10q10k10q10k.net

What changed in LSB INDUSTRIES, INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of LSB INDUSTRIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+333 added−286 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

Top changes in LSB INDUSTRIES, INC.'s 2023 10-K

333 paragraphs added · 286 removed · 204 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

28 edited+20 added−10 removed31 unchanged
Biggest changeEnd Market Products Applications Agricultural UAN, HDAN and ammonia Fertilizer and fertilizer blends for corn and other crops; NPK fertilizer blends Industrial Nitric acid, ammonia, sulfuric acid, and DEF, ammonium nitrate and CO 2 Semi-conductor and polyurethane intermediates, ordnance; Pulp and paper, alum, water treatment, metals and vanadium processing; Power plant emissions abatement, water treatment, refrigerants, metals processing; Exhaust stream additive, horticulture / greenhouse applications; refrigeration Mining LDAN, AN solution and HDAN Ammonium nitrate fuel oil (ANFO) and specialty emulsions for mining applications, surface mining, quarries, and construction 3 The following table summarizes net sales information relating to our products: 2022 2021 Percentage of consolidated net sales: AN & Nitric Acid 35 % 41 % Urea ammonium nitrate (UAN) 27 % 22 % Ammonia 31 % 28 % Other 7 % 9 % 100 % 100 % For information regarding our net sales, operating results and total assets for the past three fiscal years, see the Consolidated Financial Statements included in this report.
Biggest changeThe chart below highlights representative products and applications in each of our end markets. 3 The following table summarizes net sales information relating to our products: 2023 2022 Percentage of consolidated net sales: AN & Nitric acid 37 % 35 % Urea ammonium nitrate (UAN) 26 % 27 % Ammonia 28 % 31 % Other 9 % 7 % 100 % 100 % For information regarding our net sales, operating results and total assets for the past three fiscal years, see the Consolidated Financial Statements included in this report.
These laws and regulations (including enforcement policies thereunder) have in the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products.
These laws and regulations (including enforcement policies thereunder) have in the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or 7 disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products.
In addition to the reports filed or furnished with the SEC, we publicly disclose material information from time to time in press releases, at annual meetings of stockholders, in publicly accessible conferences and investor presentations, and through our website. The information included in our website does not constitute part of this Annual Report on Form 10-K. 7
In addition to the reports filed or furnished with the SEC, we publicly disclose material information from time to time in press releases, at annual meetings of stockholders, in publicly accessible conferences and investor presentations, and through our website. The information included on our website does not constitute part of this Annual Report on Form 10-K. 8
It is the responsibility of the CEO and the executive staff to review talent data on an annual basis and plan development actions to ensure succession and continuous improvement and growth. • Engagement – We believe that we have favorable relations with our employees. Approximately 32% of our employees are represented under collective bargaining agreements.
It is the responsibility of the CEO and the executive staff to review talent data on an annual basis and plan development actions to ensure succession and continuous improvement and growth. • Engagement – We believe that we have favorable relations with our employees. Approximately 28% of our employees are represented under collective bargaining agreements.
Our Business Our business manufactures products for three principal markets: • Agricultural Markets: ammonia, fertilizer grade ammonium nitrate (“AN” and “HDAN”) and urea ammonia nitrate (“UAN”); • Industrial Markets: high purity and commercial grade ammonia, high purity AN, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid (“DEF”); and • Mining Markets: industrial grade AN (“LDAN”) and AN solutions.
Our Business Our business manufactures products for three principal markets: • Agricultural Markets: ammonia, fertilizer grade high density ammonium nitrate (“HDAN”) and urea ammonia nitrate (“UAN”); • Industrial Markets: high purity and commercial grade ammonia, ammonium nitrate, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid (“DEF”); and • Mining Markets: low density ammonium nitrate (“LDAN”) and ammonium nitrate (“AN”) solutions.
Our Strategy We pursue a strategy of balancing the sale of product as fertilizer into the agriculture markets at spot prices or short duration pre-sales and developing industrial and mining customers that purchase substantial quantities of products, primarily under contractual obligations and/or pricing arrangements that generally provide for the pass through of some raw material and other manufacturing costs.
With respect to our current portfolio of products, we pursue a strategy of balancing the sale of product as fertilizer into the agriculture markets at spot prices or short duration pre-sales and developing industrial and mining customers that purchase substantial quantities of products, primarily under contractual obligations and/or pricing arrangements that generally provide for the pass through of some raw material and other manufacturing costs.
This raw material feedstock is a commodity and subject to price fluctuations. Natural gas is the primary raw material for producing ammonia, UAN, nitric acid and acid blends and other products at our El Dorado, Cherokee and Pryor Facilities. For 2022, we purchased approximately 27.8 million MMBtus of natural gas.
This raw material feedstock is a commodity and subject to price fluctuations. Natural gas is the primary raw material for producing ammonia, UAN, nitric acid and acid blends and other products at our El Dorado, Cherokee and Pryor Facilities. During 2023, we purchased approximately 29.8 million MMBtus of natural gas.
We also produce and sell LDAN, HDAN and AN solution to the mining industry, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, for metals mining, and to a lesser extent, for coal mining.
We also produce and sell LDAN, HDAN and AN solution to the mining industry, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries and for metals mining.
While economic concerns persist for 2023, we believe that we have a meaningful degree of downside protection from the potential impacts of a recession given the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
While economic concerns persist, we believe that we have a meaningful degree of downside protection from the potential impacts of a recession given our diverse customer base, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
This design has allowed us to develop and deploy a business model optimizing the mix of products to capture the value opportunities in the end markets we serve with a focus on balancing our production. The chart below highlights representative products and applications in each of our end markets.
This design has allowed us to develop and deploy a business model optimizing the mix of products to capture the value opportunities in the end markets we serve with a focus on balancing our production.
Our strategy also includes evaluating and pursuing acquisitions of strategic assets or companies, mergers with other companies and investment in additional production capacity where we believe those acquisitions, mergers or expansion of production capacity will enhance the value of the Company and provide appropriate returns.
Our strategy also includes evaluating further investments in low carbon opportunities, potential acquisitions of strategic assets or companies, mergers with other companies and investment in additional production capacity where we believe those acquisitions, mergers or expansion of production capacity will enhance the value of the Company and provide appropriate returns.
We have three 3-year union contracts which were successfully ratified in 2022. 6 Oversight & Management Our success depends on the capabilities and strength of our workforce. Our People Operations Director is responsible for developing and executing our human capital strategy.
We have three 3-year union contracts which were each successfully ratified in 2022. Oversight & Management Our success depends on the capabilities and strength of our workforce. Our Chief Human Resources Officer is responsible for developing and executing our human capital strategy.
We have signed long-term contracts with certain customers that provide for the annual sale of LDAN, which a portion include various natural-gas-based pricing arrangements. One of our customers has a plant located at our El Dorado Facility. Raw Materials The products we manufacture at our facilities are primarily derived from natural gas.
We have signed long-term contracts with certain customers that provide for the annual sale of LDAN mostly under natural gas cost pass through pricing arrangements. One of our customers has a plant located at our El Dorado Facility. Raw Materials The products we manufacture at our facilities are primarily derived from natural gas.
See further discussion relating to the outlook for our business under “Key Industry Factors.” Competition We operate in a highly competitive market with many other larger chemical companies, such as Advansix, Inc., Austin Powder Company, CF Industries Holdings, Inc., Chemtrade Logistics L.L.C., Cornerstone Chemical, CVR Partners, Dyno Nobel, a subsidiary of Incitec Pivot Limited, Ecovyst, Inc., Eurochem North America, Fertinal, Helm AG, International Raw Materials, Ltd., Interoceanic Corporation, Koch Industries, Macro-Source L.L.C., Norfalco, N-7 L.L.C., Nutrien, Orica Limited, Southern States Chemical, Trammo Inc., Veolia North America and Yara International (some of whom are our customers), many of whom have greater financial and other resources than we do.
See further discussion relating to the outlook for our business under “Key Industry Factors.” Competition We operate in a highly competitive market with many other larger chemical companies, such as CF Industries Holdings, Inc., CVR Partners, Dyno Nobel, a subsidiary of Incitec Pivot Limited, Eurochem North America, Helm AG, Koch Industries, Macro-Source L.L.C., Nutrien, Orica Limited, and Yara International (some of whom are our customers), many of whom have greater financial and other resources than we do.
Our products are sold through distributors and directly to end customers throughout the United States and parts of Mexico, Canada and the Caribbean.
Our products are sold through distributors and directly to end customers throughout the United States and other parts of North America.
Government Laws and Regulations Our facilities and operations are subject to numerous federal, state and local laws and regulations, including matters regarding environmental, health and safety, many of which provide for certain performance obligations, substantial fines and criminal sanctions for violations.
In addition, the management system includes periodic third-party audits and internal self-assessment to continuously improve. Government Laws and Regulations Our facilities and operations are subject to numerous federal, state and local laws and regulations, including matters regarding environmental, health and safety, many of which provide for certain performance obligations, substantial fines and criminal sanctions for violations.
As for our liquidity, we had approximately $458.5 million of combined cash, short-term investments and borrowing capacity at the end of 2022, which we believe provides us with ample liquidity to fund our operations and meet our current obligations. Also see discussions under “Liquidity and Capital Resources” of our MD&A.
As for our liquidity, we had approximately $353 million of combined cash, restricted cash, short-term investments and borrowing capacity at the end of 2023, which we believe provides us with ample liquidity to fund our operations and meet our current obligations. Also see discussions in “ Item 7.
Agricultural Market Conditions As discussed in more detail under “Key Industry Factors” of MD&A, the price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation and storage, weather conditions, competitive pricing and the availability of imports.
Management’s Discussion and Analysis of Financial Condition and Results of Operations–Key Industry Factors ”, the price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation and storage, weather conditions, competitive pricing and the availability of imports.
We own and operate three multi plant facilities in El Dorado, Arkansas (the “El Dorado Facility”), Cherokee, Alabama (the “Cherokee Facility”), and Pryor, Oklahoma (the “Pryor Facility”), and we operate a facility on behalf of Covestro LLC (“Covestro”) in Baytown, Texas (the “Baytown Facility”).
The Company manufactures ammonia and ammonia-related products in El Dorado, Arkansas (the “El Dorado Facility”), Cherokee, Alabama (the “Cherokee Facility”), and Pryor, Oklahoma (the “Pryor Facility”), and operates a facility on behalf of Covestro LLC (“Covestro”) in Baytown, Texas (the “Baytown Facility”).
Key Operating Initiatives for 2023 As discussed in more detail under “Key Operating Initiatives for 2023” of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (“MD&A”) contained in Item 7 of this report, we believe our future results of operations and financial condition will depend significantly on our ability to successfully implement the following key initiatives: • Investing to improve Environmental, Health & Safety and Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality. • Continue Broadening the Distribution and Optimization of our Product Mix. • Development and Implementation of a Strategy to Capitalize on Low Carbon Ammonia and Clean Energy Opportunities. • Evaluate and Pursue Organic Capacity Expansion. • Pursue Acquisitions of Strategic Assets or Companies.
Management’s Discussion and Analysis of Financial Condition and Results of Operations–Key Operating Initiatives ,” we believe our future results of operations and financial condition will depend significantly on our ability to successfully implement the following key initiatives: • Investing to improve Environmental, Health & Safety and Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality. • Continue Broadening the Distribution and Optimization of our Product Mix. • Development of Low-Carbon Ammonia and Clean Energy Projects. • Evaluate Acquisitions of Strategic Assets or Companies.
The El Dorado Facility also has rail access providing favorable freight logistics to our industrial and agricultural customers and cost advantaged when selling a number of our products West of the Mississippi River. Our Cherokee Facility is located east of the Mississippi River, allowing it to reach customers that are not freight logical for others.
Gulf at our El Dorado Facility, which provides low-cost transportation to distribution points. The El Dorado Facility also has rail access providing favorable freight logistics to our industrial and agricultural customers and cost advantaged when selling a number of our products West of the Mississippi River.
Industrial and Mining Market Conditions As discussed in more detail under “Key Industry Factors” of MD&A, in our industrial markets, our sales volumes are typically driven by changes in general economic conditions, energy prices, metals market prices and our contractual arrangements with certain large customers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations–Key Industry Factors ,” in our industrial markets, our sales volumes are typically driven by changes in general economic conditions, energy prices, metals market prices and our contractual arrangements with certain large customers.
Our Competitive Strengths Strategically Located Chemical Assets and Long-Standing Customer Relationships Our business benefits from highly advantageous locations with logistical and distribution benefits. We have access to the Nustar ammonia pipeline from the U.S. Gulf at our El Dorado Facility, which provides low-cost transportation to distribution points.
Management’s Discussion and Analysis of Financial Condition and Results of Operations–Liquidity and Capital Resources ”. 4 Our Competitive Strengths Strategically Located Chemical Assets and Long-Standing Customer Relationships Our business benefits from highly advantageous locations with logistical and distribution benefits. We have access to the Nustar ammonia pipeline from the U.S.
Our Cherokee Facility sits adjacent to the Tennessee River, providing barge receipt and shipping access, in addition to truck and rail delivery access.
Our Cherokee Facility is located east of the Mississippi River, allowing it to reach customers that are not freight logical for others. Our Cherokee Facility sits adjacent to the Tennessee River, providing barge receipt and shipping access, in addition to truck and rail delivery access.
We believe that competition within the markets we serve is primarily based upon service, price, location of production and distribution sites, and product quality and performance. Human Capital Management As of December 31, 2022, we employed 571 persons, 180 whom are represented by unions under collective bargaining agreements.
We believe that competition within the markets we serve is primarily based upon service, price, location of production and distribution sites, and product quality and performance.
Additionally, changes in natural gas prices and demand in renewable power sources, such as wind and solar in the electrical generation sector, will impact demand for our mining products and impact competition within the other sectors of this market. 5 Looking forward to 2023, demand from industrial markets remains generally stable with domestic end-use markets continuing to be stronger than those in Europe and Asia.
Additionally, changes in natural gas prices and demand in renewable power sources, such as wind and solar in the electrical generation sector, will impact demand for our mining products and impact competition within the other sectors of this market. 5 Looking forward to 2024, despite global economic challenges, our industrial business has been solid and demand for our products is steady, supported by the resilience of the U.S. economy.
Notes referenced throughout this document refer to consolidated financial statement footnote disclosures that are found in Item 8. The Company was formed in 1968 as an Oklahoma corporation and became a Delaware corporation in 1977. We manufacture and market chemical products for the agricultural, industrial and mining markets.
Notes referenced throughout this document refer to consolidated financial statement footnote disclosures that are found in Item 8 of this report. LSB is a Delaware corporation, formed in 1968, and headquartered in Oklahoma City, Oklahoma.
Our Pryor Facility is located in the heart of the Southern Plains with close proximity to the Port of Catoosa along with strategic rail and truck delivery access. 4 Advantaged Raw Material Cost Position We produce ammonia at our El Dorado, Cherokee and Pryor Facilities, which allows us to take advantage of the spread between producing and purchasing ammonia at those facilities.
Our Pryor Facility is located in the heart of the Southern Plains with strategic rail and truck delivery access. Advantaged Raw Material Cost Position We have access to low-cost, relative to international markets, natural gas in the United States, which allows for significant cost advantages as compared to comparable production facilities in Europe and other parts of the world.
Removed
Operation of Multiple Facilities and High Production Capacity We operate our business through several facilities. Operating multiple facilities diversifies the risk and impact of operational issues that may occur at a single plant, which gives us a strategic advantage over competitors that operate their company through a single facility.
Added
LSB is committed to playing a leadership role in the energy transition through the production of low and no carbon products that build, feed and power the world.
Removed
Additionally, our competitive production capacity of our combined plants allows us to decrease manufacturing costs, helping us to achieve enhanced margins.
Added
We seek to accomplish this through the manufacture and marketing of essential products for the agricultural, industrial and mining markets, and in the future, energy markets, all with an emphasis on a culture of excellence in customer experience.
Removed
Looking forward to 2023, elevated corn prices remain a significant driver to the strength of fertilizer pricing. U.S. corn stock to use ratios are at their lowest levels in a decade reflecting the impact on global corn supplies from dry conditions in South America, the Western U.S. and parts of Europe.
Added
Our Strategy We aim to be a leader in the energy transition in the chemical industry through the production of low and no carbon products that build, feed and power the world.
Removed
As a result, corn prices remain near 10-year highs suggesting that farmers will likely be incentivized to maximize yield through the coming planting season in order to capitalize on the favorable economics. Subject to supportive weather conditions, this should translate into strong demand and above historic average pricing for nitrogen fertilizers in the coming planting season.
Added
We plan to accomplish this by leveraging our existing business platform and portfolio of assets to produce low carbon products, utilizing our significant manufacturing expertise and experience in ammonia and hydrogen plant operations, optimizing our liquidity and free cash flows to generate growth, and creating a network of partners that bring additional knowledge, expertise and relationships.
Removed
Natural gas prices in Europe were a driver of historically high nitrogen prices in 2022. While having declined in recent months, natural gas prices in European markets remain above 10-year averages keeping production costs for European producers substantially higher than those in the U.S. and allowing ammonia prices to remain at attractive levels for U.S. producers.
Added
Key Operating Initiatives for 2024 As discussed in more detail under “ Item 7.
Removed
We develop our market position in these areas by emphasizing high quality products, customer service and technical advice. We sell most of our agricultural products at the current spot market price in effect at the time of shipment, although we periodically enter into forward sales commitments for some of these products.
Added
Agricultural Market Conditions As discussed in more detail under “ Item 7.
Removed
Inflation and other economic pressures are impacting some parts of the chemical manufacturing industry while mining activity remains strong.
Added
Looking forward to 2024, we believe that while prices for ammonia are anticipated to moderate, prices for other nitrogen products such as urea and UAN could see improvements due to Chinese urea export limitations in the first half of 2024, which should support urea prices and indirectly support UAN prices through the Spring 2024 planting season.
Removed
At December 31, 2022, we had natural gas contracts of approximately 8.1 million MMBtus, at an average cost of $6.25 per MMBtu. These contracts extend through December 2023.
Added
Fertilizer prices, however, should remain attractive to retailers and farmers during the 2024 planting season which, combined with anticipated high planting levels in the U.S., should lead to healthy demand for nitrogen fertilizers. Additionally, we believe that corn prices will remain at a level that will further support demand for fertilizers during 2024.
Removed
In addition, the management system includes periodic third-party audits and internal self-assessment to continuously improve.
Added
We sell our agricultural products at the current spot market price for either immediate shipment or as part of a forward sales commitments, depending on fertilizer seasonality and our forward pricing point of view. Industrial and Mining Market Conditions As discussed in more detail in “ Item 7.
Removed
Like many other companies, we had experienced challenges resulting from the novel coronavirus of 2019 ("COVID-19") pandemic but due to our focused energy and effort on protecting our employees and their families from potential virus exposure while continuing safe and compliant operations we had no business interruptions or work stoppage in 2022.
Added
Nitric acid demand has remained stable as global producers have shifted production from international facilities to their U.S. operations in order to take advantage of lower domestic input costs.
Added
Demand for AN for use in mining applications has remained steady due to attractive market fundamentals for quarrying and aggregate production and U.S. metals offsetting any reductions resulting from lower coal production.
Added
As of December 31, 2023, we did not have any volume purchase commitments or forward contracts.
Added
NOL Rights Agreement On August 22, 2023, we entered into an Amended and Restated Section 382 Rights Agreement (as amended, the “NOL Rights Agreement”), which amended and restated the Section 382 Rights Agreement, dated as of July 6, 2020 (the “Original Rights Agreement”), between LSB and Computershare Trust Company, N.A., as rights agent.
Added
During 2023, the Original Rights Agreement was ratified by our shareholders at our annual meeting of shareholders held on May 11, 2023. The NOL Rights Agreement remains in effect as of December 31, 2023.
Added
The purpose of the NOL Rights Agreement is to facilitate our ability to preserve our NOLs and other tax attributes in order to be able to offset potential future income taxes for federal income tax purposes.
Added
Our ability to use these NOLs and other tax attributes would be 6 substantially limited if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
Added
A company generally experiences an ownership change if the percentage of the value of its stock owned by certain 5% shareholders, as defined in Section 382 of the Code, increases by more than 50% points over a rolling three-year period.
Added
The NOL Rights Agreement is intended to reduce the likelihood of an ownership change under Section 382 of the Code by deterring any person (as defined in the NOL Rights Agreement) or group of affiliated or associated persons (“Group”) from acquiring beneficial ownership of 4.9% or more of our outstanding common shares.
Added
The rights issued under the NOL Rights Agreement will expire on the earliest to occur of (i) the close of business on the day following the certification of the voting results of our 2024 annual meeting of stockholders, or other duly held stockholders’ meeting, (ii) the date on which our Board determines in its sole discretion that (x) the NOL Rights Agreement is no longer necessary for the preservation of material valuable NOLs or tax attributes or (y) the NOLs and tax attributes have been fully utilized and may no longer be carried forward and (iii) the close of business on August 22, 2026.
Added
Our Board may, in its discretion, determine that a person, entity or a certain transaction is exempt from the operation of the NOL Rights Agreement or amend the terms of the rights. Human Capital Resources As of December 31, 2023, we employed 586 persons, 163 whom are represented by unions under collective bargaining agreements.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

81 edited+29 added−18 removed135 unchanged
Biggest changeForward-Looking Statements contained herein include, but are not limited to, the following: our ability to invest in projects that will generate best returns for our stockholders; • our ability to invest in projects that will generate the best returns for our stockholders • our future liquidity outlook; • the outlook our chemical products and related markets; • the amount, timing and effect on the nitrogen market from the current nitrogen expansion projects; • the effect from the lack of non-seasonal volume; • our belief that competition is based upon service, price, location of production and distribution sites, and product quality and performance; • our outlook for the coal industry; • the availability of raw materials; • the result of our product and market diversification strategy; • changes in domestic fertilizer production; • the increasing output and capacity of our existing production facilities; • production volumes at our production facilities; • our ability to moderate risk inherent in agricultural markets; • the sources to fund our cash needs and how this cash will be used; • the ability to enter into the additional borrowings; • the anticipated cost and timing of our capital projects; • certain costs covered under warranty provisions; • our ability to pass to our customers cost increases in the form of higher prices; • our belief as to whether we have sufficient sources for materials and components; • annual natural gas requirements; • compliance by our facilities with the terms of our permits; • the costs of compliance with environmental laws, health laws, security regulations and transportation regulations; • our belief as to when Turnarounds will be performed and completed; • expenses in connection with environmental projects; • the effect of litigation and other contingencies; • the increase in interest expense; • our ability to comply with debt servicing and covenants; • our ability to meet debt maturities or redemption obligations when due; • the effects of the ongoing COVID-19 pandemic and related response; and • our beliefs as to whether we can meet all required covenant tests for the next twelve months. 19 While we believe, the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance such expectations will prove to have been correct.
Biggest changeForward-Looking Statements contained herein, and the associated risks, uncertainties, assumptions and other important factors include, but are not limited to, the following: • our ability to invest in projects that will generate the best returns for our stockholders; • our future liquidity outlook; • the outlook of our chemical products and related markets; • our ability to successfully leverage our existing business platform and portfolio of assets to produce low carbon products and execute our strategy to become a leader in the energy transition in the chemical industry; • the amount, timing and effect on the nitrogen market from current nitrogen expansion projects; • the effect from the lack of non-seasonal volume; • our belief that competition is based upon service, price, location of production and distribution sites, and product quality and performance; • the outlook for the industrial and mining industries; • the availability of raw materials; • our ability to broaden the distribution of our products, including our ability to leverage our nitric acid production capacity at our El Dorado Facility; • the result of our product and market diversification strategy; • changes in domestic fertilizer production; • the increasing output and capacity of our existing production facilities; • production volumes at our production facilities; • our ability to moderate risk inherent in agricultural markets; • the sources to fund our cash needs and how this cash will be used; • the ability to enter into the additional borrowings; • the anticipated cost and timing of our capital projects; • certain costs covered under warranty provisions; • our ability to pass to our customers cost increases in the form of higher prices; • our belief as to whether we have sufficient sources for materials and components; • annual natural gas requirements; • the development of the market and demand for low-carbon ammonia; • compliance by our facilities with the terms of our permits; • the costs of compliance with environmental laws, health laws, security regulations and transportation regulations; • our belief as to when Turnarounds will be performed and completed; • expenses in connection with environmental projects; • the effect of litigation and other contingencies; 21 • the increase in interest expense; • our ability to comply with debt servicing and covenants; • our ability to meet debt maturities or redemption obligations when due; • the impact of our repurchase program on our stock price and cash reserves: • the effects of the ongoing COVID-19 pandemic and related response; and • our beliefs as to whether we can meet all required covenant tests for the next twelve months.
We offer our customers from time-to-time, the opportunity to purchase products from us on a forward basis at prices and delivery dates we propose.
From time-to-time, we offer our customers the opportunity to purchase products from us on a forward basis at prices and delivery dates we propose.
There are a variety of factors which could cause future outcomes to differ materially from those described in this report, including, but not limited to, the following: • changes in general economic conditions, both domestic and foreign; • material reductions in revenues; • material changes in interest rates; • our ability to collect in a timely manner a material amount of receivables; • increased competitive pressures; • adverse effects of increases in prices of raw materials; • changes in federal, state and local laws and regulations, or in the interpretation of such laws and regulations; • changes in laws, regulations or other issues related to climate change; • releases of pollutants into the environment exceeding our permitted limits; • material increases in equipment, maintenance, operating or labor costs not presently anticipated by us; • the requirement to use internally generated funds for purposes not presently anticipated; • the inability to secure additional financing for planned capital expenditures or financing obligations due in the near future; • our substantial existing indebtedness; • material changes in the cost of natural gas and certain precious metals; • limitations due to financial covenants; • changes in competition; • the loss of any significant customer; • increases in cost to maintain internal controls over financial reporting; • changes in operating strategy or development plans; • an inability to fund the working capital and expansion of our businesses; • changes in the production efficiency of our facilities; • adverse results in our contingencies including pending litigation; • unplanned downtime at one or more of our chemical facilities; • changes in production rates at any of our chemical plants; • an inability to obtain necessary raw materials and purchased components; • material increases in cost of raw materials; • material changes in our accounting estimates; • significant problems within our production equipment; • fire or natural disasters; • an inability to obtain or retain our insurance coverage; • difficulty obtaining necessary permits; • difficulty obtaining third-party financing; • risks associated with proxy contests initiated by dissident stockholders; • changes in fertilizer production; • reduction in acres planted for crops requiring fertilizer; 20 • decreases in duties for products we sell resulting in an increase in imported products into the U.S.; • adverse effects from regulatory policies, including tariffs; • volatility of natural gas prices; • price increases resulting from increased inflation; • weather conditions, including the effects of climate change; • increases in imported agricultural products; • global supply chain disruptions; • other factors described in the MD&A contained in this report; and • other factors described in “Risk Factors” contained in this report.
There are a variety of factors which could cause future outcomes to differ materially from those described in this report, including, but not limited to, the following: • changes in general economic conditions, both domestic and foreign; • material reductions in revenues; • material changes in interest rates; • our ability to collect in a timely manner a material amount of receivables; • increased competitive pressures; • adverse effects of increases in prices of raw materials; • changes in federal, state and local laws and regulations, or in the interpretation of such laws and regulations; • changes in laws, regulations or other issues related to climate change; • releases of pollutants into the environment exceeding our permitted limits; • material increases in equipment, maintenance, operating or labor costs not presently anticipated by us; • the requirement to use internally generated funds for purposes not presently anticipated; • the inability to secure additional financing for planned capital expenditures or financing obligations due in the near future; • our substantial existing indebtedness; • material changes in the cost of natural gas and certain precious metals; • limitations due to financial covenants; • changes in competition; • the loss of any significant customer; • increases in cost to maintain internal controls over financial reporting; • changes in operating strategy or development plans; • an inability to fund the working capital and expansion of our businesses; • changes in the production efficiency of our facilities; • adverse results in our contingencies including pending litigation; • unplanned downtime at one or more of our chemical facilities; • changes in production rates at any of our chemical plants; • an inability to obtain necessary raw materials and purchased components; • material increases in cost of raw materials; • material changes in our accounting estimates; • significant problems within our production equipment; • fire or natural disasters; 22 • an inability to obtain or retain our insurance coverage; • difficulty obtaining necessary permits; • difficulty obtaining third-party financing; • risks associated with proxy contests initiated by dissident stockholders; • changes in fertilizer production; • reduction in acres planted for crops requiring fertilizer; • decreases in duties for products we sell resulting in an increase in imported products into the U.S.; • adverse effects from regulatory policies, including tariffs; • volatility of natural gas prices; • price increases resulting from increased inflation; • weather conditions, including the effects of climate change; • increases in imported agricultural products; • global supply chain disruptions; • other factors described in the MD&A contained in this report; and • other factors described in “Risk Factors” contained in this report.
We have implemented security procedures and measures in order to protect our information from being vulnerable to theft, loss, damage or interruption from a number of potential sources or events. Although we believe these measures and procedures are appropriate, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks.
We have implemented security procedures and measures in order to protect our information from being vulnerable to theft, loss, damage or interruption from a number of potential sources or events. Although we believe these measures and procedures are appropriate, we 14 may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks.
While the occupation of Ukraine has had an effect on commodity prices and fertilizer supply (primarily ammonia and urea from Russia), there is no guarantee that the current conflict will not draw military intervention from other countries or retaliation from Russia, which, in turn, could lead to a much larger conflict.
While the occupation of Ukraine has had an effect on commodity prices and fertilizer supply (primarily ammonia and urea from Russia), there is no guarantee that the current conflict will not draw military intervention from other countries or further retaliation from Russia, which, in turn, could lead to a much larger conflict.
For example, they will be able to strongly influence the election of all of the members of our board of directors and our business and affairs, including certain determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of additional indebtedness, the issuance of additional shares of common stock or other equity securities, the repurchase or redemption of shares of our common stock and the payment of dividends.
For example, they will be able to strongly influence the election of all of the members of our Board and our business and affairs, including certain determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of additional indebtedness, the issuance of additional shares of common stock or other equity securities, the repurchase or redemption of shares of our common stock and the payment of dividends.
Such future sales could also significantly reduce the percentage ownership and voting power of our existing common stockholders. 7. General Risk Factors Deterioration of global market and economic conditions could have a material adverse effect on our business, financial condition, results of operations and cash flow.
Such future sales could also significantly reduce the percentage ownership and voting power of our existing common stockholders. General Risk Factors Deterioration of global market and economic conditions could have a material adverse effect on our business, financial condition, results of operations and cash flow.
Over the course of the past several years, global climate conditions have become increasingly inconsistent, volatile and unpredictable. Many of the regions in which we do business have experienced excessive moisture, cold, drought and/or heat of an unprecedented nature at various times of the year.
Over the course of the past several years, global climate conditions have become increasingly inconsistent, volatile and unpredictable. Many of the regions in which we do business have variously experienced excessive moisture, cold, drought and/or heat of an unprecedented nature at various times of the year.
Compromises to our information systems could have an adverse effect on our business, results of operations, liquidity and financial condition. 13 We may engage in certain strategic transactions which may adversely affect our financial condition. An important part of our business strategy is the acquisition of strategic assets or companies.
Compromises to our information systems could have an adverse effect on our business, results of operations, liquidity and financial condition. We may engage in certain strategic transactions which may adversely affect our financial condition. An important part of our business strategy is the acquisition of strategic assets or companies.
In summary, new or changed laws and regulations or the inability of our customers to obtain or maintain insurance in connection with any of our chemical products could have an adverse effect on our operating results, liquidity and financial condition. We may not have adequate insurance.
In summary, new or changed laws and regulations or the inability of our customers to obtain or maintain insurance in connection with any of our chemical products could have an adverse effect on our operating results, liquidity and financial condition. 16 We may not have adequate insurance.
The Occupational Safety and Health Administration is likewise considering changes to its Process Safety Management standards. In addition, DHS, the EPA, and the Bureau of Alcohol, 15 Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling, and management of AN.
The Occupational Safety and Health Administration is likewise considering changes to its Process Safety Management standards. In addition, DHS, the EPA, and the Bureau of Alcohol, Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling, and management of AN.
These covenants and other restrictions limit our ability to, among other things: • incur additional debt or issue preferred shares; • pay dividends on, repurchase or make distributions in respect of capital stock, make other restricted payments; • make investments or certain capital expenditures; • sell or transfer assets; 8 • create liens on assets to secure debt; • engage in certain fundamental corporate changes or changes to our business activities; • make certain material acquisitions; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into transactions with affiliates; • designate subsidiaries as unrestricted subsidiaries; and • repay, repurchase or modify certain subordinated and other material debt.
These covenants and other restrictions limit our ability to, among other things: • incur additional debt or issue preferred shares; • pay dividends on, repurchase or make distributions in respect of capital stock, make other restricted payments; • make investments or certain capital expenditures; • sell or transfer assets; 9 • create liens on assets to secure debt; • engage in certain fundamental corporate changes or changes to our business activities; • make certain material acquisitions; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; • enter into transactions with affiliates; • designate subsidiaries as unrestricted subsidiaries; and • repay, repurchase or modify certain subordinated and other material debt.
ITEM 1A. RI SK FACTORS 1. Risks Relating to Our Liquidity We may not be able to generate sufficient cash to service our debt and may be required to take other actions to satisfy the obligations under our debt agreements, which may not be successful.
ITEM 1A. RI SK FACTORS Risks Relating to Our Liquidity We may not be able to generate sufficient cash to service our debt and may be required to take other actions to satisfy the obligations under our debt agreements, which may not be successful.
The loss of, or a material reduction in purchase levels by, one or more of these customers could have a material adverse effect on our business, results of operations, financial condition and liquidity if we are unable to replace a customer with other sales on substantially similar terms. 11 A change in the volume of products that our customers purchase on a forward basis, or the percentage of our sales volume that is sold to our customers on a forward basis, could increase our exposure to fluctuations in our profit margins and materially adversely affect our business, financial condition, results of operations and cash flows.
The loss of, or a material reduction in purchase levels by, one or more of these customers could have a material adverse effect on our business, results of operations, financial condition and liquidity if we are unable to replace a customer with other sales on substantially similar terms. 12 A change in the volume of products that our customers purchase on a forward basis, or the percentage of our sales volume that is sold to our customers on a forward basis, could increase our exposure to fluctuations in our profit margins and materially adversely affect our business, financial condition, results of operations and cash flows.
These may include changes in rainfall and storm patterns and intensities, water shortages and changing temperatures. Any of these matters could have a material adverse effect on us. 4.
These may include changes in rainfall and storm patterns and intensities, water shortages and changing temperatures. Any of these matters could have a material adverse effect on us.
For instance, the EPA published a rule, known as the Clean Power Plan, to limit greenhouse gases from electric power plants. The EPA is currently reviewing the Clean Power Plan however, it could result in increased electricity costs due to increased requirements for use of alternative energy sources, and a decreased demand for coal-generated electricity.
For instance, the EPA published a rule, known as the “Clean Power Plan,” to limit greenhouse gases from electric power plants. The EPA is currently reviewing the Clean Power Plan however, it could result in increased electricity costs due to increased requirements for use of alternative energy sources, and a decreased demand for coal-generated electricity.
Therefore, substantial changes could adversely affect our operating results, liquidity, financial condition and capital resources. There is intense competition in the markets we serve. Substantially all of the markets in which we participate are highly competitive with respect to product quality, price, distribution, service, and reliability.
Therefore, substantial changes in these factors could adversely affect our operating results, liquidity, financial condition and capital resources. There is intense competition in the markets we serve. Substantially all of the markets in which we participate are highly competitive with respect to product quality, price, distribution, service, and reliability.
Our management is currently evaluating and pursing certain such opportunities, and from time to time separately provides indications of interest in respect of similar transactions, which may be significant. Any such discussions may or may not result in the consummation of a transaction, and we may not be able to identify or complete any of these potential acquisitions.
Our management is currently evaluating and pursuing certain such opportunities, and from time to time separately provides indications of interest in respect of similar transactions, which may be significant. Any such discussions may or may not result in the consummation of a transaction, and we may not be able to identify or complete any of these potential acquisitions.
Depending on various factors, including prevailing prices from other exporters, the price of coal, and the price of China’s export tariff, higher volumes of urea from China could be imported into the U.S. at prices that could have an adverse effect on the selling prices of other nitrogen products, including the nitrogen products we manufacture and sell.
Depending on various factors, including prevailing prices from other exporters, the price of coal and regulatory policies, including the price of China’s export tariff, higher volumes of urea from China could be imported into the U.S. at prices that could have an adverse effect on the selling prices of other nitrogen products, including the nitrogen products we manufacture and sell.
In addition, certain failures to make payments when due on, or the acceleration of, significant indebtedness constitutes a default under some of our debt instruments, including the indenture governing the notes. Further, a breach of any of the covenants or restrictions in a debt instrument could result in an event of default under such debt instrument.
In addition, certain failures to make payments when due on, or the acceleration of, significant indebtedness constitutes a default under some of our debt instruments, including the Indenture governing the Senior Secured Notes. Further, a breach of any of the covenants or restrictions in a debt instrument could result in an event of default under such debt instrument.
If seasonal demand is greater than we expect, we may experience product shortages, and customers of ours may turn to our competitors for products that they would otherwise have purchased from us. 10 Weather conditions adversely affect our business.
If seasonal demand is greater than we expect, we may experience product shortages, and customers of ours may turn to our competitors for products that they would otherwise have purchased from us. 11 Weather conditions adversely affect our business.
Accordingly, our business, financial condition, liquidity and results of operations could be materially affected in the future by 12 the lack of availability of natural gas and other key components and increase costs relating to the purchase of natural gas and other key components.
Accordingly, our business, financial condition, liquidity and results of operations could be materially affected in the 13 future by the lack of availability of natural gas and other key components and increase costs relating to the purchase of natural gas and other key components.
Our Board has not made a decision whether or not to pay dividends on our common stock in 2023. In addition, there are certain limitations contained in our loan agreements that may limit our ability to pay dividends on our outstanding common stock.
Our Board has not made a decision whether or not to pay dividends on our common stock in 2024. In addition, there are certain limitations contained in our loan agreements that may limit our ability to pay dividends on our outstanding common stock.
For further discussion of our litigation, please see “Other Pending, Threatened or Settled Litigation” in Note 8 to the Consolidated Financial Statements included in this report. We may be required to modify or expand our operating, sales and reporting procedures and to install additional equipment in order to comply with current and possible future government regulations.
For further discussion of our litigation, please see “Other Pending, Threatened or Settled Litigation” in Note 7 – Commitments and Contingencies to the Consolidated Financial Statements included in this report. We may be required to modify or expand our operating, sales and reporting procedures and to install additional equipment in order to comply with current and possible future government regulations.
Secured Financing Agreement due 2025 - A secured financing arrangement between EDA and an affiliate of LSB Funding L.L.C. which matures in August 2025. Secured Loan Agreement due 2025 - A secured loan agreement between EDC and an affiliate of LSB Funding L.L.C. which matures in March 2025.
Secured Financing Agreement due 2025 - A secured financing arrangement between EDA and an affiliate of LSB Funding which matures in August 2025. Secured Loan Agreement due 2025 - A secured loan agreement between EDC and an affiliate of LSB Funding which matures in March 2025.
In addition, a significant downturn in global economic growth, or recessionary conditions in major geographic regions as a result of a resurgence of the COVID-19 pandemic or the emergence of a similar pandemic, 9 may lead to reduced demand for a portion or all our products.
In addition, a significant downturn in global economic growth, or recessionary conditions in major geographic regions as a result of a resurgence of the pandemic or the emergence of a similar pandemic, may lead to reduced demand for a portion or all our products.
Additionally, third parties on whose systems we place significant reliance for the conduct of our business are also subject to cyber security risks. We are significantly dependent upon internet connectivity and a third-party cloud hosting vendor.
Additionally, third parties on whose systems we place significant reliance for the conduct of our business are also subject to cybersecurity risks. We are significantly dependent upon internet connectivity and a third-party cloud hosting vendor.
Further, the random nature of climactic change has made it increasingly difficult to forecast market demand and, consequently, financial performance, from year-to-year.
Further, the unpredictable nature of climactic change has made it increasingly difficult to forecast market demand and, consequently, financial performance, from year-to-year.
We believe we have implemented appropriate security measures, controls and procedures to safeguard our information technology systems and to prevent unauthorized access to such systems and any data processed or stored in such systems, and we periodically evaluate and test the adequacy of such systems, measures, controls and procedures and perform third-party risk assessments; however, there can be no guarantee that such systems, measures, controls and procedures will be effective, that we will be able to establish secure capabilities with all of third parties, or that third parties will have appropriate controls in place to protect the confidentiality of our information.
We believe we have implemented appropriate security measures, controls and procedures to safeguard our information technology systems and to prevent unauthorized access to such systems and any data processed or stored in such systems, and we periodically evaluate and test the adequacy of such systems, measures, and controls and procedures; however, there can be no guarantee that such systems, measures, controls and procedures will be effective, that we will be able to establish secure capabilities with all of third 10 parties, or that third parties will have appropriate controls in place to protect the confidentiality of our information.
Terrorist attacks in the U.S and elsewhere, including Russia’s occupation of Ukraine, and natural disasters (such as hurricanes or pandemic health crises) have in the past and can in the future negatively affect our operations. We cannot predict further terrorist attacks and natural disasters in the U.S. and elsewhere.
Terrorist attacks in the U.S and elsewhere, including Russia’s occupation of Ukraine and ongoing conflict in the Middle East, and natural disasters (such as hurricanes or pandemic health crises) have in the past and can in the future negatively affect our operations. We cannot predict further terrorist attacks and natural disasters in the U.S. and elsewhere.
Therefore, ethanol incentive programs may not be renewed, or if renewed, they may be renewed on terms significantly less favorable to ethanol producers than current incentive programs. Therefore, a decrease in ethanol production or an increase in ethanol imports could have a material adverse effect on our overall business, results of operations, financial condition and liquidity.
Therefore, ethanol incentive programs may not be renewed, or if renewed, they may be renewed on terms significantly less favorable to ethanol producers when compared with current incentive programs. Consequently, a decrease in ethanol production or an increase in ethanol imports could have a material adverse effect on our overall business, results of operations, financial condition and liquidity.
Regardless of the cause, if any of these unusual weather events occur during the primary seasons for sales of our agricultural products (March-June and September-November), this could have a material adverse effect on our agricultural sales and our financial condition and results of operations. Climate Change may adversely affect our business .
Regardless of the cause, if any of these adverse weather events occur, or occur with greater frequency, during the primary seasons for sales of our agricultural products (March-June and September-November), this could have a material adverse effect on our agricultural sales and our financial condition and results of operations. Climate change may adversely affect our business .
We may not be able to maintain a level of cash flows sufficient to pay the principal and interest on our debt, including the $700 million principal amount of our 6.25% Senior Secured Notes due 2028 (the “New Notes”).
We may not be able to maintain a level of cash flows sufficient to pay the principal and interest on our debt, including the $575 million principal amount of our 6.25% senior secured notes due 2028 (the “Senior Secured Notes”).
In some cases, these conditions have either reduced or obviated the need for our products, particularly in the agriculture space, whether pre-plant, at-plant, post-emergent or at harvest. Due to the unpredictable nature of these conditions, growers and distributors appear to have become increasingly conservative in procurement practices and the accumulation of inventory.
In some cases, these conditions have either reduced or obviated the need for our products, particularly in the agriculture space, whether pre-plant, at-plant, post-emergent or at harvest. Due to the unpredictable nature of these conditions, we have observed growers and distributors becoming increasingly conservative in procurement practices and the accumulation of inventory.
There is no guarantee that climate change will abate in the near future, and it is possible that such change will continue to hinder our ability to forecast sales performance with accuracy and otherwise adversely affect our financial performance. Our business and customers are sensitive to adverse economic cycles.
There is no guarantee that climate change or its impacts will abate in the near future, and it is possible that such change will continue to hinder, or significantly further hinder, our ability to forecast sales performance with accuracy and otherwise adversely affect our financial performance. Our business and customers are sensitive to adverse economic cycles.
Notwithstanding the fact that the Senior Secured Notes Indenture and the credit agreement governing our Working Capital Revolver Loan limit our ability to incur additional debt or grant certain liens on our assets, the restrictions on the incurrence of additional indebtedness and liens are subject to a number of important qualifications and exceptions, and the additional indebtedness and liens incurred in compliance with these restrictions could be substantial.
Notwithstanding the fact that the Indenture governing the Senior Secured Notes and the credit agreement governing our New Revolving Credit Facility Loan limit our ability to incur additional debt or grant certain liens on our assets, the restrictions on the incurrence of additional indebtedness and liens are subject to a number of important qualifications and exceptions, and the additional indebtedness and liens incurred in compliance with these restrictions could be substantial.
Terrorist attacks and other acts of violence or war, such as Russia’s occupation of Ukraine, and natural disasters (such as hurricanes, etc.), have negatively affected and could negatively affect U.S. and foreign companies, the financial markets, the industries where we operate, our operations and our profitability.
Terrorist attacks and other acts of violence or war, such as Russia’s occupation of Ukraine and ongoing conflict in the Middle East, and natural disasters (such as hurricanes, etc.), have negatively affected and could negatively affect U.S. and foreign companies, the financial markets, the industries where we operate, our operations and our profitability.
Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the Forward-Looking Statements contained herein to reflect future events or developments.
Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements. Except to the extent required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the Forward-Looking Statements contained herein to reflect future events or developments.
We have authorized and unissued (including shares held in treasury) approximately 73.7 million shares of common stock and approximately 5.2 million shares of preferred stock as of December 31, 2022. These unissued shares could be used by our management to make it more difficult, and thereby discourage an attempt to acquire control of us.
We have authorized and unissued (including shares held in treasury) approximately 76.9 million shares of common stock and approximately 5.2 million shares of preferred stock as of December 31, 2023. These unissued shares could be used by our management to make it more difficult, and thereby discourage an attempt to acquire control of us.
Additionally, pursuant to the Board Representation and Standstill Agreement, as amended, SBT Investors has certain board member nomination rights based on the size of our Board and its and LSB Fundings' holdings.
Additionally, pursuant to the Board Representation and Standstill Agreement, as amended, TLB-LSB has certain board member nomination rights based on the size of our Board and its holdings.
Golsen. 2008 Plan - The 2008 Incentive Stock Plan. 2016 Plan - The 2016 Long Term Incentive Plan. 23 2021 Crop - Corn crop marketing year (September 1 - August 31), which began in 2020 and ended in 2021 and primarily relates to corn planted and harvested in 2020. 2022 Crop - Corn crop marketing year (September 1 - August 31), which began in 2021 and ended in 2022 and primarily relates to corn planted and harvested in 2021. 2023 Crop - Corn crop marketing year (September 1 - August 31), which began in 2022 and will end in 2023 and primarily relates to corn planted and harvested in 2022.
Golsen. 2016 Plan - The 2016 Long Term Incentive Plan. 2022 Crop - Corn crop marketing year (September 1 - August 31), which began in 2021 and ended in 2022 and primarily relates to corn planted and harvested in 2021. 2023 Crop - Corn crop marketing year (September 1 - August 31), which began in 2022 and will end in 2023 and primarily relates to corn planted and harvested in 2022. 2024 Crop - Corn crop marketing year (September 1 - August 31), which began in 2023 and will end in 2024 and primarily relates to corn planted and harvested in 2023.
Additionally, Eldridge manages businesses across a range of industries and may acquire and hold interests in businesses that compete directly or indirectly with us. Eldridge may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
Additionally, Boehly and his affiliates manage businesses across a range of industries and may acquire and hold interests in businesses that compete directly or indirectly with us. Boehly and his affiliates may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
While the CSB does not have authority to directly regulate our business, the findings in this report, and other activities taken in response to the West, Texas incident by federal, state, and local regulators may result in additional regulation of our processes and products. In January 2017, the U.S.
While the CSB does not have authority to directly regulate our business, the findings in this report, and other activities taken in response to the West, Texas incident by federal, state, and local regulators may result in additional regulation of our processes and products. In January 2017, the U.S. EPA finalized revisions to its Risk Management Program (“RMP”).
The international market for fertilizers is influenced by such factors as the relative value of the U.S. currency and its impact on the importation of fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets and other regulatory policies (including tariffs) of foreign governments, as well as the U.S. laws and policies affecting foreign trade and investment. 18 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained within this report may be deemed “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933 (as amended, the “Securities Act”) and Section 21E of the Securities Exchange Act.
The international market for fertilizers is influenced by such factors as the relative value of the U.S. currency and its impact on the importation of fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign markets and other regulatory policies (including tariffs) of foreign governments, as well as the U.S. laws and policies affecting foreign trade and investment. 20 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained within this report may be deemed “Forward-Looking Statements.” within the meaning of U.S. federal securities laws.
Changes to the production equipment at our chemical facilities that are required in order to comply with health, safety and environmental regulations may require substantial capital expenditures. 14 Explosions and/or losses at other chemical facilities that we do not own (such as the April 2013 explosion in West, Texas) could also result in new or additional legislation or regulatory changes, particularly relating to public health, safety or any of the products manufactured and/or sold by us or the inability on the part of our customers to obtain or maintain insurance as to certain products manufactured and/or sold by us, which could have a negative effect on our revenues, cash flow and liquidity.
Explosions and/or losses at other chemical facilities that we do not own (such as the April 2013 explosion in West, Texas) could also result in new or additional legislation or regulatory changes, particularly relating to public health, safety or any of the products manufactured and/or sold by us or the inability on the part of our customers to obtain or maintain insurance as to certain products manufactured and/or sold by us, which could have a negative effect on our revenues, cash flow and liquidity.
The Working Capital Revolver Loan also contains certain affirmative covenants and requires the borrowers to comply with a fixed charge coverage ratio (as defined in the Working Capital Revolver Loan) if their excess availability (as defined in the Working Capital Revolver Loan) falls below a certain level.
The New Revolving Credit Facility Loan also contains certain affirmative covenants and requires the borrowers to comply with a fixed charge coverage ratio (as defined in the New Revolving Credit Facility Loan) if their excess availability (as defined in the New Revolving Credit Facility Loan) falls below a certain level.
The agreements relating to our debt, including the Senior Secured Notes Indenture and the credit agreement governing our Working Capital Revolver Loan, limit but do not prohibit our ability to incur additional debt, including additional secured debt.
The agreements relating to our debt, including the Indenture governing the Senior Secured Notes and the credit agreement governing our New Revolving Credit Facility Loan, limit but do not prohibit our ability to incur additional debt, including additional secured debt.
Environmental Protection Agency (“EPA”) finalized revisions to its Risk Management Program (“RMP”). The revisions include new requirements for certain facilities to perform hazard analyses, third-party auditing, incident investigations and root cause analyses, emergency response exercises, and to publicly share chemical and process information. Compliance with many of the rule’s new requirements became required beginning in 2021.
The revisions include new requirements for certain facilities to perform hazard analyses, third-party auditing, incident investigations and root cause analyses, emergency response exercises, and to publicly share chemical and process information. Compliance with many of the rule’s new requirements became required beginning in 2021.
Additionally, if a collective bargaining agreement is negotiated at higher-than-anticipated cost, absorbing those costs or passing them through to customers in the form of higher prices may make us less competitive. 6.
The prolonged failure to renew or renegotiate a collective bargaining agreement could result in work stoppages. Additionally, if a collective bargaining agreement is negotiated at higher-than-anticipated cost, absorbing those costs or passing them through to customers in the form of higher prices may make us less competitive.
COVID-19 has evolved into a global pandemic and the full extent of its impact will depend on future developments that are uncertain and cannot be accurately predicted, including new information that may emerge concerning the COVID-19 pandemic and the actions to contain the COVID-19 pandemic or treat its impact.
The impact of global pandemics will depend on future developments that are uncertain and cannot be accurately predicted, including new information that may emerge concerning the pandemic and the actions to contain the pandemic or treat its impact.
Note - A note in the accompanying notes to the consolidated financial statements. NPDES - National Pollutant Discharge Elimination. NPK - Compound fertilizer products which are a solid granular fertilizer product for which the nutrient content is a combination of nitrogen, phosphorus, and potassium. ODEQ - The Oklahoma Department of Environmental Quality.
Note - A note in the accompanying notes to the consolidated financial statements. NPK - Compound fertilizer products which are a solid granular fertilizer product for which the nutrient content is a combination of nitrogen, phosphorus, and potassium.
For as long as the Eldridge-affiliated stockholders continue to beneficially own a substantial percentage of the voting power of our outstanding common stock, Eldridge and its affiliates will continue to have significant influence over us.
For as long as TLB-LSB continues to beneficially own a substantial percentage of the voting power of our outstanding common stock, Boehly and his affiliates will continue to have significant influence over us.
In addition, Eldridge, through its affiliates, and the Golsen Holders have significant voting power and rights to designate board representatives, all of which may further discourage a third-party tender offer, proxy contest, or other attempts to acquire control of us. 17 Delaware has adopted an anti-takeover law which, among other things, will delay for three years business combinations with acquirers of 15% or more of the outstanding voting stock of publicly-held companies (such as us), unless: • prior to such time the Board of the corporation approved the business combination that results in the stockholder becoming an invested stockholder; • the acquirer owned at least 85% of the outstanding voting stock of such company prior to commencement of the transaction; • two-thirds of the stockholders, other than the acquirer, vote to approve the business combination after approval thereof by the Board; or • the stockholders of the corporation amend its articles of incorporation or by-laws electing not to be governed by this provision.
Delaware has adopted an anti-takeover law which, among other things, will delay for three years business combinations with acquirers of 15% or more of the outstanding voting stock of publicly-held companies (such as us), unless: • prior to such time the Board of the corporation approved the business combination that results in the stockholder becoming an invested stockholder; 19 • the acquirer owned at least 85% of the outstanding voting stock of such company prior to commencement of the transaction; • two-thirds of the stockholders, other than the acquirer, vote to approve the business combination after approval thereof by the Board; or • the stockholders of the corporation amend its articles of incorporation or by-laws electing not to be governed by this provision.
FASB - Financial Accounting Standards Board. February Report - WASDE report dated February 8, 2023. Financial Covenant - Certain springing financial covenants associated with the working capital revolver loan. GAAP - U.S. Generally Accepted Accounting Principles. Global - Global Industrial, Inc., a subcontractor asserting mechanics liens for work rendered to LSB and EDC. Golsen Holders - Jack E.
Financial Covenant - Certain springing financial covenants associated with the loan. GAAP - U.S. Generally Accepted Accounting Principles. 23 Global - Global Industrial, Inc., a subcontractor asserting mechanics liens for work rendered to LSB and EDC. Golsen Holders - Jack E. Golsen, Barry H.
Our operations are subject to hazards inherent in the manufacture, transportation, storage and distribution of chemical products, including some products that are highly toxic and corrosive.
Risks Relating to Legal, Regulatory and Compliance Matters Our operations and the production and handling of our products involve significant risks and hazards. Our operations are subject to hazards inherent in the manufacture, transportation, storage and distribution of chemical products, including some products that are highly toxic and corrosive.
Old Notes - The notes issued on April 28, 2018 with an interest rate of 9.625%, which mature in May 2023. PAR - Permit Appeal Resolution PBRS - Performance-based restricted stock. 22 PBRSU - Performance-based restricted stock unit. PCC - Pryor Chemical Company. PP&E - Plant, property and equipment.
Old Notes - The senior secured notes issued on April 28, 2018 with an interest rate of 9.625%, which were due to mature in May 2023 but were redeemed in October 2021. PBRSU - Performance-based restricted stock unit. PCC - Pryor Chemical Company (now merged into LSB Chemical, L.L.C.). PP&E - Plant, property and equipment.
Risks Relating to Shareholders Affiliates of Eldridge have significant influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control. LSB Funding and SBT Investors, each of which is an affiliate of Eldridge, beneficially own, in the aggregate approximately 26% of our outstanding common stock as of December 31, 2022.
Risks Relating to Shareholders An affiliate of Todd Boehly (“Boehly”) has significant influence over us, which could limit your ability to influence the outcome of key transactions, including a change of control. TLB-LSB, LLC (“TLB-LSB”), which is an affiliate of Boehly, beneficially owns, in the aggregate approximately 21% of our outstanding common stock as of December 31, 2023.
While these actions may result in additional regulatory requirements or changes to our operators, it is difficult to predict at this time how these and any other possible regulations, if and when adopted, will affect our business, operations, liquidity or financial results.
While these actions may result in additional regulatory requirements or changes to our operators, it is difficult to predict at this time how these and any other possible regulations, if and when adopted, will affect our business, operations, liquidity or financial results. 17 Proposed and existing governmental laws and regulations relating to greenhouse gas and other air emissions may subject certain of our operations and customers to significant new costs and restrictions on their operations and may reduce sales of our products.
We are also required to effect electronic transmissions with third parties including clients, vendors and others with whom we do business, and with our Board.
Our business depends on the proper functioning and availability of our information technology platform, including communications and data processing systems. We are also required to effect electronic transmissions with third parties including clients, vendors and others with whom we do business, and with our Board.
We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of compliance.
We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of compliance. Changes to the production equipment at our chemical facilities that are required in order to comply with health, safety and environmental regulations may require substantial capital expenditures.
All statements in this report other than statements of historical fact are Forward-Looking Statements that are subject to known and unknown risks, uncertainties and other factors which could cause actual results and performance of the Company to differ materially from such statements. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “may,” “could” and similar expressions identify Forward-Looking Statements.
All statements in this report other than statements of historical fact are Forward-Looking Statements that are subject to known and unknown risks, uncertainties and other factors, many of which are difficult to predict or outside of the Company’s control, which could cause actual results and performance of the Company to differ materially from those expressed in, or implied or projected by, such statements.
Legislative, regulatory, judicial or social influences related to the COVID-19 pandemic may affect our financial performance and our ability to conduct our business. An extended period of remote work arrangements due to the COVID-19 pandemic could also exacerbate cybersecurity risks. Our business depends on the proper functioning and availability of our information technology platform, including communications and data processing systems.
Legislative, regulatory, judicial or social influences related to the pandemic may affect our financial performance and our ability to conduct our business. An extended period of remote work arrangements due to a pandemic or other public health crises, including as a result of government and business responses to such events, could also exacerbate cybersecurity risks.
Series D Preferred - The Series D 6% cumulative convertible Class C preferred stock. Series E Redeemable Preferred - The 14% Series E Redeemable Preferred stock with participating rights and liquidating distributions based on a certain number of shares of our common stock.
Series E Redeemable Preferred - The 14% Series E Redeemable Preferred stock with participating rights and liquidating distributions based on a certain number of shares of our common stock. 24 Series F Redeemable Preferred - The Series F Redeemable Preferred stock with one share to vote as a single class on all matters with our common stock equal to 456,225 shares of our common stock.
However, recent disruptions in the global supply chain and increased inflation in the United States have led to reduced availability and increased prices of natural gas and they may continue to have an impact in the near term in fiscal year 2023.
However, recent disruptions in the global supply chain may continue to have an impact in the near term in fiscal year 2024.
Golsen, Barry H. Golsen and certain of their related parties, as defined in the Board Representation and Standstill Agreement, as amended. Hallowell Facility - A chemical facility previously owned by two of our subsidiaries located in Kansas. HDAN - High density ammonium nitrate prills used in the agricultural industry. Indenture - The agreement governing the 6.25% Senior Secured Notes. J.
Golsen and certain of their related parties, as defined in the Board Representation and Standstill Agreement, as amended. HDAN - High density ammonium nitrate prills used in the agricultural industry.
Although we have employment agreements with certain of our principal executive officers, including Mark T. Behrman and Cheryl A. Maguire, we do not have employment agreements with all of our key personnel. The loss of any of our principal executive officers could have a material adverse effect on us.
Maguire, we do not have employment agreements with all of our key personnel. The loss of any of our principal executive officers could have a material adverse effect on us. We believe that our future success will depend in large part on our continued ability to attract and retain highly skilled and qualified personnel.
If any such effects, whether anthropogenic or otherwise, were to occur in areas where we or our clients operate, they could have an adverse effect on our business, financial condition and results of operations. A major factor underlying the current high level of demand for our nitrogen-based fertilizer products is the production of ethanol.
If any such effects, whether anthropogenic or otherwise, were to occur in areas where we or our clients operate, they could have an adverse effect on our business, financial condition and results of operations. The Russian invasion of the Ukraine may expand into a broader international conflict that could adversely affect multiple channels of commerce and markets.
It is possible that supply chain, trade routes and the markets we currently serve could be adversely affected, which, in turn, could materially, adversely affect the our business operations and financial performance. A substantial portion of our sales is dependent upon a limited number of customers. For 2022, nine customers accounted for approximately 58% of our consolidated net sales.
It is possible that supply chain, trade routes and the markets we currently serve could be further adversely affected, which, in turn, could materially, adversely affect our business operations and financial performance. A major factor underlying the current high level of demand for our nitrogen-based fertilizer products is the production of ethanol.
Employee turnover and associated costs of rehiring, the loss of human capital and expertise through attrition and the reduced ability to attract talent could impair our ability to operate our business. We are subject to collective bargaining agreements with certain employees. Approximately 32% of our employees are covered by collective bargaining agreements.
In recent years, as competition for employees in our industry has increased, we may experience higher than anticipated levels of employee attrition. Employee turnover and associated costs of rehiring, the loss of human capital and expertise through attrition and the reduced ability to attract talent could impair our ability to operate our business.
As a result, these planned and unplanned downtime events at our chemical facilities have in the past and could in the future adversely affect our liquidity, operating results and financial condition. LSB is a holding company and depends, in large part, on receiving funds from its subsidiaries to fund our indebtedness.
As a result, these planned and unplanned downtime events at our chemical facilities have in the past and could in the future adversely affect our liquidity, operating results and financial condition. Risks Relating to Our Business Pandemics or other public health crises have and may in the future disrupt our business, which could adversely affect our financial performance.
Secured Promissory Note due 2021 - A secured promissory note between EDC and a lender which, matured in March 2021. Senior Secured Notes - Senior secured notes with a stated interest rate of 9.625%, which were redeemed in October 2021. Series B Preferred - The Series B 12% cumulative convertible Class C Preferred stock.
Senior Secured Notes - The senior secured notes issued on October 14, 2021 and March 8, 2022, with an interest rate of 6.25%, which mature in October 2028. Series B Preferred - The Series B 12% cumulative convertible Class C Preferred stock. Series D Preferred - The Series D 6% cumulative convertible Class C preferred stock.
We may not be able to renew our collective bargaining agreements on terms similar to current terms or renegotiate collective bargaining agreements on terms acceptable to us. The prolonged failure to renew or renegotiate a collective bargaining agreement could result in work stoppages.
We are subject to collective bargaining agreements with certain employees. Approximately 28% of our employees are covered by collective bargaining agreements. We may not be able to renew our collective bargaining agreements on terms similar to current terms or renegotiate collective bargaining agreements on terms acceptable to us.
Small Business Administration. SBT Investors - SBT Investors LLC, an affiliate of Eldridge. SEC - The U.S. Securities and Exchange Commission. Secured Financing due 2023 - A secured financing arrangement between EDC and an affiliate of LSB Funding L.L.C. which matures in June 2023.
Pryor Facility - Our chemical production facility located in Pryor, Oklahoma. RSU - Restricted stock unit. SEC - The U.S. Securities and Exchange Commission. Secured Financing due 2023 - A secured financing arrangement between EDC and an affiliate of LSB Funding, which was repaid in April 2023.
Risks Relating to Human Capital Loss of key personnel and other employees could negatively affect our business. Our performance has been and will continue to be dependent upon the efforts of our principal executive officers. We cannot ensure that our principal executive officers will continue to be available.
Our performance has been and will continue to be dependent upon the efforts of our principal executive officers. We cannot ensure that our principal executive officers will continue to be available. Although we have employment agreements with certain of our principal executive officers, including Mark T. Behrman and Cheryl A.
If new debt is added to our current debt levels, the related risks that we now face could intensify.
If new debt is added to our current debt levels, the related risks that we now face could intensify. Borrowings under our New Revolving Credit Facility Loan bear interest at a variable rate, which subjects us to interest rate risk and could cause our debt service obligations to increase.
Borrowings under our Working Capital Revolver Loan bear interest at a variable rate, which subjects us to interest rate risk and could cause our debt service obligations to increase. 16 All of our borrowings under our Working Capital Revolver Loan are at variable rates of interest and expose us to interest rate risk.
All of our borrowings under our New Revolving Credit Facility Loan are at variable rates of interest and expose us to interest rate risk. If interest rates continue to increase, our debt service obligations on this variable rate indebtedness would increase even though the 18 amount borrowed remained the same.
Baytown Facility - The nitric acid production facility located in Baytown, Texas. Board - Board of Directors CAO - A consent administrative order. CARES - Coronavirus Aid, Relief, and Economic Security Act. CEO - Chief Executive Officer. Cherokee Facility - Our chemical production facility located in Cherokee, Alabama. Chevron - Chevron Environmental Management Company.
Defined Terms The following is a list of terms used in this report. AN - Ammonium nitrate. ASC - Accounting Standard Codification. Baytown Facility - The nitric acid production facility located in Baytown, Texas. Board - The Board of Directors of the Company. CEO - Chief Executive Officer. Cherokee Facility - Our chemical production facility located in Cherokee, Alabama.
If interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same. Although we may enter into interest rate swaps to reduce interest rate volatility, we cannot provide assurances that we will be able to do so or that such swaps will be effective. 5.
Although we may enter into interest rate swaps to reduce interest rate volatility, we cannot provide assurances that we will be able to do so or that such swaps will be effective. Risks Relating to Human Capital Loss of key personnel and other employees could negatively affect our business.
WASDE - World Agricultural Supply and Demand Estimates Report. West Fertilizer - West Fertilizer Company. Working Capital Revolver Loan - Our secured revolving credit facility. 2005 Agreement - A death benefit agreement with Jack E.
West Fertilizer - West Fertilizer Company. 2005 Agreement - A death benefit agreement with Jack E.
If we are unsuccessful in integrating acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected. 3. Risks Relating to Legal, Regulatory and Compliance Matters Our operations and the production and handling of our products involve significant risks and hazards.
If we are unsuccessful in integrating acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected. There can be no assurance that we will repurchase shares of common stock or that we will repurchase shares at favorable prices. In May 2023, our Board authorized a $150 million stock repurchase program.

… 48 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−1 removed1 unchanged
Biggest changeP ROPERTIES The following table presents our significant properties for 2022: Facility El Dorado Facility Cherokee Facility Pryor Facility Baytown Facility Chemical Distribution Centers Location El Dorado, AR Cherokee, AL Pryor, OK Baytown, TX (A) Plant Area (acres) 150 160 47 2 Site Area (acres) 1,400 1,300 104 (B) Site Status Owned Owned Owned Operating Agreement (A) Ammonia Production Capacity (tons) 493,000 (C) 188,000 (D) 246,000 (E) Not Applicable (A) We distribute our agricultural products through 7 wholesale and retail distribution centers, with 6 of the centers located in Texas (5 of which we own and 1 of which we lease); and 1 center located in Missouri (owned).
Biggest changeP ROPERTIES The following table presents our significant properties for 2023: Facility El Dorado Facility Cherokee Facility Pryor Facility Chemical Distribution Centers Location El Dorado, AR Cherokee, AL Pryor, OK (A) Plant Area (acres) 150 160 47 Site Area (acres) 1,400 1,300 104 Site Status Owned Owned Owned (A) Annual Ammonia Production Capacity (tons) (E) 493,000 (B) 188,000 (C) 246,000 (D) _____________________________ (A) We distribute our agricultural products through 6 wholesale and retail distribution centers, with 5 of the centers located in Texas (all of which we own); and 1 center located in Missouri (owned).
(B) This facility is located within a chemical production complex owned by Covestro. (C) The ammonia production capacity is based on optimal 1,350 tons per day of production for the year but excludes 27 Turnaround days during 2022. (D) The ammonia production capacity is based on 515 tons per day of production for the year.
(B) The ammonia production capacity is based on 1,350 tons per day of production for the year. (C) The ammonia production capacity is based on 515 tons per day of production for the year. (D) The ammonia production capacity is based on 675 tons per day of production for the year.
Removed
The Cherokee Facility did not perform a Turnaround during 2022. (E) The ammonia production capacity is based on 675 tons per day of production for the year but excludes 38 Turnaround days during 2022. For 2022, our facilities produced approximately 732,000 tons of ammonia.
Added
(E) Reflects production at full daily capacity throughout the entire year. There were no Turnarounds performed in 2023 at any of our facilities. For 2023, our facilities produced approximately 816,000 tons of ammonia. In addition, we currently lease the office space housing our headquarters in Oklahoma City, Oklahoma.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+3 added−2 removed0 unchanged
Biggest changeThe following table summarizes the Company’s purchase of its common stock for the year ended December 31, 2022: Period (a) Total Number of Shares Purchased (b) Average Price Paid per Share (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Program (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program May 1 – May 31, 2022 29,213 $ 19.98 29,213 $ 49,416,245 June 1 – June 30, 2022 719,224 $ 17.81 719,224 36,606,634 July 1 – July 31, 2022 125,100 $ 13.59 125,100 34,907,150 August 1 – August 31, 2022 6,590,288 12.57 6,590,288 2,086,186 September 1 – September 30, 2022 139,054 15.31 139,054 — October 1 - October 31, 2022 — — — 75,000,000 November 1 - November 30, 2022 3,871,516 13.04 3,871,516 24,483,801 December 1 - December 31, 2022 1,693,399 14.51 1,693,399 — Total 13,167,794 $ 13.30 13,167,794 $ — (1) During May 2022, our Board authorized a $50 million stock repurchase program.
Biggest changeThe following table summarizes the Company’s purchase of its common stock for the year ended December 31, 2023: Period (a) Total Number of Shares (or Units) Purchased (b) Average Price Paid per Share (or Unit) (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Program (1) (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Program May 1 – May 31, 2023 1,173,778 $ 9.49 1,173,778 $ 138,855,631 June 1 – June 30, 2023 621,581 $ 9.77 621,581 132,781,963 July 1 – July 31, 2023 59,911 $ 9.78 59,911 132,195,998 August 1 – August 31, 2023 — — — 132,195,998 September 1 – September 30, 2023 — — — 132,195,998 October 1 - October 31, 2023 — — — 132,195,998 November 1 - November 30, 2023 934,867 8.50 934,867 124,249,670 December 1 - December 31, 2023 304,155 9.07 304,155 121,489,988 Total 3,094,292 $ 9.21 3,094,292 _____________________________ 1.
This number does not include investors whose ownership is recorded in the name of their brokerage company. Equity Compensation Plans Discussions relating to our equity compensation plans under Item 12 of Part III are incorporated by reference to our definitive proxy statement which we intend to file with the SEC on or before March 28, 2023.
This number does not include investors whose ownership is recorded in the name of their brokerage company. Equity Compensation Plans Discussions relating to our equity compensation plans under Item 12 of Part III are incorporated by reference to our definitive proxy statement which we intend to file with the SEC on or before April 9, 2024.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is trading on the New York Stock Exchange under the symbol “LXU.” Stockholders As of February 17, 2023, we had approximately 335 record holders of our common stock which was obtained from our transfer agent.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is trading on the New York Stock Exchange under the symbol “LXU.” Stockholders As of February 16, 2024, we had approximately 336 record holders of our common stock which was obtained from our transfer agent.
Removed
Sale of Unregistered Securities During 2022, we completed the repurchase authorizations by repurchasing approximately 13.2 million shares at an average cost of approximately $13 per share, including fees, including 9.0 million shares that were repurchased at an average cost of approximately $13 per share in connection with public offerings by LSB Funding and SBT Investors, each of which is an affiliate of Eldridge.
Added
Dividends We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash dividends on our outstanding common stock in the near future. Our Board has not made a decision whether or not to pay dividends on our common stock in 2024.
Removed
In August 2022, our Board authorized an increase in the size of the stock repurchase program to $100 million. In October 2022, our Board approved another expansion of the stock repurchase program , authorizing us to repurchase an additional $75 million of our outstanding common stock under the stock repurchase program. ITEM 6. [RESERVED] 25
Added
Sale of Unregistered Securities During 2023, we repurchased approximately 3.1 million shares at an average cost of $9.21 per share. During our fiscal quarter ended December 31, 2023, we repurchased approximately 1.2 million shares at an average cost of $8.64 per share.
Added
In May 2023, our Board authorized a $150 million stock repurchase program. The stock repurchase program is discussed in Item 7. Management Discussion and Analysis – Liquidity and Capital Resources – Capitalization and in Note 1 – Summary of Significant Accounting Policies. The repurchase program does not have an expiration date and can be discontinued at any time.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

88 edited+74 added−47 removed17 unchanged
Biggest changeYear Ended December 31, 2022 Compared to Year Ended December 31, 2021 The following table contains certain financial information: Percentage 2022 2021 Change Change (Dollars In Thousands) Net sales: AN & Nitric Acid $ 315,679 $ 228,754 $ 86,925 38 % Urea ammonium nitrate (UAN) 239,463 123,840 115,623 93 % Ammonia 284,005 155,159 128,846 83 % Other 62,564 48,486 14,078 29 % Total net sales $ 901,711 $ 556,239 $ 345,472 62 % Gross profit: Adjusted gross profit (1) 444,384 217,515 226,869 104 % Depreciation and amortization (2) (66,782 ) (68,583 ) 1,801 (3 )% Turnaround expense (29,235 ) (9,953 ) (19,282 ) Total gross profit 348,367 138,979 209,388 151 % Selling, general and administrative expense 39,428 38,028 1,400 4 % Other (income) expense, net 561 (97 ) 658 Operating income 308,378 101,048 207,330 205 % Interest expense, net 46,827 49,378 (2,551 ) (5 )% Net loss on extinguishments of debt 113 10,259 (10,146 ) Non-operating other income (expense), net (8,083 ) 2,422 (10,505 ) Provision (benefit) for income taxes 39,174 (4,556 ) 43,730 Net income $ 230,347 $ 43,545 $ 186,802 429 % Other information: Gross profit percentage (3) 38.6 % 25.0 % 13.6 % Adjusted gross profit percentage (3) 49.3 % 39.1 % 10.2 % Property, plant and equipment expenditures $ 45,833 $ 35,128 $ 10,705 30 % (1) Represents a non-GAAP measure.
Biggest changeYear Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table contains certain financial information: Percentage 2023 2022 Change Change (Dollars In Thousands) Net sales: AN & Nitric Acid $ 221,818 $ 315,679 $ (93,861 ) (30 )% Urea ammonium nitrate (UAN) 154,206 239,463 (85,257 ) (36 )% Ammonia 166,581 284,005 (117,424 ) (41 )% Other 51,104 62,564 (11,460 ) (18 )% Total net sales $ 593,709 $ 901,711 $ (308,002 ) (34 )% Gross profit: Adjusted gross profit (1) 157,075 444,384 (287,309 ) (65 )% Depreciation and amortization (2) (68,385 ) (66,782 ) (1,603 ) 2 % Turnaround expense (2,430 ) (29,235 ) 26,805 N/M Total gross profit 86,260 348,367 (262,107 ) (75 )% Selling, general and administrative expense 36,580 39,428 (2,848 ) (7 )% Other (income) expense, net (2,097 ) 561 (2,658 ) (474 )% Operating income 51,777 308,378 (256,601 ) (83 )% Interest expense, net 41,136 46,827 (5,691 ) (12 )% (Gain) loss on extinguishments of debt (8,644 ) 113 (8,757 ) N/M Non-operating other income, net (14,611 ) (8,083 ) (6,528 ) 81 % Provision for income taxes 5,973 39,174 (33,201 ) N/M Net income $ 27,923 $ 230,347 $ (202,424 ) (88 )% Other information: Gross profit percentage (3) 14.5 % 38.6 % (24.1 )% Adjusted gross profit percentage (3) 26.5 % 49.3 % (22.8 )% Property, plant and equipment expenditures $ 67,603 $ 45,833 $ 21,770 48 % _____________________________ N/M Not meaningful.
The resulting low carbon emission product, we believe, can be sold at a premium to agricultural, industrial, mining, power generation and marine customers seeking to reduce their carbon footprint and potentially capitalize on government incentives.
The resulting low carbon emission product, we believe, can be sold at a premium to power generation, marine, industrial, mining and agricultural customers seeking to reduce their carbon footprint and potentially capitalize on government incentives.
The marketing year is the twelve-month period during which a crop normally is marketed. For example, the marketing year for the current corn crop is from September 1 of the current year to August 31 of the next year. The year begins at the harvest and continues until just before harvest of the following year.
The marketing year is the twelve-month period during which a crop normally is 31 marketed. For example, the marketing year for the current corn crop is from September 1 of the current year to August 31 of the next year. The year begins at the harvest and continues until just before harvest of the following year.
Key Operating Initiatives for 2023 We expect our future results of operations and financial condition to benefit from the following key initiatives: • Investing to improve Environmental, Health & Safety and Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality. ▪ We believe that our operational progress over the past several years represents proof that high safety standards not only enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant performance.
Key Operating Initiatives for 2024 We expect our future results of operations and financial condition to benefit from the following key initiatives: • Investing to improve Environmental, Health & Safety and Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality. ▪ We believe that our operational progress over the past several years represents proof that high safety standards not only enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant performance.
It is reasonably possible that the estimates and assumptions utilized as of December 31, 2022, could change in the near term. The more critical areas of financial reporting affected by management's judgment, estimates and assumptions include the following: Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur.
It is reasonably possible that the estimates and assumptions utilized as of December 31, 2023, could change in the near term. The more critical areas of financial reporting affected by management's judgment, estimates and assumptions include the following: Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur.
In addition, we recognize contingent gains when such gains are realized or realizable and earned. We are involved in various legal matters that require management to make estimates and assumptions as discussed in Note 8. It is reasonably possible that the actual costs could be significantly different than our estimates.
In addition, we recognize contingent gains when such gains are realized or realizable and earned. We are involved in various legal matters that require management to make estimates and assumptions as discussed in Note 7. It is reasonably possible that the actual costs could be significantly different than our estimates.
We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash dividends on our outstanding common stock in the near future. Our Board has not made a decision whether or not to pay dividends on our common stock in 2023.
We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash dividends on our outstanding common stock in the near future. Our Board has not made a decision whether or not to pay dividends on our common stock in 2024.
In addition, sequestering more than 450,000 metric tons of CO 2 annually is expected to enable LSB to produce over 375,000 metric tons of blue ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia.
In addition, sequestering more than 450,000 metric tons of CO 2 annually is expected to enable LSB to produce over 375,000 metric tons of low-carbon ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia.
Expenses Associated with Environmental Regulatory Compliance We are subject to numerous federal, state and local laws and regulations, including matters regarding environmental, health and safety matters. As a result, we incurred expenses of $3.9 million in 2022 in connection with environmental projects.
Expenses Associated with Environmental Regulatory Compliance We are subject to numerous federal, state and local laws and regulations, including matters regarding environmental, health and safety matters. As a result, we incurred expenses of $4.3 million in 2023 in connection with environmental projects, compared with $3.9 million in 2022.
We continue to evaluate the recent rising costs of freight domestically. As a result of increases in demand for available rail, truck and barge options to transport product, primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins, if we were unable to fully pass through these costs to our customers.
We continue to evaluate the recent rising costs of freight domestically. As a result of increases in demand for available rail, truck and barge options to transport product, primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins, where we are unable to fully pass through these costs to our customers.
We evaluate assets and companies that can provide us with geographic expansion, extend an existing product line, add one or more new product lines, leverage our existing ammonia production capabilities, or complement our existing business lines, among other accretive opportunities.
We may consider assets and companies that can provide us with geographic expansion, extend an existing product line, add one or more new product lines, leverage our existing ammonia production capabilities, or complement our existing business lines, among other accretive opportunities.
Progress towards this goal would enable us to produce greater volumes of product for sale while lowering our unit cost of production thereby increasing our overall profitability. Additionally, our product quality program continues to focus on providing products to our customers that meet our quality standards. • Continue Broadening the Distribution and Optimization of our Product Mix.
Progress towards these goals would enable us to produce greater volumes of product for sale while lowering our unit cost of production thereby increasing our overall profitability. Additionally, our product quality program continues to focus on providing products to our customers that meet our quality standards. • Continue Broadening the Distribution and Optimization of our Product Mix.
Lapis, backed by Cresta Fund Management, a Dallas-based middle-market infrastructure investment firm, will make 100% of the capital investment required for the project development. The project is expected to be completed by 2025, subject to the approval of a Class VI permit, at which time CO 2 injections are expected to begin.
Lapis, backed by Cresta Fund Management, a Dallas-based middle-market infrastructure investment firm, will invest the majority of the capital required for project development. The project is expected to be completed by 2025, subject to the approval of a Class VI permit, at which time CO 2 injections are expected to begin.
New Accounting Pronouncements Refer to Note 1 for recently adopted and issued accounting standards. 36 Critical Accounting Policies and Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and disclosures of contingencies and fair values.
New Accounting Pronouncements Refer to Note 1 – Summary of Significant Accounting Policies for recently adopted and issued accounting standards. 39 Critical Accounting Policies and Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and disclosures of contingencies and fair values.
We believe that this, combined with continued expansion of our customer relationships and the robust market analysis capabilities we have developed, will make us more effective in identifying and capitalizing on the most profitable distribution opportunities for our products.
We believe that this, combined with continued expansion of our customer relationships, the robust market analysis capabilities we have developed, and the establishment of in-market tank storage and distribution terminals, will make us more effective in identifying and capitalizing on the most profitable distribution opportunities for our products.
At December 31, 2022 and 2021, liabilities totaling $0.5 million have been accrued relating to these matters. It is also reasonably possible that the estimates and assumptions utilized as of December 31, 2022 could change in the near term. Actual results could differ materially from these estimates and judgments, as additional information becomes known.
As of December 31, 2023 and 2022, liabilities totaling $0.4 million and $0.5 million, respectively, have been accrued relating to these matters. It is also reasonably possible that the estimates and assumptions utilized as of December 31, 2023 could change in the near term. Actual results could differ materially from these estimates and judgments, as additional information becomes known.
Blue and green ammonia can be used as zero carbon fuel in the maritime sector, as a carbon free fertilizer and as a coal substitute in power generation. If ammonia were to be adopted for these and other energy needs globally, some studies have indicated that future demand could increase significantly from current levels of global annual production of ammonia.
Low-carbon ammonia can be used as a coal and natural gas substitute in power generation, a zero-carbon fuel in the maritime sector, and as a carbon free fertilizer. If ammonia were to be adopted for these and other energy needs globally, some studies have indicated that future demand could increase from current levels of global annual production of ammonia.
The amounts exclude unallocated depreciation and amortization and Turnaround expenses which we believe are not reflective of our operating performance in a given period. (2) Represents amount classified as cost of sales.
(1) Represents a non-GAAP measure. The amounts exclude unallocated depreciation and amortization and Turnaround expenses which we believe are not reflective of our operating performance in a given period. (2) Represents amount classified as cost of sales.
While economic concerns persist for 2023, we believe that we have a meaningful degree of downside protection from the potential impacts of a recession given the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
While economic concerns persist for 2024, we believe that for both our industrial and mining products we have a meaningful degree of downside protection from the potential impacts of a recession given the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
See discussion under Note 13 regarding the conversion and payment of the accumulated dividends during 2021 relating to the Series D 6% cumulative convertible Class C preferred stock (the “Series D Preferred”) and Series B 12% cumulative convertible Class C Preferred Stock (the “Series B Preferred”).
See discussion under Note 11 – Related Party Transactions regarding the conversion and payment of the accumulated dividends during 2021 relating to the Series D 6% cumulative convertible Class C preferred stock (the “Series D Preferred”) and Series B 12% cumulative convertible Class C Preferred Stock (the “Series B Preferred”).
For 2023, we expect to incur expenses ranging from $4.5 million to $4.9 million in connection with additional environmental projects. However, it is possible that the actual costs could be significantly different than our estimates. Dividends See discussions under Note 1 regarding the common stock Special Dividend completed in 2021.
For 2024, we expect to incur expenses ranging from $3.9 million to $4.5 million in connection with additional environmental projects. However, it is possible that the actual costs could be significantly different than our estimates. Dividends See discussions under Note 1 – Summary of Significant Accounting Policies regarding the common stock Special Dividend completed in 2021.
However, certain conditions exist which may result in a loss, but which will only be resolved when future events occur relating to these matters. We are involved in various environmental matters that require management to make estimates and assumptions, including matters discussed under footnote A of Note 8.
However, certain conditions exist which may result in a loss, but which will only be resolved when future events occur relating to these matters. We are involved in various environmental matters that require management to make estimates and assumptions, including matters discussed in Note 7 – Commitments and Contingencies.
The USDA also lowered the expected yield for the 2022 Harvest, down approximately 2% from a year ago. The following February 2023 estimates are associated with the corn market: 2023 Crop 2022 Crop 2021 Crop (2022 Harvest) (2021 Harvest) Percentage (2020 Harvest) Percentage February Report (1) February Report (1) Change (2) February Report (1) Change (3) U.S.
The USDA also raised the expected yield for the 2023 Harvest, up approximately 2% from a year ago. The following February 2024 estimates are associated with the corn market: 2024 Crop 2023 Crop 2022 Crop (2023 Harvest) (2022 Harvest) Percentage (2021 Harvest) Percentage February Report (1) February Report (1) Change (2) February Report (1) Change (3) U.S.
The following table shows the annual volume of natural gas we purchased and the average cost per MMBtu: 2022 2021 Natural gas volumes (MMBtu in millions) 27.8 28.3 Natural gas average cost per MMBtu $ 6.58 $ 3.51 Transportation Costs Costs for transporting nitrogen-based products can be significant relative to their selling price.
The following table shows the annual volume of natural gas we purchased and the average cost per MMBtu: 2023 2022 Natural gas volumes (MMBtu in millions) 29.8 27.8 Natural gas average cost per MMBtu $ 4.16 $ 6.58 Transportation Costs Costs for transporting nitrogen-based products can be significant relative to their selling price.
Our contractual agreements with industrial customers that specify minimum volumes and our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand.
Demand for our industrial and mining products remains stable despite growing global recessionary forces. Our contractual agreements with industrial customers that specify minimum volumes and our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand.
We plan to invest additional capital at all three of our facilities during 2023 to build upon the success we have had in implementing enhanced safety programs during the last several years. ▪ We have multiple initiatives currently underway focused on continuing to improve the reliability of our plants as we advance towards our 95% on-stream operating rate goal.
We have been investing and plan to continue to invest additional capital at all three of our facilities during 2024 to build upon the success we have had in implementing enhanced safety programs during the last several years. ▪ We have multiple initiatives currently underway focused on continuing to improve the reliability of our plants as we advance towards our 95% ammonia on-stream operating rate goal and increase our production volumes of downstream products.
Our 2022 average industrial selling prices for most of our products were also higher compared to the same period of 2021, primarily driven by the $573 per metric ton increase in the Tampa Ammonia benchmark price, as many of our industrial contracts are indexed to the Tampa Ammonia benchmark price.
Our 2023 average industrial selling prices for most of our products were also lower compared to the same period of 2022, primarily driven by the $655 per metric ton decrease in the average annual Tampa Ammonia benchmark price, as many of our industrial contracts are indexed to the Tampa Ammonia benchmark price.
These forward purchase contracts are generally either fixed-price or index-price, short-term in nature and for a fixed supply quantity. We are able to purchase natural gas at competitive prices due to our connections to large distribution systems and their proximity to interstate pipeline systems.
These forward purchase contracts are generally either fixed-price or index-price, short-term in nature and for a fixed supply quantity. We are able to purchase natural gas at competitive prices due to our connections to large distribution systems and their proximity to interstate pipeline systems. As of December 31, 2023, we do not have any natural gas forward contacts outstanding.
Natural Gas Prices Natural gas is the primary feedstock used to produce nitrogen fertilizers at our manufacturing facilities. In recent years, U.S. natural gas reserves have increased significantly due to, among other factors, advances in extracting shale gas, which has reduced and stabilized natural gas prices, providing North America with a cost advantage over certain imports.
Natural Gas Prices Natural gas is the primary resource for conversion and manufacturing production of our nitrogen products. In recent years, U.S. natural gas reserves have increased significantly due to, among other factors, advances in extracting shale gas, which has reduced and stabilized natural gas prices, providing North America with a cost advantage over certain imports.
We present the following information about our results of operations. Net sales to unaffiliated customers are reported in the consolidated financial statements and gross profit represents net sales less cost of sales. Net sales are reported on a gross basis with the cost of freight being recorded in cost of sales.
Net sales to unaffiliated customers are reported in the consolidated financial statements and gross profit represents net sales less cost of sales. Net sales are reported on a gross basis with the cost of freight being recorded in cost of sales.
See a more detailed discussion below under “Key Industry Factors.” Key Industry Factors Supply and Demand Fertilizer The price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation and storage, weather conditions, competitive pricing and the availability of imports.
The price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation and storage, weather conditions, competitive pricing and the availability of imports.
The reduction of greenhouse gas emissions, particularly related to carbon dioxide, has been and we expect will increasingly become a global environmental priority as part of efforts to stem the harmful effects of climate change.
The reduction of greenhouse gas emissions, particularly related to carbon dioxide, has been and we expect will increasingly become a global environmental priority.
In January of 2023, we took over direct distribution of our Pryor facility’s UAN production following several years of working with a third party to sell the product.
In January of 2023, we took over direct distribution of our Pryor facility’s UAN production, and in July 2023 we did the same for our Cherokee facility’s UAN production, following several years of working with third parties to sell the product.
Net Cash Flow from Investing Activities Net cash used by investing activities was $369.7 million for 2022 compared to $34.7 million for 2021, a change of $335.0 million. For 2022, net cash used primarily relates to purchases of short-term investments of $486.1 million and expenditures for PP&E of $45.8 million partially offset by short-term investment maturities of $158.9 million.
For 2022, net cash used primarily relates to purchases of short-term investments of $486.1 million and expenditures for PP&E of $45.8 million partially offset by short-term investment maturities of $158.9 million. Net Cash Flow from Financing Activities Net cash used by financing activities was $157.7 million for 2023 compared to $5.7 million provided in 2022, a change of $163.4 million.
Once operational, the project at the El Dorado site will initially capture and permanently sequester more than 450,000 metric tons of CO 2 per year in underground saline aquifers, with the potential to increase this quantity based on a potential debottlenecking project at the facility.
Once operational, the project at the El Dorado site will initially capture and permanently sequester more than 450,000 metric tons of CO 2 per year in underground saline aquifers.
You should carefully review and consider the information in the MD&A of our 2021 Form 10-K, filed with the SEC on February 24, 2022, as amended by the Form 10-K/A filed on March 25, 2022 for an understanding of our results of operations and liquidity discussions and analysis comparing 2021 to 2020.
You should carefully review and consider the information in the MD&A of our 2022 Form 10-K, filed with the SEC on February 23, 2023 for an understanding of our results of operations and liquidity discussions and analysis comparing 2022 to 2021. We present the following information about our results of operations.
As of December 31, 2022, we have agreed to indemnify the sureties for payments, up to $9.7 million, made by them in respect of such bonds. All of these insurance bonds are expected to expire or be renewed in 2023.
As of December 31, 2023, we have agreed to indemnify the sureties for payments, up to $9.7 million, made by them in respect of such bonds.
We are actively engaged in evaluating and pursuing various opportunities to acquire strategic assets or companies, where we believe those acquisitions will enhance the value of the Company and provide attractive returns.
We may evaluate opportunities to acquire strategic assets or companies where we believe those acquisitions will enhance the value of the Company and provide attractive returns.
For 2022, the effective tax rate is less than the statutory rate primarily due to the impact of valuation allowances releases.
For 2022, the effective tax rate is less than the statutory rate primarily due to the impact of valuation allowances releases. Also see discussion in Note 6 – Income Taxes.
In May 2022 we entered into agreements with Thyssenkrupp Uhde USA, LLC and Bloom Energy, (NYSE:BE) to develop a project to produce approximately 30,000 metric tons of zero-carbon or “green” ammonia per year at our Pryor, Oklahoma facility.
We will also collaborate on various advocacy, education, and outreach efforts regarding the use of ammonia as a fuel. In May 2022, we entered into agreements with Thyssenkrupp Uhde USA, LLC and Bloom Energy Corporation, to develop a project to produce approximately 30,000 metric tons of zero-carbon or “green” ammonia per year at our Pryor, Oklahoma facility.
According to the February Report, farmers planted approximately 88.6 million acres of corn in 2022, down 5% compared to the 2021 planting season. In addition, the USDA estimates the U.S. ending stocks for the 2022 Harvest will be approximately 32 million metric tons, an 8% decrease from the 2021 Harvest.
According to the February Report, farmers planted approximately 94.6 million acres of corn in 2023, up 7% compared to the 2022 planting season. According to the February Report, the USDA estimates the U.S. ending stocks for the 2023 Harvest will be approximately 55 million metric tons, an almost 60% increase from the 2022 Harvest.
Gross Profit As noted in the table above, we recognized a gross profit of $348 million for 2022 compared to $139 million for the same period in 2021, or a $209 million improvement. Overall, our gross profit percentage was 39% for 2022 compared to 25% for 2021.
Gross Profit As noted in the table above, we recognized a gross profit of $86.3 million for 2023 compared to $348.4 million for the same period in 2022, or a $262.1 million reduction. Overall, our gross profit percentage was 15% for 2023 compared to 39% for 2022.
For 2021, net cash provided primarily consists of proceeds of $500 million from the New Notes, $16.7 million from insurance premium short-term financing partially offset by $435 million redemption of the Old Notes, payments of debt-related costs of $27.3 million, payments on other long-term debt and short-term financing of $28.0 million, payments of costs of $7.4 million related to the Exchange Transaction, and payments of $6.1 million for other financing activities. 33 Capitalization The following is our total current cash, cash equivalents and short-term investments long-term debt and stockholders’ equity: December 31, 2022 2021 (In Millions) Cash and cash equivalents $ 63.8 $ 82.1 Short-term investments $ 330.6 $ — Total cash, cash equivalents and short-term investments $ 394.4 $ 82.1 Revolving credit facility and long-term debt: Working Capital Revolver Loan — — Senior Secured Notes due 2028 (1) 700.0 500.0 Secured Financing due 2023 4.2 7.7 Secured Financing Agreement due 2025 19.3 24.0 Secured Loan Agreement due 2025 — 5.3 Other 1.1 0.3 Unamortized discount and debt issuance costs (12.3 ) (9.7 ) Total long-term debt, including current portion, net 712.3 $ 527.6 Total stockholders' equity 515.9 $ 460.5 (1) See discussions below under “Loan Agreements" relating to the debt agreement.
For 2022, net cash provided primarily consists of proceeds of $200 million from the New Notes and $20.1 million from short-term financing partially offset by payments of $179.0 million for the purchase of treasury stock, payments of $30.5 million on other long-term debt and short-term financing, and payments of $4.9 million for debt-related costs. 36 Capitalization The following is our total current cash, cash equivalents and short-term investments long-term debt and stockholders’ equity: December 31, 2023 2022 (In Millions) Cash and cash equivalents $ 98.5 $ 63.8 Short-term investments 207.4 330.6 Total cash, cash equivalents and short-term investments $ 305.9 $ 394.4 Revolving credit facility and long-term debt: New Revolving Credit Facility $ — $ — Prior Revolving Credit Facility — — Senior Secured Notes due 2028 (1) 575.0 700.0 Secured Financing Agreement due 2025 14.1 19.3 Secured Financing due 2023 — 4.2 Finance Leases 1.0 1.1 Unamortized debt issuance costs (2) (8.4 ) (12.3 ) Total long-term debt, including current portion, net $ 581.7 $ 712.3 Total stockholders' equity $ 518.3 $ 515.9 _____________________________ (1) See discussion below under “Loan Agreements" relating to the debt agreement.
Our Cherokee Facility is currently on a three-year ammonia plant Turnaround cycle completing with the next ammonia plant Turnaround planned in the third quarter of 2024. Our El Dorado Facility completed its scheduled ammonia plant Turnaround during the third quarter of 2022. Our Pryor Facility started its scheduled ammonia plant Turnaround during the third quarter which was completed in mid-October.
Our Cherokee Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2024. Our El Dorado Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2025.
The permanently sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured beginning in 2026. Once in operation, the sequestered CO 2 is expected to reduce LSB’s scope 1 GHG emissions by approximately 25% from current levels.
The permanently sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured and pay us a fee for each ton of CO 2 captured and permanently sequestered beginning in 2026.
Ending Stocks (Million metric tons) 32.2 35.0 (8.0 %) 31.4 2.5 % World Ending Stocks (Million metric tons) 295.3 306.3 (3.6 %) 292.8 0.9 % (1) Information obtained from WASDE report dated February 8, 2023 (“February Report”) for the 2022/2023 (“2023 Crop”), 2021/2022 (“2022 Crop”) and 2020/2021 (“2021 Crop”) corn marketing years.
Ending Stocks (Million metric tons) 55.2 34.6 59.5 % 35.0 57.7 % World Ending Stocks (Million metric tons) 322.1 300.3 7.3 % 310.5 3.7 % _____________________________ (1) Information obtained from WASDE report dated February 8, 2024 (“February Report”) for the 2023/2024 (“2024 Crop”), 2022/2023 (“2023 Crop”) and 2021/2022 (“2022 Crop”) corn marketing years.
Our mining products are LDAN and AN solution, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, for metals mining and to a lesser extent, for coal.
Our sales prices generally vary with the market price of ammonia or natural gas, as applicable, in our pricing arrangements with customers. Our mining products are LDAN and AN solution, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, for metals mining and to a lesser extent, for coal.
Our consolidated operating income for 2022 was $308.4 million compared to $101.0 million for 2021. The items affecting our operating results are discussed below and under “Results of Operations.” Items Affecting Comparability of Results Selling Prices Our 2022 average selling prices for our ammonia, AN & Nitric Acid, and UAN increased 102%, 61% and 90%, respectively, compared to 2021.
The items affecting our operating results are discussed below and under “Results of Operations.” Items Affecting Comparability of Results Selling Prices Our 2023 average selling prices for our ammonia, AN & Nitric Acid, and UAN decreased compared to 2022.
We believe that the combination of our cash and cash equivalents on hand, short-term investments, the availability on our revolving credit facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next twelve months. During May 2022, our Board authorized a $50 million stock repurchase program.
Liquidity – We believe that the combination of our cash and cash equivalents, short-term investments, the availability on our New Revolving Credit Facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next twelve months. As of December 31, 2023, we have approximately $305.9 million of cash and short-term investments.
Area Planted (Million acres) 88.6 93.3 (5.0 %) 90.7 (2.3 %) U.S. Yield per Acre (Bushels) 173.3 176.7 (1.9 %) 171.4 1.1 % U.S. Production (Million bushels) 13,730 15,074 (8.9 %) 14,111 (2.7 %) U.S.
Area Planted (Million acres) 94.6 88.2 7.3 % 92.9 1.8 % U.S. Yield per Acre (Bushels) 177.3 173.4 2.2 % 176.7 0.3 % U.S. Production (Million bushels) 15,342 13,651 12.4 % 15,018 2.2 % U.S.
Our adjusted gross profit percentage increased to 49% for 2022 from 39% for 2021. The increase in gross profit was primarily driven by higher sales prices for our products and increased UAN sales volumes partially offset by lower volumes of ammonia and acids products.
Our adjusted gross profit percentage decreased to 27% for 2023 from 49% for 2022. The decrease in gross profit was primarily driven by lower sales prices for our products partially offset by higher volumes for our agricultural products and lower natural gas costs during 2023 compared to 2022.
In 2023 we remain focused on our efforts to further the progress we’ve made with our safety programs to move closer to attaining zero injuries.
In 2023 our Total Recordable Injury Rate was 0.33, a significant improvement from previous years. In 2024, we remain focused on our efforts to further the progress we have made with our safety programs to move closer to attaining zero injuries.
Green ammonia is ammonia produced using renewable energy to power electrolyzers that extract hydrogen from water, resulting in zero-carbon production of ammonia, which we believe can also be sold at a premium to a variety of customers and industries around the world.
Green ammonia is ammonia produced using renewable energy to power electrolyzers that extract hydrogen from water, resulting in zero-carbon production of ammonia, which we believe can also be sold at a premium to a variety of customers and industries around the world. 28 We believe we are well-positioned to capitalize on this opportunity and become a market leader given our potential to retrofit our existing plants, which we believe can reduce our time to market for low-carbon ammonia and also reduce the upfront capital expenditures necessary to enable us to produce this product.
LIQUIDITY AND CAPITAL RESOURCES The following table summarizes our cash flow activities for 2022 and 2021: 2022 2021 Change (In Thousands) Net cash flows from operating activities $ 345,654 $ 87,627 $ 258,027 Net cash flows from investing activities $ (369,735 ) $ (34,694 ) $ (335,041 ) Net cash flows from financing activities $ 5,706 $ 12,947 $ (7,241 ) Net Cash Flow from Operating Activities Net cash provided by operating activities was $345.7 million for 2022 compared to $87.6 million for 2021, a change of $258.0 million.
Liquidity and Capital Resources The following table summarizes our cash flow activities for 2023 and 2022: 2023 2022 Change (In Thousands) Net cash flows - operating activities $ 137,521 $ 345,654 $ (208,133 ) Net cash flows - investing activities $ 57,400 $ (369,735 ) $ 427,135 Net cash flows - financing activities $ (157,658 ) $ 5,706 $ (163,364 ) Net Cash Flow from Operating Activities Net cash provided by operating activities was $137.5 million for 2023 compared to $345.7 million for 2022, a decrease of $208.1 million.
These sales are made by offering customers the opportunity to purchase product on a forward basis at prices and delivery dates that are agreed upon, with dates typically occurring within 12 months. We use this program to varying degrees during the year depending on market conditions and our view of changing price environments.
Forward Sales Contracts In certain instances, we may use forward sales of our fertilizer products to optimize our asset utilization, planning process and production scheduling. These sales are made by offering customers the opportunity to purchase product on a forward basis at prices and delivery dates that are agreed upon, with dates typically occurring within 12 months.
As a result, we are currently evaluating and developing projects that could enable us to become a producer and marketer of blue and green ammonia and other derivative products. Blue ammonia is produced using natural gas and conventional processes but includes an additional stage where the carbon dioxide emissions are captured and permanently stored in deep underground rock formations.
Low-carbon ammonia is produced using natural gas and conventional processes but includes an additional stage where the carbon dioxide emissions are captured and permanently stored in deep underground rock formations.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following MD&A should be read in conjunction with a review of the other Items included in this Form 10-K and our December 31, 2022 consolidated financial statements included elsewhere in this report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following MD&A should be read in conjunction with the consolidated financial statements and related notes included in Item 8. Financial Statements and Supplementary Data. Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in Item 8.
Settlement of Life Insurance (2022 only) In June we recognized a settlement on our company owned life insurance resulting from the approval by our insurer of a death benefit relating to the death of J. Golsen as discussed in Note 12. Turnaround Activities When a Turnaround is performed, overall results for the period are negatively impacted.
Settlement of Life Insurance (2022 only) In the second quarter of 2022, we recognized a $3.0 million settlement on our company owned life insurance resulting from the approval by our insurer of a death benefit relating to the death of J.
(2) Our proportionate share of the minimum costs to ensure capacity relating to a gathering and pipeline system.
As of December 31, 2023, we do not have any outstanding borrowings based on variable interest rates. (2) Our proportionate share of the minimum costs to ensure capacity relating to a gathering and pipeline system.
Recent Business Developments Signed Agreements for Low and No Carbon Ammonia Projects In April 2022 we entered into an agreement with Lapis Energy to develop a project to capture and permanently sequester CO 2 at our El Dorado, Arkansas facility.
We continue to have discussions with potential partners to redesign the project so that it qualifies for the recently released 45V tax credit guidance. In April 2022, we entered into an agreement with Lapis Energy to develop a project to capture and permanently sequester CO 2 at our El Dorado, Arkansas facility.
These factors can affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect product margins. From a farmers’ perspective, the demand for fertilizer is affected by the aggregate crop planting decisions and fertilizer application rate decisions of individual farmers.
From a farmers’ perspective, the demand for fertilizer is affected by the aggregate crop planting decisions and farm economics, weather and fertilizer application rate decisions of individual farmers.
For 2021, net cash used relates primarily to expenditures for PP&E. Net Cash Flow from Financing Activities Net cash provided by financing activities was $5.7 million for 2022 compared to $12.9 million for 2021, a change of $7.2 million.
Net Cash Flow from Investing Activities Net cash provided by investing activities was $57.4 million for 2023 compared to $369.7 million used for 2022, a change of $427.1 million.
We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be realized. Significant judgment is applied in evaluating the need for and the magnitude of appropriate valuation allowances against deferred tax assets.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled. We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be realized.
From time to time, we may seek to deploy capital through additional share repurchases or the retirement or purchase of outstanding debt. Such repurchases may be made in open market purchases, privately negotiated transactions or otherwise and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Such repurchases, those of which we describe below for 2023, may be made in open market purchases, privately negotiated transactions or otherwise and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Equity and debt repurchases – In May 2023, our Board authorized a $150 million stock repurchase program.
Fixing the selling prices of our products months in advance of their ultimate delivery to customers typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment. Consolidated Results for 2022 Our consolidated net sales for 2022 were $901.7 million compared to $556.2 million for 2021.
We use this program to varying degrees during the year depending on market conditions and our view of changing price environments. Fixing the selling prices of our products months in advance of their ultimate delivery to customers typically causes our reported selling prices and margins to differ from spot market prices and margins available at the time of shipment.
Additionally, expansions or upgrades of competitors’ facilities and international and domestic political and economic developments continue to play an important role in the global nitrogen fertilizer industry economics, including the impact from the Phase 1 trade agreement between the U.S and China.
Additionally, expansions or upgrades of competitors’ facilities and international and domestic political and economic developments continue to play an important role in the global nitrogen fertilizer industry economics. These factors can affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect product margins.
We recently achieved a key milestone in the advancement of our blue ammonia project at El Dorado by filing a permit application with the U.S. Environmental Protection Agency to develop a Class VI well. Upon approval of the Class VI permit, construction will begin on the infrastructure required to capture and sequester CO 2 at El Dorado.
In February 2023, we achieved a key milestone in the advancement of our low-carbon ammonia project at El Dorado by filing a pre-construction Class VI permit application with the U.S. Environmental Protection Agency (the “EPA”). The EPA recognized our application as complete in March 2023 and is currently in the review process.
Principal and interest are payable in 60 equal monthly installments with a final balloon payment of approximately $5 million due in August 2025.
Principal and interest are payable in 60 equal monthly installments with a final balloon payment of approximately $5 million due in August 2025. Finance leases – Our finance leases consist primarily of leases on railcars. Most of our railcar leases are classified as operating leases. 37 Capital Expenditures – Our capital expenditures during 2023 relating to PP&E were $67.6 million.
Partially offsetting this loss was a gain on extinguishment of debt of $10 million associated with the PPP loan that was fully forgiven by the SBA and lender. 32 Non-operating Other Expense (Income), net Non-operating other income for 2022 was $8.1 million primarily relating to a recognized settlement of our company owned life insurance from the payment by our insurer of a death benefit relating to the death of J.
For the same period of 2022, we had non-operating other income of $8.1 million, primarily relating to a $3.0 million recognized settlement on our company owned life insurance resulting from a death benefit from an insurer relating to the death of J.
For 2022, net cash provided primarily consists of proceeds of $200 million from the New Notes and $20.1 million from proceeds from short-term financing partially offset by payments for the acquisition of treasury shares of $179.0 million, payments on other long-term debt and short-term financing of $30.5 million, payments of $4.9 million for payments of debt-related and exchange related costs.
For 2023, the net cash used primarily consists of repurchases of our 6.25% Senior Secured Notes of $114.3, payments on other long-term debt and short-term financing of $30.1 million, payments of $28.3 million for the purchase of treasury stock and other payments of $2.8 million partially offset by proceeds from short-term financing of $17.8 million.
Principal and interest are payable in 48 equal monthly installments with a final balloon payment of approximately $3 million due in June 2023. Secured Financing due 2025 – El Dorado Ammonia L.L.C. (“EDA”) is party to a $30 million secured financing arrangement with an affiliate of Eldridge.
The Senior Secured Notes have an interest rate of 6.25%, to be paid semiannually in arrears on May 15th and October 15th, and matures on October 15, 2028. Secured Financing due 2025 – El Dorado Ammonia L.L.C. (“EDA”) is party to a $30 million secured financing arrangement with an affiliate of Eldridge.
See “Special Note Regarding Forward-Looking Statements.” Overview General LSB is headquartered in Oklahoma City, Oklahoma and through our subsidiaries, we manufacture and sell chemical products for the agricultural, mining, and industrial markets. We own and operate three multi plant facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operate a facility on behalf of Covestro in Baytown, Texas.
Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements. Certain statements contained in this MD&A may be deemed to be forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” Overview LSB is headquartered in Oklahoma City, Oklahoma and we manufacture and sell chemical products for the agricultural, mining, and industrial markets.
The effects of our Turnaround, exclusive of the impacts due to lost ammonia production during the downtime, are shown below and do not reflect all Turnaround activity during 2022 and 2021: Turnaround Turnaround Expense Estimated Lost Production Facility Related Period Downtime (In Thousands) (In Tons) El Dorado 3 rd Quarter 2022 27 days $ 8,414 36,000 Pryor 3 rd & 4 th Quarter 2022 38 days 14,952 26,000 $ 23,366 62,000 Cherokee 3 rd Quarter 2021 40 days $ 7,976 21,000 $ 7,976 21,000 Settlement of Natural Gas Contracts (2021 only) During the first quarter of 2021, we settled all of our natural gas forward contracts and certain volume purchase commitments and recognized a realized gain of approximately $6.8 million, which was classified as a reduction to cost of sales.
The effects of our ammonia plant Turnaround activity during 2022, excluding the impacts on downstream production from lost ammonia, are shown below and do not reflect all Turnaround activity during 2022: 33 Turnaround Turnaround Expense Estimated Lost Production Facility Related Period Downtime (In Thousands) (In Tons) El Dorado 3 rd Quarter 2022 27 days $ 8,414 36,000 Pryor 3 rd & 4 th Quarter 2022 38 days 14,952 26,000 $ 23,366 62,000 Results of Operations The following Results of Operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2023 and 2022 and accompanying notes and the discussions under “Overview” and “Liquidity and Capital Resources” included in this MD&A.
Income Tax – As discussed under “Income Taxes” in Note 1 and in Note 7, income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.
Income Tax – As discussed under “Income Taxes” in Note 1 – Summary of Significant Accounting Policies and in Note 6 – Income Taxes, income taxes are accounted for under the asset and liability method.
This impact includes lost contribution margin from lost sales, lost fixed cost absorption from lower production, and increased costs associated with repairs and maintenance.
Turnaround Activities (2022 only) When a Turnaround is performed, overall results for the period are negatively impacted. This impact includes lost contribution margin from lost sales, lost fixed cost absorption from lower production, and increased costs associated with repairs and maintenance. No ammonia plant Turnarounds were performed at any of our facilities during 2023.
The green hydrogen produced from the electrolyzers is expected to qualify for federal incentive programs such as the production and tax credit under Internal Revenue Code Section 45V, which are up to $3 per kilogram of clean hydrogen beginning in 2023. Continued Improvement in Product Sales Our product sales and profitability increased significantly in 2022 as compared to 2021.
The green hydrogen produced from the electrolyzers could qualify for federal incentive programs such as the production and tax credit under Internal Revenue Code Section 45V. In November 2023, the uncertainty of the Internal Revenue Code Section 45V tax credits combined with the project’s current capital costs, caused us to place this project on hold.
We are evaluating opportunities across all of our facilities to increase production capacity through the implementation of several potential debottlenecking projects. Our initial calculations suggest that, assuming mid-market pricing for Tampa ammonia, UAN and natural gas, these projects could potentially represent significant incremental annual profitability.
We have been evaluating opportunities across all our facilities to increase production capacity through the implementation of several potential debottlenecking projects, particularly at our El Dorado facility. Initial feasibility studies have pointed to potentially attractive returns for some of these projects.
On December 31, 2022 and 2021, our valuation allowance on deferred tax assets was $14.9 million and $47.0 million, respectively. 37
Significant judgment is applied in evaluating the need for and the magnitude of appropriate valuation allowances against deferred tax assets. As of December 31, 2023 and 2022, our valuation allowance on deferred tax assets was $15.2 million and $14.9 million, respectively. 40
Following those Turnarounds, they will be on a three-year and two-year ammonia plant Turnaround cycle, respectively. Ammonia Production Ammonia is the basic product used to produce all of our upgraded products. The ammonia production rates of our plants affect the total cost per ton of each product produced and the overall sales of our products.
Our Pryor Facility is currently on a two-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2024. 32 Ammonia Production Ammonia is the basic product used to produce all of our upgraded products.
We believe that our focus on continuous improvement in reliability as discussed in key operating initiatives will result in year-over-year improvement in ammonia production for 2023. 29 Forward Sales Contracts We use forward sales of our fertilizer products to optimize our asset utilization, planning process and production scheduling.
We believe that our focus on continuous improvement in reliability as discussed in our key operating initiatives underscores our focused goal of achieving a 95% ammonia on-stream operating rate goal and increasing our production volumes of downstream products.

… 129 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+2 added−4 removed4 unchanged
Biggest changeAt December 31, 2022, we had no outstanding natural gas contracts, which are accounted for on a mark-to-market basis. Interest Rate Risk Generally, we are exposed to variable interest rate risk with respect to our revolving credit facility. As of December 31, 2022, we had no outstanding borrowings on this credit facility and no other variable rate borrowings.
Biggest changeAs of December 31, 2023, we had no outstanding natural gas contracts. Interest Rate Risk We are exposed to variable interest rate risk with respect to our New Revolving Credit Facility. As of December 31, 2023, we had no outstanding borrowings on the New Revolving Credit Facility and no other variable rate borrowings.
As a result, we could be exposed to embedded losses should our product costs exceed the firm sales prices at the end of a reporting period. At December 31, 2022, we had no embedded losses associated with sales commitments with firm sales prices.
As a result, we could be exposed to embedded losses should our product costs exceed the firm sales prices at the end of a reporting period. As of December 31, 2023, we had no embedded losses associated with sales commitments with firm sales prices.
Removed
We currently do not hedge our interest rate risk associated with these variable interest loans.
Added
We have a substantial amount of short-term investments in treasury securities. As these securities mature, to the extent that the proceeds are not required to fund operations, we may roll the funds over by purchasing additional securities.
Removed
The following table presents principal amounts by maturity date and weighted-average interest rates for the periods presented for our debt agreements as of December 31, 2022: Years ending December 31, 2023 2024 2025 2026 2027 Thereafter Total (Dollars In Thousands) Expected maturities of long-term debt (1): Fixed interest rate debt $ 9,522 $ 5,838 $ 8,793 $ 173 $ 125 $ 700,125 $ 724,576 Weighted-average interest rate 6.31 % 6.29 % 6.27 % 6.25 % 6.25 % 6.25 % 6.25 % (1) The debt balances and weighted-average interest rate are based on the aggregate amount of debt outstanding as of December 31, 2022.
Added
When interest rates fluctuate, there is no assurance that future purchases of short term debt instruments will provide similar yields to the yields of those that have matured. ITEM 8.
Removed
At December 31, 2022 and 2021, we did not have any financial instruments with fair values materially different from their carrying amounts (which excludes issuance costs, if applicable) except for our Senior Secured Notes. See Note 9.
Removed
The fair value of financial instruments is not indicative of the overall fair value of our assets and liabilities since financial instruments do not include all assets, including intangibles, and all liabilities. ITEM 8.

Other LXU 10-K year-over-year comparisons