
|
111,762
|
79,838
|
|||||
Accumulated
other comprehensive loss
|
(556
|
)
|
(701
|
)
|
|||
Accumulated
deficit
|
(36,346
|
)
|
(47,962
|
)
|
|||
90,769
|
62,067
|
||||||
Less
treasury stock at cost:
|
|||||||
Series
2 Preferred, 18,300 shares
|
797
|
797
|
|||||
Common
stock, 3,447,754 shares
|
17,636
|
17,636
|
|||||
Total
stockholders' equity
|
72,336
|
43,634
|
|||||
$
|
265,399
|
$
|
219,927
|
Six
Months
|
Three
Months
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands, Except Per Share
Amounts)
|
Net
sales
|
$
|
304,141
|
$
|
244,248
|
$
|
156,756
|
$
|
132,391
|
|||||||
Cost
of sales
|
237,432
|
199,274
|
122,099
|
107,596
|
|||||||||||
Gross
profit
|
66,709
|
44,974
|
34,657
|
24,795
|
|||||||||||
Selling,
general and administrative expense
|
36,994
|
29,722
|
18,693
|
15,570
|
|||||||||||
Provisions
for losses on accounts receivable
|
621
|
282
|
363
|
82
|
|||||||||||
Other
expense
|
518
|
691
|
494
|
585
|
|||||||||||
Other
income
|
(100
|
)
|
(148
|
)
|
(46
|
)
|
(101
|
)
|
|||||||
Operating
income
|
28,676
|
14,427
|
15,153
|
8,659
|
|||||||||||
Interest
expense
|
4,580
|
5,761
|
1,992
|
2,886
|
|||||||||||
Non-operating
other income, net
|
(73
|
)
|
(497
|
)
|
(31
|
)
|
(467
|
)
|
|||||||
Income
from continuing operations before provisions for income taxes and
equity in earnings of affiliate |
24,169
|
9,163
|
13,192
|
6,240
|
|||||||||||
Provisions
for income taxes
|
532
|
200
|
188
|
150
|
|||||||||||
Equity
in earnings of affiliate
|
(431
|
)
|
(405
|
)
|
(216
|
)
|
(200
|
)
|
|||||||
Income
from continuing operations
|
24,068
|
9,368
|
13,220
|
6,290
|
|||||||||||
Net
loss from discontinued operations
|
29
|
131
|
-
|
31
|
|||||||||||
Net
income
|
24,039
|
9,237
|
13,220
|
6,259
|
|||||||||||
Dividend
requirements and stock dividend on preferred stock exchanged in
March 2007 |
4,971
|
497
|
-
|
249
|
|||||||||||
Other
preferred stock dividend requirements
|
434
|
607
|
217
|
303
|
|||||||||||
Net
income applicable to common stock
|
$
|
18,634
|
$
|
8,133
|
$
|
13,003
|
$
|
5,707
|
|||||||
Weighted
average common shares:
|
|||||||||||||||
Basic
|
18,615
|
13,769
|
19,713
|
13,776
|
|||||||||||
Diluted
|
21,950
|
20,914
|
22,923
|
20,988
|
|||||||||||
Income
(loss) per common share:
|
|||||||||||||||
Basic:
|
|||||||||||||||
Income
from continuing operations
|
$
|
1.00
|
$
|
.60
|
$
|
.66
|
$
|
.41
|
|||||||
Net
loss from discontinued operations
|
-
|
(.01
|
)
|
-
|
-
|
||||||||||
Net
income
|
$
|
1.00
|
$
|
.59
|
$
|
.66
|
$
|
.41
|
|||||||
Diluted:
|
|||||||||||||||
Income
from continuing operations
|
$
|
.87
|
$
|
.47
|
$
|
.58
|
$
|
.32
|
|||||||
Net
loss from discontinued operations
|
-
|
(.01
|
)
|
-
|
-
|
||||||||||
Net
income
|
$
|
.87
|
$
|
.46
|
$
|
.58
|
$
|
.32
|
Common Stock Shares |
Non-
Redeemable Preferred Stock |
Common Stock
Par Value
|
Capital in Excess of Par Value |
Accumulated
Other Comprehensive Loss |
Accumulated Deficit |
Treasury Stock-Preferred |
Treasury Stock-Common |
Total |
Balance
at December 31, 2006
|
20,215
|
$
|
28,870
|
$
|
2,022
|
$
|
79,838
|
$
|
(701
|
)
|
$
|
(47,962
|
)
|
$
|
(797
|
)
|
$
|
(17,636
|
)
|
$
|
43,634
|
|||
Net
income
|
24,039
|
24,039
|
||||||||||||||||||||||
Amortization
of cash flow hedge
|
145
|
145
|
||||||||||||||||||||||
Total
comprehensive income
|
24,184
|
|||||||||||||||||||||||
Cumulative
effect adjustment in accordance with FIN 48
|
(120
|
)
|
(120
|
)
|
||||||||||||||||||||
Conversion
of debentures to common stock
|
565
|
57
|
3,681
|
3,738
|
||||||||||||||||||||
Exercise
of stock options
|
245
|
24
|
834
|
858
|
||||||||||||||||||||
Stock-based
compensation
|
36
|
36
|
||||||||||||||||||||||
Exchange
of 305,807 shares of
non-redeemable preferred stock for 2,262,965 shares of
common stock
|
2,263
|
(15,290
|
)
|
226
|
27,367
|
(12,303
|
)
|
-
|
||||||||||||||||
Conversion
of 71 shares of redeemable
preferred stock to
common stock
|
3
|
6
|
6
|
|||||||||||||||||||||
Balance
at June 30, 2007
|
23,291
|
$
|
13,580
|
$
|
2,329
|
$
|
111,762
|
$
|
(556
|
)
|
$
|
(36,346
|
)
|
$
|
(797
|
)
|
$
|
(17,636
|
)
|
$
|
72,336
|
2007
|
2006
|
(In
Thousands)
|
Cash
flows from continuing operating activities:
|
|||||||
Net
income
|
$
|
24,039
|
$
|
9,237
|
|||
Adjustments
to reconcile net income to net cash provided by continuing operating
activities:
|
|||||||
Net
loss from discontinued operations
|
29
|
131
|
|||||
Loss
(gain) on sales and disposals of property and equipment
|
431
|
(7
|
)
|
||||
Depreciation
of property, plant and equipment
|
6,089
|
5,420
|
|||||
Amortization
|
441
|
587
|
|||||
Stock-based
compensation
|
36
|
-
|
|||||
Provisions
for losses on accounts receivable
|
621
|
282
|
|||||
Realization
of losses on inventory
|
(345
|
)
|
(539
|
)
|
|||
Provision
for impairment on long-lived assets
|
-
|
286
|
|||||
Provision
for (realization and reversal of) losses on firm sales
commitments
|
(328
|
)
|
296
|
||||
Equity
in earnings of affiliate
|
(431
|
)
|
(405
|
)
|
|||
Distributions
received from affiliate
|
380
|
500
|
|||||
Change
in fair value of interest rate caps
|
(307
|
)
|
(337
|
)
|
|||
Cash
provided (used) by changes in assets and liabilities:
|
|||||||
Accounts
receivable
|
(11,842
|
)
|
(16,478
|
)
|
|||
Inventories
|
(365
|
)
|
846
|
||||
Other
supplies and prepaid items
|
(2,582
|
)
|
1,615
|
||||
Accounts
payable
|
(5,611
|
)
|
4,752
|
||||
Customer
deposits
|
(567
|
)
|
3,027
|
||||
Deferred
rent expense
|
(4,004
|
)
|
(2,291
|
)
|
|||
Other
current and noncurrent liabilities
|
2,382
|
2,208
|
|||||
Net
cash provided by continuing operating activities
|
8,066
|
9,130
|
|||||
Cash
flows from continuing investing activities:
|
|||||||
Capital
expenditures
|
(8,131
|
)
|
(5,567
|
)
|
|||
Proceeds
from sales of property and equipment
|
191
|
117
|
|||||
Proceeds
from (deposits of) restricted cash
|
2,807
|
(557
|
)
|
||||
Purchase
of interest rate cap contracts
|
(621
|
)
|
-
|
||||
Other
assets
|
17
|
(122
|
)
|
||||
Net
cash used by continuing investing activities
|
(5,737
|
)
|
(6,129
|
)
|
|||
2007
|
2006
|
(In
Thousands)
|
Cash
flows from continuing financing activities:
|
|||||||
Proceeds
from revolving debt facilities
|
$
|
248,972
|
$
|
226,139
|
|||
Payments
on revolving debt facilities
|
(275,356
|
)
|
(234,905
|
)
|
|||
Proceeds
from 5.5% convertible debentures, net of fees
|
56,985
|
-
|
|||||
Proceeds
from 7% convertible debentures, net of fees
|
-
|
16,876
|
|||||
Acquisition
of 10-3/4% Senior Unsecured Notes
|
-
|
(6,950
|
)
|
||||
Proceeds
from other long-term debt, net of fees
|
2,424
|
-
|
|||||
Payments
on other long-term debt
|
(5,723
|
)
|
(1,494
|
)
|
|||
Payments
of debt issuance costs
|
(50
|
)
|
(367
|
)
|
|||
Proceeds
from short-term financing and drafts payable
|
56
|
123
|
|||||
Payments
on short-term financing and drafts payable
|
(2,106
|
)
|
(2,124
|
)
|
|||
Proceeds
from exercise of stock options
|
858
|
61
|
|||||
Dividends
paid on preferred stock
|
-
|
(136
|
)
|
||||
Net
cash provided (used) by continuing financing activities
|
26,060
|
(2,777
|
)
|
||||
Cash
flows of discontinued operations:
|
|||||||
Operating
cash flows
|
(69
|
)
|
(105
|
)
|
|||
Net
increase in cash and cash equivalents
|
28,320
|
119
|
|||||
Cash
and cash equivalents at beginning of period
|
2,255
|
4,653
|
|||||
Cash
and cash equivalents at end of period
|
$
|
30,575
|
$
|
4,772
|
|||
Supplemental
cash flow information:
|
|||||||
Noncash
investing and financing activities:
|
|||||||
Debt
issuance costs
|
$
|
3,131
|
$
|
1,124
|
|||
Debt
issuance costs associated with 7% convertible debentures converted
to
common stock
|
$
|
266
|
$
|
-
|
|||
7%
convertible debentures converted to common stock
|
$
|
4,000
|
$
|
-
|
|||
Series
2 preferred stock converted to common stock of which $12,303,000
was
charged to accumulated deficit
|
$
|
27,593
|
$
|
-
|
|||
As
Originally
Reported
|
As
Adjusted
|
Effect
of
Changes
|
Net
sales
|
$
|
244,017
|
$
|
244,248
|
$
|
231
|
||||||
Cost
of sales
|
$
|
199,507
|
$
|
199,274
|
$
|
(233
|
)
|
|||||
Gross
profit
|
$
|
44,510
|
$
|
44,974
|
$
|
464
|
||||||
Selling,
general and administrative expense (1)
|
$
|
29,575
|
$
|
30,004
|
$
|
429
|
||||||
Operating
income
|
$
|
14,392
|
$
|
14,427
|
$
|
35
|
||||||
Income
from continuing operations before provision for income taxes and
equity in
earnings of affiliate
|
$
|
9,128
|
$
|
9,163
|
$
|
35
|
||||||
Income
from continuing operations
|
$
|
9,333
|
$
|
9,368
|
$
|
35
|
||||||
Net
income
|
$
|
9,202
|
$
|
9,237
|
$
|
35
|
||||||
Net
income applicable to common stock
|
$
|
8,098
|
$
|
8,133
|
$
|
35
|
As
Originally
Reported
|
As
Adjusted
|
Effect
of
Changes
|
Net
sales
|
$
|
132,273
|
$
|
132,391
|
$
|
118
|
||||||
Cost
of sales
|
$
|
107,310
|
$
|
107,596
|
$
|
286
|
||||||
Gross
profit
|
$
|
24,963
|
$
|
24,795
|
$
|
(168
|
)
|
|||||
Selling,
general and administrative expense (1)
|
$
|
15,433
|
$
|
15,652
|
$
|
219
|
||||||
Operating
income
|
$
|
9,046
|
$
|
8,659
|
$
|
(387
|
)
|
|||||
Income
from continuing operations before provision for income taxes and
equity in
earnings of affiliate
|
$
|
6,627
|
$
|
6,240
|
$
|
(387
|
)
|
|||||
Income
from continuing operations
|
$
|
6,677
|
$
|
6,290
|
$
|
(387
|
)
|
|||||
|
||||||||||||
Net
income
|
$
|
6,646
|
$
|
6,259
|
$
|
(387
|
)
|
|||||
Net
income applicable to common stock
|
$
|
6,094
|
$
|
5,707
|
$
|
(387
|
)
|
As
Originally
Reported
|
As
Adjusted
|
Effect
of
Change
|
Income
per common share:
|
||||||||||||
Basic
|
$
|
.44
|
$
|
.41
|
$
|
(.03
|
)
|
|||||
Diluted
|
$
|
.34
|
$
|
.32
|
$
|
(.02
|
)
|
As
Originally
Reported
|
As
Adjusted
|
Effect
of
Change
|
Net
income
|
$
|
9,202
|
$
|
9,237
|
$
|
35
|
||||||
Cash
provided by change in other current and noncurrent
liabilities
|
$
|
2,243
|
$
|
2,208
|
$
|
(35
|
)
|
|||||
Net
cash provided by continuing operations activities
|
$
|
9,130
|
$
|
9,130
|
$
|
-
|
June
30,
2007
|
December
31,
2006
|
(In
Thousands)
|
Trade
receivables
|
$
|
79,668
|
$
|
68,165
|
|||
Other
|
1,416
|
1,675
|
|||||
81,084
|
69,840
|
||||||
Allowance
for doubtful accounts
|
(2,476
|
)
|
(2,269
|
)
|
|||
$
|
78,608
|
$
|
67,571
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands)
|
Balance
at beginning of period
|
$
|
1,255
|
$
|
2,423
|
$
|
938
|
$
|
1,263
|
|||||||
Add:
Provision for (realization of) losses
|
(345
|
)
|
(539
|
)
|
(28
|
)
|
297
|
||||||||
Deduct:
Write-offs/disposals
|
(63
|
)
|
(328
|
)
|
(63
|
)
|
(4
|
)
|
|||||||
Balance
at end of period
|
$
|
847
|
$
|
1,556
|
$
|
847
|
$
|
1,556
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands)
|
Balance
at beginning of period
|
$
|
1,251
|
$
|
861
|
$
|
1,227
|
$
|
921
|
|||||||
Add:
Charged to costs and expenses
|
1,335
|
706
|
827
|
321
|
|||||||||||
Deduct:
Costs and expenses incurred
|
(1,065
|
)
|
(587
|
)
|
(533
|
)
|
(262
|
)
|
|||||||
Balance
at end of period
|
$
|
1,521
|
$
|
980
|
$
|
1,521
|
$
|
980
|
June
30,
2007
|
December
31,
2006
|
(In
Thousands)
|
Accrued
payroll and benefits
|
$
|
4,545
|
$
|
4,170
|
||
Deferred
revenue on extended warranty contracts
|
2,917
|
2,426
|
||||
Accrued
commissions
|
2,396
|
2,565
|
||||
Customer
deposits
|
2,371
|
2,938
|
||||
Accrued
property and income taxes
|
1,984
|
1,217
|
||||
Accrued
insurance
|
1,963
|
1,646
|
||||
Accrued
death benefits
|
1,745
|
1,446
|
||||
Accrued
warranty costs
|
1,521
|
1,251
|
||||
Accrued
contractual manufacturing obligations
|
1,403
|
1,801
|
||||
Accrued
environmental remediation costs
|
1,389
|
1,432
|
||||
Deferred
rent expense
|
1,227
|
5,231
|
||||
Accrued
precious metals costs
|
979
|
1,068
|
||||
Other
|
5,856
|
5,554
|
||||
30,296
|
32,745
|
|||||
Less
noncurrent portion
|
6,554
|
5,929
|
||||
Current
portion of accrued and other liabilities
|
$
|
23,742
|
$
|
26,816
|
June
30,
|
December
31,
|
||
2007
|
2006
|
(In
Thousands)
|
Senior
Secured Loan due 2009 (A)
|
$
|
50,000
|
$
|
50,000
|
|||
Working
Capital Revolver Loan due 2009 - ThermaClime (B)
|
21
|
26,048
|
|||||
7%
Convertible Senior Subordinated Notes due 2011 (C)
|
-
|
4,000
|
|||||
5.5%
Convertible Senior Subordinated Notes due 2012 (D)
|
60,000
|
-
|
|||||
Other,
with interest at rates of 4.25% to 9.36% most of which is secured
by
machinery, equipment and real estate
|
14,446
|
17,644
|
|||||
124,467
|
97,692
|
||||||
Less
current portion of long-term debt
|
2,729
|
11,579
|
|||||
Long-term
debt due after one year
|
$
|
121,738
|
$
|
86,113
|
(A)
|
ThermaClime
and certain of its subsidiaries (the “Borrowers”) are parties of a $50
million term loan (“Senior Secured Loan”) with a certain lender (the
“Lender”). The Senior Secured Loan is to be repaid as
follows:
|
·
|
quarterly
interest payments which began September 30,
2004;
|
·
|
quarterly
principal payments of $312,500 beginning September 30,
2007;
|
·
|
a
final payment of the remaining outstanding principal of $47.5 million
and
accrued interest on September 16,
2009.
|
·
|
certain
real property and equipment located at the El Dorado, Arkansas facility
(“El Dorado Facility”),
|
·
|
certain
real property and equipment located at the Cherokee, Alabama facility
(“Cherokee Facility”),
|
·
|
certain
equipment of the Climate Control Business, and
|
·
|
the
equity stock of certain of ThermaClime’s
subsidiaries.
|
·
|
incur
additional indebtedness,
|
·
|
incur
liens,
|
·
|
make
restricted payments or loans to affiliates who are not Borrowers,
|
·
|
engage
in mergers, consolidations or other forms of recapitalization,
|
·
|
dispose
assets, or
|
·
|
repurchase
ThermaClime's 10-3/4% Senior Unsecured Notes (the “Notes”).
|
(C)
|
On
March 14, 2006, we completed a private placement to six qualified
institutional buyers pursuant to which we sold $18 million aggregate
principal amount of our 7% Convertible Senior Subordinated Debentures
due
2011 (the “2006 Debentures”). We used a placement agent for this
transaction which we paid a fee of 6% of the aggregate gross proceeds
received in the financing. Other offering expenses in connection
with the
transaction were $.4 million. As a result, the total debt issuance
costs
related to this transaction were $1.5 million.
|
A.
|
Environmental
Matters
|
·
|
if
the inquiry will ever rise to the level of an investigation or proceeding,
or
|
·
|
the
materiality to the Company’s financial position with respect to
enforcement actions, if any, the SEC may have available to it.
|
· |
risk-free
interest rate of 5.16% based on an U.S. Treasury zero-coupon issue
with a
term approximating the estimated expected life as of the grant date;
|
· |
a
dividend yield of 0 based on historical
data;
|
· |
volatility
factors of the expected market price of our common stock of 24.7%
based on
historical volatility of our common stock since it has been traded
on the
American Stock Exchange, and;
|
· |
a
weighted average expected life of the options of 5.76 years based
on the
historical exercise behavior of these employees.
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
Numerator:
|
|||||||||||||||
Net
income
|
$
|
24,039
|
$
|
9,237
|
$
|
13,220
|
$
|
6,259
|
|||||||
Dividend
requirements and stock dividends on preferred stock exchanged in
March
2007
|
(4,971
|
)
|
(497
|
)
|
-
|
(249
|
)
|
||||||||
Other
preferred stock dividend requirements
|
(434
|
)
|
(607
|
)
|
(217
|
)
|
(303
|
)
|
|||||||
Numerator
for basic net income per common share - net income applicable to
common
stock
|
18,634
|
8,133
|
13,003
|
5,707
|
|||||||||||
Preferred
stock dividend requirements on preferred stock assumed to be converted,
if
dilutive
|
434
|
1,104
|
217
|
552
|
|||||||||||
Interest
expense including amortization of debt issuance costs, net of income
taxes, on convertible debt assumed to be converted
|
83
|
485
|
34
|
390
|
|||||||||||
Numerator
for diluted net income per common share
|
$
|
19,151
|
$
|
9,722
|
$
|
13,254
|
$
|
6,649
|
|||||||
Denominator:
|
|||||||||||||||
Denominator
for basic net income per common share - weighted-average
shares
|
18,614,835
|
13,768,813
|
19,713,471
|
13,775,988
|
|||||||||||
Effect
of dilutive securities:
|
|||||||||||||||
Convertible
preferred stock
|
1,778,610
|
3,569,133
|
1,777,900
|
3,567,613
|
|||||||||||
Stock
options
|
1,255,959
|
1,263,521
|
1,228,399
|
1,326,346
|
|||||||||||
Convertible
notes payable
|
212,088
|
2,254,000
|
111,651
|
2,254,000
|
|||||||||||
Warrants
|
88,257
|
58,517
|
92,068
|
64,369
|
|||||||||||
Dilutive
potential common shares
|
3,334,914
|
7,145,171
|
3,210,018
|
7,212,328
|
|||||||||||
Denominator
for diluted net income per common share - adjusted weighted-average
shares
and assumed conversions
|
21,949,749
|
20,913,984
|
22,923,489
|
20,988,316
|
|||||||||||
Basic
net income per common share
|
$
|
1.00
|
$
|
.59
|
$
|
.66
|
$
|
.41
|
|||||||
Diluted
net income per common share
|
$
|
.87
|
$
|
.46
|
$
|
.58
|
$
|
.32
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
Convertible
preferred stock
|
522,181
|
-
|
-
|
-
|
||||
Stock
options
|
42,265
|
-
|
84,066
|
-
|
||||
564,446
|
-
|
84,066
|
-
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands)
|
Other
expense:
|
|||||||||||||||
Losses
on sales and disposals of property and equipment
|
$
|
431
|
$
|
-
|
$
|
431
|
$
|
-
|
|||||||
Litigation
settlement
|
-
|
300
|
-
|
300
|
|||||||||||
Impairments
on long-lived assets (1)
|
-
|
286
|
-
|
286
|
|||||||||||
Other
miscellaneous expense (2)
|
87
|
105
|
63
|
(1
|
)
|
||||||||||
Total
other expense
|
$
|
518
|
$
|
691
|
$
|
494
|
$
|
585
|
|||||||
Other
income (2)
|
$
|
100
|
$
|
148
|
$
|
46
|
$
|
101
|
|||||||
Non-operating
other income, net:
|
|||||||||||||||
Interest
income
|
$
|
58
|
$
|
396
|
$
|
16
|
$
|
359
|
|||||||
Miscellaneous
income (2)
|
65
|
149
|
39
|
125
|
|||||||||||
Miscellaneous
expense (2)
|
(50
|
)
|
(48
|
)
|
(24
|
)
|
(17
|
)
|
|||||||
Total
non-operating other income, net
|
$
|
73
|
$
|
497
|
$
|
31
|
$
|
467
|
(1)
|
Long-lived
assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts may not be recoverable.
During the six and three months ended June 30, 2006, we recognized
impairments of $286,000 which includes $230,000 relating to the wastewater
projects. Due to the significant wastewater quality progress at the
El
Dorado Facility and meetings with the ADEQ, certain capitalized costs
relating to the wastewater projects are no longer believed to be
recoverable.
|
(2)
|
Amounts represent numerous unrelated transactions, none of which are individually significant requiring separate disclosure. |
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands)
|
Net
sales:
|
|||||||||||||||
Climate
Control
|
$
|
145,823
|
$
|
99,035
|
$
|
74,518
|
$
|
51,673
|
|||||||
Chemical
|
153,142
|
140,697
|
79,422
|
78,167
|
|||||||||||
Other
|
5,176
|
4,516
|
2,816
|
2,551
|
|||||||||||
$
|
304,141
|
$
|
244,248
|
$
|
156,756
|
$
|
132,391
|
||||||||
Gross
profit: (1)
|
|||||||||||||||
Climate
Control
|
$
|
42,628
|
$
|
30,509
|
$
|
21,921
|
$
|
15,702
|
|||||||
Chemical
(2) (3)
|
22,242
|
12,899
|
11,710
|
8,198
|
|||||||||||
Other
|
1,839
|
1,566
|
1,026
|
895
|
|||||||||||
$
|
66,709
|
$
|
44,974
|
$
|
34,657
|
$
|
24,795
|
||||||||
Operating
income (loss): (4)
|
|||||||||||||||
Climate
Control
|
$
|
18,125
|
$
|
11,577
|
$
|
9,617
|
$
|
6,004
|
|||||||
Chemical
(2) (3) (5)
|
15,646
|
6,626
|
7,936
|
4,817
|
|||||||||||
General
corporate expenses and other business operations, net (6)
|
(5,095
|
)
|
(3,776
|
)
|
(2,400
|
)
|
(2,162
|
)
|
|||||||
28,676
|
14,427
|
15,153
|
8,659
|
||||||||||||
Interest
expense
|
(4,580
|
)
|
(5,761
|
)
|
(1,992
|
)
|
(2,886
|
)
|
|||||||
Non-operating
other income (expense), net:
|
|||||||||||||||
Climate
Control
|
2
|
-
|
-
|
-
|
|||||||||||
Chemical
|
82
|
236
|
54
|
217
|
|||||||||||
Corporate
and other business operations
|
(11
|
)
|
261
|
(23
|
)
|
250
|
|||||||||
Provisions
for income taxes
|
(532
|
)
|
(200
|
)
|
(188
|
)
|
(150
|
)
|
|||||||
Equity
in earnings of affiliate-Climate Control
|
431
|
405
|
216
|
200
|
|||||||||||
Income
from continuing operations
|
$
|
24,068
|
$
|
9,368
|
$
|
13,220
|
$
|
6,290
|
(1)
|
Gross
profit by industry segment represents net sales less cost of sales.
Gross
profit classified as “Other” relates to the sales of industrial machinery
and related components.
|
(2)
|
For
the three months ended June 30, 2007 and 2006, Turnaround costs for
the El
Dorado Facility totaled $182,000 and $1,097,000, respectively. For
the
three months ended June 30, 2007 and 2006, expenses for precious
metals,
net of recoveries, were $494,000 and $1,114,000,
respectively.
|
(3)
|
During
the six and three months ended June 30, 2007, we recorded the realization
for losses on certain nitrate-based inventories of $354,000 and $26,000,
respectively. For the same periods in 2006, we recorded the realization
of
losses (provision for losses) of $782,000 and $(147,000), respectively.
During the six and three months ended June 30, 2006, we realized
insurance
recoveries of $595,000 and $41,000, respectively, relating to a business
interruption claim. The above transactions (excluding the provision
for
losses) contributed to an increase in gross profit.
|
(4)
|
Our
chief operating decision makers use operating income by industry
segment
for purposes of making decisions which include resource allocations
and
performance evaluations. Operating income by industry segment represents
gross profit by industry segment less SG&A incurred by each industry
segment plus other income and other expense earned/incurred by each
industry segment before general corporate expenses and other business
operations, net. General corporate expenses and other business operations,
net, consist of unallocated portions of gross profit, SG&A, other
income and other expense.
|
(5)
|
During
the six and three months ended June 30, 2006, we recognized impairments
on
long-lived assets of $286,000.
|
(6)
|
The
amounts included are not allocated to our Climate Control and Chemical
Businesses since these items are not included in the operating
results
reviewed by our chief operating decision makers for purposes of
making
decisions as discussed above. A detail of these amounts are as
follows:
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
2007
|
2006
|
2007
|
2006
|
(In
Thousands)
|
Gross
profit-Other
|
$
|
1,839
|
$
|
1,566
|
$
|
1,026
|
$
|
895
|
|||||||
Selling,
general and administrative:
|
|||||||||||||||
Personnel
|
(3,552
|
)
|
(2,825
|
)
|
(1,894
|
)
|
(1,623
|
)
|
|||||||
Professional
fees
|
(1,767
|
)
|
(1,253
|
)
|
(773
|
)
|
(413
|
)
|
|||||||
Office
overhead
|
(376
|
)
|
(311
|
)
|
(180
|
)
|
(113
|
)
|
|||||||
Property,
franchise and other taxes
|
(156
|
)
|
(141
|
)
|
(73
|
)
|
(70
|
)
|
|||||||
Advertising
|
(140
|
)
|
(105
|
)
|
(60
|
)
|
(75
|
)
|
|||||||
Shareholders
relations
|
(130
|
)
|
(16
|
)
|
(32
|
)
|
(8
|
)
|
|||||||
All
other (A)
|
(828
|
)
|
(424
|
)
|
(425
|
)
|
(482
|
)
|
|||||||
Total
selling, general and administrative
|
(6,949
|
)
|
(5,075
|
)
|
(3,437
|
)
|
(2,784
|
)
|
|||||||
Other
income
|
32
|
33
|
14
|
27
|
|||||||||||
Other
expense (B)
|
(17
|
)
|
(300
|
)
|
(3
|
)
|
(300
|
)
|
|||||||
Total
general corporate expenses and other business operations,
net
|
$
|
(5,095
|
)
|
$
|
(3,776
|
)
|
$
|
(2,400
|
)
|
$
|
(2,162
|
)
|
(A) |
For
the six months ended June 30, 2006, a refund of $350,000 was recognized
relating to insurance brokerage
fees.
|
(B) |
During
the six and three months ended June 30, 2006, we recognized a litigation
settlement of $300,000.
|
June
30,
|
December
31,
|
2007
|
2006
|
(In
Thousands)
|
Climate
Control
|
$
|
109,932
|
$
|
97,166
|
||||
Chemical
|
109,981
|
109,122
|
||||||
Corporate
assets and other
|
45,486
|
13,639
|
||||||
Total
assets
|
$
|
265,399
|
$
|
219,927
|
· |
the
Jayhawk Group may bring legal action against us for all accrued and
unpaid
dividends on the shares of Series 2 Preferred that it converts after
receipt of the notice of redemption discussed in Note 21;
and
|
· |
a
letter received by us from a law firm on behalf of a stockholder
demanding
that we investigate potential short-swing profit liability of the
Jayhawk
Group under Section 16(b) of the Exchange
Act.
|
·
|
the
participation of the Jayhawk Group and Golsen Group in the tender
offer;
|
·
|
the
number of shares of our common stock issued to the Jayhawk Group
and
Golsen Group as a result of the tender offer;
and
|
·
|
the
amount of accrued and unpaid dividends waived by the Jayhawk Group
and
Golsen Group as the result of the tender
offer.
|
·
|
Climate
Control Business engaged in the manufacturing and selling of a broad
range
of air conditioning and heating products in the niche markets we
serve
consisting of geothermal and water source heat pumps, hydronic fan
coils,
large custom air handlers and other products used in commercial and
residential new building construction, renovation of existing buildings
and replacement of existing
systems.
|
·
|
Chemical
Business engaged in the manufacturing and selling of chemical products
produced from plants located in Arkansas, Alabama and Texas for the
industrial, mining and agricultural markets.
|
· |
increasing
the sales and operating margins of all
products,
|
· |
developing
and introducing new and energy efficient products,
and
|
· |
increasing
production to meet customer demand.
|
(In
Millions)
|
Senior
Secured Loan due 2009
|
$
|
50.0
|
||
5.5%
Convertible Senior Subordinated Notes due 2012
|
60.0
|
|||
Other
|
14.5
|
|||
$
|
124.5
|