[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
||
For the quarterly period
ended March
31, 2010
|
|||
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.
|
35 | |
Item
3.
|
56 | |
Item
4.
|
57 | |
58 | ||
PART
II – Other Information
|
||
Item
1.
|
60 | |
Item
1A.
|
60 | |
Item
2.
|
60 | |
Item
3.
|
60 | |
Item
4.
|
(
Reserved)
|
60 |
Item
5.
|
60 | |
Item
6.
|
61 |
March
31,
2010
|
December
31,
2009
|
(In
Thousands)
|
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 45,067 | $ | 61,739 | ||||
Restricted
cash
|
582 | 30 | ||||||
Short-term
investments
|
10,000 | 10,051 | ||||||
Accounts
receivable, net
|
67,906 | 57,762 | ||||||
Inventories:
|
||||||||
Finished
goods
|
36,319 | 25,753 | ||||||
Work
in process
|
2,104 | 2,466 | ||||||
Raw
materials
|
22,690 | 22,794 | ||||||
Total
inventories
|
61,113 | 51,013 | ||||||
Supplies,
prepaid items and other:
|
||||||||
Prepaid
insurance
|
3,206 | 4,136 | ||||||
Prepaid
income taxes
|
1,181 | 1,642 | ||||||
Precious
metals
|
12,194 | 13,083 | ||||||
Supplies
|
5,415 | 4,886 | ||||||
Other
|
2,682 | 1,626 | ||||||
Total
supplies, prepaid items and other
|
24,678 | 25,373 | ||||||
Deferred
income taxes
|
5,459 | 5,527 | ||||||
Total
current assets
|
214,805 | 211,495 | ||||||
Property,
plant and equipment, net
|
122,877 | 117,962 | ||||||
Other
assets:
|
||||||||
Debt
issuance costs, net
|
1,547 | 1,652 | ||||||
Investment
in affiliate
|
3,959 | 3,838 | ||||||
Goodwill
|
1,724 | 1,724 | ||||||
Other,
net
|
2,168 | 1,962 | ||||||
Total
other assets
|
9,398 | 9,176 | ||||||
$ | 347,080 | $ | 338,633 |
March
31,
2010
|
December
31,
2009
|
(In
Thousands)
|
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 39,297 | $ | 37,553 | ||||
Short-term
financing
|
1,905 | 3,017 | ||||||
Accrued
and other liabilities
|
25,367 | 23,054 | ||||||
Current
portion of long-term debt
|
3,438 | 3,205 | ||||||
Total
current liabilities
|
70,007 | 66,829 | ||||||
Long-term
debt
|
101,775 | 98,596 | ||||||
Noncurrent
accrued and other liabilities
|
10,776 | 10,626 | ||||||
Deferred
income taxes
|
12,094 | 11,975 | ||||||
Commitments
and contingencies (Note 11)
|
||||||||
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, 25,371,925
shares issued (25,369,095 at December 31, 2009)
|
2,537 | 2,537 | ||||||
Capital
in excess of par value
|
130,349 | 129,941 | ||||||
Retained
earnings
|
42,495 | 41,082 | ||||||
178,381 | 176,560 | |||||||
Less
treasury stock at cost:
|
||||||||
Common
stock, 4,143,362 shares
|
25,953 | 25,953 | ||||||
Total
stockholders' equity
|
152,428 | 150,607 | ||||||
$ | 347,080 | $ | 338,633 |
2010
|
2009
|
(In
Thousands, Except Per Share
Amounts)
|
Net
sales
|
$
|
130,410
|
$
|
150,197
|
|||
Cost
of sales
|
102,144
|
109,469
|
|||||
Gross
profit
|
28,266
|
40,728
|
|||||
Selling,
general and administrative expense
|
24,589
|
21,375
|
|||||
Provisions
for losses on accounts receivable
|
9
|
52
|
|||||
Other
expense
|
58
|
43
|
|||||
Other
income
|
(806
|
)
|
(162
|
)
|
|||
Operating
income
|
4,416
|
19,420
|
|||||
Interest
expense
|
2,080
|
1,911
|
|||||
Gain
on extinguishment of debt
|
-
|
(1,322
|
)
|
||||
Non-operating
other income, net
|
(38
|
)
|
(23
|
)
|
|||
Income
from continuing operations before provisions for income
taxes and equity in earnings of affiliate
|
2,374
|
18,854
|
|||||
Provisions
for income taxes
|
912
|
7,349
|
|||||
Equity
in earnings of affiliate
|
(261
|
)
|
(240
|
)
|
|||
Income
from continuing operations
|
1,723
|
11,745
|
|||||
Net
loss from discontinued operations
|
5
|
2
|
|||||
Net
income
|
1,718
|
11,743
|
|||||
Dividends
on preferred stocks
|
305
|
306
|
|||||
Net
income applicable to common stock
|
$
|
1,413
|
$
|
11,437
|
|||
Weighted-average
common shares:
|
|||||||
Basic
|
21,226
|
21,110
|
|||||
Diluted
|
21,364
|
23,671
|
|||||
Income
per common share:
|
|||||||
Basic
|
$
|
.07
|
$
|
.54
|
|||
Diluted
|
$
|
.07
|
$
|
.51
|
|||
Common
Stock Shares |
Non-
Redeemable Preferred Stock |
Common
Stock
Par
Value |
Capital
in
Excess of Par Value |
Retained
Earnings |
Treasury
Stock-
Common |
Total
|
(In
Thousands)
|
Balance
at December 31, 2009
|
25,369 | $ | 3,000 | $ | 2,537 | $ | 129,941 | $ | 41,082 | $ | (25,953 | ) | $ | 150,607 | |||||||||||||
Net
income
|
1,718 | 1,718 | |||||||||||||||||||||||||
Dividends
paid on preferred stocks
|
(305 | ) | (305 | ) | |||||||||||||||||||||||
Stock-based
compensation
|
247 | 247 | |||||||||||||||||||||||||
Exercise
of stock options
|
2 | 22 | 22 | ||||||||||||||||||||||||
Excess
income tax benefit associated with stock-based
compensation
|
138 | 138 | |||||||||||||||||||||||||
Conversion
of 13 shares of redeemable preferred stock to common stock
|
1 | 1 | 1 | ||||||||||||||||||||||||
Balance
at March 31, 2010
|
25,372 | $ | 3,000 | $ | 2,537 | $ | 130,349 | $ | 42,495 | $ | (25,953 | ) | $ | 152,428 |
2010
|
2009
|
(In
Thousands)
|
Cash
flows from continuing operating activities:
|
|||||||
Net
income
|
$
|
1,718
|
$
|
11,743
|
|||
Adjustments
to reconcile net income to net cash provided (used) by continuing
operating activities:
|
|||||||
Net
loss from discontinued operations
|
5
|
2
|
|||||
Deferred
income taxes
|
189
|
1,950
|
|||||
Gain
on extinguishment of debt
|
-
|
(1,322
|
)
|
||||
Losses
on sales and disposals of property and equipment
|
3
|
13
|
|||||
Gain
on property insurance recoveries associated with property, plant and
equipment
|
(495
|
)
|
-
|
||||
Depreciation
of property, plant and equipment
|
4,060
|
3,796
|
|||||
Amortization
|
153
|
245
|
|||||
Stock-based
compensation
|
247
|
261
|
|||||
Provisions
for losses on accounts receivable
|
9
|
52
|
|||||
Provision
for (realization of) losses on inventory
|
118
|
(3,032
|
)
|
||||
Realization
of losses on firm sales commitments
|
(351
|
)
|
-
|
||||
Equity
in earnings of affiliate
|
(261
|
)
|
(240
|
)
|
|||
Distributions
received from affiliate
|
140
|
175
|
|||||
Changes
in fair value of commodities contracts
|
310
|
1,498
|
|||||
Changes
in fair value of interest rate contracts
|
220
|
70
|
|||||
Other
|
(10
|
)
|
-
|
||||
Cash
provided (used) by changes in assets and liabilities:
|
|||||||
Accounts
receivable
|
(11,323
|
)
|
4,055
|
||||
Inventories
|
(10,218
|
)
|
8,842
|
||||
Prepaid
and accrued income taxes
|
461
|
1,157
|
|||||
Other
supplies and prepaid items
|
351
|
(538
|
)
|
||||
Accounts
payable
|
3,291
|
(7,748
|
)
|
||||
Accrued
payroll and benefits
|
1,885
|
2,009
|
|||||
Commodities
contracts
|
124
|
(3,127
|
)
|
||||
Other
current and noncurrent liabilities
|
1,137
|
(1,027
|
)
|
||||
Net
cash provided (used) by continuing operating activities
|
(8,237
|
)
|
18,834
|
||||
Cash
flows from continuing investing activities:
|
|||||||
Capital
expenditures
|
(6,524
|
)
|
(7,195
|
)
|
|||
Proceeds
from property insurance recoveries associated with property, plant and
equipment
|
1,670
|
-
|
|||||
Proceeds
from sales of property and equipment
|
2
|
1
|
|||||
Proceeds
from short-term investments
|
10,051
|
-
|
|||||
Purchase
of short-term investments
|
(10,000
|
)
|
-
|
||||
Proceeds
from (deposits of) restricted cash
|
(552
|
)
|
148
|
||||
Other
assets
|
(209
|
)
|
(108
|
)
|
|||
Net
cash used by continuing investing activities
|
(5,562
|
)
|
(7,154
|
)
|
|
2010
|
2009
|
(In
Thousands)
|
Cash
flows from continuing financing activities:
|
|||||||
Proceeds
from revolving debt facilities
|
$
|
113,111
|
$
|
143,503
|
|||
Payments
on revolving debt facilities
|
(113,111
|
)
|
(143,503
|
)
|
|||
Acquisition
of 5.5% convertible debentures
|
-
|
(4,174
|
)
|
||||
Proceeds
from other long-term debt, net of fees
|
47
|
-
|
|||||
Payments
on other long-term debt
|
(1,588
|
)
|
(267
|
)
|
|||
Payments
on short-term financing
|
(1,112
|
)
|
(888
|
)
|
|||
Proceeds
from exercise of stock options
|
22
|
-
|
|||||
Excess
income tax benefit associated with stock-based
compensation
|
136
|
79
|
|||||
Dividends
paid on preferred stocks
|
(305
|
)
|
(306
|
)
|
|||
Net
cash used by continuing financing activities
|
(2,800
|
)
|
(5,556
|
)
|
|||
Cash
flows of discontinued operations:
|
|||||||
Operating
cash flows
|
(73
|
)
|
(20
|
)
|
|||
Net
increase (decrease) in cash and cash equivalents
|
(16,672
|
)
|
6,104
|
||||
Cash
and cash equivalents at beginning of period
|
61,739
|
46,204
|
|||||
Cash
and cash equivalents at end of period
|
$
|
45,067
|
$
|
52,308
|
|||
Supplemental
cash flow information:
|
|||||||
Cash
payments for income taxes, net of refunds
|
$
|
150
|
$
|
4,159
|
|||
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
|
$
|
6,074
|
$
|
2,444
|
|||
Debt
issuance costs associated with the acquisition of the 5.5% convertible
debentures
|
$
|
-
|
$
|
204
|
|||
March
31,
2010
|
December
31,
2009
|
(In
Thousands)
|
Trade
receivables
|
$
|
67,085
|
$
|
55,318
|
|||
Insurance
claims
|
364
|
1,517
|
|||||
Other
|
1,138
|
1,603
|
|||||
68,587
|
58,438
|
||||||
Allowance
for doubtful accounts
|
(681
|
)
|
(676
|
)
|
|||
$
|
67,906
|
$
|
57,762
|
Three
Months Ended
March
31,
|
2010
|
2009
|
(In
Thousands)
|
Balance
at beginning of period
|
$
|
1,676
|
$
|
4,141
|
|||
Provision
for (realization of) losses
|
118
|
(3,032
|
)
|
||||
Write-offs/disposals
|
(50
|
)
|
-
|
||||
Balance
at end of period
|
$
|
1,744
|
$
|
1,109
|
Three
Months Ended
March
31,
|
2010
|
2009
|
(In
Thousands)
|
Precious
metals expense
|
$
|
1,379
|
$
|
1,727
|
|||
Recoveries
of precious metals
|
-
|
(2,213
|
)
|
||||
Gains
on sales of precious metals
|
(112
|
)
|
-
|
||||
Precious
metals expense (recoveries), net
|
$
|
1,267
|
$
|
(486
|
)
|
March
31,
2010
|
December
31,
2009
|
(In
Thousands)
|
Accrued
payroll and benefits
|
$ | 7,785 | $ | 5,900 | ||||
Deferred
revenue on extended warranty contracts
|
4,967 | 4,884 | ||||||
Accrued
insurance
|
4,224 | 3,667 | ||||||
Accrued
death benefits
|
3,528 | 3,356 | ||||||
Accrued
warranty costs
|
2,991 | 3,138 | ||||||
Fair
value of derivatives
|
2,705 | 1,929 | ||||||
Accrued
contractual manufacturing obligations
|
1,606 | 732 | ||||||
Accrued
executive benefits
|
1,084 | 1,102 | ||||||
Accrued
interest
|
1,014 | 1,593 | ||||||
Accrued
commissions
|
958 | 1,035 | ||||||
Other
|
5,281 | 6,344 | ||||||
36,143 | 33,680 | |||||||
Less
noncurrent portion
|
10,776 | 10,626 | ||||||
Current
portion of accrued and other liabilities
|
$ | 25,367 | $ | 23,054 |
Three
Months Ended
March
31,
|
2010
|
2009
|
|||
(In
Thousands)
|
Balance
at beginning of period
|
$
|
3,138
|
$
|
2,820
|
|||
Add:
Charged to costs and expenses
|
998
|
1,858
|
|||||
Deduct:
Costs and expenses incurred
|
(1,145
|
)
|
(1,814
|
)
|
|||
Balance
at end of period
|
$
|
2,991
|
$
|
2,864
|
March
31,
|
December
31,
|
||
2010
|
2009
|
(In
Thousands)
|
Working
Capital Revolver Loan due 2012 (A)
|
$ | - | $ | - | ||||
5.5%
Convertible Senior Subordinated Notes due 2012 (B)
|
29,400 | 29,400 | ||||||
Secured
Term Loan due 2012 (C)
|
49,151 | 50,000 | ||||||
Other,
with a current weighted-average interest rate of 6.42%, most of which is
secured by machinery, equipment and real estate
|
26,662 | 22,401 | ||||||
105,213 | 101,801 | |||||||
Less
current portion of long-term debt
|
3,438 | 3,205 | ||||||
Long-term
debt due after one year
|
$ | 101,775 | $ | 98,596 |
·
|
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, 2010 Using
|
Description
|
Total
Fair
Value
at
March
31,
2010
|
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,
2009
|
(In
Thousands)
|
Assets
- Supplies, prepaid items
and other:
|
||||||||||||||||||
Commodities
contracts
|
$
|
267
|
$
|
267
|
$
|
-
|
$
|
-
|
$
|
150
|
||||||||
Total
|
$
|
267
|
$
|
267
|
$
|
-
|
$
|
-
|
$
|
150
|
||||||||
Liabilities
- Current and noncurrent
accrued and other
liabilities:
|
||||||||||||||||||
Commodities
contracts
|
$
|
551
|
$
|
551
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
Foreign
exchange contracts
|
5
|
-
|
5
|
-
|
-
|
|||||||||||||
Interest
rate contracts
|
2,149
|
-
|
2,149
|
-
|
1,929
|
|||||||||||||
Total
|
$
|
2,705
|
$
|
551
|
$
|
2,154
|
$
|
-
|
$
|
1,929
|
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,
|
2010
|
2009
|
(In
Thousands)
|
Total
net losses included in earnings:
|
|||||||
Cost
of sales – Commodities contracts
|
$
|
(688
|
)
|
$
|
(1,156
|
)
|
|
Cost
of sales – Foreign exchange contracts
|
(24
|
)
|
(30
|
)
|
|||
Interest
expense – Interest rate contracts
|
(614
|
)
|
(269
|
)
|
|||
$
|
(1,326
|
)
|
$
|
(1,455
|
)
|
Change
in unrealized gains and losses relating to
contracts still held at period end:
|
|||||||
Cost
of sales – Commodities contracts
|
$
|
(310
|
)
|
$
|
(1,498
|
)
|
|
Cost
of sales – Foreign exchange contracts
|
(5
|
)
|
(1
|
)
|
|||
Interest
expense – Interest rate contracts
|
(220
|
)
|
(70
|
)
|
|||
$
|
(535
|
)
|
$
|
(1,569
|
)
|
March
31, 2010
|
December
31, 2009
|
Estimated
Fair
Value
|
Carrying
Value
|
Estimated
Fair
Value
|
Carrying
Value
|
(In
Thousands)
|
Variable
Rate:
|
||||||||||||||||
Secured
Term Loan
|
$ | 26,090 | $ | 49,151 | $ | 27,640 | $ | 50,000 | ||||||||
Working
Capital Revolver Loan
|
- | - | - | - | ||||||||||||
Other
debt
|
2,525 | 2,525 | 2,553 | 2,553 | ||||||||||||
Fixed
Rate:
|
||||||||||||||||
5.5%
Convertible Senior Subordinated Notes
|
29,400 | 29,400 | 29,106 | 29,400 | ||||||||||||
Other
bank debt and equipment financing
|
24,811 | 24,137 | 20,231 | 19,848 | ||||||||||||
$ | 82,826 | $ | 105,213 | $ | 79,530 | $ | 101,801 |
·
|
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 $5,000,
respectively.
|
·
|
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; and
|
·
|
we
acquired $5.7 million aggregate principal amount of our 2007
Debentures.
|
Three
Months Ended
March
31,
|
2010
|
2009
|
Numerator:
|
|||||||
Net
income
|
$
|
1,718
|
$
|
11,743
|
|||
Dividends
on Series B Preferred
|
(240
|
)
|
(240
|
)
|
|||
Dividends
on Series D Preferred
|
(60
|
)
|
(60
|
)
|
|||
Dividends
on Noncumulative Preferred
|
(5
|
)
|
(6
|
)
|
|||
Total
dividends on preferred stock
|
(305
|
)
|
(306
|
)
|
|||
Numerator
for basic net income per common share - net income applicable to common
stock
|
1,413
|
11,437
|
|||||
Dividends
on preferred stock assumed to be converted, if dilutive
|
-
|
306
|
|||||
Interest
expense including amortization of debt issuance costs,
net of income taxes, on convertible debt assumed to be converted, if
dilutive
|
|
-
|
349
|
||||
Numerator
for diluted net income per common share
|
$
|
1,413
|
$
|
12,092
|
|||
Denominator:
|
|||||||
Denominator
for basic net income per common share - weighted-average
shares
|
21,226,411
|
21,109,812
|
|||||
Effect
of dilutive securities:
|
|||||||
Stock
options
|
133,192
|
351,888
|
|||||
Convertible
notes payable
|
4,000
|
1,270,720
|
|||||
Convertible
preferred stock
|
-
|
938,546
|
|||||
Dilutive
potential common shares
|
137,192
|
2,561,154
|
|||||
Denominator
for diluted net income per common share - adjusted
weighted-average shares and assumed conversions
|
21,363,603
|
23,670,966
|
|||||
Basic
net income per common share
|
$
|
.07
|
$
|
.54
|
|||
Diluted
net income per common share
|
$
|
.07
|
$
|
.51
|
Three
Months Ended
March
31,
|
2010
|
2009
|
Convertible
notes payable
|
1,070,160
|
-
|
||||
Convertible
preferred stock
|
936,846
|
-
|
||||
Stock
options
|
375,000
|
842,000
|
||||
2,382,006
|
842,000
|
Three
Months Ended
March
31,
|
2010
|
2009
|
(In
Thousands)
|
Current:
|
||||||
Federal
|
$
|
516
|
$
|
4,808
|
||
State
|
207
|
590
|
||||
Total
current provisions
|
$
|
723
|
$
|
5,398
|
||
Deferred:
|
||||||
Federal
|
$
|
177
|
$
|
1,751
|
||
State
|
12
|
200
|
||||
Total
deferred provisions
|
189
|
1,951
|
||||
Provisions
for income taxes
|
$
|
912
|
$
|
7,349
|
Three
Months Ended
March
31,
|
2010
|
2009
|
(In
Thousands)
|
Other
expense:
|
|||||||
Total
other expense (1)
|
$
|
58
|
$
|
43
|
|||
Other
income:
|
|||||||
Property
insurance recoveries in excess of losses
incurred
|
$
|
739
|
$
|
-
|
|||
Miscellaneous
income (1)
|
67
|
162
|
|||||
Total
other income
|
$
|
806
|
$
|
162
|
|||
Non-operating
other income, net:
|
|||||||
Interest
income
|
$
|
56
|
$
|
45
|
|||
Miscellaneous
expense (1)
|
(18
|
)
|
(22
|
)
|
|||
Total
non-operating other income, net
|
$
|
38
|
$
|
23
|
(1)
|
Amounts
represent numerous unrelated transactions, none of which are individually
significant requiring separate
disclosure.
|
Three
Months Ended
March
31,
|
2010
|
2009
|
(In
Thousands)
|
Net
sales:
|
|||||||
Climate
Control
|
$
|
53,671
|
$
|
72,048
|
|||
Chemical
|
74,872
|
74,478
|
|||||
Other
|
1,867
|
3,671
|
|||||
$
|
130,410
|
$
|
150,197
|
||||
Gross
profit: (1)
|
|||||||
Climate
Control
|
$
|
18,399
|
$
|
22,428
|
|||
Chemical
(2)
|
9,158
|
17,148
|
|||||
Other
|
709
|
1,152
|
|||||
$
|
28,266
|
$
|
40,728
|
||||
Operating
income: (3)
|
|||||||
Climate
Control
|
$
|
5,527
|
$
|
8,978
|
|||
Chemical
(2) (4)
|
1,885
|
12,638
|
|||||
General
corporate expenses and other business operations,
net (5)
|
(2,996
|
)
|
(2,196
|
)
|
|||
4,416
|
19,420
|
||||||
Interest
expense
|
(2,080
|
)
|
(1,911
|
)
|
|||
Gain
on extinguishment of debt
|
-
|
1,322
|
|||||
Non-operating
other income, net:
|
|||||||
Climate
Control
|
1
|
-
|
|||||
Chemical
|
2
|
3
|
|||||
Corporate
and other business operations
|
35
|
20
|
|||||
Provisions
for income taxes
|
(912
|
)
|
(7,349
|
)
|
|||
Equity
in earnings of affiliate-Climate Control
|
261
|
240
|
|||||
Income
from continuing operations
|
$
|
1,723
|
$
|
11,745
|
(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)
|
As
the result of entering into sales commitments with higher firm sales
prices during 2008, we recognized sales with a gross profit of $761,000
and $2,500,000 higher than our comparable product sales made at lower
market prices available during the first quarter of 2010 and 2009,
respectively. In addition, during the first quarter of 2010 and 2009, we
recognized gains on sales and recoveries of precious metals totaling
$112,000 and $2,213,000, respectively. The impact of these transactions
increased gross profit and operating income for each respective period.
During the first quarter of 2010 and 2009, we incurred expenses of
$1,432,000 and $120,000, respectively, relating to planned major
maintenance activities. During the first quarter of 2010 and 2009, we
recognized losses totaling $838,000 and $1,619,000, respectively, on our
futures/forward contracts for
natural
|
|
(3)
|
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.
|
(4)
|
During
the first quarter of 2010, we began limited production of anhydrous
ammonia and urea ammonium nitrate (“UAN”) at our previously idled chemical
facility located in Pryor, Oklahoma (the “Pryor
Facility”). However the production was at rates lower than our
targeted production rates. As a result, we incurred expenses of $6,037,000
(including the $770,000 net loss on firm sales commitments discussed above
in footnote 2). During the first quarter of 2009, we incurred start up
expenses of $1,996,000 relating to the Pryor Facility. Excluding the net
loss on firm sales commitments, which are included in cost of sales, these
expenses are primarily included in SG&A for each respective
period.
|
(5)
|
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,
|
2010
|
2009
|
(In
Thousands)
|
Gross
profit-Other
|
$
|
709
|
$
|
1,152
|
|||
Selling,
general and administrative:
|
|||||||
Personnel
costs
|
(1,747
|
)
|
(1,725
|
)
|
|||
Professional
fees
|
(1,170
|
)
|
(984
|
)
|
|||
Office
overhead
|
(163
|
)
|
(188
|
)
|
|||
Property,
franchise and other taxes
|
(86
|
)
|
(83
|
)
|
|||
Advertising
|
(66
|
)
|
(70
|
)
|
|||
All
other
|
(503
|
)
|
(385
|
)
|
|||
Total
selling, general and administrative
|
(3,735
|
)
|
(3,435
|
)
|
|||
Other
income
|
40
|
110
|
|||||
Other
expense
|
(10
|
)
|
(23
|
)
|
|||
Total
general corporate expenses and other business
operations, net
|
$
|
(2,996
|
)
|
$
|
(2,196
|
)
|
March
31,
2010
|
December
31,
2009
|
(In
Thousands)
|
Climate
Control
|
$
|
107,390
|
$
|
102,029
|
||
Chemical
|
165,000
|
143,800
|
||||
Corporate
assets and other
|
74,690
|
92,804
|
||||
Total
assets
|
$
|
347,080
|
$
|
338,633
|
·
|
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
quarter of 2010, approximately 41% 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. In addition, we are
continuing the restart of our previously idled Pryor Facility located in
Pryor, Oklahoma. Our products include industrial and fertilizer grade AN,
UAN, anhydrous ammonia, sulfuric acids, nitric acids in various
concentrations, nitrogen solutions and various other products. For the
first quarter of 2010, approximately 57% of our consolidated net sales
relates to the Chemical Business.
|
·
|
Multi-Family
Residential (apartments and
condominiums)
|
·
|
Single-Family
Residential
|
·
|
Lodging
|
·
|
Education
|
·
|
Healthcare
|
·
|
Offices
|
·
|
Manufacturing
|
2010
|
2009
|
Natural
gas average price per MMBtu based upon Tennessee
500 pipeline pricing point
|
$
|
5.64
|
$
|
5.16
|
|||
Ammonia
average price based upon low Tampa metric
price per ton
|
$
|
381
|
$
|
223
|
|||
Sulfur
price based upon Tampa average quarterly price per
long ton
|
$
|
90
|
See
(1)
|
(1)
|
The
average quarterly price was negligible for the first quarter of
2009.
|
Percentage
Change of
|
Tons
|
Dollars
|
Increase (Decrease)
|
|
Chemical
products:
|
Agricultural
|
(14
|
)%
|
(25
|
)%
|
|||
Industrial
acids and other
|
44
|
%
|
23
|
%
|
|||
Mining
|
(14
|
)%
|
17
|
%
|
|||
Total
weighted-average change
|
9
|
%
|
1
|
%
|
March
31,
2010
|
December
31,
2009
|
||
(In
Millions)
|
Cash
and cash equivalents
|
$
|
45.1
|
$
|
61.7
|
||
Short-term
investments (1)
|
10.0
|
10.1
|
||||
$
|
55.1
|
$
|
71.8
|
|||
Long-term
debt:
|
||||||
2007
Debentures due 2012
|
$
|
29.4
|
$
|
29.4
|
||
Secured
Term Loan due 2012
|
49.2
|
50.0
|
||||
Other
|
26.6
|
22.4
|
||||
Total
long-term debt, including current portion
|
$
|
105.2
|
$
|
101.8
|
||
Total
stockholders’ equity
|
$
|
152.4
|
$
|
150.6
|
·
|
the
amount of income taxes that ThermaClime would be required to pay if they
were not consolidated with us;
|
·
|
an
amount not to exceed fifty percent (50%) of ThermaClime's consolidated net
income during each fiscal year determined in accordance with generally
accepted accounting principles plus amounts paid to us within the first
bullet above, provided that certain other conditions are
met;
|
·
|
the
amount of direct and indirect costs and expenses incurred by us on behalf
of ThermaClime pursuant to a certain services
agreement;
|
·
|
the
amount under a certain management agreement between us and ThermaClime,
provided certain conditions are met,
and
|
·
|
outstanding
loans entered into subsequent to November 2, 2007 not to exceed $2.0
million at any time.
|
·
|
Series
D Preferred at the rate of $.06 a share payable on October 9, which
dividend is cumulative;
|
·
|
Series
B Preferred at the rate of $12.00 a share payable January 1, which
dividend is cumulative; and
|
·
|
Noncumulative
Preferred at the rate of $10.00 a share payable April 1, which is
noncumulative.
|