LSB INDUSTRIES INC
For the period ended Sep 30, 2024. Filed Oct 30, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 30, 2024
LXU$10.60+2.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000950170-24-089292
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0000950170-24-118995
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 177 previous paragraphs and 175 current paragraphs.
109 unchanged; 51 reworded; 15 added; 15 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Higher Ammonia Prices and Lower Natural Gas Input Costs Partially Offset by Impact of Planned Turnaround of Pryor Facility
Current report
Third quarter results benefited from higher ammonia selling prices and lower natural gas feedstock costs relative to the third quarter of 2023. Sales volumes of our products decreased in the third quarter of 2024 as compared to the same quarter of 2023 due to lower sales volumes of UAN and ammonia as a result of the Turnaround performed at our Pryor facility during the period.
Current report
Ammonia prices have strengthened over the past several months supported by a combination of global factors, including: tight U.S. and West-of-Suez supply-demand dynamics driven by global supply disruptions; geopolitical concerns over conflict in the Middle East leading to higher natural gas feedstock costs for European ammonia producers; extended turnarounds, outages and limited spot availability across the Middle East, North Africa and Trinidad that have reduced global inventories; ongoing disruptions in the Suez Canal limiting ammonia imports into Europe from the Middle East; and the delayed startup of new production capacity in the U.S. Gulf and export terminal in Russia.
Current report
Our Pryor Facility has completed its scheduled full plant Turnaround which commenced during the third quarter of 2024. Our Cherokee Facility commenced its scheduled ammonia plant Turnaround during the fourth quarter. Following those Turnarounds, they are expected to be on a two-year and three-year ammonia plant Turnaround cycle, respectively
Current report
For the third quarter of 2024, average selling prices for our ammonia increased while other pricing remained flat compared to the third quarter of 2023. As discussed above under “Recent Business Developments,” prices have strengthened over the past several months supported by a combination of global factors, including: tight supply-demand dynamics driven by global supply disruptions; geopolitical concerns over conflict in the Middle East leading to higher natural gas feedstock costs; extended turnarounds, outages and limited spot availability reducing global inventories; ongoing disruptions in the Suez Canal limiting ammonia imports into Europe from the Middle East; and the delayed startup of new production capacity in the U.S. Gulf and export terminal in Russia.
Current report
Turnaround Activities (2024 only)
Current report
As discussed above, we performed major Turnaround activities at our Pryor Facility in the third quarter of 2024. Additionally, we planned and executed a minor planned outage at our El Dorado Facility during July to change the catalyst in the ammonia plant to maximize production rates. When such activities are performed, overall results are negatively impacted. This impact includes lost contribution margin from lost sales, lost fixed cost absorption from lower production, and increased costs associated with repairs and maintenance. In addition, Turnaround related costs may be incurred in periods earlier than the actual outage of the plant for activities such as planning and procurement of materials.
Current report
Plant, Property and Equipment Impairments
Current report
For the three months ended September 30, 2024 and 2023, we recorded impairments on assets the Company has or intends to abandon in the amount of $5.4 million and $0.2 million, respectively. For the nine months ended September 30, 2024 and 2023, we recorded asset impairments of $6.8 million and $2.1 million, respectively. These impairment losses are included in Other expense (income), net on our condensed consolidated statements of operations.
Current report
Gross (Loss)
Current report
Benefit provision for Income Taxes
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
Other Expense (income), net
Current report
(Benefit) provision for Income Taxes
Current report
Capital Expenditures – First Nine Months of 2024
Removed paragraphs (15)
Previous report
Lower Natural Gas Input Costs Offset by Modestly Lower Selling Prices and Weather-Effected Sales Volume Declines
Previous report
Second quarter results benefited from lower natural gas feedstock costs relative to the second quarter of 2023. Selling prices were down compared to the prior year second quarter; however, the impact of year-over-year pricing declines was significantly smaller than it had been in the previous five quarters due, in part, to a stabilization of supply-demand dynamics. Sales volumes of our products decreased in the second quarter of 2024 as compared to the same quarter of 2023 as a result of lower sales volumes of HDAN resulting from wet weather in key markets for this product in late May and June, in addition to timing of agricultural ammonia demand, which was heavier than average in the first quarter of 2024, translating into lower orders during the second quarter.
Previous report
Nitrogen chemical prices declined from 2022 peak levels through much of 2023 due to a variety of domestic and international factors. One of the most significant of these factors was the decline in natural gas costs in Europe. Natural gas is the primary feedstock for the production of ammonia and a key driver of ammonia selling prices globally. During the second half of 2022 and first half of 2023, natural gas prices in Europe dropped as relatively warm winter temperatures reduced demand, which, combined with a rise in imports of liquified natural gas from the U.S., resulted in ample supply and high gas storage inventories. After having production largely curtailed for much of 2022 due to the high input costs, lower natural gas prices enabled a majority of European ammonia facilities to resume operations over the course of 2023, increasing global supply for nitrogen products. These gas supply dynamics persisted in the first half of 2024, keeping natural gas costs in Europe at levels similar to much of 2023. However, natural gas prices in Europe remain significantly higher than those in the U.S., making European operators the high cost, or marginal producers, of ammonia globally.
Previous report
A slowdown in Far East Asian industrial activity combined with lower demand for phosphate products also contributed to lower nitrogen prices during much of 2023 and the first half of 2024. Ammonia is a feedstock for various downstream chemicals that are produced in Asia, such as polyurethane, caprolactam and acrylonitrile, and markets for these products continue to be weak, resulting in reduced ammonia demand.
Previous report
For the second quarter of 2024, average selling prices for our key products decreased compared to the second quarter of 2023, however, the impact of year-over-year pricing declines was significantly smaller than it had been in the previous five quarters due, in part, to a stabilization of supply-demand dynamics. As discussed above under “Recent Business Developments,” declining European natural gas prices resulted in ammonia production costs in Europe declining substantially, translating into increased global supply and lower selling prices for ammonia and ammonia derivative fertilizers.
Previous report
Gain on Extinguishment of Senior Secured Notes
Previous report
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 approximately $1.9 million.
Previous report
During the second quarter of 2023 we repurchased $125 million in principal amount of our Senior Secured Notes for approximately $114.3 million. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of approximately $8.6 million.
Previous report
Provision for Income Taxes
Previous report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Previous report
Gross Profit
Previous report
Gain on Extinguishment of Debt
Previous report
Other Expense, net
Previous report
Provision for Income Taxes
Previous report
Capital Expenditures – First Six Months of 2024
Reworded paragraphs (51)
Previous wording
Development of Low Carbon Ammonia and Clean Energy Projects. 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 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.
Current wording
Development of Low Carbon Ammonia and Clean Energy Projects. 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.
Previous wording
As a result, we are currently evaluating and developing projects that could enable us to become a producer and marketer of low-carbon ammonia and other derivative products. These include a low-carbon ammonia project at our El Dorado facility in collaboration with Lapis Energy and a low-carbon ammonia project on the Houston Ship Channel in conjunction with INPEX Corporation (“INPEX”), Air Liquide Group (“Air Liquide”) and Vopak Exolum Houston LLC (f/k/a Vopak Moda Houston LLC), a joint venture between Royal Vopak and Exolum (“Vopak Exolum”). 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. The resulting low carbon emission product, we believe, can be sold at a premium to power generation, marine, industrial, mining and agricultural customers seeking to reduce their carbon footprint and potentially capitalize on government incentives.
Current wording
As a result, we are currently continuing to evaluate and develop projects that could enable us to become a producer and marketer of low-carbon ammonia and other derivative products. These include a low-carbon ammonia project at our El Dorado facility in collaboration with Lapis Energy and a low-carbon ammonia project on the Houston Ship Channel in conjunction with INPEX Corporation (“INPEX”), Air Liquide Group (“Air Liquide”) and Vopak Exolum Houston LLC (f/k/a Vopak Moda Houston LLC), a joint venture between Royal Vopak and Exolum (“Vopak Exolum”). 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. The resulting low carbon emission product, we believe, can be sold at a premium to power generation, marine, industrial, mining and agricultural customers seeking to reduce their carbon footprint and potentially capitalize on government incentives.
Previous wording
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 have elected to put the El Dorado expansion projects on hold for the current year and will reevaluate the prospects of moving forward with one or more of them in 2025.
Current wording
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, we have elected to put the El Dorado expansion projects on hold for the current year. We plan to reevaluate these projects in 2025 to determine our prospects of moving forward with one or more of them in the future.
Previous wording
We have several smaller, more near-term projects currently underway that we expect to enhance our profitability beginning in the second half of 2024 with relatively minimal capital investment. These projects include:
Current wording
We have recently undertaken several smaller projects that we expect to enhance our profitability beginning in the fourth quarter of 2024. These projects include:
Previous wording
INPEX and LSB would sell the low-carbon ammonia and finalize off-take agreements with the numerous parties that have expressed interest and could also further partner in the project. The majority of the product would be used for power generation in Asia with volumes also going to Europe and the U.S. INPEX, with stakes in both hydrogen and ammonia production, will likely be the largest investor in the overall project across the entire value chain, from production to export.
Current wording
INPEX and LSB would sell the low-carbon ammonia and finalize off-take agreements with the numerous parties that have expressed interest and could also further partner in the project. The ammonia from this facility is intended to be used as a clean fuel for power generation, a hydrogen carrier, an industrial chemical feedstock, and as a marine fuel in a variety of domestic and international markets. INPEX, with stakes in both hydrogen and ammonia production, will likely be the largest investor in the overall project across the entire value chain, from production to export.
Previous wording
In April 2022, we entered into an agreement with Lapis Energy to develop a project to capture and sequester CO 2 at our El Dorado, Arkansas 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 early 2026, subject to the approval of a Class VI permit, at which time CO 2 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 CO 2 per year in underground saline aquifers. The sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured and sequestered. Lapis, as the majority owner of the carbon capture and sequestration equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO 2 captured and sequestered beginning in 2026. Once in operation, the sequestered CO 2 is expected to reduce LSB’s overall scope 1 GHG emissions by approximately 25% from current levels. In addition, sequestering approximately 400,000 to 500,000 metric tons of CO 2 annually is expected to enable LSB 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 U.S. Environmental Protection Agency (the “EPA”). The EPA recognized the application as complete in March 2023 and is currently in the review process.
Current wording
In April 2022, we entered into an agreement with Lapis Energy to develop a project to capture and sequester CO 2 at our El Dorado, Arkansas 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 in 2026, subject to the approval of a Class VI permit, at which time CO 2 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 CO 2 per year in underground saline aquifers. The sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured and sequestered. Lapis, as the majority owner of the carbon capture and sequestration equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO 2 captured and sequestered beginning in 2026. Once in operation, the sequestered CO 2 is expected to reduce LSB’s overall scope 1 GHG emissions by approximately 25% from current levels. In addition, sequestering approximately 400,000 to 500,000 metric tons of CO 2 annually is expected to enable LSB 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 U.S. Environmental Protection Agency (the “EPA”). The EPA recognized the application as complete in March 2023 and is currently in the review process.
Previous wording
Despite the pressures on nitrogen pricing, ammonia prices thus far in 2024 have been significantly above lows reached in July 2023, supported by a combination of global factors, including: strong U.S. demand for nitrogen fertilizers in the fourth quarter of 2023 and first half of 2024; multiple unplanned production outages in the U.S. due to cold weather events; constraints in global supply do to an extended turnaround at a large Saudi Arabian facility and natural gas curtailments in Trinidad and Egypt; constrained ammonia imports into Europe from the Middle East due to the disruption of shipping through the Suez canal; and the delayed start-up of new production capacity. We believe ammonia pricing could moderate over the balance of 2024 for a variety of reasons, including: the start-up of new production capacity during the second half of the year, an increase in Russian exports during the second half of the year, and continued muted demand for nitrogen products from the global industrial sector, particularly in Asia. Upside to our 2024 pricing expectations could be driven by a variety of factors, including: an increase in energy prices, a strengthening Chinese economy driving increased industrial market demand, further delays in new production capacity coming online, ongoing gas curtailments in regions exporting ammonia, a lower interest rate environment and supportive weather dynamics.
Current wording
We expect ammonia pricing to moderate in the fourth quarter of 2024 and into 2025 for a variety of reasons, including: the anticipated start-up of new production capacity in both the U.S. and internationally; an increase in Russian exports; and continued muted demand for nitrogen products from the global industrial sector, particularly in Asia. Upside to our pricing expectations could be driven by a variety of factors, including: an increase in energy prices; a strengthening Chinese economy driving increased industrial market demand; further delays in new production capacity coming online; gas curtailments in regions exporting ammonia; a lower interest rate environment; and supportive weather dynamics.
Previous wording
With respect to trends in our agricultural markets, corn prices have declined since early 2023 due largely to rising stocks-to-use ratios. The increased corn supply reflects lower demand from large corn consuming countries, such as China, and increased global competition from other corn producing nations, along with a multi-year high U.S. corn harvest in 2023, among other factors. Additionally, the USDA is currently estimating that U.S. farmers planted approximately 91.5 million acres of corn during the Spring 2024 planting season, down slightly from 2023, but at a level that would further increase corn supplies. Recently, weather trends in certain corn growing regions of the U.S. have been such that 2024 corn yields could be adversely affected, which could translate into stronger corn prices later this year.
Current wording
With respect to trends in our agricultural markets, corn prices have rebounded from earlier in 2024 reflecting recent revisions by the U.S. Department of Agriculture (“USDA”) for smaller than previously estimated U.S. corn supplies and a modest decline in ending stocks; increases in U.S. corn exports and corn used for ethanol production; and production challenges in international growing regions. While currently above lows from earlier in 2024, corn prices sit below year-ago levels due largely to the impact on corn supply of the multi-year high U.S. corn harvest in 2023. Additionally, the USDA is currently estimating that U.S. farmers planted approximately 90.7 million acres of corn during the Spring 2024 planting season, down from 2023, but at a level that would increase corn supplies.
Previous wording
According to the World Agricultural Supply and Demand Estimates Report dated July 12, 2024 (“July Report”), farmers planted approximately 91.5 million acres of corn in 2024, down 3.3% compared to the 2023 planting season. In addition, the U.S. Department of Agriculture (“USDA”) estimates the U.S. ending stocks for the 2024 Harvest will be approximately 53.3 million metric tons, a 11.7% increase from the 2023 Harvest. The USDA's expected yield for the 2024 Harvest is 181.0, up approximately 2.1% from a year ago.
Current wording
According to the World Agricultural Supply and Demand Estimates Report dated October 11, 2024 (“October Report”), farmers planted approximately 90.7 million acres of corn in 2024, down 4.1% compared to the 2023 planting season. In addition, the USDA estimates the U.S. ending stocks for the 2024 Harvest will be approximately 50.8 million metric tons, a 13.6% increase from the 2023 Harvest. The USDA's expected yield for the 2024 Harvest is 183.8, up approximately 3.7% from a year ago.
Previous wording
The current USDA corn outlook for the U.S. calls for larger supplies, greater domestic use and exports, and lower ending stocks. Corn production is forecast up on greater planted and harvested area from the USDA June Acreage Report. Yield is unchanged at 181 bushels an acre, and ending stocks are down. From a demand perspective, corn prices have declined since early 2023 due largely to rising stocks-to-use ratios.
Current wording
The current USDA corn outlook for the U.S. calls forsmaller supplies, larger exports, and reduced ending stocks. Corn production is forecast up on increased yield. Yield is increased to 183.8 bushels an acre, harvested area is unchanged and beginning stocks were lowered with total use raised slightly lowering ending stocks. From a demand perspective, corn prices have declined since early 2023 due largely to rising stocks-to-use ratios.
Previous wording
Our industrial products sales volumes are dependent upon general economic conditions, primarily in the housing, automotive and paper industries. Demand for our industrial products has remained stable despite persistent global economic challenges in the second quarter of 2024. Nitric acid demand has been steady, reflecting the strength of the U.S. economy and robust 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.
Current wording
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 robust 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.
Previous wording
Our mining products are LDAN and AN solution, which are primarily used as AN fuel oil and specialty emulsions for usage in the quarry and the construction industries, for metals mining and to a lesser extent, for coal. 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.
Current wording
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. While some degree of economic uncertainty persists, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
Previous wording
We historically have purchased natural gas either on the spot market, through forward purchase contracts, or a combination of both and 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.
Current wording
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.
Previous wording
Our Pryor Facility is currently on a two-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2024. Our Cherokee Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the fourth quarter of 2024. Our El Dorado Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2025.
Current wording
Our El Dorado Facility is currently on a three-year ammonia plant Turnaround cycle with the next ammonia plant Turnaround planned in the third quarter of 2025. However, we planned a short plant outage in July 2024 to perform a catalyst change to get back to maximum production rates.
Previous wording
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 2024, we are targeting total ammonia production of approximately 780,000 tons to 800,000 tons.
Current wording
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 2024, we are targeting total ammonia production of approximately 770,000 tons to 790,000 tons.
Previous wording
Consolidated Results of the Second Quarter of 2024
Current wording
Consolidated Results of the Third Quarter of 2024
Previous wording
Our consolidated net sales for the second quarter of 2024 were $140.1 million compared to $165.8 million for the same period in 2023. Our consolidated operating income for the second quarter of 2024 was $14.4 million compared to operating income of $27.5 million for the same period in 2023. The items impacting our operating results are discussed in more detail below and under “Results of Operations.”
Current wording
Our consolidated net sales for the third quarter of 2024 were $109.2 million compared to $114.3 million for the same period in 2023. Our consolidated operating loss for the third quarter of 2024 was $24.4 million compared to operating loss of $9.5 million for the same period in 2023. The items impacting our operating results are discussed in more detail below and under “Results of Operations.”
Previous wording
Items Affecting Comparability of Results of the Second Quarter
Current wording
Items Affecting Comparability of Results of the Third Quarter
Previous wording
Net sales of our primary products decreased during the second quarter of 2024 compared to the prior year period driven by the impact of lower selling prices for acids and UAN and lower volumes for acids and ammonia relative to the second quarter of 2023. Also impacting sales volumes was lower sales volumes of HDAN resulting from wet weather in key markets for this product in late May and June, in addition to timing of agricultural ammonia demand, which was heavier than average in the first quarter of 2024, translating into lower orders during the second quarter. Partially offsetting this decrease was improved pricing for ammonia and increased UAN sales volumes. Additionally, we benefited from a healthy increase in downstream production volumes.
Current wording
Net sales decreased during the third quarter of 2024 compared to the prior year period driven by the impact of lower volumes for UAN and ammonia, and to a lesser extent, lower selling prices for acids relative to the third quarter of 2023. Also impacting sales volumes was the planned Turnaround activity completed during the third quarter at our Pryor Facility. Partially offsetting this decrease was improved pricing for ammonia and increased acid sales volumes.
Previous wording
Demand for our industrial products remains stable despite continued global economic challenges. In some cases, our contractual agreements with industrial customers specify minimum volumes and our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand.
Current wording
Demand for our industrial products is stable despite continued global economic challenges. In some cases, our contractual agreements with industrial customers specify minimum volumes and our product mix flexibility helps us mitigate the impact of a reduction in demand from certain end markets by shifting production to products with stronger demand.
Previous wording
As noted in the table above, we recognized a gross profit of $27.4 million for the second quarter of 2024 compared to $36.0 million for the same period in 2023, or an $8.6 million reduction. Overall, our gross profit percentage was 19.6% compared to a gross profit percentage of 21.7% for the same period in 2023. Our adjusted gross profit percentage increased to 35.4% for the second quarter of 2024 from 31.9% for the second quarter of 2023. Our overall gross profit for the second quarter of 2024 is primarily lower compared to the same period of 2023 due to overall lower sales prices and volume for our products, turnaround expenses and higher depreciation partially offset by lower natural gas costs.
Current wording
As noted in the table above, we recognized a gross loss of $7.9 million for the third quarter of 2024 compared to a gross loss of $3.4 million for the same period in 2023, or a $4.6 million increase. Overall, our gross loss percentage was (7.3)% compared to a gross loss percentage of (3.0)% for the same period in 2023. Our adjusted gross profit percentage increased to 22.9% for the third quarter of 2024 from 12.1% for the third quarter of 2023. Our overall gross loss for the third quarter of 2024 is primarily lower compared to the same period of 2023 due to lower sales prices and overall volume for our products, planned Turnaround expenses and higher depreciation partially offset by lower natural gas costs.
Previous wording
Our SG&A expenses were $11.5 million for the second quarter of 2024, an increase of $2.1 million compared to the same period in 2023. The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in depreciation and amortization expenses.
Current wording
Our SG&A expenses were $10.0 million for the third quarter of 2024, an increase of $1.5 million compared to the same period in 2023. The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in insurance, depreciation and amortization and other miscellaneous expenses.
Previous wording
Interest expense for the second quarter of 2024 was $8.4 million compared to $11.8 million for the same period in 2023. The decrease primarily relates to reduced interest expense as a result of the lower outstanding balance on our 6.25% Senior Secured Notes as a result of recent repurchases along with a lower outstanding principal balance our Secured Financing due 2025 as a result of repayments.
Current wording
Interest expense for the third quarter of 2024 was $8.1 million compared to $7.2 million for the same period in 2023. The increase primarily relates to the reversal of the previous judgment awarded to Global in the litigation discussed in Note 5 during the third quarter of 2023. The increase was partially offset by reduced interest expense during the third quarter of 2024 as a result of the lower outstanding balances on our 6.25% Senior Secured Notes (due to recent repurchases) and on our Secured Financing due 2025 (due to repayments).
Previous wording
Other expense (income), net during the second quarter of 2024 and 2023 primarily relates to losses from disposal or abandonment of assets no longer being used in operations offset by short-term rental income from railcar subleases. The losses were higher and rental income was lower in the current quarter compared to the prior year quarter.
Current wording
Other expense (income), net during the third quarter of 2024 and 2023 primarily relates to impairment losses from disposal or abandonment of assets no longer being used in operations offset by short-term rental income from railcar subleases. The losses were higher and rental income was lower in the current quarter compared to the prior year quarter.
Previous wording
Non-operating other income, net for the second quarter of 2024 was $2.9 million compared to $3.8 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.
Current wording
Non-operating other income, net for the third quarter of 2024 was $2.7 million compared to $3.7 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.
Previous wording
The provision for income taxes for the second quarter of 2024 was $1.3 million compared to $3.0 million for the same period of 2023. The resulting effective tax rate for the second quarter of 2024 was 11.6% compared to 10.6% for the same period of 2023. For the second quarter of 2024, the effective tax rate is lower than the statutory rate primarily due to nondeductible compensation and deferred benefits from state tax law changes. For the second quarter of 2023, the effective tax rate is less than the statutory rate primarily due to deferred benefits from state tax law changes. See discussion in Note 7.
Current wording
The benefit for income taxes for the third quarter of 2024 was $4.5 million and the benefit for income taxes for the same period of 2023 was $5.2 million. The resulting effective tax rate for the third quarter of 2024 was 15.0% compared to 40.5% for the same period of 2023. For the third quarter of 2024, the effective tax rate is lower than the statutory rate primarily due to change in valuation allowance and nondeductible compensation. For the third quarter of 2023, the effective tax rate is greater than the statutory rate primarily due to the impact of state taxes, valuation allowances, and other discrete items. See discussion in Note 7.
Previous wording
Net sales of our primary products decreased during the first half of 2024 compared to the prior year period driven by the impact of lower selling prices relative to the first half of 2023 for all of our products and lower sales volumes for acid products and ammonia. Partially offsetting weaker pricing was an increase in UAN sales volume driven by strong demand for fertilizers enhanced by our strategic commercial efforts. Additionally, we benefited from a healthy increase in downstream production volumes.
Current wording
Net sales of our primary products decreased during the first nine months of 2024 compared to the prior year period driven by the impact of lower selling prices relative to the first nine months of 2023 for all of our products and lower sales volumes for ammonia. Partially offsetting weaker pricing was an increase in UAN sales volume driven by strong demand for fertilizers enhanced by our strategic commercial efforts.
Previous wording
As noted in the table above, we recognized a gross profit of $49.7 million for the first half of 2024 compared to $77.6 million for the same period in 2023, or a $27.9 million reduction. Overall, our gross profit percentage was 17.9% compared to a gross profit percentage of 22.4% for the same period in 2023. Our adjusted gross profit percentage was 32.3% for the first half of 2024 and 2023. Our overall gross profit for the first half of 2024 is lower compared to the same period of 2023 by overall lower sales prices for our products, turnaround expenses and higher depreciation partially offset by lower natural gas costs.
Current wording
As noted in the table above, we recognized a gross profit of $41.7 million for the first nine months of 2024 compared to $74.3 million for the same period in 2023, or a $32.6 million reduction. Overall, our gross profit percentage was 10.8% compared to a gross profit percentage of 16.1% for the same period in 2023. Our adjusted gross profit percentage was 29.7% for the first nine months of 2024 and compared to 27.3% for the same period in 2023. Our overall gross profit for the first nine months of 2024 is lower compared to the same period of 2023 by overall lower sales prices for our products and higher planned Turnaround expenses partially offset by lower natural gas costs.
Previous wording
Our SG&A expenses were $21.8 million for the first half of 2024, an increase of $2.5 million compared to the same period in 2023. The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in expense relating to insurance, other miscellaneous expenses and depreciation and amortization expenses.
Current wording
Our SG&A expenses were $31.9 million for the first nine months of 2024, an increase of $4.1 million compared to the same period in 2023. The net increase was primarily driven by increases in professional fees and payroll related items partially offset by a reduction in expense relating to insurance, other miscellaneous expenses and depreciation and amortization expenses.
Previous wording
Interest expense for the first half of 2024 was $18.1 million compared to $24.0 million for the same period in 2023. The decrease primarily relates to reduced interest expense as a result of the repurchase of our 6.25% Senior Secured Notes made beginning in the second quarter of 2023 and during 2024 along with a lower outstanding principal balance our Secured Financing due 2025.
Current wording
Interest expense for the first nine months of 2024 was $26.3 million compared to $31.2 million for the same period in 2023. The decrease primarily relates to reduced interest expense as a result of the repurchase of our 6.25% Senior Secured Notes made beginning in the second quarter of 2023 and during 2024 along with a lower outstanding principal balance our Secured Financing due 2025.
Previous wording
During the first half of 2024, we repurchased $96.6 million of our Senior Secured Notes through open market transactions for approximately $92.2 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $3.0 million. During the first half of 2023, we repurchased $125.0 million of our Senior Secured Notes through open market transactions for approximately $114.3 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $8.6 million.
Current wording
During the first nine months of 2024, we repurchased $96.6 million of our Senior Secured Notes through open market transactions for approximately $92.2 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $3.0 million. During the first half of 2023, we repurchased $125.0 million of our Senior Secured Notes through open market transactions for approximately $114.3 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $8.6 million.
Previous wording
Other expense, net during the first half of 2024 and 2023 consists primarily of losses from disposal or abandonment of assets no longer being used in operations partially offset by short-term rental income from railcar subleases. The losses were higher and rental income was lower in the current year compared to the prior year.
Current wording
Other expense, net during the first nine months of 2024 and 2023 consists primarily of impairment losses from disposal or abandonment of assets no longer being used in operations partially offset by short-term rental income from railcar subleases. The losses were higher and rental income was lower in the current year compared to the prior year.
Previous wording
Non-operating other income, net for the first half of 2024 was $6.5 million compared to $7.2 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.
Current wording
Non-operating other income, net for the first nine months of 2024 was $9.1 million compared to $10.9 million for the same period of 2023, primarily related to interest income earned during both periods from our short-term investments.
Previous wording
The provision for income taxes for the first half of 2024 was $1.9 million compared to $8.9 million for the same period of 2023. The resulting effective tax rate for the first half 2024 was 10.9% compared to 17.8% for the same period of 2023. For the first half of 2024, the effective tax rate is lower than the statutory rate primarily due to nondeductible compensation and deferred benefits from state tax law changes. For the first half of 2023, the effective tax rate is less than the statutory rate primarily due to deferred benefits from state tax law changes. See discussion in Note 7.
Current wording
The benefit for income taxes for the first nine months of 2024 was $2.6 million compared to the provision for income taxes of $3.6 million for the same period of 2023. The resulting effective tax rate for the first nine months of 2024 was 20.5% compared to 9.8% for the same period of 2023. For the first nine months of 2024, the effective tax rate is lower than the statutory rate primarily due to change in valuation allowance and nondeductible compensation, partially offset by state tax law changes. For the nine months of 2023, the effective tax rate is less than the statutory rate primarily due to deferred benefits from state tax law changes, partially offset by state taxes. See discussion in Note 7.
Previous wording
The following table summarizes our cash flow activities for the six months ended June 30:
Current wording
The following table summarizes our cash flow activities for the nine months ended September 30:
Previous wording
Net cash provided by operating activities was $65.5 million for the first six months ended 2024 compared to $102.9 million for the same period of 2023, a change of $37.5 million. The decrease was primarily a result of a reduction in net sales, working capital changes and reduced interest income from short-term investments and partially offset by lower cost of sales.
Current wording
Net cash provided by operating activities was $82.6 million for the first nine months of 2024 compared to $120.5 million for the same period of 2023, a change of $37.9 million. The decrease was primarily a result of a reduction in net sales, partially offset by lower cost of sales and lower cash interest paid.
Previous wording
Net cash provided by investing activities was $168.8 million for the first six months ended 2024 compared to net cash provided of $30.2 million for the same period of 2023, a change of $138.6 million.
Current wording
Net cash used by investing activities was $18.4 million for the first nine months of 2024 compared to net cash provided of $21.5 million for the same period of 2023, a change of $39.9 million.
Previous wording
For the first six months ended 2024, the net cash provided primarily relates to proceeds from short-term investments of $236.5 million, partially offset by purchases of short-term investments of $34.7 million and expenditures for PP&E of $33.0 million.
Current wording
For the first nine months of 2024, the net cash used primarily relates to purchases of short-term investments of $190.6 million and expenditures for PP&E of $64.1 million partially offset by proceeds from short-term investments of $236.5 million.
Previous wording
For the first six months ended 2023, the net cash provided primarily relates to proceeds from short-term investments of $264.2 million, partially offset by purchases of short-term investments of $201.7 million and expenditures for PP&E of $32.3 million.
Current wording
For the first nine months of 2023, the net cash provided primarily relates to proceeds from short-term investments of $293.3 million, partially offset by purchases of short-term investments of $230.7 million and expenditures for PP&E of $41.0 million.
Previous wording
Net cash used by financing activities was $119.0 million for the first six months ended 2024 compared to net cash used of $151.9 million for the same period of 2023, a change of $32.9 million.
Current wording
Net cash used by financing activities was $123.0 million for the first nine months of 2024 compared to net cash used of $159.0 million for the same period of 2023, a change of $36.0 million.
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Previous report — wording carried elsewhere
While some degree of economic uncertainty persists for 2024, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
Previous report — wording carried elsewhere
During the second quarter of 2024, we repurchased $63.7 million of our Senior Secured Notes through open market transactions for approximately $60.9 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $1.9 million. During the second quarter of 2023 we repurchased $125 million of our Senior Secured Notes through open market transactions for approximately $114.3 million. As a result, we recognized a gain on extinguishment of debt net of issuance costs of approximately $8.6 million.