LSB Industries, Inc. (NYSE: LXU) announced results for the fourth quarter ended December 31, 2009. These results include $5.0 million of expenses related to the start-up of the chemical plant in Pryor, Oklahoma (â€œPryor Facilityâ€).
Fourth Quarter 2009 Financial Highlights Compared to Fourth Quarter 2008:
* Net sales were $115.3 million, a 35.8% decline from $179.5 million;
* Operating income was $2.5 million compared to $1.8 million;
* Net income was $38,000 compared to $3.6 million;
* Net income applicable to common shareholders was $38,000 compared to $3.6 million;
* Diluted earnings per common share were less than $0.01 compared $0.16.
Year 2009 Financial Highlights Compared to Year 2008:
* Net sales were $531.8 million, a 29.0% decline from $749.0 million;
* Operating income was $40.7 million compared to $59.2 million;
* Net income was $21.6 million compared to $36.5 million;
* Net income applicable to common shareholders decreased to $21.3 million from $36.2 million;
* Diluted earnings per common share were $0.96 compared to $1.58.
Discussion of Fourth Quarter of 2009:
The $64.2 million decline in fourth quarter net sales includes a decrease of $21.4 million in our Climate Control Business and a decrease of approximately $41.1 million in our Chemical Business.
Consolidated operating income was $2.5 million compared to $1.8 million in 2008.
Operating income for the Climate Control Business was $5.6 million, a 30% decline from 2008 primarily primarily as a result of a 26.3% decline in net sales.
The Chemical Business reported an operating loss of $0.4 million in the fourth quarter of 2009, which included $5.0 million of start-up expenses for the Pryor Facility; in the fourth quarter of 2008, the Chemical Business incurred an operating loss of $3.1 million, which included Pryor Facility start-up expenses of $1.0 million. Excluding the Pryor Facility start-up expenses from both quarters, the Chemical Businessâ€™ operating income was $6.7 million higher compared to 2008 due to a number of factors including:
* The timing of planned major maintenance ($3.7 million),
* Reduced losses on natural gas and anhydrous ammonia hedge contracts ($3.2 million),
* 2008 firm sales commitments settled in the fourth quarter of 2009, resulting in higher gross profit compared to then current market prices ($1.4 million),
* Other plant variances and efficiencies ($1.6 million),
* Partially offset by lower gross profit on agricultural product sales ($3.2 million).
Although our consolidated operating income for the fourth quarter 2009 increased, net income decreased to $38,000 from $3.6 million for the same period of 2008. This decrease was primarily due to non-operating items in the 2008 fourth quarter, including a $5.5 million pre-tax gain from the repurchase of a portion of the Companyâ€™s subordinated debentures partially offset by a $3.1 million loss included in interest expense relating to interest rate contracts used as economic hedges. Additionally, income taxes for the 2008 fourth quarter included a benefit of $1.0 million compared to a $0.9 million provision for the 2009 fourth quarter.
Discussion of the Year 2009:
The sales decrease of approximately $217.2 million includes a decrease of $45.2 million in our Climate Control Business and a decrease of $166.3 million in our Chemical Business. Operating income for 2009 included approximately $17.2 million of start-up expenses associated with the Pryor Facility. Expenses associated with maintaining the Pryor Facility were $2.4 million in 2008.
Interest expense was $6.7 million for 2009 compared to $11.4 million for 2008, a decrease of approximately $4.7 million primarily due to $2.0 million of reduced losses associated with our interest rate contracts, a decrease of $1.6 million from the repurchase of the 2007 Debentures and a decrease of $1.1 million due declines in the LIBOR interest rates on our $50.0 million secured term loan.
Pre-tax income in 2009 includes a gain of $1.8 million from the extinguishment of debt as a result of acquiring $11.1 million of our 2007 Debentures at discounts to face value. The prior year includes a $5.5 million gain from acquiring $19.5 million of these debentures at discounts to face value.