LSB Industries Inc Reports Operating Results (10-Q)
Lsb Industries, Inc. has a market cap of $912.7 million; its shares were traded at around $41.68 with a P/E ratio of 12.8 and P/S ratio of 1.1. Lsb Industries, Inc. had an annual average earning growth of 12.9% over the past 10 years.
Highlight of Business Operations:Climate Control Business - Sales for the first nine months of 2012 were 7% lower than the same period in 2011, including a 10% decrease in geothermal and water source heat pump sales and a 3% decrease in hydronic fan coil sales partially offset by a slight increase in other HVAC sales. From a market sector perspective, the sales decline is due to a 17% decrease in residential product sales and a 4% decrease in sales of commercial/institutional products although we did experience a slight increase in sales of our custom air handlers. The decline in product sales generally reflects the continued softness in the markets we serve and delays between the date of order intake and the date of delivery. For the first nine months of 2012, order levels of our products decreased by 3%, primarily due to lower order levels of our residential products (down 19%), partially offset by an increase in order levels of our commercial/institutional products (up 1%). The latest information available from the Construction Market Forecasting Service provided by McGraw-Hill (CMFS) indicates that construction activity for the markets we serve in the commercial/institutional sector are expected to decline for 2012 compared 2011 levels, although these markets are expected to rebound in aggregate during 2013 and return to the activity levels experienced in 2011. CMFS has also indicated construction growth in the single-family residential sector for both 2012 and 2013.
The remaining 52% of our Chemical Business sales were into industrial and mining markets of which approximately 59% of these sales are to customers that have contractual obligations to purchase a minimum quantity and allow us to recover our cost plus a profit, irrespective of the volume of product sold. During the first nine months of 2012, our sales volumes to industrial customers decreased 5% and sales volumes to mining customers decreased 18%, as compared to the same period in 2011. Sales dollars during the first nine months of 2012 decreased slightly to industrial customers and sales dollars to mining customers decreased 13% as compared to the same period in 2011. The slight decrease in industrial sales was due to the lower sales volume as a result of the unplanned downtime at our El Dorado Facility as discussed below under Downtime at Pryor and El Dorado Facilities 2012 partially offset by our ability to pass through higher cost ammonia with our contractual pricing. Mining sales were lower due, in part, to the unplanned downtime at our El Dorado Facility and due to lower customer demand, which we believe is due to higher coal inventories and natural gas being a more attractive alternative feedstock than coal for utility companies.
Our consolidated net sales for the third quarter of 2012 were $182.4 million compared to $176.8 million for the same period in 2011. The sales increase of $5.6 million includes an increase of $7.4 million relating to our Chemical Business partially offset by a decrease of $3.8 million relating to our Climate Control Business.
Our Chemical Business sales for the third quarter of 2012 were $110.2 million, an increase of $7.4 million compared to the same period in 2011, which includes a $3.1 million increase in agricultural products sales, a $2.2 million increase in industrial acids and other products sales, and a $2.1 million increase in mining products sales.
On October 31, 2012, a subsidiary within our Chemical Business closed an acquisition of working interests in certain natural gas properties located in Wyoming County, Pennsylvania, within the Marcellus Shale. Our Chemical Business acquired from a private seller an average working interest of 9.7% (7.7% net revenue interest) in 14 proved producing natural gas wells, 7 proved non-producing natural gas wells and 36 proved undeveloped future drilling locations identified on the leasehold. Currently, our Chemical Business annually purchases approximately 15 million MCF of natural gas as a feedstock for the production of anhydrous ammonia. Management considers this acquisition as an economic hedge against a potential rise in natural prices in the future for a limited amount of our future natural gas production requirements. The purchase price was approximately $49 million, subject to certain adjustments, and was funded by utilizing cash on hand. We are considering financing up to $35 million of the acquisition price in the near term. For 2011 and the first nine months of 2012, the unaudited net revenues attributable to the natural gas working interest we acquired was approximately $3.4 million and $3.8 million, respectively
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