LSB Industries, Inc. Reports 1998 Results
15 March 1999
LSB Industries, Inc., Reports Results for the Year Ended December 31, 1998
OKLAHOMA CITY, March 15 -- LSB Industries, Inc. ,
today reported operating results for the twelve months and three months ended
December 31, 1998.
Revenues from operations for 1998, excluding the gain on the sale of the
Tower, were $311,327,000 compared to $320,189,000 in 1997. Total revenues for
the three months ended December 31, 1998 were $65,614,000 compared to
$75,961,000 for the same period in 1997.
Net loss for the year ended December 31, 1998, was $1,920,000 compared to
a net loss for the year ended December 31, 1997 of $23,065,000 after an
extraordinary charge of $4.6 million. After deducting $3,229,000 for
dividends on the Company's outstanding preferred stocks, the net loss
applicable to common stock for the year ended December 31, 1998 was
$5,149,000, or $.42 per share, diluted on 12.4 million average common shares
compared to a net loss for the year ended December 31, 1997 of $26,294,000 or
$2.04 per share on 12.9 million average shares. The net loss for 1998 is
after a gain of $13.0 million on the sale of the Tower office building in
March 1998.
Net loss for the quarter ended December 31, 1998, was $9,423,000 compared
to a net loss for the same period in 1997 of $ 14,315,000. After deducting
$803,000 for dividends on the Company's outstanding preferred stocks, the net
loss applicable to common stock for the three months ended December 31, 1998,
was $10,226,000 or $.85 per share computed on 12.0 million average common
shares compared to a net loss for the three months ended December 31, 1997 of
$15,118,000, or $1.18 per share, computed on 12.8 million average common
shares.
Jack E. Golsen, Chairman, stated that "the overall results for the fourth
quarter are very disappointing."
Golsen indicated that the Climate Control Business had an off quarter, but
overall continued to experience growth in sales and earnings and that the
Chemical Business, while being affected by pricing pressure, has the ability
to recover in 1999. The outlook for 1999 is for improved pricing and demand,
if the excess quantities of nitrogen products available in the market are
reduced during the spring fertilizer season.
Company management is continuing to pursue alternatives to realize its
investment in non-core and non-earning assets which may result in disposal of
certain of these assets.
Golsen also stated that the Company has experienced a delay in the start-
up of a new nitric acid plant being constructed at Bayer Corporation's
("Bayer") Baytown facility to produce nitric acid for sale to Bayer. Delay in
the start-up of the new nitric acid plant has been due to the failure of the
contractor to complete the construction in a timely manner, and due to the
inability or failure on the part of the contractor to pay the costs associated
with construction of the plant under its turnkey contract. This has resulted
in the parties arranging with the contractor's bonding company and the lenders
to the project to provide certain funds needed for the contractor to complete
construction of the plant. This arrangement is subject to finalization of
definitive agreements. Subject to completion of the above arrangements, the
Company has completed an amendment to the agreements with Bayer related to the
project which provides, among other things, for additional time to complete
construction.
Chemical Business
For the quarter ended December 31, 1998, the Chemical Business' sales were
$6.4 million lower than in the same quarter last year. The fourth quarter
1998 operating loss was approximately $2 million compared to operating income
of approximately $200,000 for the same quarter last year. Included in the
1998 loss were provisions totaling $1.2 million to provide loss accruals on
certain accounts.
The lower sales and the operating loss for the fourth quarter 1998 are a
result of lower sales prices due to excess quantities of nitrogen products on
the market, a decline in sales because of weather conditions and losses of the
Australian subsidiary.
The Australian subsidiary, which provides explosive products and services
to the Australian mining industry, continued to report losses due to weak
demand in the Asian market. The Company has received an offer, which it is
presently considering, to sell the Australian subsidiary.
Climate Control
Although sales and earnings in the Climate Control Business were
significantly higher in the calendar year 1998 than in the prior year, the
fourth quarter results were less in 1998 than in 1997.
Lower sales in the fourth quarter resulted from a low order level in the
water source heat pump product line during this period. Since December,
however, the order level has accelerated and appears to be back on its prior
growth track. The decrease in the results for the fourth quarter 1998
primarily resulted from adjustments to the cost of the Business' inventories
recorded in the fourth quarter 1998 which had the effect of reducing gross
profit on net sales by approximately $1.5 million.
Automotive and Industrial
The operations for the year and fourth quarter 1998, although improved
over last years' comparable periods, still resulted in losses for the 1998
periods. The Company is continuing with its efforts to evaluate the spin-off
of its' Automotive Business to shareholders. The evaluation of the spin-off
of the Automotive Business has been delayed as a result of the Company's
continuing attempt to resolve certain business issues.
One of the issues the Company is attempting to resolve is the arrangement
of a separate credit facility for the Automotive Business. At this time
management believes a new credit facility for the Automotive Business can be
in place by the end of April 1999. The spin-off remains subject to certain
conditions including approval by the Board of Directors.
LSB is a manufacturing, marketing, and engineering company with activities
on a worldwide basis. LSB's principal business activities consist of the
manufacture and sale of chemical products for the mining, agricultural and
industrial markets, the manufacture and sale of commercial and residential
climate control products, the provision of specialized engineering services,
and other activities. LSB's common stock and Series 2 Preferred Stock are
listed for trading on the New York Stock Exchange.
Certain statements contained within this release may be deemed "Forward-
Looking Statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. 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", "except", "anticipate", "intend", "will", and similar
expressions identify Forward-Looking Statements. Forward-Looking Statements
contained herein relate to, among other things, (i) that the Chemical Business
has the ability to recover in 1999 and the outlook of this Business in 1999 is
for improved pricing and demand, (ii) water source heat pump products back on
its prior growth track, (iii) complete a credit facility for the Automotive
Business by the end of April 1999, and (iv) complete its evaluation of the
spin-off of the Automotive Business. While the Company believes the
expectations reflected in such Forward-Looking Statements are reasonable, it
can give no assurance such expectations will prove to have been correct.
There are a variety of factors which could cause future outcomes to differ
materially from those described in this release, including, but not limited
to, (i) decline in general economic conditions, both domestic and foreign,
(ii) material reduction in revenues, (iii) increased competitive pressures,
(iv) excess quantities of nitrogen products are not reduced in the Chemical
Business markets due to certain foreign countries continuing to import large
quantities of nitrogen products at low products, (v) weather conditions in the
Chemical Business' fertilizer markets have an adverse effect on the Chemical
Business fertilizer season as experienced during the last two years, (vi) the
effect of additional production capacity of anhydrous ammonia in the western
hemisphere, (vii) the Company is not able to complete the new credit facility
for the Automotive business due to (a) the proposed lender not being satisfied
with the results of its due diligence, which due diligence is currently
continuing, or (b) failure of the parties to complete definitive loan
agreements on terms that the Company believes is in the best interest of the
Automotive Business as an independent company and which are satisfactory to
the proposed lender, and (viii) inability to obtain, among other things, (a)
unqualified audited financial statements on the Automotive Business, (b) legal
and financial opinions, (c) approval from the Company's Board of Directors,
and (d) approval from the Securities and Exchange Commission, all of which are
necessary in connection with the spin-off of the Automotive Business. Given
these uncertainties, all parties are cautioned not to place undue reliance on
such Forward-Looking Statements. The Company disclaims 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.
LSB Industries, Inc.
Financial Highlights (Notes)
Periods Ended December 31, 1998 and 1997
(In thousands, except per share amounts)
Twelve Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
(Unaudited)
Total revenues, excluding gain
on sale of the Tower $ 311,327 $ 320,189 $ 65,614 $ 75,961
Operating costs, expenses
and interest $ 326,140 $ 338,585 $ 75,212 $ 85,793
Gain on sale of the Tower $ 12,993 $ --- $ --- $ ---
Early termination fee $ --- $ (4,619)$ --- $ (4,619)
Net loss $ (1,920)$ (23,065)$ (9,423)$ (14,315)
Net loss applicable to
common stock $ (5,149)$ (26,294)$ (10,226)$ (15,118)
Loss per common share:
Basic and diluted $ (0.42)$ (2.04)$ (0.85)$ (1.18)
Average common shares outstanding
used in computing loss
per common share:
Basic and diluted 12,373 12,876 11,984 12,791
Note 1: Basic and diluted loss per common share is based upon the
weighted average number of common shares outstanding during each
period after giving appropriate effect to preferred stock
dividends.
LSB Industries, Inc.
Financial Highlights
Periods Ended December 31, 1998 and 1997
Note 2: Information about the Company's operations in different industry
segments for the twelve month and three month periods ended
December 31, 1998 and 1997 is detailed below:
Twelve Months Three Months
1998 1997 1998 1997
(In Thousands) (In Thousands)
(Unaudited)
Sales:
Chemical $ 139,942 $ 156,949 $ 27,724 $ 34,096
Climate Control 115,786 105,909 25,892 28,383
Automotive Products 39,994 35,499 8,720 8,254
Industrial Products 14,315 15,572 3,459 4,159
$ 310,037 $ 313,929 $ 65,795 $ 74,892
Gross Profit (Loss)
Chemical $ 18,274 $ 19,320 $ 2,512 $ 2,932
Climate Control 32,278 29,552 5,779 7,083
Automotive Products 8,670 3,299 1,685 (12)
Industrial Products 3,731 3,776 1,053 1,102
$ 62,953 $ 55,947 $ 11,029 $ 11,105
Operating Profit (Loss):
Chemical $ 3,675 $ 5,479 $ (2,027)$ 191
Climate Control 10,493 8,895 98 1,174
Automotive Products (1,827) (7,251) (1,490) (2,804)
Industrial Products (402) (993) 378 (113)
11,939 6,130 (3,041) (1,552)
General Corporate Expenses
and other (9,425) (9,786) (2,292) (3,924)
Interest Expense (17,327) (14,740) (4,265) (4,358)
Gain on Sale of Tower 12,993 --- --- ---
Early Termination Fee (4,619) (4,619)
Loss Before Provision
for Income Taxes (1,820) (23,015) (9,598) (14,453)
Provision for Taxes 100 50 (175) (138)
Net Loss $ (1,920)$ (23,065)$ (9,423)$ (14,315)