[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
||
For the quarterly period
ended March
31, 2009
|
|||
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.
|
34
|
|
Item
3.
|
56
|
|
Item
4.
|
57
|
|
58
|
||
PART
II – Other Information
|
||
Item
1.
|
61
|
|
Item
1A.
|
64
|
|
Item
2.
|
65
|
|
Item
3.
|
65
|
|
Item
4.
|
65
|
|
Item
5.
|
65
|
|
Item
6.
|
65
|
March
31,
2009
|
December
31,
2008
|
(In
Thousands)
|
Assets
|
||||||
Current
assets:
|
||||||
Cash
and cash equivalents
|
$
|
52,308
|
$
|
46,204
|
||
Restricted
cash
|
745
|
893
|
||||
Accounts
receivable, net
|
75,856
|
78,846
|
||||
Inventories:
|
||||||
Finished
goods
|
32,041
|
30,679
|
||||
Work
in process
|
2,465
|
2,954
|
||||
Raw
materials
|
20,494
|
27,177
|
||||
Total
inventories
|
55,000
|
60,810
|
||||
Supplies,
prepaid items and other:
|
||||||
Prepaid
insurance
|
2,456
|
3,373
|
||||
Precious
metals
|
15,592
|
14,691
|
||||
Supplies
|
4,492
|
4,301
|
||||
Other
|
2,203
|
1,378
|
||||
Total
supplies, prepaid items and other
|
24,743
|
23,743
|
||||
Deferred
income taxes
|
10,273
|
11,417
|
||||
Total
current assets
|
218,925
|
221,913
|
||||
Property,
plant and equipment, net
|
105,946
|
104,292
|
||||
Other
assets:
|
||||||
Debt
issuance costs, net
|
2,229
|
2,607
|
||||
Investment
in affiliate
|
3,693
|
3,628
|
||||
Goodwill
|
1,724
|
1,724
|
||||
Other,
net
|
1,712
|
1,603
|
||||
Total
other assets
|
9,358
|
9,562
|
||||
$
|
334,229
|
$
|
335,767
|
March
31,
2009
|
December
31,
2008
|
(In
Thousands)
|
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
33,664
|
$
|
43,014
|
|||
Short-term
financing
|
1,340
|
2,228
|
|||||
Accrued
and other liabilities
|
39,111
|
39,236
|
|||||
Current
portion of long-term debt
|
1,980
|
1,560
|
|||||
Total
current liabilities
|
76,095
|
86,038
|
|||||
Long-term
debt
|
98,681
|
103,600
|
|||||
Noncurrent
accrued and other liabilities
|
10,300
|
9,631
|
|||||
Deferred
income taxes
|
7,260
|
6,454
|
|||||
Contingencies
(Note 10)
|
|||||||
Stockholders'
equity:
|
|||||||
Series
B 12% cumulative, convertible preferred stock, $100 par value;
20,000 shares issued and outstanding
|
2,000
|
2,000
|
|||||
Series
D 6% cumulative, convertible Class C preferred stock, no par
value; 1,000,000 shares issued
|
1,000
|
1,000
|
|||||
Common
stock, $.10 par value; 75,000,000 shares authorized, 24,958,330
shares issued
|
2,496
|
2,496
|
|||||
Capital
in excess of par value
|
127,677
|
127,337
|
|||||
Accumulated
other comprehensive loss
|
(48
|
)
|
(120
|
)
|
|||
Retained
earnings
|
31,241
|
19,804
|
|||||
164,366
|
152,517
|
||||||
Less
treasury stock at cost:
|
|||||||
Common
stock, 3,848,518 shares
|
22,473
|
22,473
|
|||||
Total
stockholders' equity
|
141,893
|
130,044
|
|||||
$
|
334,229
|
$
|
335,767
|
2009
|
2008
|
(In
Thousands, Except Per Share
Amounts)
|
Net
sales
|
$
|
150,197
|
$
|
160,455
|
|||
Cost
of sales
|
109,469
|
122,698
|
|||||
Gross
profit
|
40,728
|
37,757
|
|||||
Selling,
general and administrative expense
|
21,375
|
18,764
|
|||||
Provisions
for losses on accounts receivable
|
52
|
90
|
|||||
Other
expense
|
43
|
181
|
|||||
Other
income
|
(162
|
)
|
(610
|
)
|
|||
Operating
income
|
19,420
|
19,332
|
|||||
Interest
expense
|
1,911
|
2,454
|
|||||
Gain
on extinguishment of debt
|
(1,322
|
)
|
-
|
||||
Non-operating
other income, net
|
(23
|
)
|
(517
|
)
|
|||
Income
from continuing operations before provisions for income
taxes and equity in earnings of affiliate
|
18,854
|
17,395
|
|||||
Provisions
for income taxes
|
7,349
|
6,720
|
|||||
Equity
in earnings of affiliate
|
(240
|
)
|
(232
|
)
|
|||
Income
from continuing operations
|
11,745
|
10,907
|
|||||
Net
loss from discontinued operations
|
2
|
-
|
|||||
Net
income
|
11,743
|
10,907
|
|||||
Dividends
on preferred stocks
|
306
|
306
|
|||||
Net
income applicable to common stock
|
$
|
11,437
|
$
|
10,601
|
|||
Weighted-average
common shares:
|
|||||||
Basic
|
21,110
|
21,057
|
|||||
Diluted
|
23,671
|
24,992
|
|||||
Income
per common share:
|
|||||||
Basic
|
$
|
.54
|
$
|
.50
|
|||
Diluted
|
$
|
.51
|
$
|
.46
|
|||
Common
Stock Shares
|
Non-Redeemable
Preferred Stock
|
Common
Stock
Par Value
|
Capital
in Excess of Par Value
|
Accumulated
Other Comprehensive Loss
|
Retained
Earnings
|
Treasury
Stock-Common
|
Total
|
(In
Thousands)
|
Balance
at December 31, 2008
|
24,958
|
$
|
3,000
|
$
|
2,496
|
$
|
127,337
|
$
|
(120
|
)
|
$
|
19,804
|
$
|
(22,473
|
)
|
$
|
130,044
|
|||||
Net
income
|
11,743
|
11,743
|
||||||||||||||||||||
Amortization
of cash flow hedge
|
72
|
72
|
||||||||||||||||||||
Total
comprehensive income
|
11,815
|
|||||||||||||||||||||
Dividends
paid on preferred stock
|
(306
|
)
|
(306
|
)
|
||||||||||||||||||
Stock-based
compensation
|
261
|
261
|
||||||||||||||||||||
Excess
income tax benefit associated with
stock-based compensation |
79
|
79
|
||||||||||||||||||||
Balance
at March 31, 2009
|
24,958
|
$
|
3,000
|
$
|
2,496
|
$
|
127,677
|
$
|
(48
|
)
|
$
|
31,241
|
$
|
(22,473
|
)
|
$
|
141,893
|
2009
|
2008
|
(In
Thousands)
|
Cash
flows from continuing operating activities:
|
|||||||
Net
income
|
$
|
11,743
|
$
|
10,907
|
|||
Adjustments
to reconcile net income to net cash provided (used) by continuing
operating activities:
|
|||||||
Net
loss from discontinued operations
|
2
|
-
|
|||||
Deferred
income taxes
|
1,950
|
1,010
|
|||||
Gain
on extinguishment of debt
|
(1,322
|
)
|
-
|
||||
Loss
(gain) on sales and disposals of property and equipment
|
13
|
(45
|
)
|
||||
Depreciation
of property, plant and equipment
|
3,796
|
3,091
|
|||||
Amortization
|
245
|
279
|
|||||
Stock-based
compensation
|
261
|
192
|
|||||
Provisions
for losses on accounts receivable
|
52
|
90
|
|||||
Provision
for (realization of) losses on inventory
|
(3,032
|
)
|
169
|
||||
Provision
for losses on firm sales commitments
|
-
|
137
|
|||||
Equity
in earnings of affiliate
|
(240
|
)
|
(232
|
)
|
|||
Distributions
received from affiliate
|
175
|
280
|
|||||
Changes
in fair value of commodities contracts
|
1,498
|
(53
|
)
|
||||
Changes
in fair value of interest rate contracts
|
70
|
187
|
|||||
Cash
provided (used) by changes in assets and liabilities:
|
|||||||
Accounts
receivable
|
4,055
|
(12,424
|
)
|
||||
Inventories
|
8,842
|
(5,710
|
)
|
||||
Other
supplies and prepaid items
|
(538
|
)
|
(657
|
)
|
|||
Accounts
payable
|
(7,748
|
)
|
(1,027
|
)
|
|||
Customer
deposits
|
522
|
(2,451
|
)
|
||||
Deferred
rent expense
|
490
|
(6,314
|
)
|
||||
Other
current and noncurrent liabilities
|
(2,000
|
)
|
5,291
|
||||
Net
cash provided (used) by continuing operating activities
|
18,834
|
(7,280
|
)
|
||||
Cash
flows from continuing investing activities:
|
|||||||
Capital
expenditures
|
(7,195
|
)
|
(4,985
|
)
|
|||
Proceeds
from sales of property and equipment
|
1
|
55
|
|||||
Proceeds
from restricted cash
|
148
|
172
|
|||||
Other
assets
|
(108
|
)
|
(176
|
)
|
|||
Net
cash used by continuing investing activities
|
(7,154
|
)
|
(4,934
|
)
|
|||
2009
|
2008
|
(In
Thousands)
|
Cash
flows from continuing financing activities:
|
|||||||
Proceeds
from revolving debt facilities
|
$
|
143,503
|
$
|
126,031
|
|||
Payments
on revolving debt facilities
|
(143,503
|
)
|
(126,031
|
)
|
|||
Acquisition
of 5.5% convertible debentures
|
(4,174
|
)
|
-
|
||||
Payments
on other long-term debt
|
(267
|
)
|
(277
|
)
|
|||
Payments
on short-term financing
|
(888
|
)
|
(394
|
)
|
|||
Proceeds
from exercise of stock options
|
-
|
206
|
|||||
Purchase
of treasury stock
|
-
|
(3,421
|
)
|
||||
Excess
income tax benefit associated with stock-based compensation and stock
options exercised
|
79
|
702
|
|||||
Dividends
paid on preferred stock
|
(306
|
)
|
(306
|
)
|
|||
Net
cash used by continuing financing activities
|
(5,556
|
)
|
(3,490
|
)
|
|||
Cash
flows of discontinued operations:
|
|||||||
Operating
cash flows
|
(20
|
)
|
(34
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
6,104
|
(15,738
|
)
|
||||
Cash
and cash equivalents at beginning of period
|
46,204
|
58,224
|
|||||
Cash
and cash equivalents at end of period
|
$
|
52,308
|
$
|
42,486
|
|||
Supplemental
cash flow information:
|
|||||||
Cash
payments for income taxes, net of refunds
|
$
|
4,159
|
$
|
2,745
|
|||
Noncash
investing and financing activities:
|
|||||||
Receivable
associated with a property insurance claim
|
$
|
1,135
|
$
|
-
|
|||
Current
other assets, accounts payable and long-term debt associated with
property, plant and equipment
|
$
|
2,444
|
$
|
2,098
|
|||
Debt
issuance costs associated with the acquisition of the 5.5% convertible
debentures
|
$
|
204
|
$
|
-
|
|||
March
31,
2009
|
December
31,
2008
|
(In
Thousands)
|
Trade
receivables
|
$
|
73,890
|
$
|
78,092
|
|||
Insurance
claims
|
1,255
|
252
|
|||||
Other
|
1,415
|
1,231
|
|||||
76,560
|
79,575
|
||||||
Allowance
for doubtful accounts
|
(704
|
)
|
(729
|
)
|
|||
$
|
75,856
|
$
|
78,846
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Balance
at beginning of period
|
$
|
4,141
|
$
|
473
|
||||
Provision
for (realization of) losses
|
(3,032
|
)
|
169
|
|||||
Write-offs/disposals
|
-
|
(32
|
)
|
|||||
Balance
at end of period
|
$
|
1,109
|
$
|
610
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Precious
metals expense
|
$
|
1,727
|
$
|
2,460
|
|||
Recoveries
of precious metals
|
(2,213
|
)
|
-
|
||||
Precious
metals expense (recoveries), net
|
$
|
(486
|
)
|
$
|
2,460
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Balance
at beginning of period
|
$
|
2,820
|
$
|
1,944
|
|||
Add:
Charged to costs and expenses
|
1,858
|
731
|
|||||
Deduct:
Costs and expenses incurred
|
(1,814
|
)
|
(619
|
)
|
|||
Balance
at end of period
|
$
|
2,864
|
$
|
2,056
|
March
31,
2009
|
December
31,
2008
|
(In
Thousands)
|
Accrued
payroll and benefits
|
$ | 8,431 | $ | 6,422 | ||||
Fair
value of derivatives
|
6,789 | 8,347 | ||||||
Deferred
revenue on extended warranty contracts
|
4,345 | 4,028 | ||||||
Customer
deposits
|
3,764 | 3,242 | ||||||
Accrued
insurance
|
2,900 | 2,971 | ||||||
Accrued
warranty costs
|
2,864 | 2,820 | ||||||
Accrued
income taxes
|
2,861 | 1,704 | ||||||
Accrued
death benefits
|
2,851 | 2,687 | ||||||
Accrued
commissions
|
2,109 | 2,433 | ||||||
Deferred
rent expense
|
1,914 | 1,424 | ||||||
Accrued
contractual manufacturing obligations
|
1,794 | 2,230 | ||||||
Accrued
precious metals costs
|
1,578 | 1,298 | ||||||
Accrued
interest
|
1,314 | 2,003 | ||||||
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
1,117 | 1,882 | ||||||
Accrued
executive benefits
|
1,001 | 1,111 | ||||||
Other
|
3,779 | 4,265 | ||||||
49,411 | 48,867 | |||||||
Less
noncurrent portion
|
10,300 | 9,631 | ||||||
Current
portion of accrued and other liabilities
|
$ | 39,111 | $ | 39,236 |
March
31,
|
December
31,
|
||
2009
|
2008
|
(In
Thousands)
|
Working
Capital Revolver Loan due 2012 (A)
|
$
|
-
|
$
|
-
|
||
5.5%
Convertible Senior Subordinated Notes due 2012 (B)
|
34,800
|
40,500
|
||||
Secured
Term Loan due 2012 (C)
|
50,000
|
50,000
|
||||
Other,
with a current weighted-average interest rate of 6.66%, most of which is
secured by machinery, equipment and real estate
|
15,861
|
14,660
|
||||
100,661
|
105,160
|
|||||
Less
current portion of long-term debt
|
1,980
|
1,560
|
||||
Long-term
debt due after one year
|
$
|
98,681
|
$
|
103,600
|
·
|
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,
or
|
·
|
dispose
assets.
|
A.
|
Environmental
Matters
|
·
|
for
a period of five years from the completion of an exchange or tender to
repurchase, redeem or otherwise acquire shares of our common stock,
without approval of the outstanding Series 2 Preferred irrespective that
dividends are accrued and unpaid with respect to the Series 2 Preferred;
or
|
·
|
to
provide that holders of Series 2 Preferred may not elect two directors to
our Board of Directors when dividends are unpaid on the Series 2 Preferred
if less than 140,000 shares of Series 2 Preferred remain
outstanding.
|
·
|
fraudulent
inducement and fraud,
|
·
|
violation
of 10(b) of the Exchange Act and Rule
10b-5,
|
·
|
violation
of 17-12A501 of the Kansas Uniform Securities Act,
and
|
·
|
breach
of contract.
|
Fair
Value Measurements at
March
31, 2009 Using
|
Description
|
Total
Fair
Value
at
March
31,
2009
|
Quoted
Prices
in
Active
Markets
for
Identical
Assets
(Level
1)
|
Significant
Other
Observable
Inputs
(Level
2)
|
Significant
Unobservable
Inputs
(Level
3)
|
Total
Fair
Value
at
December
31,
2008
|
(In
Thousands)
|
Assets
– Supplies, prepaid items
and other:
|
||||||||||||||||||||
Foreign
exchange contracts
|
$ | - | $ | - | $ | - | $ | - | $ | 35 | ||||||||||
Liabilities
– Current and noncurrent
accrued and other
liabilities:
|
||||||||||||||||||||
Commodities
contracts
|
$ | 4,281 | $ | 472 | $ | 3,809 | $ | - | $ | 5,910 | ||||||||||
Interest
rate contracts
|
2,507 | - | 2,507 | - | 2,437 | |||||||||||||||
Foreign
exchange contracts
|
1 | - | 1 | - | - | |||||||||||||||
Total
|
$ | 6,789 | $ | 472 | $ | 6,317 | $ | - | $ | 8,347 |
Commodities
Contracts
|
(In
Thousands)
|
Beginning
balance
|
$ | (1,388 | ) | |
Total
realized and unrealized gain included
in earnings
|
493 | |||
Purchases,
issuances, and settlements
|
895 | |||
Transfers
in and/or out of Level 3
|
- | |||
Ending
balance
|
$ | - |
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Total
gains (losses) included in earnings:
|
|||||||
Cost
of sales – Commodities contracts
|
$
|
(1,156
|
)
|
$
|
3,197
|
||
Cost
of sales – Foreign exchange contracts
|
(30
|
)
|
-
|
||||
Interest
expense – Interest rate contracts
|
(269
|
)
|
(169
|
)
|
|||
$
|
(1,455
|
)
|
$
|
3,028
|
Change
in unrealized gains and losses relating to
contracts still held at period end:
|
|||||||
Cost
of sales – Commodities contracts
|
$
|
(1,498
|
)
|
$
|
53
|
||
Cost
of sales – Foreign exchange contracts
|
(1
|
)
|
-
|
||||
Interest
expense – Interest rate contracts
|
(70
|
)
|
(187
|
)
|
|||
$
|
(1,569
|
)
|
$
|
(134
|
)
|
·
|
we
paid cash dividends on our Series B 12% cumulative, convertible preferred
stock (“Series B Preferred”), Series D 6% cumulative, convertible Class C
preferred stock (“Series D Preferred”) and noncumulative redeemable
preferred stock (“Noncumulative Preferred”) totaling approximately
$240,000, $60,000 and $6,000, respectively;
and
|
·
|
we
acquired $5.7 million aggregate principal amount of our 2007
Debentures.
|
·
|
we
acquired 200,000 shares of our common
stock;
|
·
|
we
issued 124,304 shares of our common stock as the result of the exercise of
stock options;
|
·
|
we
paid cash dividends on our Series B Preferred, Series D Preferred and
Noncumulative Preferred totaling approximately $240,000, $60,000 and
$6,000, respectively.
|
Three
Months Ended
March
31,
|
2009
|
2008
|
Numerator:
|
|||||||
Net
income
|
$
|
11,743
|
$
|
10,907
|
|||
Dividends
on Series B Preferred
|
(240
|
)
|
(240
|
)
|
|||
Dividends
on Series D Preferred
|
(60
|
)
|
(60
|
)
|
|||
Dividends
on Noncumulative Preferred
|
(6
|
)
|
(6
|
)
|
|||
Total
dividends on preferred stock
|
(306
|
)
|
(306
|
)
|
|||
Numerator
for basic net income per common share - net income applicable to common
stock
|
11,437
|
10,601
|
|||||
Dividends
on preferred stock assumed to be converted, if dilutive
|
306
|
306
|
|||||
Interest
expense including amortization of debt issuance costs,
net of income taxes, on convertible debt assumed to be converted, if
dilutive
|
349
|
602
|
|||||
Numerator
for diluted net income per common share
|
$
|
12,092
|
$
|
11,509
|
|||
Denominator:
|
|||||||
Denominator
for basic net income per common share - weighted-average
shares
|
21,109,812
|
21,056,786
|
|||||
Effect
of dilutive securities:
|
|||||||
Convertible
notes payable
|
1,270,720
|
2,188,000
|
|||||
Convertible
preferred stock
|
938,546
|
940,066
|
|||||
Stock
options
|
351,888
|
806,972
|
|||||
Dilutive
potential common shares
|
2,561,154
|
3,935,038
|
|||||
Denominator
for diluted net income per common share - adjusted
weighted-average shares and assumed conversions
|
23,670,966
|
24,991,824
|
|||||
Basic
net income per common share
|
$
|
.54
|
$
|
.50
|
|||
Diluted
net income per common share
|
$
|
.51
|
$
|
.46
|
Three
Months Ended
March
31,
|
2009
|
2008
|
Stock
options
|
842,000
|
-
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Current:
|
||||||
Federal
|
$
|
4,808
|
$
|
4,895
|
||
State
|
590
|
815
|
||||
Total
current provisions
|
$
|
5,398
|
$
|
5,710
|
||
Deferred:
|
||||||
Federal
|
$
|
1,751
|
$
|
830
|
||
State
|
200
|
180
|
||||
Total
deferred provisions
|
1,951
|
1,010
|
||||
Provisions
for income taxes
|
$
|
7,349
|
$
|
6,720
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Other
expense:
|
|||||||
Total
other expense (1)
|
$
|
43
|
$
|
181
|
|||
Other
income:
|
|||||||
Settlements
of litigation (2)
|
$
|
-
|
$
|
525
|
|||
Other
miscellaneous income (1)
|
162
|
85
|
|||||
Total
other income
|
$
|
162
|
$
|
610
|
|||
Non-operating
other income, net:
|
|||||||
Interest
income
|
$
|
45
|
$
|
541
|
|||
Miscellaneous
expense (1)
|
(22
|
)
|
(24
|
)
|
|||
Total
non-operating other income, net
|
$
|
23
|
$
|
517
|
(1)
|
Amounts
represent numerous unrelated transactions, none of which are individually
significant requiring separate
disclosure.
|
(2)
|
During
the three months ended March 31, 2008, a settlement was reached for
$400,000 for the recovery of certain environmental-related costs incurred
in previous periods relating to property used by Corporate and other
business operations. In addition, a settlement was reached relating to a
Section 16(b) short-swing profit claim of which we recognized
$125,000.
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Net
sales:
|
|||||||
Climate
Control
|
$
|
72,048
|
$
|
66,323
|
|||
Chemical
|
74,478
|
91,330
|
|||||
Other
|
3,671
|
2,802
|
|||||
$
|
150,197
|
$
|
160,455
|
||||
Gross
profit: (1)
|
|||||||
Climate
Control (2)
|
$
|
22,428
|
$
|
21,522
|
|||
Chemical
(3)
|
17,148
|
15,353
|
|||||
Other
|
1,152
|
882
|
|||||
$
|
40,728
|
$
|
37,757
|
||||
Operating
income: (4)
|
|||||||
Climate
Control (2)
|
$
|
8,978
|
$
|
9,327
|
|||
Chemical
(3) (5)
|
12,638
|
12,125
|
|||||
General
corporate expenses and other business operations, net (6)
|
(2,196
|
)
|
(2,120
|
)
|
|||
19,420
|
19,332
|
||||||
Interest
expense
|
(1,911
|
)
|
(2,454
|
)
|
|||
Gain
on extinguishment of debt
|
1,322
|
-
|
|||||
Non-operating
other income, net:
|
|||||||
Climate
Control
|
-
|
1
|
|||||
Chemical
|
3
|
4
|
|||||
Corporate
and other business operations
|
20
|
512
|
|||||
Provisions
for income taxes
|
(7,349
|
)
|
(6,720
|
)
|
|||
Equity
in earnings of affiliate-Climate Control
|
240
|
232
|
|||||
Income
from continuing operations
|
$
|
11,745
|
$
|
10,907
|
(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)
|
During
the first quarters of 2009 and 2008, we recognized gains totaling $463,000
and $2,575,000, respectively, on our exchange-traded futures contracts for
copper. These gains contributed to an increase in gross profit and
operating income.
|
(3)
|
As
the result of entering into sales commitments with higher firm sales
prices during 2008, we recognized sales with a gross profit of $2,500,000
higher than our comparable product sales made at lower market prices
available during the first quarter of 2009. In addition, we
recognized recoveries of precious metals totaling $2,213,000. These
transactions contributed to an increase in gross profit and operating
income for the first quarter of 2009. During the first quarter
of 2009, we recognized losses totaling $1,619,000 on our futures/forward
contracts for natural gas and ammonia compared to gains totaling $621,000
during the first quarter of 2008. These losses contributed to a decrease
(gains contributed to an increase) in gross profit and operating income
for each respective period.
|
|
(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 Selling, general and administration
expense (“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 first quarters of 2009 and 2008, we incurred expenses of $1,996,000
and $421,000, respectively, associated with our idle chemical facility
located in Pryor, Oklahoma that we are in the process of activating. See
discussion concerning an urea ammonium nitrate ("UAN") purchase and sales
agreement under Note 18 - Subsequent
Event.
|
(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:
|
Three
Months Ended
March
31,
|
2009
|
2008
|
(In
Thousands)
|
Gross
profit-Other
|
$
|
1,152
|
$
|
882
|
||||
Selling,
general and administrative:
|
||||||||
Personnel
costs
|
(1,725
|
)
|
(1,592
|
)
|
||||
Professional
fees
|
(984
|
)
|
(1,181
|
)
|
||||
Office
overhead
|
(188
|
)
|
(176
|
)
|
||||
Property,
franchise and other taxes
|
(83
|
)
|
(126
|
)
|
||||
Advertising
|
(70
|
)
|
(70
|
)
|
||||
All
other
|
(385
|
)
|
(291
|
)
|
||||
Total
selling, general and administrative
|
(3,435
|
)
|
(3,436
|
)
|
||||
Other
income
|
110
|
535
|
||||||
Other
expense
|
(23
|
)
|
(101
|
)
|
||||
Total
general corporate expenses and other business
operations, net
|
$
|
(2,196
|
)
|
$
|
(2,120
|
)
|
March
31,
2009
|
December
31,
2008
|
(In
Thousands)
|
Climate
Control
|
$
|
113,104
|
$
|
117,260
|
||||
Chemical
|
145,090
|
145,518
|
||||||
Corporate
assets and other
|
76,035
|
72,989
|
||||||
Total
assets
|
$
|
334,229
|
$
|
335,767
|
·
|
Climate
Control Business manufactures and sells 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 related products used to control the environment in
commercial and residential new building construction, renovation of
existing buildings and replacement of existing systems. For the
first three months of 2009, approximately 48% of our consolidated net
sales relates to the Climate Control
Business.
|
·
|
Chemical
Business manufactures and sells nitrogen based chemical products produced
from three plants located in Arkansas, Alabama and Texas for the
industrial, mining and agricultural markets. Our products include
industrial and fertilizer grade ammonium nitrate (“AN”), urea ammonium
nitrate (“UAN”), nitric acid in various concentrations, nitrogen solutions
and various other products. For the first three months of 2009,
approximately 50% of our consolidated net sales relates to the Chemical
Business. We have recently announced that we are taking steps to start-up
our idled chemical facility located in Pryor, Oklahoma to produce
UAN. This project is described in more detail
below.
|
·
|
nitric
acid, sulfuric acid and anhydrous ammonia sold to industrial customers;
and
|
·
|
industrial
grade AN and nitrogen solutions sold to mining
customers.
|
·
|
AN
produced at our El Dorado Facility from purchased anhydrous ammonia
and,
|
·
|
UAN
produced at our Cherokee Facility from natural
gas.
|
Percentage
Change of
|
Tons
|
Dollars
|
Increase (Decrease)
|
|
Chemical
products:
|
Agricultural
products
|
12.3
|
%
|
(5.0
|
)%
|
||||
Mining
products
|
29.4
|
%
|
(17.5
|
)%
|
||||
Industrial
acids and other
|
(27.4
|
)%
|
(31.6
|
)%
|
||||
Total
weighted-average change
|
(4.5
|
)%
|
(18.5
|
)%
|
·
|
Multi-Family
|
·
|
Lodging
|
·
|
Education
|
·
|
Healthcare
|
·
|
Offices
|
·
|
Manufacturing
|
·
|
monitoring
and managing to the current economic environment, to optimize operating
results, but with a long-term
perspective
|
·
|
developing
and introducing new and energy efficient
products,
|
·
|
improving
production and product delivery
performance,
|
·
|
expanding
the markets we serve, both domestic and foreign,
and
|
·
|
increase
our manufacturing capacity for geothermal and water source heat
pumps
|
Increase
(Decrease)
|
(In
Millions)
|
Gross
profit margins in excess of current quarter’s pricing, resulting from
sales commitments in prior periods
|
$
|
2.5
|
||
Recoveries
of precious metals
|
2.2
|
|||
Losses
on natural gas and ammonia hedging contracts
|
(2.2
|
)
|
||
Total
effect on change in gross profit
|
2.5
|
|||
Expenses
- Pryor Facility
|
(1.6
|
)
|
||
Total
effect on change in operating income
|
$
|
0.9
|
March
31,
2009
|
December
31,
2008
|
||
(In
Millions)
|
Cash
and cash equivalents
|
$
|
52.3
|
$
|
46.2
|
||
Long-term
debt:
|
||||||
2007
Debentures due 2012
|
$
|
34.8
|
$
|
40.5
|
||
Secured
Term Loan due 2012
|
50.0
|
50.0
|
||||
Other
|
15.9
|
14.7
|
||||
Total
long-term debt
|
$
|
100.7
|
$
|
105.2
|
||
Total
stockholders’ equity
|
$
|
141.9
|
$
|
130.0
|