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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-7677

LSB Industries, Inc.

(Exact name of registrant as specified in its charter)

     Delaware

     73-1015226

     (State or other jurisdiction of
incorporation or organization)

     (I.R.S. Employer
Identification No.)


3503 NW 63rd Street, Suite 500, Oklahoma City, Oklahoma		73116
(Address of principal executive offices)		(Zip Code)

(405) 235-4546

(Registrant's telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading Symbol(s)

     Name of each exchange on which registered

     Common Stock, Par Value $.10
Preferred Stock Purchase Rights

     LXU
N/A

     New York Stock Exchange
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).☐ Yes ☒ No

The number of shares outstanding of the registrant's common stock was 71,936,047 shares as of July 25, 2025.

FORM 10-Q OF LSB INDUSTRIES, INC.

TABLE OF CONTENTS


	PART I – Financial Information	Page

Item 1.	Financial Statements	3

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	31

	PART II – Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	35

Item 6.	Exhibits	36

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Information at June 30, 2025 is unaudited)


	June 30, 2025			December 31, 2024
	(In Thousands)
Assets
Current assets:
Cash and cash equivalents	$	5,614		$	20,230
Short-term investments		119,278			163,971
Accounts receivable		51,653			39,083
Allowance for doubtful accounts		(364	)		(323	)
Accounts receivable, net		51,289			38,760
Inventories:
Finished goods		22,635			22,382
Raw materials		1,812			2,519
Total inventories		24,447			24,901
Supplies, prepaid items and other:
Prepaid insurance		5,925			14,345
Precious metals		13,198			11,596
Supplies		32,834			31,995
Other		2,627			3,916
Total supplies, prepaid items and other		54,584			61,852
Total current assets		255,212			309,714
Property, plant and equipment, net		838,035			847,570
Other assets:
Operating lease assets		33,623			28,727
Intangible and other assets, net		1,213			1,177
Total other assets		34,836			29,904
Total assets	$	1,128,083		$	1,187,188
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		59,577			83,498
Short-term financing		4,127			12,146
Accrued and other liabilities		26,555			30,874
Current portion of long-term debt		6,252			9,116
Total current liabilities		96,511			135,634
Long-term debt, net		446,370			476,163
Noncurrent operating lease liabilities		26,327			21,387
Other noncurrent accrued and other liabilities		456			456
Deferred income taxes		62,619			61,908
Commitments and contingencies (Note 5)
Stockholders' equity:
Common stock, $.10 par value per share; 150 million shares authorized, 91.2 million shares issued		9,117			9,117
Capital in excess of par value		503,496			504,578
Retained earnings		209,028			207,662
		721,641			721,357
Less treasury stock, at cost:
Common stock, 19.2 million shares (19.5 million shares at December 31, 2024)		225,841			229,717
Total stockholders' equity		495,800			491,640
Total liabilities and stockholders’ equity	$	1,128,083		$	1,187,188

See accompanying notes to the unaudited condensed consolidated financial statements.

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In Thousands, Except Per Share Amounts)
Net sales	$151,296	$140,073	$294,728	$278,277
Cost of sales	128,123	112,658	257,171	228,584
Gross profit	23,173	27,415	37,557	49,693

Selling, general and administrative expense	9,844	11,547	19,997	21,841
Other expense, net	2,836	1,465	2,599	2,189
Operating income	10,493	14,403	14,961	25,663

Interest expense, net	7,886	8,385	15,950	18,114
Loss (gain) on extinguishment of debt	59	(1,879)	59	(3,013)
Non-operating other income, net	(1,542)	(2,908)	(3,215)	(6,469)
Income before income taxes	4,090	10,805	2,167	17,031
Provision for income taxes	1,084	1,250	801	1,853
Net income	$3,006	$9,555	$1,366	$15,178

Net income per common share:
Basic:
Net income	$0.04	$0.13	$0.02	$0.21

Diluted:
Net income	$0.04	$0.13	$0.02	$0.21

See accompanying notes to the unaudited condensed consolidated financial statements.

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock Shares		Treasury Stock- Common Shares			Common Stock Par Value		Capital in Excess of Par Value			Retained Earnings			Treasury Stock- Common			Total
	(In Thousands)
Balance at December 31, 2024		91,168		(19,528	)	$	9,117	$	504,578		$	207,662		$	(229,717	)	$	491,640
Net (loss)												(1,640	)					(1,640	)
Stock-based compensation									1,733									1,733
Vesting of equity compensation				369					(4,344	)					4,344			—
Shares withheld upon vesting of equity compensation				(133	)										(1,170	)		(1,170	)
Balance at March 31, 2025		91,168		(19,292	)		9,117		501,967			206,022			(226,543	)		490,563
Net income												3,006						3,006
Stock-based compensation									2,088									2,088
Employee stock purchase plan				22					(105	)					262			157
Vesting of equity compensation				39					(454	)					453			(1	)
Shares withheld upon vesting of equity compensation				(2	)										(13	)		(13	)
Balance at June 30, 2025		91,168		(19,233	)	$	9,117	$	503,496		$	209,028		$	(225,841	)	$	495,800

Balance at December 31, 2023		91,168		(18,051	)	$	9,117	$	501,026		$	227,015		$	(218,827	)	$	518,331
Net income												5,623						5,623
Stock-based compensation									1,394									1,394
Purchase of common stock				(690	)										(5,397	)		(5,397	)
Vesting of equity compensation				109					(1,323	)					1,323			—
Shares withheld upon vesting of equity compensation				(231	)										(1,766	)		(1,766	)
Balance at March 31, 2024		91,168		(18,863	)		9,117		501,097			232,638			(224,667	)		518,185
Net income												9,555						9,555
Stock-based compensation									2,099									2,099
Purchase of common stock				(802	)										(6,734	)		(6,734	)
Shares issued restricted stock units and ESPP participants				37					(331	)					429			98
Vesting of equity compensation				123					(1,443	)					1,443			—
Shares withheld upon vesting of equity compensation				(42	)										(410	)		(410	)
Balance at June 30, 2024		91,168		(19,547	)	$	9,117	$	501,422		$	242,193		$	(229,939	)	$	522,793

See accompanying notes to the unaudited condensed consolidated financial statements.

LSB INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
	2025			2024
	(In Thousands)
Cash flows from operating activities
Net income	$	1,366		$	15,178
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes		711			2,321
Loss (gain) on extinguishment of debt		59			(3,013	)
Depreciation and amortization of property, plant and equipment		40,765			35,861
Amortization of short-term investments		409			5,630
Stock-based compensation		3,821			3,492
Write-downs of property, plant and equipment		2,599			2,943
Other		1,169			1,725
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable		(12,564	)		(1,531	)
Inventories		190			6,098
Prepaid insurance		8,420			8,693
Supplies, prepaid items and other		(2,937	)		(1,481	)
Accounts payable		(16,194	)		(5,587	)
Accrued interest		(2,745	)		(3,749	)
Other assets and other liabilities		(68	)		(1,091	)
Net cash provided by operating activities		25,001			65,489

Cash flows from investing activities
Expenditures for property, plant and equipment		(39,347	)		(33,047	)
Proceeds from short-term investments		154,565			236,493
Purchases of short-term investments		(110,281	)		(34,689	)
Other investing activities		(111	)		29
Net cash provided by investing activities		4,826			168,786

Cash flows from financing activities
Repurchases of 6.25% Senior Secured Notes		(32,076	)		(92,216	)
Payments on other long-term debt		(3,323	)		(2,925	)
Payments on short-term financing		(8,019	)		(8,847	)
Acquisition of treasury stock, net		157			(12,032	)
Taxes paid on equity awards		(1,182	)		(2,176	)
Payments of debt-related costs		—			(777	)
Net cash used by financing activities		(44,443	)		(118,973	)

Net (decrease) increase in cash and cash equivalents		(14,616	)		115,302

Cash and cash equivalents at beginning of period		20,230			101,032
Cash and cash equivalents at end of period	$	5,614		$	216,334

See accompanying notes to the unaudited condensed consolidated financial statements.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Summary of Significant Accounting Policies

All references to “LSB Industries,” “LSB,” the “Company,” “we,” “us,” and “our” refer to LSB Industries, Inc. and its subsidiaries on a consolidated basis, except where the context makes clear that the reference is only to LSB Industries, Inc. itself and not its subsidiaries. The accompanying unaudited interim financial statements and notes of LSB have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Pursuant to such rules and regulations, certain disclosures normally included in financial statements prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) have been omitted. The accompanying unaudited condensed consolidated interim financial statements and notes should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (our “2024 Form 10-K”), filed with the SEC on February 27, 2025. The accompanying unaudited interim financial statements in this report reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the Company’s results of operations and cash flows for the three and six months ended June 30, 2025 and 2024 and the Company’s financial position as of June 30, 2025.

Basis of Consolidation – LSB Industries, Inc. and its subsidiaries are consolidated in the accompanying unaudited condensed consolidated interim financial statements. All intercompany accounts and transactions have been eliminated. Certain prior period amounts reported in our unaudited condensed consolidated interim financial statements and notes thereto have been reclassified to conform to current period presentation.

Nature of Business – We are engaged in the manufacture and sale of chemical products. The chemical products we primarily manufacture, market and sell are ammonia, fertilizer grade ammonium nitrate (“HDAN”) and urea ammonia nitrate (“UAN”) for agricultural applications, high purity and commercial grade ammonia, high purity ammonium nitrate, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and industrial grade ammonium nitrate (“LDAN”) and ammonium nitrate (“AN”) solutions for industrial applications. We manufacture and distribute products in four facilities; three of which we own and are located in El Dorado, Arkansas (the “El Dorado Facility”); Cherokee, Alabama (the “Cherokee Facility”); and Pryor, Oklahoma (the “Pryor Facility”); and one of which we operate on behalf of Covestro LLC in Baytown, Texas.

Our customers include farmers, ranchers, fertilizer dealers and distributors primarily in the ranch land and grain production markets in the United States; industrial users of acids throughout the United States and parts of Canada; and explosives manufacturers in United States and other parts of North America.

Seasonality – These interim results are not necessarily indicative of results for a full year due, in part, to the seasonality of our sales of agricultural products and the timing of performing our major plant maintenance activities. Our selling seasons for agricultural products are primarily during the spring and fall planting seasons, which typically extend from March through June and from September through November.

Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents – Investments, which consist of highly liquid investments with original maturities of three months or less, are considered cash equivalents.

Short-Term Investments – Investments, which consist of U.S. treasury securities with remaining maturity at the time of purchase greater than three months but less than 12 months, are considered short-term investments and are classified as Level 1 under the fair value hierarchy. These investments are classified as held to maturity, consistent with our intent to hold these investments to maturity. U.S. treasury bills with remaining maturity at the time of purchase of three months or less are included in cash and cash equivalents. Due to the nature of these investments as U.S. treasury securities, no impairment is anticipated. See “Note 6. Financial Instruments” for more information regarding our short-term investments.

Accounts Receivable – Substantially all of our accounts receivable consists of trade receivables from customers. We have recognized an appropriate allowance for estimated uncollectible accounts to reflect any estimate of expected credit losses. Our estimate is based on historical experience and periodic assessment, particularly on accounts that are past due (based upon the terms of the sale). Our periodic assessment is based on our best estimate of amounts that are not recoverable, which includes a present collectability review and forward-looking assessment, where applicable. We write off accounts receivable when we deem them uncollectible and record recoveries of accounts receivable previously written off when received.

Impairment of Long-Lived Assets – Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An asset’s fair value must be determined when the carrying amount of an asset (asset group) exceeds the estimated undiscounted future cash flows expected to result from the use of the asset (asset group) and/or its eventual disposition. If assets to be held and used are considered to be impaired, the impairment to be

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

recognized is the amount by which the carrying amounts of the assets exceed the fair values of the assets as measured by the present value of future net cash flows expected to be generated by the assets or their appraised value. In general, our asset groups are reviewed for impairment on a facility-by-facility basis (such as the Cherokee, El Dorado or Pryor Facility) unless it is determined that the asset being evaluated will generate cash flows that are independent from the rest of the facility.

In addition, if the event or change in circumstance relates to the probable sale of an asset (or group of assets), the specific asset (or group of assets) is reviewed for impairment.

For the three and six months ended June 30, 2025, we recorded asset write-downs in the amount of $2.5 million and $2.6 million, respectively. For the three and six months ended June 30, 2024, we recorded asset write-downs in the amount of $1.5 million and $2.9 million, respectively. These asset write-downs are included in “Other expense, net” on our condensed consolidated statements of operations.

Short-Term Financing – Our short-term financing represents the short-term note related to financing of our insurance premium, which is renewed annually.

Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. If the assessment of a contingency indicates that it is probable that a loss has been incurred, we accrue for such contingent loss when such loss can be reasonably estimated. If the assessment indicates that a potentially material loss contingency is not probable but reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Estimates of potential legal fees and other directly related costs associated with contingencies are not accrued but rather are expensed as incurred. Loss contingency liabilities are included in current and noncurrent accrued and other liabilities and are based on current estimates that may be revised in the near term. In addition, we recognize contingent gains when such gains are realized or when the contingencies have been resolved (generally at the time a settlement has been reached).

Derivatives, Hedges and Financial Instruments – In order to mitigate a portion of the commodity price risk associated with natural gas, which we utilize in our manufacturing process, we periodically enter into natural gas forward contracts or volume purchase commitments. Such contracts are required to be accounted for as derivatives under applicable accounting guidance unless they are eligible for and we elect the normal purchase normal sale (“NPNS”) exception. We are eligible for the NPNS exception when these contracts provide for the purchase of natural gas that will be delivered in quantities expected to be used over a reasonable period of time in the normal course of business and are documented as such. In the event that we have natural gas derivatives that we do not elect or do not qualify for the NPNS exception, we would account for such contracts as derivatives by recognizing them in the balance sheet at fair value with changes in fair value recognized in the statement of operations. Such derivatives are not designated as hedges for accounting purposes.

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:

Level 1 - Valuations of contracts classified as Level 1 are based on quoted prices in active markets for identical contracts.

Level 2 - Valuations of contracts classified as Level 2 are based on quoted prices for similar contracts and valuation inputs other than quoted prices that are observable for these contracts.

Level 3 - Valuations of assets and liabilities classified as Level 3 are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Leases – We are the lessee in most of the lease arrangements we enter into. We determine if an arrangement is a lease at inception or modification of a contract and classify each lease as either an operating or finance lease based on the terms of the contract. We reassess lease classification subsequent to commencement upon a change to the expected lease term or a modification to the contract. A contract contains a lease if the contract conveys the right to control the use of the identified property or equipment, explicitly or implicitly, for a period of time in exchange for consideration. Control of an underlying asset is conveyed if we obtain the rights to direct the use of and obtain substantially all of the economic benefit from the use of the underlying asset.

An operating lease asset represents our right to use the underlying asset as a lessee for the lease term and an operating lease liability represents our obligation to make lease payments arising from the lease. Currently, most of our leases are classified as operating leases and primarily relate to railcars, other equipment and office space. Our leases that are classified as finance leases primarily relate to railcars. Variable payments are excluded from the present value of lease payments and are recognized in the period in which the payment is made. Our current leases do not contain residual value guarantees. Most of our leases do not include options to extend or terminate the lease prior to the end of the term. Leases with a term of 12 months or less are not recognized in the balance sheet.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As a lessee, we use our incremental borrowing rate based on the lease term and other information available at the commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the applicable lease term.

From time to time when we have excess freight capacity, we may sublease a portion of our railcars fleet on a short-term basis to other parties. The income from these subleases is recorded as a component of “Other expense, net” in our condensed consolidated statements of operations. For the three and six months ended June 30, 2025, sublease income was $0.1 million and $0.2 million, respectively. For the three and six months ended June 30, 2024, sublease income was $0.1 million and $0.8 million, respectively.

As of June 30, 2025, we had an executed finance lease for railcars with lease terms greater than one year with aggregate lease payments of approximately $1.6 million which has not yet commenced.

Recently Issued Accounting Pronouncements

ASU 2023-06 - In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements—Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which modifies the disclosure or presentation requirements of a variety of topics in the codification. Certain of the amendments represent clarifications to or technical corrections of the current requirements. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity. These amendments should be applied prospectively. We are currently evaluating the timing and the effect of adoption of this ASU on our consolidated financial statements and related disclosures.

ASU 2023-09 - In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on income tax disclosures around effective tax rates and cash income taxes paid. This ASU will be effective for us on a prospective basis for annual periods beginning after December 15, 2024. We will adopt this ASU prospectively for the period ending December 31, 2025, and it will impact only our disclosures, with no impact to our financial condition and results of operations. We do not expect the impact of this update to be material, as the improvements are enhancements to existing disclosures in the financial statements.

ASU 2024-03 - In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires an entity to disclose the amounts of purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each relevant expense caption. It also requires an entity to include certain amounts that are already required to be disclosed under current U.S. GAAP in the same disclosure. Additionally, it requires an entity to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, and to disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The amendments in the ASU are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. An entity may apply the amendments prospectively for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. While this ASU will impact only our disclosures and not our financial condition and results of operations, we are currently evaluating the timing and effect of adopting this ASU.

Changes to U.S. GAAP are established by the FASB in the form of ASUs to the FASB’s Accounting Standards Codification. We considered all ASUs issued and outstanding or that became effective since January 1, 2025 through the date of these financial statements and determined them not to be applicable or materially impact our financial statements other than those ASUs specifically addressed above.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

2. Net (Loss) Income per Common Share


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(In Thousands, Except Per Share Amounts)
Numerator:
Net income	$	3,006	$	9,555	$	1,366	$	15,178
Numerator for basic and diluted net income per common share	$	3,006	$	9,555	$	1,366	$	15,178

Denominator:
Denominator for basic net income per common share - adjusted weighted-average shares		71,910		71,700		71,874		72,271
Effect of dilutive securities:
Unvested restricted stock and stock units		236		330		263		331
Dilutive potential common shares		236		330		263		331
Denominator for diluted net income per common share - adjusted weighted-average shares		72,146		72,030		72,137		72,602

Basic net income per common share	$	0.04	$	0.13	$	0.02	$	0.21

Diluted net income per common share	$	0.04	$	0.13	$	0.02	$	0.21

The following securities were not included in the computation of diluted net (loss) income per common share as their effect would have been antidilutive:


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024

Restricted stock and stock units	1,289,035	667,947	1,321,184	691,255
Stock options	—	13,000	—	13,000
	1,289,035	680,947	1,321,184	704,255

3. Accrued and Other Liabilities


	June 30, 2025		December 31, 2024
	(In Thousands)
Accrued interest	$	3,485	$	6,230
Customer deposits		142		1,107
Current portion of operating lease liabilities		7,365		7,406
Accrued payroll and benefits		9,378		10,217
Other		6,641		6,370
		27,011		31,330
Less noncurrent portion		456		456
Current portion of accrued and other liabilities	$	26,555	$	30,874

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

4. Long-Term Debt

Our long-term debt consists of the following:


	June 30, 2025			December 31, 2024
	(In Thousands)
Revolving Credit Facility (A)	$	—		$	—
Senior Secured Notes due 2028, with an interest rate of 6.25% (B)		446,080			478,440
Secured Financing due 2025, with an interest rate of 8.75% (C)		5,512			8,516
Finance Leases (D)		5,536			3,895
Unamortized debt issuance costs (1)		(4,506	)		(5,572	)
		452,622			485,279
Less current portion of long-term debt		6,252			9,116
Long-term debt due after one year, net	$	446,370		$	476,163

_____________________________

(1)

Debt issuance costs as of June 30, 2025 and December 31, 2024 of approximately $0.6 million and $0.6 million, respectively, relating to our Revolving Credit Facility (defined below) are not included in Unamortized debt issuance costs. Such costs are included in our condensed consolidated balance sheet in “Intangible and other assets, net.”

(A)

The revolving credit facility pursuant to a credit agreement, dated December 21, 2023, between us and the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent (the “Revolving Credit Facility”) provides for borrowings up to an initial maximum of $75 million, with an option to increase the maximum by an additional $25 million (which amount is uncommitted). Availability under the Revolving Credit Facility is subject to a borrowing base and is also subject to an availability block of $7.5 million (which can be removed by us at our sole discretion, subject to the satisfaction of certain conditions) (the “Availability Block”). The Availability Block is applied against the $75 million maximum. The Revolving Credit Facility provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $10 million, with the outstanding amount of any such letters of credit reducing availability for borrowings. As of June 30, 2025, our Revolving Credit Facility was undrawn and had approximately $46 million of availability, based on our eligible collateral.

The Revolving Credit Facility matures on December 21, 2028, subject to springing maturity to the date that is 90 days prior to the stated maturity date of our existing Senior Secured Notes (defined below), which is currently October 15, 2028 (unless such Senior Secured Notes have been repaid or redeemed in full prior thereto). Borrowings outstanding under the Revolving Credit Facility will bear interest at a rate per annum equal to, at the option of us, either (a) term Secured Overnight Financing Rate (“SOFR”) for a period of one month (with a fallback to the prime rate if such rate is unavailable), plus 0.10%, plus an applicable margin of 1.625% or (b) term SOFR for a period of one, three or six months (at our election), plus 0.10%, plus an applicable margin of 1.625%, in each case with a floor of 0.00%.

LSB Industries, Inc. and all of its subsidiaries (collectively, the “Borrowers”) are co-borrowers under the Revolving Credit Facility. Obligations under the Revolving Credit Facility are secured by a first priority security interest in substantially all of our current assets, including accounts receivable and inventory, subject to certain exceptions.

The Revolving Credit Facility contains a financial covenant, which requires that, solely if we elect to remove the Availability Block, then the Borrowers must maintain a minimum fixed charge coverage ratio of not less than 1.00:1.00. The financial covenant, if triggered, is tested monthly. The financial covenant was not triggered as of June 30, 2025.

(B)

We previously issued at par an aggregate total of $700 million principal value of our Senior Secured Notes due 2028 (“Senior Secured Notes”). The Senior Secured Notes, which mature in October 2028, bear interest at a rate of 6.25% paid in arrears on May 15 and October 15 of each year. From time to time, we have engaged in open market repurchases to extinguish a portion of the outstanding balance.

During the three months ended June 30, 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 million, which was accounted for as an extinguishment of debt. All such repurchases were made during the three months ended June 30, 2025. While the repurchases were at prices slightly below par value, including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.

During the three months ended June 30, 2024, we repurchased $63.7 million in principal amount of our Senior Secured Notes for approximately $60.9 million, which was accounted for as an extinguishment of debt. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt of approximately $1.9 million.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the six months ended June 30, 2024, we repurchased $96.6 million in principal amount of our Senior Secured Notes for approximately $92.2 million which was accounted for as an extinguishment of debt. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt approximately $3.0 million.

(C)

In August 2020, we entered into a $30 million secured financing arrangement with an affiliate of Eldridge Industries, L.L.C. (“Eldridge”). Principal and interest are payable in 60 equal monthly installments with a final balloon payment of approximately $5 million due in August 2025.

(D)

Finance leases consist primarily of leases on railcars.

5. Commitments and Contingencies

Outstanding Natural Gas Purchase Commitments – Certain of our natural gas contracts qualify as normal purchases under U.S. GAAP and thus are not financial instruments for which we mark-to-market. At June 30, 2025, we did not have material volumes of natural gas under fixed price contracts.

Legal Matters - Following is a summary of certain legal matters involving the Company:

A. Environmental Matters

Our facilities and operations are subject to numerous federal, state and local environmental laws and to other laws regarding health and safety matters (collectively, the “Environmental and Health Laws”), many of which provide for certain performance obligations, substantial fines and criminal sanctions for violations. Certain Environmental and Health Laws impose strict liability as well as joint and several liability for costs required to remediate and restore sites where hazardous substances, hydrocarbons or solid wastes have been stored or released. We may be required to remediate contaminated properties currently or formerly owned or operated by us or facilities of third parties that received waste generated by our operations regardless of whether such contamination resulted from the conduct of others or from consequences of our own actions that were in compliance with all applicable laws at the time those actions were taken.

In addition, claims for damages to persons or property, including natural resources, may result from the environmental, health and safety effects of our operations.

There can be no assurance that we will not incur material costs or liabilities in complying with such laws or in paying fines or penalties for violation of such laws. Our insurance may not cover all environmental risks and costs or may not provide sufficient coverage if an environmental claim is made against us. The Environmental and Health Laws and related enforcement policies 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. Further, a number of our facilities are dependent on environmental permits to operate, the loss or modification of which could have a material adverse effect on their operations and our financial condition.

Historically, we have incurred significant capital expenditures in order to comply with the Environmental and Health Laws and significant capital expenditures are expected to be incurred in the future. We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at our facilities should we discontinue the operations of a facility.

As of June 30, 2025, our accrued liabilities for environmental matters totaled approximately $0.8 million relating primarily to the matters discussed below. Estimates of the most likely costs for our environmental matters are generally based on preliminary or completed assessment studies, preliminary results of studies, or our experience with other similar matters. It is reasonably possible that a change in the estimate of our liability could occur in the near term.

1. Discharge Water Matters

Each of our manufacturing facilities generates process wastewater, which may include cooling tower and boiler water quality control streams, contact storm water and miscellaneous spills and leaks from process equipment. The process water discharge, storm-water runoff and miscellaneous spills and leaks are governed by various permits generally issued by the respective state environmental agencies as authorized and overseen by the U.S. Environmental Protection Agency (the “EPA”). These permits limit the type and volume of effluents that can be discharged and control the method of such discharge.

In 2017, the Company filed a Permit Renewal Application for its Non-Hazardous Injection Well Permit at the Pryor Facility. Although the Injection Well Permit expired in 2018, we continue to operate the injection well in accordance with an executed November 2023 Consent Order with the Oklahoma Department of Environmental Quality (“ODEQ”) that allows for the continued use of the injection

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

well until a wastewater treatment process is designed, built and operational. The Company continues to work with the ODEQ under the terms of the Consent Order. We have identified and selected a wastewater treatment technology using biological processes that can and will treat the nitrogen-containing wastewater streams at our Pryor Facility. We are unable to estimate the costs related to the replacement of the disposal well at this time as we are in the early stages of design for the wastewater treatment process with a wastewater process design engineering firm. We have also commenced preliminary discussions with the ODEQ on permitting the treated wastewater discharges, but have not received any confirmation from the ODEQ on their preliminary acceptance of our treated wastewater stream.

In 2006, the Company entered into a Consent Administrative Order (“CAO”) that recognizes the presence of nitrate contamination in the shallow groundwater at our El Dorado Facility. The CAO required us to perform semi-annual groundwater monitoring, continue operation of a groundwater recovery system, submit a human health and ecological risk assessment and submit a remedial action plan. The risk assessment was submitted in 2007. In 2015, the Arkansas Department of Environmental Quality (“ADEQ”) stated that the El Dorado Facility was meeting the requirements of the CAO and should continue semi-annual monitoring. A CAO was signed in 2018, which required an Evaluation Report of the data and effectiveness of the groundwater remedy for nitrate contamination. During 2019, the Evaluation Report was submitted to the ADEQ and the ADEQ approved the report. In August 2023, the Company received a Notice of Violation (“NOV”) for wastewater discharges from our El Dorado Facility. We have been in discussions with the ADEQ about our response to the NOV. The ADEQ provided notice of the cash penalty amount related to the NOV, which was accrued as of June 30, 2025 and was not material.

2. Other Environmental Matters

In 2002, certain of our subsidiaries sold substantially all of their operating assets relating to a Kansas chemical facility (the “Hallowell Facility”) but retained ownership of the real property where the facility is located. Our subsidiary retained the obligation to be responsible for and perform the activities under a previously executed consent order to investigate the surface and subsurface contamination at the real property, develop a corrective action strategy based on the investigation and implement such strategy. In addition, certain of our subsidiaries agreed to indemnify the buyer of such assets for these environmental matters.

As the successor to a prior owner of the Hallowell Facility, Chevron Environmental Management Company (“Chevron”) has agreed in writing, within certain limitations, to pay and has been paying one-half of the costs of the investigation and interim measures relating to this matter as approved by the Kansas Department of Health and Environment (the “KDHE”), subject to reallocation.

During this process, our subsidiary and Chevron retained an environmental consultant that prepared and performed a corrective action study work plan as to the appropriate method to remediate the Hallowell Facility. During 2020, the KDHE selected a remedy of annual monitoring and the implementation of an Environmental Use Control (“EUC”). This remedy primarily relates to long-term surface and groundwater monitoring to track the natural decline in contamination and is subject to a periodic review with the KDHE. At this time there is no review scheduled.

The final remedy, including the EUC, the finalization of the cost estimates and any required financial assurances remains under discussion with the KDHE. Pending the results from our discussions regarding the final remedy, we continue to accrue our allocable portion of costs primarily for the additional testing, monitoring and risk assessments that could be reasonably estimated, which amount is included in our accrued liabilities for environmental matters discussed above. The estimated amount is not discounted to its present value. As more information becomes available, our estimated accrual will be refined, as necessary.

We received a NOV for ten findings identified from an inspection conducted by the EPA Region IV at our Cherokee Facility in late 2022. We provided written responses to each finding in the inspection report issued in connection with such inspection and to the Notice of Potential Violations and held direct communications with the EPA related to the matter. A meeting was held with the EPA in January 2024 to discuss the NOV and our subsequent responsive actions. During the meeting, the EPA proposed two alternatives for the penalties related to the violations. We accepted one of the proposed alternatives, which included a cash fine that has been paid and an investment in a community project, for which we accrued an estimate as of December 31, 2023.

B. Other Pending, Threatened or Settled Litigation

In addition to the foregoing, we are also involved in various other claims and legal actions (including matters involving gain contingencies) in the ordinary course of our business. While it is possible that the actual claims results could differ from our estimates, after consultation with legal counsel, we believe that any such differences will not have a material effect on our business, financial condition, results of operations or cash flows.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

6. Financial Instruments

Natural Gas Contracts

Periodically, we enter into certain forward natural gas contracts or volume purchase commitments, which are derivatives. We utilize these natural gas contracts as economic hedges for risk management purposes but the contracts are not designated as hedging instruments. At June 30, 2025 and December 31, 2024, we had no outstanding forward natural gas contracts or volume purchase commitments accounted for as derivatives. When present in the past, the valuations of the natural gas contracts were classified as a Level 2 fair value measurement.

Financial Instruments

At June 30, 2025 and December 31, 2024, 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. Fair value of our Senior Secured Notes is classified as a Level 2 fair value measurement while the treasury securities that comprise our cash equivalents and short-term investments are a Level 1 fair value measurement. 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.


	June 30, 2025				December 31, 2024
	Carrying		Estimated		Carrying		Estimated
	Amount		Fair Value		Amount		Fair Value
	(In Millions)
Senior Secured Notes (1)	$	446	$	441	$	478	$	461
Short-Term Investments	$	119	$	119	$	164	$	164

_____________________________

(1)

Based on a quoted price of 98.8 at June 30, 2025 and 96.4 at December 31, 2024. Also see discussion in Note 4 (B).

7. Income Taxes

Provision for income taxes is as follows:


	Three Months Ended June 30,					Six Months Ended June 30,
	2025		2024			2025			2024
	(In Thousands)
Current:
Federal	$	—	$	—		$	—		$	—
State		37		(250	)		90			(468	)
Total Current	$	37	$	(250	)	$	90		$	(468	)

Deferred:
Federal	$	983	$	1,928		$	775		$	2,914
State		64		(428	)		(64	)		(593	)
Total Deferred	$	1,047	$	1,500		$	711		$	2,321
Provision for income taxes	$	1,084	$	1,250		$	801		$	1,853

The tax provision for the six months ended June 30, 2025, was $0.8 million (37.0% provision on pre-tax income). The tax provision for the six months ended June 30, 2024 was $1.9 million (10.9% provision on pre-tax income). For 2025, the effective tax rate was higher than the statutory tax rate primarily due to nondeductible compensation expense and state taxes. For 2024, the effective tax rate was lower than the statutory tax rate primarily due to nondeductible compensation expense and state taxes including deferred benefits from state law changes.

We considered both positive and negative evidence in our determination of the need for valuation allowances for deferred tax assets. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results. Based on our analysis, we have determined that it is more-likely-than-not that all of our federal deferred tax assets and a portion of our state deferred tax assets will be utilized. We estimate an approximately $0.7 million increase in the related valuation allowance associated with these state deferred tax assets will be recorded during the year as part of the estimated annual effective tax rate applied to ordinary income.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

LSB Industries, Inc. and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2021-2024 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Additionally, the 2013-2020 years remain subject to examination for determining the amount of net operating loss and other carryforwards.

On July 4, 2025, “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14” and commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and favorable changes to bonus depreciation, domestic research cost expensing, and the business interest limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are still evaluating its impact on our financial statements.

8. Net Sales

Disaggregated Net Sales

We primarily derive our revenues from the sales of various chemical products. The Company’s net sales disaggregation is consistent with other financial information utilized or provided outside of our condensed consolidated financial statements. Accordingly, this approach is reflected in disaggregated net sales, mirroring how the Company manages its net sales by product through contracts with customers.

The following table presents our net sales disaggregated by our products, which disaggregation is consistent with other financial information utilized or provided outside of our consolidated financial statements:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
	(In Thousands)
Net sales:
AN & Nitric Acid	$	61,707	$	58,442	$	119,325	$	106,877
Urea ammonium nitrate (UAN)		52,262		42,808		96,127		84,000
Ammonia		26,830		28,448		60,102		67,978
Other		10,497		10,375		19,174		19,422
Total net sales	$	151,296	$	140,073	$	294,728	$	278,277

Other Information

For our contracts with a duration greater than one year at contract inception, the average remaining expected duration was approximately 31 months at June 30, 2025.

Liabilities associated with contracts with customers (contract liabilities) primarily relate to deferred revenue and customer deposits associated with cash payments received in advance from customers for product shipments. We had approximately $0.2 million and $1.1 million of contract liabilities as of June 30, 2025 and December 31, 2024, respectively. For the three and six months ended June 30, 2025, revenues of $10.3 million and $1.1 million, respectively, were recognized and included in the balances as of March 31, 2025 and December 31, 2024. For the three and six months ended June 30, 2024, revenues of $2.3 million and $0.8 million, respectively, were recognized and included in the balances as of March 31, 2024 and December 31, 2023. Our contract assets consist of unconditional rights to payment from our customers, which are reflected as accounts receivable in our condensed consolidated balance sheets.

For most of our contracts with customers, the transaction price from the inception of a contract is constrained to a short period of time (generally one month) as these contracts contain terms with variable consideration related to both price and quantity. At June 30, 2025, we have remaining performance obligations with certain customer contracts, excluding contracts with original durations of less than one year and for service contracts for which we have elected the practical expedient for consideration recognized in revenue as invoiced. As of June 30, 2025, the remaining performance obligations totaled approximately $126.6 million, of which approximately 56% relates to 2025 through 2027, approximately 25% relates to 2028 through 2029, with the remainder thereafter.

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

9. Related Party Transactions

As of June 30, 2025, we had one outstanding financing arrangement with an affiliate of Eldridge as discussed in footnote (C) of Note 4.

10. Supplemental Cash Flow Information

The following provides additional information relating to cash flow activities:


	Six Months Ended June 30,
	2025		2024
	(In Thousands)
Cash payments (refunds) for:

Interest on long-term debt and other, net of capitalized interest	$	17,892	$	21,059
Income taxes, net	$	321	$	508

Noncash investing and financing activities:

Property, plant and equipment acquired and not yet paid at end of period	$	19,066	$	23,317
Loss (gain) on extinguishment of debt	$	59	$	(3,013	)
Accounts payable associated with debt-related costs	$	—	$	94

LSB INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. Segment

The Company is managed on a consolidated basis with a single reportable segment, chemical manufacturing, which is not an aggregation of individual operating segments. There have been no changes in the basis of segmentation or in the basis of measurement of segment profit or loss since the filing of our 2024 Form 10-K. Information about reported segment revenue, measures of a segment’s profit or loss, significant segment expenses, and measure of a segment's assets:


	Three Months Ended June 30,		Six Months Ended June 30,
	2025	2024	2025	2024
	(In Thousands)
Net sales	$151,296	$140,073	$294,728	$278,277
Less:
Cost of sales excluding depreciation, amortization and turnaround expense	104,867	90,465	211,857	188,382
Depreciation and amortization	20,617	18,754	40,680	35,848
Turnaround expense	2,639	3,439	4,634	4,354
Total cost of sales	128,123	112,658	257,171	228,584
Selling, general and administrative
Wages and benefits	6,037	5,545	12,257	11,688
Other selling general and administrative	3,807	6,002	7,740	10,153
Total selling general and administrative	9,844	11,547	19,997	21,841
Interest expense	7,886	8,385	15,950	18,114
Loss (gain) on extinguishments of debt	59	(1,879)	59	(3,013)
Loss from asset write-down and disposals	2,528	1,489	2,599	2,943
Income tax provision	1,084	1,250	801	1,853
Other segment items (a)	(1,234)	(2,932)	(3,215)	(7,223)
Segment net income	3,006	9,555	1,366	15,178

Reconciliation of profit or loss
Adjustments and reconciling items	—	—	—	—
Consolidated net income	$3,006	$9,555	$1,366	$15,178

_____________________________

(a) For the periods presented, amount consisted primarily of interest and sublease income.

The measure of our chemical manufacturing segment assets is reported on the condensed consolidated balance sheet as total assets. Expenditures for long-lived chemical manufacturing segment assets are reported on our condensed consolidated statement of cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Investors should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included in “Item 1. Financial Statements.” Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in “Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements.” Certain statements contained in this discussion may be deemed to be forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and in our Annual Report on Form 10-K for the year ended December 31, 2024, particularly in the section entitled “Risk Factors.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to LSB Industries, Inc. and its consolidated subsidiaries.

Overview

General

LSB is headquartered in Oklahoma City, Oklahoma and we manufacture and sell chemical products for the agricultural and industrial markets. We own and operate three multi-plant facilities in Cherokee, Alabama (the “Cherokee Facility”), El Dorado, Arkansas (the “El Dorado Facility”) and Pryor, Oklahoma (the “Pryor Facility”) and operate a facility on behalf of Covestro LLC in Baytown, Texas. Our products are sold through distributors and directly to end customers primarily throughout the United States and other parts of North America.

Key Operating Initiatives for 2025

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. In 2025, we remain focused on our efforts to further the progress we have made with our safety programs to move closer to attaining zero injuries. We have been investing and plan to continue to invest additional capital at all three of our facilities during 2025 to build upon the success we have had in implementing enhanced safety programs during the last several years.

▪

We have multiple initiatives underway focused on continuing to improve the reliability of our plants as we advance towards our ammonia on-stream operating rate target and increase our production volumes of ammonia and other downstream products. Progress towards these targets 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.

•

Continued Optimization and Increase the Breadth of Distribution of our Product Mix. We have initiatives underway to increase the distribution of our products within our industrial end markets, among other product mix optimization strategies. We believe that these initiatives and strategies, 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, while making our financial results more stable and predictable. Additionally, we have completed and are advancing several capital improvement projects with the intention of increasing our sales volumes of higher value downstream products resulting in improvements in our overall profit margins.

•

Development of Low Carbon Ammonia and Other Products. The reduction of greenhouse gas emissions, particularly related to carbon dioxide, has been and we expect will increasingly become a global environmental priority. Ammonia has continued to emerge as one of the more viable alternatives to serve as a hydrogen-based energy source for a variety of applications due to its higher energy density and ease of storage relative to hydrogen gas. 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 low carbon 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.

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. We believe that the resulting low carbon emission product can be sold at a premium to conventional ammonia, to customers seeking to reduce their carbon footprint, particularly in the power generation, marine, industrial, mining and agricultural end markets.

Additionally, we believe that producers of low carbon ammonia will be eligible for government incentives aimed at promoting carbon capture and sequestration (“CCS”).

We believe we are well-positioned to capitalize on this opportunity 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. We are currently pursuing projects that could enable us to become a producer and marketer of low carbon ammonia and other derivative products. These projects include a low carbon ammonia project at our El Dorado Facility in collaboration with Lapis Carbon Solutions (“Lapis”) that we expect to be operational by the end of 2026. In January 2025, we achieved pre-certification status under the Fertilizer Institute’s Verified Ammonia Carbon Intensity program. This is a voluntary certification of the carbon footprint of ammonia production at a specific facility, from well to production gate. Our El Dorado ammonia plant is one of four North American plants to have received such a status.

•

Evaluate and Pursue Organic Capacity Expansion. 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. However, given the current high-cost environment and limited resources, coupled with our outlook for moderating selling prices, during 2024 we elected to put the El Dorado expansion projects on hold. We will continue evaluating these projects over the course of 2025 to determine our prospects of moving forward with one or more of them in the future.

•

During 2024, we undertook several smaller projects that we expect to enhance our profitability during 2025. These projects include:

▪

Construction of additional AN solution storage and new AN solution rail loading capability at our El Dorado Facility to significantly increase the volume of AN solution sales and increase product optionality at the site. This project was completed during the second quarter of 2025;

▪

Construction of 5,000 tons of additional nitric acid storage at our El Dorado Facility was completed in the latter part of 2024 to help us optimize our product sales mix; and

▪

Expansion of our urea capacity at our Pryor Facility, to enable us to use a portion of the facility’s ammonia output to upgrade to approximately 75,000 additional tons of UAN per year. This project was completed in late 2024 and led to increased UAN sales volumes during the first half of 2025.

•

Evaluate Acquisitions of Strategic Assets or Companies. 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. 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.

Recent Business Developments

Advanced Low Carbon Ammonia Initiatives

In May 2024, we announced an agreement to supply, for a five-year period commencing January 1, 2025, up to 150,000 short tons per year of low carbon ammonium nitrate solution (“ANS”) to Freeport Minerals Corporation (“Freeport”). In early 2025 we began supplying conventional ANS to Freeport from our El Dorado Facility, and expect to phase in the low carbon contracted volume in the next year. Freeport intends to use the low carbon ANS purchased from us for its United States copper mining operations.

In April 2022, we entered into an agreement with Lapis to develop a project to capture and sequester CO2 at our El Dorado Facility. 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 and operational by the end of 2026, subject to the approval of a Class VI permit, at which time CO2 injections are expected to begin. Once operational, the project at the El Dorado site will initially capture and sequester approximately 400,000 to 500,000 metric tons of CO2 per year in underground saline aquifers.

The sequestered CO2 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 CO2 captured and sequestered. Lapis, as the majority owner of the CCS equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO2 captured and sequestered by the end of 2026. Once in operation, the sequestered CO2 is expected to reduce our overall scope 1 GHG emissions by approximately 25% from current levels. In addition, sequestering approximately 400,000 to 500,000 metric tons of CO2 annually is expected to enable us to produce approximately 305,000 to 380,000 metric tons of low carbon ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia. In February 2023, a key milestone was achieved in the advancement of our low carbon ammonia project at El Dorado by filing a pre-construction Class VI permit application with the United States Environmental Protection Agency (the “EPA”). The EPA recognized the application as complete in March 2023 and is currently in the review process. In June 2025, Lapis completed the drilling of a stratigraphic injection well at the El Dorado site and has been gathering data

to support the EPA in its continuing technical review of our Class VI application. Once the project receives EPA approval, we intend to use this well for CO2 injections.

Higher UAN Prices and Higher AN and UAN Sales Volumes Offset by Higher Natural Gas Input Costs

Second quarter 2025 results were impacted by natural gas input costs, which were higher than they were in the second quarter and full year of 2024. Partially offsetting the impact of higher natural gas prices were increased sales volumes of AN and UAN. Additionally, second quarter 2025 results benefited from higher UAN prices relative to the prior year second quarter.

Ammonia prices currently reflect reduced supply from the Middle East, robust demand in the United States, and higher cost of production in Europe. Global ammonia inventories appear balanced, however, and as the year progresses, pricing may be impacted by the start-up of new production capacity in both the United States and internationally, with at least one new world scale plant expected to come online during 2025.

Pricing for ammonia derivative fertilizer products has been strong. Both urea and UAN prices are currently well above year-ago levels, reflecting a variety of factors including tight global supply with limited inventory in the United States distribution channel; the demand pull of a strong Spring 2025 corn planting season with the United States Department of Agriculture (“USDA”) currently expecting 95 million acres of corn to be planted, up 5% from the 2024 planting season; and a reduced pace of import flow into the United States.

Demand for our industrial products is stable despite global economic concerns. Nitric acid demand has been steady, reflecting the resilience of the U.S. economy and consumer spending levels. Demand for AN for use in mining applications has been bolstered by positive exposure to copper, gold and iron ore, as well as continued attractive market fundamentals for aggregate production relating to infrastructure construction. Economic uncertainty continues to be heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs. However, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base which is almost entirely located in the United States, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.

See a more detailed discussion below under “Key Industry Factors.”

Shift in Production Mix

Over the last several months, we commenced the process of transitioning our production of HDAN, an agricultural/fertilizer product, to ANS, a product used in industrial and mining applications. We expect this transition to be complete and production of HDAN to cease later in the third quarter of 2025. This transition is consistent with our strategy to shift a portion of our sales mix from agricultural sales made at spot market pricing, which can be volatile, towards sales covered under multi-year contracts where we pass through the cost of natural gas feedstock. With the discontinuation of HDAN production, we will also close our agricultural retail location in Elkhart, TX, as its primarily purpose was to sell the HDAN we produced. The process to close this retail location commenced at the beginning of the third quarter of 2025 and will be substantially complete by quarter-end.

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. 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.

From a farmer’s perspective, the demand for fertilizer is affected by the aggregate crop planting decisions including farm economics, weather and fertilizer application rate decisions of individual farmers. Individual farmers make planting decisions based largely on prospective profitability of a harvest, while the specific varieties and amounts of fertilizer they apply depend on factors such as their financial resources, soil conditions, weather patterns and the types of crops planted.

Additionally, changes in corn prices, as well as soybean, cotton and wheat prices, can affect the number of acres of corn planted in a given year and the number of acres planted will drive the level of nitrogen fertilizer consumption, likely affecting prices.

According to the World Agricultural Supply and Demand Estimates Report dated July 11, 2025 (the “July Report”), farmers planted approximately 95.2 million acres of corn in the 2025 planting season, up 5.1% compared to the 2024 planting season. According to the July Report, the USDA estimates the United States ending stocks for the 2025 Harvest will be approximately 42.2 million metric tons, a 24.1% increase from the 2024 Harvest. The USDA's expected yield per acre for the 2025 Harvest is 181.0 bushels, up approximately 0.9% from a year ago.

The following July 2025 estimates are associated with the corn market:


	2026 Crop		2025 Crop					2024 Crop
	(2025 Harvest)		(2024 Harvest)		Percentage			(2023 Harvest)		Percentage
	July Report (1)		July Report (1)		Change (2)			July Report (1)		Change (3)
U.S. Area Planted (Million acres)		95.2		90.6		5.1	%		94.6		0.6	%
U.S. Yield per Acre (Bushels)		181.0		179.3		0.9	%		177.3		2.1	%
U.S. Production (Million bushels)		15,705		14,867		5.6	%		15,341		2.4	%
U.S. Ending Stocks (Million metric tons)		42.2		34.0		24.1	%		44.8		(5.8	%)
World Ending Stocks (Million metric tons)		272.1		284.2		(4.3	%)		315.7		(13.8	%)

Information obtained from the July Report for the 2026/2025 (“2026 Crop”), 2024/2025 ("2025 Crop") and 2023/2024 (“2024 Crop”) corn marketing years. 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.

Represents the percentage change between the 2026 Crop amounts compared to the 2025 Crop amounts.

Represents the percentage change between the 2026 Crop amounts compared to the 2024 Crop amounts.

The current USDA corn outlook for the United States calls for smaller supplies, domestic use, and ending stocks. Corn beginning stocks are down reflecting an increase in exports partly offset by lower feed and residual use. With supply falling more than use, ending stocks are down 90 million bushels from the previous month’s report. From a demand perspective, we believe that corn prices will remain at a level that will further support demand for fertilizers during the remainder of 2025.

Industrial Products

Our industrial products sales volumes are dependent upon general economic conditions, primarily in the housing, automotive and paper industries. Demand for our industrial products is stable despite persistent global economic challenges. Nitric acid demand has been steady, reflecting the strength of the U.S. economy and consumer spending levels. Our sales prices generally vary with the market price of ammonia or natural gas, as applicable, in our pricing arrangements with customers.

Our LDAN and AN solution, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, are used for metals mining and to a lesser extent, for coal. Demand for AN for use in mining applications has been bolstered by positive exposure to copper, gold and iron ore, as well as continued attractive market fundamentals for aggregate production relating to infrastructure construction. Economic uncertainty has recently been heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs. However, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base which is almost entirely located in the United States, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.

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. As a result, our competitive position and that of other North American nitrogen fertilizer producers has been positively affected.

We historically have purchased natural gas either on the spot market, through forward purchase contracts, or a combination of both and we have used forward purchase contracts to lock in pricing for a portion of our natural gas requirements. 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.

The following table shows the volume of natural gas purchased and the average cost per MMBtu:


	Three Months Ended June 30,
	2025		2024
Natural gas volumes (MMBtu in millions)		7.8		7.5
Natural gas average cost per MMBtu	$	3.37	$	1.92

Transportation Costs

Costs for transporting nitrogen-based products can be significant relative to their selling price. We continue to evaluate the 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. Additionally, truck driver shortages could impact our ability to fulfill customer demand. As a result, we continue to evaluate supply chain efficiencies to reduce or counter the impact of higher logistics costs.

Key Operational Factors

Facility Reliability

Consistent, reliable and safe operations at our chemical plants are critical to our financial performance and results of operations. The financial effects of planned downtime at our plants, including a planned major maintenance activity (each such activity, a “Turnaround”) is mitigated through a diligent planning process that considers the availability of resources to perform the needed maintenance and other factors. Unplanned downtime of our plants typically results in lost contribution margin from lost sales of our products, lost fixed cost absorption from lower production of our products and increased costs related to repairs and maintenance. All Turnarounds result in lost contribution margin from lost sales of our products, lost fixed cost absorption from lower production of our products and increased costs related to repairs and maintenance, which repair and maintenance costs are expensed as incurred.

The next ammonia plant Turnaround is currently planned for our El Dorado Facility in the first half of 2026. We completed Turnarounds at both our Pryor Facility and Cherokee Facility in the latter half of 2024. Following those Turnarounds, the next Pryor Facility Turnaround is currently planned for 2027, with the Cherokee Facility Turnaround currently planned for 2028.

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. For 2025, we are targeting total ammonia production of approximately 820,000 tons to 850,000 tons.

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 delivery 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. 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 of the Second Quarter of 2025

Our consolidated net sales for the second quarter of 2025 were $151.3 million compared to $140.1 million for the same period in 2024. Our consolidated operating income for the second quarter of 2025 was $10.5 million compared to $14.4 million for the same period in 2024. The items impacting our operating results are discussed in more detail below and under “Results of Operations.”

Items Affecting Comparability of Results of the Second Quarter

Selling Prices

For the second quarter of 2025, average selling prices for ammonia and UAN increased while the average selling price for AN and nitric acids decreased compared to the second quarter of 2024.

(Loss) Gain on Extinguishment of Senior Secured Notes

During the second quarter of 2025 we repurchased $32.4 million in principal amount of our Senior Secured Notes due 2028 (“Senior Secured Notes”) for approximately $32.1 million, which was accounted for as an extinguishment of debt. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.

During the second quarter of 2024 we repurchased $63.7 million in principal amount of our Senior Secured Notes for approximately $60.9 million. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt of approximately $1.9 million.

Plant, Property and Equipment Impairments

For the three months ended June 30, 2025 and 2024, we recorded asset write-downs primarily related to assets no longer in use in the amount of $2.5 million and $1.5 million, respectively. These write-downs are included in “Other expense, net” on our condensed consolidated statements of operations.

Results of Operations

The following is a discussion and analysis of our condensed consolidated results of operations for the three months ended June 30, 2025 and 2024.

Net sales to unaffiliated customers are reported in the condensed 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.

Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024

The following table sets forth certain financial information for the three months ended June 30, 2025 and 2024, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:


	Three Months Ended June 30,									Percentage
	2025			2024			Change			Change
	(Dollars In Thousands)
Net sales:
AN & Nitric Acid	$	61,707		$	58,442		$	3,265			6	%
Urea ammonium nitrate (UAN)		52,262			42,808			9,454			22	%
Ammonia		26,830			28,448			(1,618	)		(6	)%
Other		10,497			10,375			122			1	%
Total net sales	$	151,296		$	140,073		$	11,223			8	%

Gross profit:
Adjusted gross profit (1)	$	46,429		$	49,608		$	(3,179	)		(6	)%
Depreciation and amortization (2)		(20,617	)		(18,754	)		(1,863	)		10	%
Turnaround expense		(2,639	)		(3,439	)		800			(23	)%
Total gross profit		23,173			27,415			(4,242	)		(15	)%
Selling, general and administrative expense		9,844			11,547			(1,703	)		(15	%)
Other expense, net		2,836			1,465			1,371		N/M
Operating income		10,493			14,403			(3,910	)		(27	)%
Interest expense, net		7,886			8,385			(499	)		(6	)%
Loss (gain) on extinguishment of debt		59			(1,879	)		1,938		N/M
Non-operating other income, net		(1,542	)		(2,908	)		1,366			(47	)%
Provision for income taxes		1,084			1,250			(166	)		(13	)%
Net income	$	3,006		$	9,555		$	(6,549	)	N/M

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

LSB INDUSTRIES, INC. 10-Q