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Consolidated Statements of Stockholders' Equity
Consolidated Statements of Stockholders' Equity (Parenthetical)
Summary of Significant Accounting Policies
Income per Common Share
Property, Plant and Equipment
Current and Noncurrent Accrued and Other Liabilities
Accrued Warranty Costs
Asset Retirement Obligations
Derivatives, Hedges, Financial Instruments and Carbon Credits
Non-Redeemable Preferred Stock
Executive Benefit Agreements and Employee Savings Plans
Other Expense, Income and Non-Operating Other Income, net
Segment Information
Supplemental Cash Flow Information
Property and Business Interruption Insurance Claims and Recoveries
Valuation and Qualifying Accounts
Summary of Significant Accounting Policies (Policies)
Summary of Significant Accounting Policies (Tables)
Income per Common Share (Tables)
Accounts Receivable (Tables)
Inventories (Tables)
Property, Plant and Equipment (Tables)
Current and Noncurrent Accrued and Other Liabilities (Tables)
Accrued Warranty Costs (Tables)
Long-Term Debt (Tables)
Income Taxes (Tables)
Commitments and Contingencies (Tables)
Derivatives, Hedges, Financial Instruments and Carbon Credits (Tables)
Stockholders' Equity (Tables)
Executive Benefit Agreements and Employee Savings Plans (Tables)
Other Expense, Income and Non-Operating Other Income, net (Tables)
Segment Information (Tables)
Supplemental Cash Flow Information (Tables)
Quarterly Financial Data (Tables)
Summary of Significant Accounting Policies - Additional Information (Detail)
Summary of Significant Accounting Policies - Goodwill Relates to Business Acquisitions (Detail)
Summary of Significant Accounting Policies - Shipping and Handling Costs Included in Net Sales and Selling, General and Administrative Expense (Detail)
Summary of Significant Accounting Policies - Advertising and Promotion of Products (Detail)
Income per Common Share - Computation of Basic and Diluted Net Income Per Common Share (Detail)
Income per Common Share - Antidilutive Securities Excluded from Computation of Earnings Per Share (Detail)
Accounts Receivable - Accounts Receivable (Detail)
Accounts Receivable - Additional Information (Detail)
Inventories - Schedule of Inventories (Detail)
Inventories - Additional Information (Detail)
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Detail)
Property, Plant and Equipment - Additional Information (Detail)
Current and Noncurrent Accrued and Other Liabilities - Summary of Current and Noncurrent Accrued and Other Liabilities (Detail)
Accrued Warranty Costs - Additional Information (Detail)
Accrued Warranty Costs - Changes in Product Warranty Obligation (Accrued Warranty Costs) (Detail)
Asset Retirement Obligations - Additional Information (Detail)
Long-Term Debt - Schedule of Long-Term Debt (Detail)
Long-Term Debt - Schedule of Long-Term Debt (Parenthetical) (Detail)
Long-Term Debt - Redemption Price Percentage of Senior Secured Notes (Parenthetical) (Detail)
Long-Term Debt - Schedule of Maturities of Long Term Debt (Parenthetical) (Detail)
Income Taxes - Provisions for Income Taxes (Detail)
Income Taxes - Additional Information (Detail)
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Detail)
Income Taxes - Income from Continuing Operations Before Provision for Income Taxes (Detail)
Income Taxes - Reconciliation of the Beginning and Ending Amount of Uncertain Tax Positions (Detail)
Commitments and Contingencies - Schedule Future Minimum Payments on Leases (Detail)
Commitments and Contingencies - Additional Information (Detail)
Derivatives, Hedges, Financial Instruments and Carbon Credits - Additional Information (Detail)
Derivatives, Hedges, Financial Instruments and Carbon Credits - Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail)
Derivatives, Hedges, Financial Instruments and Carbon Credits - Reconciliation of Beginning and Ending Balances for Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail)
Derivatives, Hedges, Financial Instruments and Carbon Credits - Net Gains (Losses) Included in Earnings and the Income Statement Classifications (Detail)
Stockholders' Equity - Additional Information (Detail)
Stockholders' Equity - Valuation Assumptions of Granted Stock Options (Detail)
Stockholders' Equity - Stock Option Activities of Stock Option Plans (Detail)
Stockholder's Equity - Stock Options Outstanding and Exercisable (Detail)
Non-Redeemable Preferred Stock - Additional Information (Detail)
Executive Benefit Agreements and Employee Savings Plans - Additional Information (Detail)
Executive Benefits Agreements and Employees Savings Plans - Executive Benefit Agreements (Detail)
Executive Benefits Agreements and Employees Savings Plans - Executive Benefit Expenses (Detail)
Executive Benefits Agreements and Employees Savings Plans - Life Insurance Policies (Detail)
Executive Benefits Agreements and Employees Savings Plans - Life Insurance Premiums (Detail)
Other Expense, Income and Non-Operating Other Income, Net - Schedule of Other Income and Non-Operating Other Income, Net (Detail)
Segment Information - Additional Information (Detail)
Segment Information - Segment Financial Information (Detail)
Segment Information - Segment Financial Information (Parenthetical) (Detail)
Segment Information - General Corporate Expenses and Other Business Operations, Net (Parenthetical) (Detail)
Segment Information - PP&E and Total Assets by Business Segment (Detail)
Segment Information - Net Sales to Foreign Customers (Detail)
Related Party Transactions - Additional Information (Detail)
Supplemental Cash Flow Information - Additional Information Relating to Cash Flow Activities (Detail)
Property and Business Interruption Insurance Claims and Recoveries - Additional Information (Detail)
Subsequent Event - Additional Information (Detail)
Quarterly Financial Data - Schedule of Quarterly Financial Information (Detail)
Quarterly Financial Data - Schedule of Quarterly Financial Information (Parenthetical) (Detail)
Schedule II - Valuation and Qualifying Accounts (Detail)
Rendering Log
Document and Entity Information - USD ($)
$ in Millions
Document And Entity Information [Abstract]
Document Type 10-K
Document Fiscal Period Focus FY
Trading Symbol LXU
Entity Registrant Name LSB INDUSTRIES INC
Entity Well-known Seasoned Issuer Yes
Entity Current Reporting Status Yes
Entity Voluntary Filers No
Entity Filer Category Large Accelerated Filer
Entity Public Float $ 814
State aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to price at which the common equity was last sold, or average bid and asked price of such common equity, as of the last business day of registrant's most recently completed second fiscal quarter. The public float should be reported on the cover page of the registrants form 10K.
Name: dei_EntityPublicFloat
Trading symbol of an instrument as listed on an exchange.
Name: dei_TradingSymbol
Name: lxu_DocumentAndEntityInformationAbstract
Namespace Prefix: lxu_
Consolidated Balance Sheets - USD ($)
Restricted cash and cash equivalents 365
Short-term investments 14,500
Accounts receivable, net 88,074 80,570
Inventories 56,586 55,872
Supplies, prepaid items and other:
Prepaid insurance 13,752 15,073
Precious metals 12,838 14,927
Supplies 15,927 13,523
Prepaid and refundable income taxes 7,387 12,644
Other 5,438 3,867
Total supplies, prepaid items and other 55,342 60,034
Deferred income taxes 17,204 13,613
Total current assets 418,882 353,839
Property, plant and equipment, net 619,205 416,801
Other assets:
Noncurrent restricted cash and cash equivalents 45,969 80,974
Noncurrent restricted investments 25,000 209,990
Capitalized software costs, net 12,595 4,927
Other, net 15,354 16,566
Total other assets 98,918 312,457
Total assets 1,137,005 1,083,097
Accounts payable 81,456 61,775
Short-term financing 11,955 13,749
Accrued and other liabilities 51,166 49,107
Current portion of long-term debt 10,680 9,262
Long-term debt 446,638 453,705
Noncurrent accrued and other liabilities 17,934 17,086
Commitments and contingencies (Note 11)
Common stock, $.10 par value; 75,000,000 shares authorized, 26,968,212 shares issued (26,846,470 shares at December 31, 2013) 2,697 2,685
Capital in excess of par value 170,537 167,550
Retained earnings 286,188 266,854
Stockholders equity including treasury stock 462,422 440,089
Less treasury stock, at cost:
Common stock, 4,320,462 shares 28,374 28,374
Total stockholders' equity 434,048 411,715
Total Liabilities and Stockholders' equity 1,137,005 1,083,097
Series B Preferred Stock [Member]
Preferred stock, value 2,000 2,000
Series D Preferred Stock [Member]
Preferred stock, value $ 1,000 $ 1,000
Less treasury stock at cost.
Name: lxu_LessTreasuryStockAtCostAbstract
Carrying amount as of the balance sheet date of precious metals used as a catalyst in the chemical manufacturing process to be consumed or sold within one year or the normal operating cycle, if longer.
Name: lxu_PreciousMetals
Total supplies, prepaid items and other.
Name: lxu_SuppliesPrepaidItemsAndOther
Supplies prepaid items and other.
Name: lxu_SuppliesPrepaidItemsAndOtherAbstract
Amount due from customers or clients, within one year of the balance sheet date (or the normal operating cycle, whichever is longer), for goods or services (including trade receivables) that have been delivered or sold in the normal course of business, reduced to the estimated net realizable fair value by an allowance established by the entity of the amount it deems uncertain of collection.
-Subparagraph (SX 210.5-02.3-4)
-Subparagraph a(1)
-URI http://asc.fasb.org/extlink&oid=28358313&loc=d3e6801-107765
Name: us-gaap_AssetsCurrentAbstract
The carrying amount of capitalized computer software costs net of accumulated amortization as of the balance sheet date.
Name: us-gaap_CapitalizedComputerSoftwareNet
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
-Glossary Cash Equivalents
Name: us-gaap_CashAndCashEquivalentsAtCarryingValue
Represents the caption on the face of the balance sheet to indicate that the entity has entered into (1) purchase or supply arrangements that will require expending a portion of its resources to meet the terms thereof, and (2) is exposed to potential losses or, less frequently, gains, arising from (a) possible claims against a company's resources due to future performance under contract terms, and (b) possible losses or likely gains from uncertainties that will ultimately be resolved when one or more future events that are deemed likely to occur do occur or fail to occur.
-Subparagraph (SX 210.7-03.(a),19)
-URI http://asc.fasb.org/extlink&oid=25496072&loc=d3e14326-108349
Name: us-gaap_CommitmentsAndContingencies
Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards expected to be realized or consumed within one year or operating cycle, if longer.
Name: us-gaap_DeferredTaxAssetsNetCurrent
Amount of deferred tax liability attributable to taxable temporary differences, net of deferred tax asset attributable to deductible temporary differences and carryforwards net of valuation allowances expected to be realized or consumed after one year (or the normal operating cycle, if longer).
Name: us-gaap_DeferredTaxLiabilitiesNoncurrent
Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.
-Subparagraph (SX 210.5-02.6(a))
Name: us-gaap_InventoryNet
Amount of liabilities and equity items, including the portion of equity attributable to noncontrolling interests, if any.
Name: us-gaap_LiabilitiesCurrentAbstract
Amount of long-term debt and capital lease obligation due after one year or beyond the normal operating cycle, if longer.
-Section H
Name: us-gaap_LongTermDebtAndCapitalLeaseObligations
Amount of long-term debt and capital leases due within one year or the normal operating cycle, if longer.
Name: us-gaap_LongTermDebtAndCapitalLeaseObligationsCurrent
The aggregate carrying amounts, as of the balance sheet date, of assets not separately disclosed in the balance sheet.
Name: us-gaap_OtherAssets
Aggregate carrying amount, as of the balance sheet date, of noncurrent assets not separately disclosed in the balance sheet. Noncurrent assets are expected to be realized or consumed after one year (or the normal operating cycle, if longer).
Name: us-gaap_OtherAssetsNoncurrent
Name: us-gaap_OtherAssetsNoncurrentAbstract
Aggregate carrying amount of current liabilities (due within one year or within the normal operating cycle if longer) not separately disclosed in the balance sheet. Includes costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered and of liabilities not separately disclosed.
Name: us-gaap_OtherLiabilitiesCurrent
Aggregate carrying amount, as of the balance sheet date, of noncurrent obligations not separately disclosed in the balance sheet. Noncurrent liabilities are expected to be paid after one year (or the normal operating cycle, if longer).
Name: us-gaap_OtherLiabilitiesNoncurrent
Amount of asset related to consideration paid in advance for other costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
-Subparagraph (g)
Name: us-gaap_OtherPrepaidExpenseCurrent
Other investments not otherwise specified in the taxonomy that will be realized in a short period of time, usually less than one year or the normal operating cycle, whichever is longer.
-Subparagraph (SX 210.7-03.1(g))
-Subparagraph g
Name: us-gaap_OtherShortTermInvestments
-URI http://asc.fasb.org/extlink&oid=27012166&loc=d3e187085-122770
Amount of asset related to consideration paid in advance for insurance that provides economic benefits within a future period of one year or the normal operating cycle, if longer.
-Subparagraph (g)(1)
-Glossary Current Assets
Name: us-gaap_PrepaidInsurance
Amount of asset related to consideration paid in advance for income and other taxes that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
Name: us-gaap_PrepaidTaxes
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
The carrying amounts of cash and cash equivalent items which are restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against short-term borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits; however, time deposits and short-term certificates of deposit are not generally included in legally restricted deposits. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. For a classified balance sheet represents the current portion only (the noncurrent portion has a separate concept); there is a separate and distinct element for unclassified presentations.
Name: us-gaap_RestrictedCashAndCashEquivalentsAtCarryingValue
Cash and equivalents whose use in whole or in part is restricted for the long-term, generally by contractual agreements or regulatory requirements.
Name: us-gaap_RestrictedCashAndCashEquivalentsNoncurrent
The noncurrent cash, cash equivalents and investments that is restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits classified as long-term; that is not expected to be released from such existing restrictions within one year of the balance sheet date or operating cycle, whichever is longer. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. Includes noncurrent cash equivalents and investments that are similarly restricted as to withdrawal, usage or disposal.
Name: us-gaap_RestrictedCashAndInvestmentsNoncurrent
The cumulative amount of the reporting entity's undistributed earnings or deficit.
Name: us-gaap_RetainedEarningsAccumulatedDeficit
Reflects the total carrying amount as of the balance sheet date of debt having initial terms less than one year or the normal operating cycle, if longer.
-Subparagraph (SX 210.7-03.(a),16(a)(1))
-Subparagraph 2, 3
Name: us-gaap_ShortTermBorrowings
Total amount of stockholders' equity (deficit) items including stock value, paid in capital, retained earnings and including equity attributable to noncontrolling interests and before deducting the carrying value of treasury stock.
Name: us-gaap_StockholdersEquityBeforeTreasuryStock
Amount of consideration paid in advance for supplies that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
Name: us-gaap_Supplies
The amount allocated to treasury stock. Treasury stock is common and preferred shares of an entity that were issued, repurchased by the entity, and are held in its treasury.
Name: us-gaap_TreasuryStockValue
Name: us-gaap_StatementClassOfStockAxis=us-gaap_SeriesBPreferredStockMember
Name: us-gaap_StatementClassOfStockAxis=us-gaap_SeriesDPreferredStockMember
Consolidated Balance Sheets (Parenthetical) - $ / shares
Common stock, par value $ 0.10 $ 0.10
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued 26,968,212 26,846,470
Treasury stock, common shares 4,320,462 4,320,462
Preferred stock, shares outstanding 20,000 20,000
Preferred stock, shares issued 20,000 20,000
Convertible preferred stock dividend rate 12.00% 12.00%
Series B cumulative, convertible preferred stock, par value $ 100 $ 100
Preferred stock, shares outstanding 1,000,000 1,000,000
Preferred stock, shares issued 1,000,000 1,000,000
Convertible preferred stock dividend rate 6.00% 6.00%
Series D cumulative, convertible Class C preferred stock, par value $ 0 $ 0
Face amount or stated value per share of common stock.
The percentage rate used to calculate dividend payments on preferred stock.
Name: us-gaap_PreferredStockDividendRatePercentage
Data Type: num:percentItemType
Face amount per share of no-par value preferred stock nonredeemable or redeemable solely at the option of the issuer.
Name: us-gaap_PreferredStockNoParValue
Face amount or stated value per share of preferred stock nonredeemable or redeemable solely at the option of the issuer.
Number of common and preferred shares that were previously issued and that were repurchased by the issuing entity and held in treasury on the financial statement date. This stock has no voting rights and receives no dividends.
Name: us-gaap_TreasuryStockShares
Consolidated Statements of Income - USD ($)
Income Statement [Abstract]
Net sales $ 732,510 $ 679,287 $ 759,031
Cost of sales 579,155 535,731 575,295
Gross profit 153,355 143,556 183,736
Selling, general and administrative expense 103,886 100,674 89,988
Provisions for (recovery of) losses on accounts receivable 134 478 (214)
Property insurance recoveries in excess of losses incurred (5,147) (66,255)
Other expense (income), net 1,120 3,351 (1,693)
Operating income 53,362 105,308 95,655
Interest expense, net 21,599 13,986 4,237
Loss on extinguishment of debt 1,296
Non-operating other income, net (281) (100) (281)
Income from continuing operations before provisions for income taxes and equity in earnings of affiliate 32,044 90,126 91,699
Provisions for income taxes 12,400 35,421 33,594
Equity in earnings of affiliate (79) (436) (681)
Income from continuing operations 19,723 55,141 58,786
Net loss from discontinued operations 89 179 182
Net income 19,634 54,962 58,604
Dividends on preferred stocks 300 300 300
Net income applicable to common stock $ 19,334 $ 54,662 $ 58,304
Income from continuing operations $ 0.86 $ 2.44 $ 2.62
Net loss from discontinued operations (0.01) (0.01)
Net income 0.86 2.43 2.61
Income from continuing operations 0.83 2.34 2.50
Net income $ 0.83 $ 2.33 $ 2.49
The amount of property insurance recoveries in excess of losses incurred.
Name: lxu_PropertyInsuranceRecoveriesInExcessOfLossesIncurred
Amount of increase (decrease) in the allowance for doubtful accounts.
Name: us-gaap_AllowanceForDoubtfulAccountsReceivablePeriodIncreaseDecrease
The aggregate cost of goods produced and sold and services rendered during the reporting period.
Name: us-gaap_CostOfRevenue
Amount of paid and unpaid preferred stock dividends declared with the form of settlement in cash.
Name: us-gaap_DividendsPreferredStockCash
The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.
Name: us-gaap_EarningsPerShareBasic
Name: us-gaap_EarningsPerShareBasicAbstract
The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
Name: us-gaap_EarningsPerShareDiluted
Name: us-gaap_EarningsPerShareDilutedAbstract
Difference between the fair value of payments made and the carrying amount of debt which is extinguished prior to maturity.
Name: us-gaap_GainsLossesOnExtinguishmentOfDebt
Aggregate revenue less cost of goods and services sold or operating expenses directly attributable to the revenue generation activity.
-Subparagraph (SX 210.5-03.1,2)
Name: us-gaap_GrossProfit
Amount of income (loss) from continuing operations attributable to the parent. Also defined as revenue less expenses and taxes from ongoing operations before extraordinary items but after deduction of those portions of income or loss from continuing operations that are allocable to noncontrolling interests.
-URI http://asc.fasb.org/extlink&oid=7656940&loc=SL4613673-111683
Name: us-gaap_IncomeLossFromContinuingOperations
Sum of operating profit and nonoperating income or expense before Income or Loss from equity method investments, income taxes, extraordinary items, and noncontrolling interest.
-Subparagraph (SX 210.4-08.(h)(1)(i))
Name: us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesMinorityInterestAndIncomeLossFromEquityMethodInvestments
The amount of net income (loss) from continuing operations per each share of common stock or unit outstanding during the reporting period.
Name: us-gaap_IncomeLossFromContinuingOperationsPerBasicShare
The amount of net income (loss) derived from continuing operations during the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
Name: us-gaap_IncomeLossFromContinuingOperationsPerDilutedShare
Amount of income (loss) from a disposal group, net of income tax, reported as a separate component of income before extraordinary items after deduction or consideration of the amount allocable to noncontrolling interests. Includes, net of tax, income (loss) from operations during the phase-out period, gain (loss) on disposal, provision (or any reversals of earlier provisions) for loss on disposal, and adjustments of a prior period gain (loss) on disposal.
Name: us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxAttributableToReportingEntity
Per basic share amount, after tax, of income (loss) from the day-to-day business activities of the discontinued operation and gain (loss) from the disposal of the discontinued operation.
Name: us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare
Per diluted share amount, after tax, of income (loss) from the day-to-day business activities of the discontinued operation and gain (loss) from the disposal of the discontinued operation.
-Paragraph Question 3
Name: us-gaap_IncomeLossFromDiscontinuedOperationsNetOfTaxPerDilutedShare
This item represents the entity's proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. This item includes income or expense related to stock-based compensation based on the investor's grant of stock to employees of an equity method investee.
Name: us-gaap_IncomeLossFromEquityMethodInvestments
Name: us-gaap_IncomeStatementAbstract
Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.
-Subparagraph (a),(b)
-Subparagraph (SX 210.4-08.(h))
-Glossary Income Tax Expense (or Benefit)
-Paragraph h
Name: us-gaap_IncomeTaxExpenseBenefit
Amount of the cost of borrowed funds accounted for as interest expense.
Name: us-gaap_InterestExpense
The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.
-Glossary Net Income
-Glossary Other Comprehensive Income
Name: us-gaap_NetIncomeLoss
Net income after adjustments for dividends on preferred stock (declared in the period) and/or cumulative preferred stock (accumulated for the period).
Name: us-gaap_NetIncomeLossAvailableToCommonStockholdersBasic
The net result for the period of deducting operating expenses from operating revenues.
Name: us-gaap_OperatingIncomeLoss
The net amount of other income and expense amounts, the components of which are not separately disclosed on the income statement, resulting from ancillary business-related activities (that is, excluding major activities considered part of the normal operations of the business) also known as other nonoperating income (expense) recognized for the period. Such amounts may include: (a) dividends, (b) interest on securities, (c) net gains or losses on securities, (d) unusual costs, (e) gains or losses on foreign exchange transactions, and (f) miscellaneous other income and expense items.
Name: us-gaap_OtherNonoperatingIncomeExpense
The net amount of other operating income and expenses, the components of which are not separately disclosed on the income statement, from items that are associated with the entity's normal revenue producing operations.
Name: us-gaap_OtherOperatingIncomeExpenseNet
Total revenue from sale of goods and services rendered during the reporting period, in the normal course of business, reduced by sales returns and allowances, and sales discounts.
Name: us-gaap_SalesRevenueNet
The aggregate total costs related to selling a firm's product and services, as well as all other general and administrative expenses. Direct selling expenses (for example, credit, warranty, and advertising) are expenses that can be directly linked to the sale of specific products. Indirect selling expenses are expenses that cannot be directly linked to the sale of specific products, for example telephone expenses, Internet, and postal charges. General and administrative expenses include salaries of non-sales personnel, rent, utilities, communication, etc.
Name: us-gaap_SellingGeneralAndAdministrativeExpense
Consolidated Statements of Stockholders' Equity - USD ($)
Common Stock Shares [Member]
Non-Redeemable Preferred Stock [Member]
Capital in Excess of Par Value [Member]
Retained Earnings [Member]
Treasury Stock-Common [Member]
Balance at Dec. 31, 2011 $ 293,270 $ 2,664 $ 3,000 $ 162,092 $ 153,888 $ (28,374)
Balance, shares at Dec. 31, 2011 26,638,000
Net income 58,604 58,604
Dividends paid on preferred stocks (300) (300)
Stock-based compensation 1,652 1,652
Exercise of stock options 767 $ 9 758
Exercise of stock options, shares 90,000
Excess income tax benefit associated with stock-based compensation 498 498
Conversion of 68 shares of redeemable preferred stock to common stock 6 6
Conversion of redeemable preferred stock to common stock, shares 3,000
Balance at Dec. 31, 2012 354,497 $ 2,673 3,000 165,006 212,192 (28,374)
Exercise of stock options 1,014 $ 12 1,002
Exercise of stock options, shares 115,000
Exercise of stock options $ 1,074 $ 12 1,062
Exercise of stock options, shares 121,742 122,000
This element represents the amount of recognized equity-based compensation during the period, that is, the amount recognized as expense in the income statement (or as asset if compensation is capitalized). Alternate captions include the words "stock-based compensation".
Name: us-gaap_AdjustmentsToAdditionalPaidInCapitalSharebasedCompensationRequisiteServicePeriodRecognitionValue
Amount of increase in additional paid in capital (APIC) resulting from a tax benefit associated with share-based compensation plan other than an employee stock ownership plan (ESOP). Includes, but is not limited to, excess tax benefit.
Name: us-gaap_AdjustmentsToAdditionalPaidInCapitalTaxEffectFromShareBasedCompensation
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Name: us-gaap_SharesIssued
Number of shares issued during the period as a result of the conversion of convertible securities.
Name: us-gaap_StockIssuedDuringPeriodSharesConversionOfConvertibleSecurities
Number of share options (or share units) exercised during the current period.
-Subparagraph (c)(1)(iv)(2)
Name: us-gaap_StockIssuedDuringPeriodSharesStockOptionsExercised
The gross value of stock issued during the period upon the conversion of convertible securities.
Name: us-gaap_StockIssuedDuringPeriodValueConversionOfConvertibleSecurities
Value of stock issued as a result of the exercise of stock options.
Name: us-gaap_StockIssuedDuringPeriodValueStockOptionsExercised
Statement of Stockholders' Equity [Abstract]
Number of converted redeemable preference shares 68
Number of redeemable preferred stock shares converted.
Name: lxu_NumberOfRedeemablePreferredStockSharesConverted
Name: us-gaap_StatementOfStockholdersEquityAbstract
Consolidated Statements of Cash Flows - USD ($)
Cash flows from continuing operating activities
Net income $ 19,634 $ 54,962 $ 58,604
Adjustments to reconcile net income to net cash provided by continuing operating activities:
Deferred income taxes 12,839 35,289 245
Gains on property insurance recoveries associated with property, plant and equipment (5,147) (66,255)
Depreciation, depletion and amortization of property, plant and equipment 35,664 28,310 20,681
Other 5,479 4,819 4,614
Cash provided (used) by changes in assets and liabilities (net of effects of discontinued operations):
Accounts receivable (7,637) 2,268 7,935
Inventories (1,394) 8,203 (6,607)
Prepaid insurance 1,321 (5,073) (4,096)
Prepaid and accrued income taxes 3,505 (13,278) 11,013
Other supplies, prepaid items and other 61 (4,975) 1,853
Accounts payable (1,044) (6,032) 980
Accrued interest (37) 13,356 (6)
Customer deposits 1,333 (2,689) 3,684
Other current and noncurrent liabilities 2,078 4,971 389
Net cash provided by continuing operating activities 66,744 54,055 99,471
Cash flows from continuing investing activities
Expenditures for property, plant and equipment (219,842) (157,377) (92,644)
Acquisition of working interests in natural gas properties (9,205) (50,219)
Proceeds from property insurance recovery associated with property, plant and equipment 5,147 66,437 11,415
Software and software development costs (3,161) (966) (7)
Proceeds from sales of property and equipment 662 1,459 307
Proceeds from short-term investments 14,500 20,037
Purchases of short-term investments (29,000) (10,032)
Proceeds from noncurrent restricted cash and cash equivalents 200,111
Deposits of current and noncurrent restricted cash and cash equivalents (165,471) (80,943)
Proceeds from noncurrent restricted investments 259,990
Purchases of noncurrent restricted investments (75,000) (209,990)
Other investing activities 41 962 (526)
Net cash used by continuing investing activities (12,023) (389,623) (121,669)
Cash flows from continuing financing activities
Proceeds from senior secured notes, net of pay off of secured term loan and fees 350,957
Proceeds from other long-term debt, net of fees 39,825
Payments on other long-term debt (10,473) (12,647) (7,019)
Payments of debt issuance costs (1,872) (88)
Proceeds from short-term financing 14,346 16,385 11,192
Payments on short-term financing (16,140) (11,890) (7,584)
Proceeds from revolving debt facility 209,238
Payments on revolving debt facility (209,238)
Payments on loans secured by cash value of life insurance policies (1,918)
Proceeds from exercises of stock options 1,074 1,014 767
Excess income tax benefit associated with stock-based compensation 498
Acquisition of redeemable preferred stock (39)
Dividends paid on preferred stocks (300) (300) (300)
Net cash provided (used) by continuing financing activities (11,493) 381,472 (4,491)
Cash flows of discontinued operations:
Operating cash flows (167) (174) (220)
Net increase (decrease) in cash and cash equivalents 43,061 45,730 (26,909)
Cash and cash equivalents at beginning of year 143,750 98,020 124,929
Cash and cash equivalents at end of year $ 186,811 $ 143,750 $ 98,020
Acquisition of working interest in natural gas properties.
Name: lxu_AcquisitionOfWorkingInterestsInNaturalGasProperties
Gain on property insurance recoveries associated with property plant and equipment.
Name: lxu_GainOnPropertyInsuranceRecoveriesAssociatedWithPropertyPlantAndEquipment
Name: us-gaap_AdjustmentsToReconcileNetIncomeLossToCashProvidedByUsedInOperatingActivitiesAbstract
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
Name: us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease
Amount of cash inflow (outflow) of operating activities of discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
Name: us-gaap_CashProvidedByUsedInOperatingActivitiesDiscontinuedOperations
Amount of cash inflow associated with funds that are not available for withdrawal or use (such as funds held in escrow) and are associated with underlying transactions that are classified as investing activities.
Name: us-gaap_DecreaseInRestrictedCash
Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations.
-Glossary Deferred Tax Expense (or Benefit)
-Subparagraph (SAB TOPIC 6.I.7)
-Section I
Name: us-gaap_DeferredIncomeTaxExpenseBenefit
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
Name: us-gaap_Depreciation
Amount of cash inflow from realized tax benefit related to deductible compensation cost reported on the entity's tax return for equity instruments in excess of the compensation cost for those instruments recognized for financial reporting purposes.
Name: us-gaap_ExcessTaxBenefitFromShareBasedCompensationFinancingActivities
The increase (decrease) during the reporting period in the aggregate amount of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
Name: us-gaap_IncreaseDecreaseInAccountsPayable
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
Name: us-gaap_IncreaseDecreaseInAccountsReceivable
The increase (decrease) during the period in the amount due for taxes based on the reporting entity's earnings or attributable to the entity's income earning process (business presence) within a given jurisdiction.
Name: us-gaap_IncreaseDecreaseInAccruedIncomeTaxesPayable
The increase (decrease) during the period in the amount of customer money held in customer accounts, including security deposits, collateral for a current or future transactions, initial payment of the cost of acquisition or for the right to enter into a contract or agreement.
Name: us-gaap_IncreaseDecreaseInCustomerDeposits
The increase (decrease) during the reporting period in interest payable, which represents the amount owed to note holders, bond holders, and other parties for interest earned on loans or credit extended to the reporting entity.
Name: us-gaap_IncreaseDecreaseInInterestPayableNet
The increase (decrease) during the reporting period in the aggregate value of all inventory held by the reporting entity, associated with underlying transactions that are classified as operating activities.
Name: us-gaap_IncreaseDecreaseInInventories
Name: us-gaap_IncreaseDecreaseInOperatingCapitalAbstract
The increase (decrease) during the reporting period in other assets used in operating activities not separately disclosed in the statement of cash flows. May include changes in other current assets, other noncurrent assets, or a combination of other current and noncurrent assets.
Name: us-gaap_IncreaseDecreaseInOtherOperatingAssets
The increase (decrease) during the reporting period in other liabilities used in operating activities not separately disclosed in the statement of cash flows. May include changes in other current liabilities, other noncurrent liabilities, or a combination of other current and noncurrent liabilities.
Name: us-gaap_IncreaseDecreaseInOtherOperatingLiabilities
Amount of increase (decrease) of consideration paid in advance for insurance that provides economic benefits in future periods.
Name: us-gaap_IncreaseDecreaseInPrepaidInsurance
Amount of cash outflow associated with funds that are not available for withdrawal or use (such as funds held in escrow) and are associated with underlying transactions that are classified as investing activities.
Name: us-gaap_IncreaseInRestrictedCash
Name: us-gaap_NetCashProvidedByUsedInDiscontinuedOperationsAbstract
Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Name: us-gaap_NetCashProvidedByUsedInFinancingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInFinancingActivitiesContinuingOperationsAbstract
Amount of cash inflow (outflow) of investing activities, excluding discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Name: us-gaap_NetCashProvidedByUsedInInvestingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInInvestingActivitiesContinuingOperationsAbstract
Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
Name: us-gaap_NetCashProvidedByUsedInOperatingActivitiesContinuingOperations
Name: us-gaap_NetCashProvidedByUsedInOperatingActivitiesContinuingOperationsAbstract
Other income (expense) included in net income that results in no cash inflows or outflows in the period. Includes noncash adjustments to reconcile net income (loss) to cash provided by (used in) operating activities that are not separately disclosed.
Name: us-gaap_OtherNoncashIncomeExpense
The net cash outflow or inflow from other investing activities. This element is used when there is not a more specific and appropriate element in the taxonomy.
-Glossary Investing Activities
Name: us-gaap_PaymentsForProceedsFromOtherInvestingActivities
The cash outflow to reacquire callable preferred stock which is identified as being convertible to another type of financial security.
-Glossary Financing Activities
Name: us-gaap_PaymentsForRepurchaseOfRedeemableConvertiblePreferredStock
The cash outflow associated with the development, modification or acquisition of software programs or applications for internal use (that is, not to be sold, leased or otherwise marketed to others) that qualify for capitalization.
Name: us-gaap_PaymentsForSoftware
The cash outflow paid to third parties in connection with debt origination, which will be amortized over the remaining maturity period of the associated long-term debt.
-Subparagraph (e)
Name: us-gaap_PaymentsOfDebtIssuanceCosts
Amount of cash outflow in the form of ordinary dividends to preferred shareholders of the parent entity.
Name: us-gaap_PaymentsOfDividendsPreferredStockAndPreferenceStock
The cash outflow associated with the acquisition of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale; includes cash outflows to pay for construction of self-constructed assets.
Name: us-gaap_PaymentsToAcquirePropertyPlantAndEquipment
The cash outflow to acquire investments (not to include restricted cash) that are pledged or subject to withdrawal restrictions.
Name: us-gaap_PaymentsToAcquireRestrictedInvestments
The cash outflow for securities or other assets acquired, which qualify for treatment as an investing activity and are to be liquidated, if necessary, within the current operating cycle. Includes cash flows from securities classified as trading securities that were acquired for reasons other than sale in the short-term.
Name: us-gaap_PaymentsToAcquireShortTermInvestments
The cash inflow from the amounts received by the insured under the terms of an insurance contract settlement. This element pertains only to insurance proceeds related to investments, for example fixed assets. It excludes insurance settlements classified as operating cash flows.
Name: us-gaap_ProceedsFromInsuranceSettlementInvestingActivities
The cash inflow from other long-term borrowings not otherwise defined in the taxonomy (with maturities initially due beyond one year or the normal operating cycle of the entity, if longer).
Name: us-gaap_ProceedsFromIssuanceOfOtherLongTermDebt
The cash inflow from a borrowing with the highest claim on the assets of the entity in case of bankruptcy or liquidation (with maturities initially due after one year or beyond the operating cycle, if longer).
Name: us-gaap_ProceedsFromIssuanceOfSeniorLongTermDebt
Amount of cash inflow from contractual arrangement with the lender, including but not limited to, letter of credit, standby letter of credit and revolving credit arrangements.
-Subparagraph (SX 210.4-08.(f))
-Paragraph f
Name: us-gaap_ProceedsFromLinesOfCredit
The cash inflow from the sale of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale.
Name: us-gaap_ProceedsFromSaleOfPropertyPlantAndEquipment
The cash inflow associated with the sale of investments that are pledged or subject to withdrawal restrictions during the period.
Name: us-gaap_ProceedsFromSaleOfRestrictedInvestments
The cash inflow from sales of all investments, including securities and other assets, having ready marketability and intended by management to be liquidated, if necessary, within the current operating cycle. Includes cash flows from securities classified as trading securities that were acquired for reasons other than sale in the short-term.
Name: us-gaap_ProceedsFromSaleOfShortTermInvestments
The cash inflow from a borrowing having initial term of repayment within one year or the normal operating cycle, if longer.
Name: us-gaap_ProceedsFromShortTermDebt
The cash inflow associated with the amount received from holders exercising their stock options. This item inherently excludes any excess tax benefit, which the entity may have realized and reported separately.
-Subparagraph (j)
Name: us-gaap_ProceedsFromStockOptionsExercised
Amount of cash outflow for payment of an obligation from a lender, including but not limited to, letter of credit, standby letter of credit and revolving credit arrangements.
Name: us-gaap_RepaymentsOfLinesOfCredit
The cash outflow attributable to repayments of borrowings not otherwise defined in the taxonomy (with maturities initially due after one year or beyond the operating cycle if longer).
Name: us-gaap_RepaymentsOfOtherLongTermDebt
The cash outflow to repay long-term debt that is wholly or partially secured by collateral. Excludes repayments of tax exempt secured debt.
Name: us-gaap_RepaymentsOfSecuredDebt
The cash outflow for a borrowing having initial term of repayment within one year or the normal operating cycle, if longer.
Name: us-gaap_RepaymentsOfShortTermDebt
Accounting Policies [Abstract]
1. Summary of Significant Accounting Policies
Basis of Consolidation - LSB Industries, Inc. ("LSB") and its subsidiaries (the "Company", "We", "Us", or "Our") are consolidated in the accompanying consolidated financial statements. We are involved in manufacturing and marketing operations. We are primarily engaged in the manufacture and sale of chemical products (the "Chemical Business") and the manufacture and sale of water source and geothermal heat pumps and air handling products (the "Climate Control Business"). LSB is a holding company with no significant operations or assets other than cash, cash equivalents, and investments in its subsidiaries. Our Chemical Business' ownership of working interests in natural gas properties is accounted for as an undivided interest, whereby we reflect our proportionate share of the underlying assets, liabilities, revenues and expenses. Our working interest represents our share of the costs and expenses incurred primarily to develop the underlying leaseholds and to produce natural gas while our net revenue interest represents our share of the revenues from the sale of natural gas. The net revenue interest is less than our working interest as the result of royalty interest due to others. We are not the operator of these natural gas properties. Entities that are 20% to 50% owned and for which we have significant influence are accounted for on the equity method. All material intercompany accounts and transactions have been eliminated.
Reclassifications - Reclassifications have been made in our consolidated balance sheet at December 31, 2013 to conform to our consolidated balance sheet at December 31, 2014, which reclassifications expand and combine certain noncurrent other asset line items. These reclassifications did not impact the total amount of noncurrent other assets at December 31, 2013. In addition, reclassifications have been made in our consolidated statement of cash flows for 2012 and 2013 to conform to our consolidated statement of cash flows for 2014, which reclassifications expand an operating activity line item and combine various investing activities line items. These reclassifications did not impact the total amount of net cash provided by continuing operating activities or net cash used by continuing investing activities for 2012 and 2013.
Use of Estimates - The preparation of consolidated financial statements in conformity with United States ("U.S.") generally accepted accounting principles ("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.
Business Combinations - We account for an acquired business using the acquisition method of accounting, which requires that the assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. If applicable, any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related costs are recognized separately from the business combination and are expensed as incurred.
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 certificates of deposit with an original maturity of 26 weeks, are considered short-term investments. These investments are carried at cost which approximates fair value.
Accounts Receivable - Our accounts receivable are stated at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on accounts receivable balances. Our estimate is based on historical experience and periodic assessment of outstanding accounts receivable, particularly those accounts that are past due (based upon the terms of the sale). Our periodic assessment of our accounts receivable is based on our best estimate of amounts that are not recoverable.
Inventories - Inventories are stated at the lower of cost (determined using the first-in, first-out ("FIFO") basis) or market (net realizable value). Finished goods and work-in-process inventories include material, labor, and manufacturing overhead costs. Additionally, we review inventories and record inventory reserves for slow-moving inventory items to state them at net realizable value.
Precious Metals - Precious metals are used as a catalyst in the Chemical Business manufacturing process. Precious metals are carried at cost, with cost being determined using the FIFO basis. Because some of the catalyst consumed in the production process cannot be readily recovered and the amount and timing of recoveries are not predictable, we follow the practice of expensing precious metals as they are consumed. Occasionally, during major maintenance or capital projects, we may be able to perform procedures to recover precious metals (previously expensed) which have accumulated over time within the manufacturing equipment. Recoveries of precious metals are recognized at historical FIFO costs. When we accumulate precious metals in excess of our production requirements, we may sell a portion of the excess metals.
Property, Plant and Equipment - Property, plant and equipment ("PP&E") are stated at cost, net of accumulated depreciation, depletion and amortization ("DD&A"). Leases meeting capital lease criteria are capitalized in PP&E. Major renewals and improvements that increase the life, value, or productive capacity of assets are capitalized in PP&E while maintenance, repairs and minor renewals are expensed as incurred. In addition, maintenance, repairs and minor renewal costs relating to planned major maintenance activities ("Turnarounds") in our Chemical Business are expensed as they are incurred.
As it relates to natural gas properties, leasehold costs, intangible drilling and other costs of successful wells and development dry holes are capitalized in PP&E based on successful efforts accounting. The costs of exploratory wells are initially capitalized in PP&E, but expensed if and when the well is determined to be nonproductive.
Fully depreciated assets are retained in PP&E and accumulated DD&A accounts until disposal. When PP&E are retired, sold, or otherwise disposed, the asset's carrying amount and related accumulated DD&A are removed from the accounts and any gain or loss is included in other income or expense.
For financial reporting purposes, depreciation of the costs of PP&E is primarily computed using the straight-line method over the estimated useful lives of the assets. No provision for depreciation is made on construction in progress or capital spare parts until such time as the relevant assets are put into service. DD&A of the costs of producing natural gas properties are computed using the units of production method primarily on a field-by-field basis using proved or proved developed reserves, as applicable, as estimated by our independent consulting petroleum engineer. No provision for DD&A is made on nonproducing leasehold costs and exploratory wells in progress until such time as the relevant assets relate to proven reserves.
Our natural gas reserves are based on estimates and assumptions, which affect our DD&A calculations. Our independent consulting petroleum engineer, with our assistance, prepares estimates of natural gas reserves based on available relevant data and information. For DD&A purposes, and as required by the guidelines and definitions established by the Securities and Exchange Commission ("SEC"), the reserve estimates are based on average natural gas prices during the 12-month period, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month.
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 impairment loss would be recognized 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 its eventual disposition. If assets to be held and used are considered to be impaired, the impairment to be 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. As it relates to natural gas properties, proven natural gas properties are reviewed for impairment on a field-by-field basis and nonproducing leasehold costs are reviewed for impairment on a property-by-property basis.
In general, assets held for sale are reported at the lower of the carrying amounts of the assets or fair values less costs to sell. At December 31, 2014 and 2013, we had no long-lived assets classified as assets held for sale.
Noncurrent Restricted Cash and Cash Equivalents - Noncurrent restricted cash and cash equivalents consists of balances that are designated by us for specific purposes relating to capital projects.
Noncurrent Restricted Investments - Noncurrent restricted investments consist of investment balances that are designated by us for specific purposes relating to capital projects. At December 31, 2014, the balance includes an investment in a certificate of deposit with an original maturity no longer than approximately 26 weeks. The investment is carried at cost, which approximates fair value.
Concentration of Credit Risks for Cash, Cash Equivalents, and Investments at Financial Institutions – Financial instruments relating to cash, cash equivalents, and investments (certificates of deposits), classified as both current and noncurrent, potentially subject us to concentrations of credit risk. At December 31, 2014, the total balance of these financial instruments exceeded the FDIC-insured limits by approximately $39 million. All of these financial instruments were held by financial institutions within the U.S.
Capitalized Software – Capitalized software primarily relates to implementing a new enterprise resource planning software (ERP) for internal use and is stated at cost, net of accumulated amortization. Capitalized software costs include software purchase costs and internal and external costs for implementing software. For financial reporting purposes, amortization of capitalized software costs is computed using the straight-line method over the estimated useful lives of the software, which is primarily eight years. During 2014 and 2013, interest cost capitalized in capitalized software was $0.5 million and $0.1 million, respectively (none in 2012). No provision for amortization is made until such time as the relevant assets are placed into service. Amortization expense related to capitalized software was $0.4 million for 2014, minimal in 2013 (none in 2012). Estimated amortization related to capitalized software for each of the subsequent five years, 2015 through 2019, is $1.2 million, $2.2 million, $2.7 million, $2.7 million and $2.6 million, respectively. The estimated amortization is based on management's expected ERP implementation completion during the fourth quarter of 2016.
Capitalized Interest - Interest cost on borrowings incurred during a significant construction or development project is capitalized. Capitalized interest is added to the underlying asset and amortized over the estimated useful lives of the assets.
Goodwill - Goodwill is reviewed for impairment at least annually. An impairment loss generally would be recognized when the carrying amount of the reporting unit's net assets exceeds the estimated fair value of the reporting unit. Reporting units are one level below the business segment level. No impairments of goodwill were incurred in 2014, 2013, or 2012. Goodwill relates to business acquisitions in prior periods in the following business segments:
Total goodwill
Short-Term Financing - Our short-term financing relates primarily to agreements entered into to finance a portion of our annual premiums for certain of our insurance policies.
Accrued Insurance Liabilities - We are self-insured up to certain limits for group health, workers' compensation and general liability claims. Above these limits, we have commercial stop-loss insurance coverage for our contractual exposure on group health claims and statutory limits under workers' compensation obligations. We also carry umbrella insurance of $100 million for most general liability and auto liability risks. We have a separate $50 million insurance policy covering pollution liability at our Chemical Business facilities. Additional pollution liability coverage for our other facilities is provided in our general liability and umbrella policies. As it relates to our natural gas properties within our Chemical Business that we do not operate but only own a working interest, insurance policies are maintained by the operator, which we are responsible for our proportionate share of the costs involved.
Our accrued self-insurance liabilities are based on estimates of claims, which include the reported incurred claims amounts plus the reserves established by our insurance adjustors and/or estimates provided by attorneys handling the claims, if any, up to the amount of our self-insurance limits. In addition, our accrued insurance liabilities include estimates of incurred, but not reported, claims based on historical claims experience. The determination of such claims and the appropriateness of the related liability is periodically reviewed and revised, if needed. Changes in these estimated liabilities are charged to operations. Potential legal fees and other directly related costs associated with insurance claims are not accrued but rather are expensed as incurred. Accrued insurance claims are included in accrued and other liabilities. It is reasonably possible that the actual development of claims could be different than our estimates.
Accrued Warranty Costs - Our Climate Control Business sells equipment that has an expected life, under normal circumstances and use, which extends over several years. As such, we provide warranties after equipment shipment/start up covering defects in materials and workmanship. Our accounting policy and methodology for warranty arrangements is to measure and recognize the expense and liability for such warranty obligations at the time of sale using a percentage of sales and cost per unit of equipment, based upon our historical and estimated future warranty costs. We also recognize the additional warranty expense and liability to cover atypical costs associated with a specific product, or component thereof, or project installation, when such costs are probable and reasonably estimable. It is reasonably possible that our estimated accrued warranty costs could change in the near term.
Executive Benefit Agreements - We have entered into benefit agreements with certain key executives. Costs associated with these individual benefit agreements are accrued based on the estimated remaining service period when such benefits become probable they will be paid. Total costs accrued equal the present value of specified payments to be made after benefits become payable.
Income Taxes - We recognize deferred tax assets and liabilities for the expected future tax consequences attributable to net operating loss ("NOL") carryforwards, tax credit carryforwards, and differences between the financial statement carrying amounts and the tax basis of our assets and liabilities. We establish valuation allowances if we believe it is more-likely-than-not that some or all of deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
In addition, we do not recognize a tax benefit unless we conclude that it is more-likely-than-not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, we recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is greater than 50% likely to be realized. We record interest related to unrecognized tax positions in interest expense and penalties in operating other expense.
We reduce income tax expense for investment tax credits in the year the credit arises and is earned.
Income tax benefits associated with amounts that are deductible for income tax purposes but that do not affect earnings are credited to equity. These benefits are principally generated from exercises of non-qualified stock options.
Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur. We and our legal counsel 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 would accrue for such contingent losses when such losses 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 realizable and earned.
Asset Retirement Obligations - In general, we record the estimated fair value of an asset retirement obligation ("ARO") associated with tangible long-lived assets in the period it is incurred and when there is sufficient information available to estimate the fair value. An ARO associated with long-lived assets is a legal obligation under existing or enacted law, statute, written or oral contract or legal construction. AROs, which are initially recorded based on estimated discounted cash flows, are accreted to full value over time through charges to cost of sales. In addition, we capitalize the corresponding asset retirement cost as PP&E, which cost is depreciated or depleted over the related asset's respective useful life. We do not have any assets restricted for the purpose of settling our AROs.
Stock Options - Equity award transactions with employees are measured based on the estimated fair value of the equity awards issued. For equity awards with only service conditions that have a graded vesting period, we recognize compensation cost on a straight-line basis over the requisite service period for the entire award. In addition, we issue new shares of common stock upon the exercise of stock options.
Revenue Recognition - We recognize revenue for substantially all of our operations at the time title to the goods transfers to the buyer and there remain no significant future performance obligations by us. Revenue relating to construction contracts is recognized using the percentage-of-completion method based primarily on contract costs incurred to date compared with total estimated contract costs. Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined. Sales of extended warranty contracts are recognized as revenue ratably over the life of the contract. See discussion above under "Accrued Warranty Costs" for our accounting policy for recognizing warranty expense.
Recognition of Insurance Recoveries - If an insurance claim relates to a recovery of our losses, we recognize the recovery when it is probable and reasonably estimable. If our insurance claim relates to a contingent gain, we recognize the recovery when it is realized or realizable and earned. Amounts recoverable from our insurance carriers, if any, are included in accounts receivable. An insurance recovery in excess of recoverable costs relating to a business interruption claim, if any, is a reduction to cost of sales. An insurance recovery in excess of recoverable costs relating to a property insurance claim, if any, is included in property insurance recoveries in excess of losses incurred.
Cost of Sales - Cost of sales includes materials, labor and overhead costs to manufacture the products sold plus inbound freight, purchasing and receiving costs, inspection costs, internal transfer costs and warehousing costs (excluding certain handling costs directly related to loading product being shipped to customers in our Chemical Business which are included in selling, general and administrative expense). Maintenance, repairs and minor renewal costs relating to Turnarounds in our Chemical Business are included in cost of sales as they are incurred. Precious metals used as a catalyst (Chemical Business) and consumed during the manufacturing process are included in cost of sales. Recoveries and gains from precious metals (Chemical Business), sales of scrap material (Climate Control Business), and business interruption insurance claims are reductions to cost of sales. Provisions for (realization of) losses associated with inventory reserves, gains and losses (realized and unrealized) from our commodities and foreign currency futures/forward contracts, and provision for losses, if any, on firm sales commitments are included in cost of sales.
Selling, General and Administrative Expense - Selling, general and administrative expense ("SG&A") includes costs associated with the sales, marketing and administrative functions. Such costs include personnel costs, including benefits, advertising costs, commission expenses, warranty costs, professional fees, office and occupancy costs associated with the sales, marketing and administrative functions. SG&A also includes certain handling costs directly related to product being shipped to customers in our Chemical Business and outbound freight in our Climate Control Business. The Chemical Business' handling costs primarily consist of personnel costs for loading product into transportation equipment, rent and maintenance costs related to the transportation equipment, and certain indirect costs.
Shipping and Handling Costs – Shipping and handling costs included in net sales and SG&A for each business segment are as follows:
Chemical:
Shipping costs - Net sales (1)
Handling costs - SG&A (2)
Shipping and handling costs - SG&A (2)
$ 10,146 $ 9,520 $ 8,897
(1) These costs relate to amounts billed to our customers.
(2) See discussions above under "Selling, General and Administrative Expense."
Advertising Costs - Costs in connection with advertising and promotion of our products are expensed as incurred. These costs, primarily relating to our Climate Control Business, are as follows.
Derivatives, Hedges, Financial Instruments and Carbon Credits - Derivatives are recognized in the balance sheet and are measured at fair value. Changes in fair value of derivatives are recorded in results of operations unless the normal purchase or sale exceptions apply or hedge accounting is elected.
The fair value amounts recognized for our derivative contracts executed with the same counterparty under a master netting arrangement may be offset. We have the choice to offset or not, but that choice must be applied consistently. A master netting arrangement exists if the reporting entity has multiple contracts with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract. Offsetting the fair values recognized for the derivative contracts outstanding with a single counterparty results in the net fair value of the transactions being reported as an asset or a liability in the balance sheet. We have chosen to present the fair values of our derivative contracts under master netting agreements using a gross fair value presentation as there were no derivatives with fair values that were eligible to be offset as of December 31, 2014 and 2013.
The assets for climate reserve tonnes ("carbon credits") are recognized in the balance sheet and are measured at fair value. Changes in fair value of carbon credits are recorded in results of operations. The liabilities for contractual obligations associated with carbon credits are recognized in the balance sheet and are measured at fair value unless we enter into a firm sales commitment to sell the associated carbon credits. When we enter into a firm sales commitment, the sales price, pursuant to the terms of the firm sales commitment, establishes the amount of the liability for the contractual obligation. Changes in fair value of contractual obligations associated with carbon credits are recorded in results of operations.
Income per Common Share - Net income applicable to common stock is computed by adjusting net income by the amount of preferred stock dividends and dividend requirements, if applicable. Basic income per common share is based upon net income applicable to common stock and the weighted-average number of common shares outstanding during each year. Diluted income per share is based on net income applicable to common stock plus preferred stock dividends and dividend requirements on preferred stock assumed to be converted, if dilutive, and the weighted-average number of common shares and dilutive common equivalent shares outstanding, and the assumed conversion of dilutive convertible securities outstanding.
Recently Issued Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update 2014-09-Revenue from Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under GAAP. The standard's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. We are evaluating our existing revenue recognition policies to determine whether any contracts in the scope of the guidance will be affected by the new requirements. The effects may include identifying performance obligations in existing arrangements, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. The standard is effective for us on January 1, 2017. Early adoption is not permitted. The standard allows for either "full retrospective" adoption, meaning the standard is applied to all of the periods presented, or "modified retrospective" adoption, meaning the standard is applied only to the most current period presented in the financial statements. We are currently evaluating the transition method that will be elected.
Name: us-gaap_AccountingPoliciesAbstract
The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles.
Name: us-gaap_OrganizationConsolidationBasisOfPresentationBusinessDescriptionAndAccountingPoliciesTextBlock
Earnings Per Share [Abstract]
2. Income per Common Share
The following table sets forth the computation of basic and diluted net income per common share:
Dividends on Series B Preferred
(240 ) (240 ) (240 )
Dividends on Series D Preferred
Total dividends on preferred stocks
Numerator for basic net income per common share - net income applicable to common stock
Dividends on preferred stocks assumed to be converted, if dilutive
Numerator for diluted net income per common share
Denominator for basic net income per common share - weighted-average shares
22,575,053 22,465,176 22,359,967
Effect of dilutive securities:
Convertible preferred stocks
916,666 916,666 917,006
Dilutive potential common shares
1,092,417 1,131,790 1,178,602
Denominator for dilutive net income per common share - adjusted weighted-average shares and assumed conversions
Basic net income per common share
$ 0.86 $ 2.43 $ 2.61
Diluted net income per common share
The following weighted-average shares of securities were not included in the computation of diluted net income per common share as their effect would have been antidilutive:
Name: us-gaap_EarningsPerShareAbstract
The entire disclosure for earnings per share.
Name: us-gaap_EarningsPerShareTextBlock
Receivables [Abstract]
3. Accounts Receivable
Trade receivables
(826 ) (827 )
Our sales to contractors and independent sales representatives are generally subject to a mechanic's lien or band protection in the Climate Control Business. Sales to other customers are generally unsecured. Credit is extended to customers based on an evaluation of the customer's financial condition and other factors. Concentrations of credit risk with respect to trade receivables are monitored and this risk is reduced due to the large number of customers comprising our customer bases and their dispersion across many different industries and geographic areas (primarily as it relates to the Climate Control Business) and payment terms of 15 days or less relating to most of our significant customers in the Chemical Business. Ten customers (including their affiliates), primarily relating to the Chemical Business, account for approximately 32% of our total net receivables at December 31, 2014.
One of our subsidiaries, El Dorado Chemical Company ("EDC"), is party to an agreement with Bank of America, N.A. (the "Bank") to sell our accounts receivables generated from product sales to a certain customer. We agreed to enter into this agreement as a courtesy to this customer. The term of this agreement matures in August 2015, with renewal options, but either party has an option to terminate the agreement pursuant to the terms of the agreement. In addition, we amended our sales agreement with the customer to offer extended payment terms under the condition that they pay an extended payment terms premium equal to the discount taken by the Bank when the accounts receivables are sold. Thus, there is no gain or loss from the sale of these receivables to the Bank. We have no continuing involvement or risks associated with the transferred accounts receivable. Pursuant to the terms of the agreement, EDC is to receive payment from the Bank no later than one business day after the Bank's acceptance of EDC's offer to sell the accounts receivables. As of December 31, 2014, EDC has been paid by the Bank for the accounts receivables sold to the Bank. We account for these transfers as sales under ASC 860 – Transfers and Servicing.
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
-Subparagraph (SX 210.4-08.(k))
-Paragraph 3, 4
-Paragraph k
Name: us-gaap_LoansNotesTradeAndOtherReceivablesDisclosureTextBlock
Name: us-gaap_ReceivablesAbstract
Inventory Disclosure [Abstract]
Goods Work-in-
Process Raw
Materials Total
December 31, 2014:
$ 19,354 $ — $ 2,147 $ 21,501
Climate Control products
5,521 2,763 23,458 31,742
Industrial machinery and components
3,343 — — 3,343
$ 28,218 $ 2,763 $ 25,605 $ 56,586
At December 31, 2014 and 2013, inventory reserves for certain slow-moving inventory items (Climate Control products) were $1,653,000 and $1,389,000, respectively. In addition, because cost exceeded the net realizable value, inventory adjustments for certain nitrogen-based inventories provided by our Chemical Business were $1,976,000 and $1,623,000 at December 31, 2014 and 2013, respectively.
Name: us-gaap_InventoryDisclosureAbstract
The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.
-Subparagraph a, b, c
Name: us-gaap_InventoryDisclosureTextBlock
Property, Plant and Equipment [Abstract]
5. Property, Plant and Equipment
Useful lives
in years December 31,
Machinery, equipment and automotive
3 - 30 $ 360,222 $ 319,088
Proved natural gas properties
* 72,529 66,764
Buildings and improvements
8 - 30 55,975 48,379
Furniture, fixtures and store equipment
5 - 10 6,492 6,933
Assets under capital leases
Land improvements
10 - 40 7,125 6,214
Construction in progress
N/A 292,324 110,376
Capital spare parts
N/A 8,722 9,718
Less accumulated depreciation, depletion and amortization
$ 619,205 $ 416,801
Machinery, equipment and automotive primarily includes the categories of property and equipment and estimated useful lives as follows: chemical processing plants and plant infrastructure (15-30 years); production, fabrication, and assembly equipment (7-15 years); certain processing plant components (3-10 years); and trucks, automobiles, trailers, and other rolling stock (3-7 years). At December 31, 2014 and 2013, assets capitalized under capital leases consist of machinery and equipment. Accumulated amortization for assets capitalized under capital leases were $28,000 and $714,000 at December 31, 2014 and 2013, respectively. During 2014 and 2013, interest cost capitalized in PP&E was $13,586,000 and $3,861,000, respectively.
* See information concerning natural gas properties included in PP&E in Note 1- Summary of Significant Accounting Policies.
Name: us-gaap_PropertyPlantAndEquipmentAbstract
The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.
Name: us-gaap_PropertyPlantAndEquipmentDisclosureTextBlock
Other Liabilities Disclosure [Abstract]
6. Current and Noncurrent Accrued and Other Liabilities
Accrued interest
Accrued payroll and benefits
Deferred revenue on extended warranty contracts
Customer deposits
Less noncurrent portion
Current portion of accrued and other liabilities
Name: us-gaap_OtherLiabilitiesDisclosureAbstract
The entire disclosure for other liabilities.
Name: us-gaap_OtherLiabilitiesDisclosureTextBlock
Guarantees [Abstract]
7. Accrued Warranty Costs
Our Climate Control Business sells equipment that has an expected life, under normal circumstances and use, which extends over several years. As such, we provide warranties after equipment shipment/start-up covering defects in materials and workmanship. Generally for commercial/institutional products, the base warranty coverage for most of the manufactured equipment in the Climate Control Business is limited to eighteen months from the date of shipment or twelve months from the date of start-up, whichever is shorter, and to ninety days for spare parts. For residential products, the base warranty coverage for manufactured equipment in the Climate Control Business is limited to ten years from the date of shipment for material and to five years from the date of shipment for labor associated with the repair. The warranty provides that most equipment is required to be returned to the factory or an authorized representative and the warranty is limited to the repair and replacement of the defective product, with a maximum warranty of the refund of the purchase price. Furthermore, companies within the Climate Control Business generally disclaim and exclude warranties related to merchantability or fitness for any particular purpose and disclaim and exclude any liability for consequential or incidental damages. In some cases, the customer may purchase, or a specific product may be sold with, an extended warranty. The above discussion is generally applicable to such extended warranties, but variations do occur depending upon specific contractual obligations, certain system components, and local laws.
Changes in our product warranty obligation (accrued warranty costs) are as follows:
Balance at beginning of year
Amounts charged to SG&A
Costs incurred
Balance at end of year
Name: us-gaap_GuaranteesAbstract
The entire disclosure for standard and extended product warranties and other product guarantee contracts, including a tabular reconciliation of the changes in the guarantor's aggregate product warranty liability for the reporting period.
Name: us-gaap_ProductWarrantyDisclosureTextBlock
Asset Retirement Obligation Disclosure [Abstract]
8. Asset Retirement Obligations
Currently, we have various legal requirements related to operations at our Chemical Business facilities, including the disposal of wastewater generated at certain of these facilities. Additionally, we have certain facilities in our Chemical Business that contain asbestos insulation around certain piping and heated surfaces, which we plan to maintain or replace, as needed, with non-asbestos insulation through our standard repair and maintenance activities to prevent deterioration. Currently, there is insufficient information to estimate the fair value for most of our AROs. In addition, we currently have no plans to discontinue the use of these facilities, and the remaining life of the facilities is indeterminable. As a result, a liability for only a minimal amount relating to AROs associated with certain facilities has been established. However, we will continue to review these obligations and record a liability when a reasonable estimate of the fair value can be made. In addition, our Chemical Business owns working interests in certain natural gas properties. We recognized AROs associated with the obligation to plug and abandon wells when the natural gas reserves in the wells are depleted. At December 31, 2014 and 2013, our accrued liability for AROs was $340,000 and $304,000, respectively.
Name: us-gaap_AssetRetirementObligationDisclosureAbstract
The entire disclosure for an asset retirement obligation and the associated long-lived asset. An asset retirement obligation is a legal obligation associated with the disposal or retirement from service of a tangible long-lived asset that results from the acquisition, construction or development, or the normal operations of a long-lived asset, except for certain obligations of lessees.
Name: us-gaap_AssetRetirementObligationDisclosureTextBlock
Debt Disclosure [Abstract]
Working Capital Revolver Loan (A)
$ — $ —
7.75% Senior Secured Notes due 2019 (B)
Secured Promissory Note, with a current interest rate of 3.23% (C)
Other, with a current weighted-average interest rate of 4.22%, most of which is secured primarily by machinery and equipment
Less current portion of long-term debt (D)
Long-term debt due after one year (D)
(A) Effective December 31, 2013, LSB and certain of its wholly-owned subsidiaries (the "Borrowers") entered into an amendment to the existing senior secured revolving credit facility (the "Amended Working Capital Revolver Loan"). Pursuant to the terms of the Amended Working Capital Revolver Loan, the Borrowers may borrow on a revolving basis up to $100.0 million, based on specific percentages of eligible accounts receivable and inventories. In addition, the Amended Working Capital Revolver Loan and the Senior Secured Notes are cross collateralized as discussed in (B) below. The Amended Working Capital Revolver Loan will mature on April 13, 2018.
The Amended Working Capital Revolver Loan accrues interest at a base rate (generally equivalent to the prime rate) plus 0.50% if borrowing availability is greater than $25.0 million, otherwise plus 0.75% or, at our option, accrues interest at LIBOR plus 1.50% if borrowing availability is greater than $25.0 million, otherwise LIBOR plus 1.75%. At December 31, 2014, the interest rate was 3.75% based on LIBOR. Interest is paid monthly, if applicable.
The Amended Working Capital Revolver Loan provides for up to $15.0 million of letters of credit. All letters of credit outstanding reduce availability under the Amended Working Capital Revolver Loan. As of December 31, 2014, the amount available for borrowing under the Amended Working Capital Revolver Loan was approximately $71.1 million. Under the Amended Working Capital Revolver Loan, the lender also requires the Borrowers to pay a letter of credit fee equal to 1% per annum of the undrawn amount of all outstanding letters of credit, an unused line fee equal to .25% per annum for the excess amount available under the Amended Working Capital Revolver Loan not drawn and various other audit, appraisal and valuation charges.
The lender has the ability to, upon an event of default, as defined, terminate the Amended Working Capital Revolver Loan and make the balance outstanding, if any, due and payable in full.
The Amended Working Capital Revolver Loan requires the Borrowers to meet a minimum fixed charge coverage ratio of not less than 1.10 to 1, if at any time the excess availability (as defined by the Amended Working Capital Revolver Loan), under the Amended Working Capital Revolver Loan, is less than or equal to $12.5 million. This ratio will be measured monthly on a trailing twelve month basis and as defined in the agreement. The Amended Working Capital Revolver Loan contains covenants that, among other things, limit the Borrowers' ability, without consent of the lender and with certain exceptions, to:
• incur additional indebtedness;
• create liens on, sell or otherwise dispose of our assets;
• engage in certain fundamental corporate changes or changes to our business activities;
• make certain material acquisitions;
• make other restricted payments, including investments;
• repay certain indebtedness;
• engage in certain affiliate transactions;
• declare dividends and distributions;
• engage in mergers, consolidations or other forms of recapitalization; or
• dispose assets.
The Amended Working Capital Revolver Loan allows the Borrowers and subsidiaries under the Senior Secured Notes to guarantee those notes.
So long as both immediately before and after giving effect to any of the following, excess availability as defined by the Amended Working Capital Revolver Loan is equal to or greater than the greater of (x) 20% of the maximum revolver commitment or (y) $20 million, the Amended Working Capital Revolver will allow each of the Borrowers under the Amended Working Capital Revolver Loan to make:
• distributions and pay dividends by LSB with respect to amounts in excess of $0.5 million during each fiscal year;
• acquisitions of treasury stock by LSB with respect to amounts in excess of $0.5 million during each fiscal year;
• certain hedging agreements;
• investments in joint ventures and certain subsidiaries of LSB in an aggregate amount not exceeding $35.0 million; and
• other investments in an aggregate amount not exceeding $50.0 million at any one time outstanding.
The Amended Working Capital Revolver Loan includes customary events of default, including events of default relating to nonpayment of principal and other amounts owing under the Amended Working Capital Revolver Loan from time to time, any material misstatement or misrepresentation and breaches of representations and warranties made, violations of covenants, cross-payment default to indebtedness in excess of $2.5 million, cross-acceleration to indebtedness in excess of $2.5 million, bankruptcy and insolvency events, certain unsatisfied judgments, certain liens, and certain assertions of, or actual invalidity of, certain loan documents.
(B) On August 7, 2013, LSB sold $425 million aggregate principal amount of the 7.75% Senior Secured Notes due 2019 (the "Senior Secured Notes") in a private transaction to qualified institutional buyers under Rule 144A and, outside of the United States, pursuant to Regulation S of the Securities Act of 1933, as amended. In accordance with the registration rights agreement entered into at the time of the issuance of the Senior Secured Notes, LSB and the guarantor subsidiaries completed an exchange offer to exchange the Senior Secured Notes for substantially identical notes registered under the Securities Act. The registration statement for the exchange offer was declared effective by the SEC in May 2014, and the exchange offer was completed in June 2014. The Senior Secured Notes bear interest at the rate of 7.75% per year and mature on August 1, 2019. Interest is to be paid semiannually on February 1st and August 1st.
The Senior Secured Notes are general senior secured obligations of LSB. The Senior Secured Notes are jointly and severally and fully and unconditionally guaranteed by all of LSB's current wholly-owned subsidiaries, with all of the guarantees, except two, being senior secured guarantees and two being senior unsecured guarantees. The Senior Secured Notes rank equally in right of payment to all of LSB and the guarantors' existing and future senior secured debt, including the Amended Working Capital Revolver Loan discussed above, and are senior in right of payment to all of LSB and the guarantors' future subordinated indebtedness. LSB does not have independent assets or operations.
Those subsidiaries that provided guarantees of the Senior Secured Notes will be released from such guarantees upon the occurrence of certain events, including the following:
• the designation of such guarantor as an unrestricted subsidiary;
• the release or discharge of any guarantee or indebtedness that resulted in the creation of the guarantee of the Senior Secured Notes by such guarantor;
• the sale or other disposition, including by way of merger or otherwise, of its capital stock or of all or substantially all of the assets, of such guarantor; or
• LSB's exercise of its legal defeasance option or its covenant defeasance option as described in the Indenture with LSB's obligations under the Indenture discharged in accordance with the Indenture.
The Senior Secured Notes will be effectively senior to all existing and future unsecured debt of LSB and the guarantors to the extent of the value of the property and assets subject to liens ("Collateral") and will effectively be senior to all existing and future obligations under the Amended Working Capital Revolver Loan and other debt to the extent of the value of the certain collateral ("Priority Collateral").
The Senior Secured Notes will secured be on a first-priority basis by the Priority Collateral owned by LSB and the guarantors (other than the two unsecured guarantors) and on a second-priority basis by the certain collateral securing the Amended Working Capital Revolver Loan owned by LSB and the guarantors (other than the two unsecured guarantors), in each case subject to certain liens permitted under the Indenture. The Senior Secured Notes will be equal in priority as to the Priority Collateral owned by LSB and the guarantors with respect to any obligations under any equally ranked lien obligations subsequently incurred. At December 31, 2014, the carrying value of the assets secured on a first-priority basis was approximately $607 million and the carrying value of the assets secured on a second-priority basis was approximately $136 million.
The Senior Secured Notes will effectively subordinated to all of LSB and the guarantors' existing and future obligations under the Amended Working Capital Revolver Loan and other debt to the extent of the value of the certain collateral securing such debt and to any of LSB and the guarantors' existing and future indebtedness that is secured by liens that are not part of the Collateral. The Senior Secured Notes will be structurally subordinated to all of the existing and future indebtedness, preferred stock obligations and other liabilities, including trade payables, of our subsidiaries that do not guarantee the Senior Secured Notes in the future.
Except under certain conditions, the Senior Secured Notes are not redeemable before August 1, 2016. On or after such date, LSB may redeem the Senior Secured Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof), plus accrued and unpaid interest to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period commencing on August 1st of the year set forth below:
103.875 %
2018 and thereafter
Upon the occurrence of a change of control, as defined in the Indenture, each holder of the Senior Secured Notes will have the right to require that LSB purchase all or a portion of such holder's notes at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date).
The Indenture contains covenants that, among other things, limit LSB's ability, with certain exceptions and as defined in the Indenture, to:
• pay dividends;
• repurchase LSB common and preferred stocks;
• make investments;
• engage in mergers, consolidations or other forms of recapitalization;
• engage in sale-leaseback transactions; or
• engage in certain affiliate transactions.
In 2013, approximately $67.2 million of the proceeds from Senior Secured Notes was used to pay all outstanding borrowings, including a prepayment premium, under a secured term loan facility. As a result of the payoff of the secured term loan facility, we incurred a loss on extinguishment of debt of $1.3 million in 2013, consisting of the prepayment premium and writing off unamortized debt issuance costs.
(C) On February 1, 2013, Zena Energy L.L.C. ("Zena"), a subsidiary within our Chemical Business, entered into a loan (the "Secured Promissory Note") with a lender in the original principal amount of $35 million. The Secured Promissory Note followed the original acquisition by Zena of working interests ("Working Interests") in certain natural gas properties during October 2012. The proceeds of the Secured Promissory Note effectively financed $35 million of the approximately $50 million purchase price of the Working Interests previously paid out of LSB's working capital. The Secured Promissory Note matures on February 1, 2016.
Principal and interest are payable monthly based on a five-year amortization at a defined LIBOR rate plus 300 basis points with a final balloon payment of $15.3 million due at maturity. The interest rate at December 31, 2014 was 3.23%. The loan is secured by the Working Interests and related properties and proceeds.
(D) Maturities of long-term debt for each of the five years after December 31, 2014 are as follows (in thousands):
Name: us-gaap_DebtDisclosureAbstract
The entire disclosure for long-term debt.
Name: us-gaap_LongTermDebtTextBlock
Income Tax Disclosure [Abstract]
10. Income Taxes
Provisions for income taxes are as follows:
$ (1,452 ) $ (1,225 ) $ 28,654
Total Current
$ (439 ) $ 132 $ 33,349
Deferred:
$ 12,278 $ 32,197 $ 559
561 3,092 (314 )
Total Deferred
Provisions for income taxes
The current provision for federal income taxes shown above includes regular federal income tax after the consideration of permanent and temporary differences between income for GAAP and tax purposes. For 2013 and in connection with the American Taxpayer Relief Act of 2012 that was signed into law in January 2013, we recorded a one-time benefit of approximately $0.5 million related to the retroactive tax relief for certain tax provisions that expired in 2012. Because the legislation was signed into law after December 31, 2012, the retroactive effects of the law reduced the current provision for 2013 and impacted the effective tax rate for 2013. The current provision for state income taxes includes regular state income tax and provisions for uncertain income tax positions.
The deferred tax provision results from the recognition of changes in our prior year deferred tax assets and liabilities, and the utilization of state NOL carryforwards and other temporary differences. We reduce income tax expense for tax credits in the year they arise and are earned. At December 31, 2014, our gross amount of the investment tax credits available to offset state income taxes was minimal. These investment tax credits do not expire and carryforward indefinitely. The gross amount of federal tax credits was $2.1 million. These credits carryforward for 20 years and begin expiring in 2034.
We utilized approximately $5.9 million, $0.1 million and $0.1 million of state NOL carryforwards to reduce tax liabilities in 2014, 2013 and 2012, respectively. At December 31, 2014, we have remaining federal and state tax NOL carryforwards of $33.6 million and $58.5 million, respectively, which amounts exclude the NOL carryforwards that are related to unrecognized tax benefits and stock compensation that have not been recognized in accordance with GAAP. Additionally, we had approximately $2.8 million of alternative minimum tax ("AMT") NOL carryforwards available as a deduction against future AMT income. The federal and state NOL carryforwards begin expiring in 2033 and 2014, respectively.
We considered both positive and negative evidence in our determination of the need for valuation allowances for the deferred tax assets associated with federal and state NOLs and federal credits. For 2014, 2013 and 2012, we determined it was more-likely-than-not that approximately $8.1 million, $8.3 million and $6.8 million, respectively, of the state NOL carryforwards would not be able to be utilized before expiration and a valuation allowance was maintained for the deferred tax assets associated with these state NOL carryforwards, net of federal benefit of approximately $0.3 million for each of the respective years.
When non-qualified stock options ("NSOs") are exercised, the grantor of the options is permitted to deduct the spread between the fair market value of the stock issued and the exercise price of the NSOs as compensation expense in determining taxable income. Income tax benefits related to stock-based compensation deductions in excess of the compensation expense recorded for financial reporting purposes are not recognized in earnings as a reduction of income tax expense for financial reporting purposes. As a result, the stock-based compensation deduction recognized in our income tax return will exceed the stock-based compensation expense recognized in earnings. The excess tax benefit realized (i.e., the resulting reduction in the current tax liability) related to the excess stock-based compensation tax deduction of $0.5 million in 2012 (none in 2014 and 2013), which is included in the net change in capital in excess of par value rather than a decrease in the provision for income taxes.
In addition, if the grantor of NSOs will not currently reduce its tax liability from the excess tax benefit deduction taken at the time of the taxable event (option exercised) because it has a NOL carryforward that is increased by the excess tax benefit, then the tax benefit should not be recognized until the deduction actually reduces current taxes payable. The amounts included in the federal and state NOL carryforwards but not reflected in deferred tax assets at December 31, 2014 totaled $3.1 million and $1.7 million, respectively. At December 31, 2014 and 2013, we had $1.1 million and $0.5 million, respectively of unrecognized federal and state tax benefits resulting from the exercise of NSOs.
Deferred tax assets and liabilities include temporary differences and carryforwards as follows:
Deferred tax assets
Asset impairment
Other accrued liabilities
Net operating loss carryforwards
Total deferred tax assets
Less valuation allowance on deferred tax assets
Net deferred tax assets
Deferred tax liabilities
Prepaid and other insurance reserves
Investment in unconsolidated affiliate
Total deferred tax liabilities
Net deferred tax liabilities
$ (65,924 ) $ (53,085 )
Consolidated balance sheet classification:
Net current deferred tax assets
Net noncurrent deferred tax liabilities
Net deferred tax liabilities by tax jurisdiction:
All of our income before taxes relates to domestic operations. Detailed below are the differences between the amount of the provision for income taxes and the amount which would result from the application of the federal statutory rate to "Income from continuing operations before provision for income taxes".
Provisions for income taxes at federal statutory rate
State current and deferred income taxes
Domestic production activities deduction
Effect of tax return to tax provision reconciliation
(250 ) 126 (181 )
A reconciliation of the beginning and ending amount of uncertain tax positions is as follows:
$ 2,409 $ 2,292 $ 709
Additions based on tax positions related to the current year
Additions based on tax positions of prior years
Reductions for tax positions of prior years
(1,411 ) (123 ) (485 )
(753 ) (112 ) —
$ 657 $ 2,409 $ 2,292
We expect that the amount of unrecognized tax benefits may change as the result of ongoing operations, the outcomes of audits, and the expiration of statute of limitations. This change is not expected to have a significant impact on our results of operations or the financial condition. The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, was $160,000, $204,000, and $236,000, net of federal expense, in 2014, 2013, and 2012, respectively.
We record interest related to unrecognized tax positions in interest expense and penalties in operating other expense. During 2014, we recognized a recovery of $518,000 in interest expense and penalties associated with the reduction of unrecognized tax positions. During 2013 and 2012, we recognized $121,000 and $430,000, respectively, in interest and penalties associated with unrecognized tax benefits. We had approximately $67,000 and $585,000 accrued for interest and penalties at December 31, 2014 and 2013, respectively.
LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2011-2013 years remain open for all purposes of examination by the U.S. Internal Revenue Service ("IRS") and other major tax jurisdictions. During 2014, we settled the examination with the IRS for the tax years 2008-2010 with no material changes to our financial position, results of operations and cash flow.
Name: us-gaap_IncomeTaxDisclosureAbstract
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Name: us-gaap_IncomeTaxDisclosureTextBlock
Commitments and Contingencies Disclosure [Abstract]
11. Commitments and Contingencies
Operating Leases - We lease certain PP&E under non-cancelable operating leases. Future minimum payments on operating leases with initial or remaining terms of one year or more at December 31, 2014, are as follows:
Total minimum lease payments
Expenses associated with our operating lease agreements, including month-to-month leases, were $7,425,000 in 2014, $6,401,000 in 2013, and $6,830,000 in 2012. Renewal options are available under certain of the lease agreements for various periods at approximately the existing annual rental amounts.
Purchase and Sales Commitments - We have the following significant purchase and sales commitments.
Bayer Agreement - Subsidiaries within our Chemical Business, El Dorado Nitric Company and its subsidiaries ("EDN") and EDC, are party to an agreement (the "Bayer Agreement") with Bayer MaterialScience LLC ("Bayer"). EDN operates Bayer's nitric acid plant (the "Baytown Facility") located within Bayer's chemical manufacturing complex. Under the terms of the Bayer Agreement, Bayer purchases from EDN all of Bayer's requirements for nitric acid for use in Bayer's chemical manufacturing complex located in Baytown, Texas that provides a pass-through of certain costs plus a profit. In addition, EDN is responsible for the maintenance and operation of the Baytown Facility. If there is a change in control of EDN, Bayer has the right to terminate the Bayer Agreement upon payment of certain fees to EDN. The Bayer Agreement expires in June 2021, with options for renewal.
Anhydrous ammonia purchase agreement - EDC is party to an anhydrous ammonia purchase agreement with Koch Nitrogen International Sarl ("Koch"). Under the agreement, Koch agrees to supply certain of EDC's requirements of anhydrous ammonia through December 31, 2015. The terms of this agreement do not include minimum volumes or take-or-pay provisions.
UAN supply agreement – A subsidiary within our Chemical Business, Pryor Chemical Company ("PCC"), is party to a contract with Koch Nitrogen Company, LLC ("Koch Nitrogen") under which Koch Nitrogen agrees to purchase and distribute at market prices substantially all of the urea ammonium nitrate ("UAN") produced at the Pryor Facility through June 30, 2016, but either party has an option to terminate the agreement pursuant to the terms of the contract (PCC's required notice of termination is three months and Koch Nitrogen's required notice of termination is six months).
Natural gas gathering agreements – Zena owns approximately 12% working interest in certain natural gas properties but is not the operator of these properties. The operator of the natural gas wells developed on these properties has contractually agreed to deliver a minimum daily quantity of natural gas to a certain gathering and pipeline system through December 2026 to ensure capacity availability on that system. This gathering agreement effectively requires a daily minimum demand charge. As a result, Zena's proportionate share of the annual minimum demand charges is approximately $8.9 million for the next five years and approximately $5.7 million thereafter for a total of approximately $14.6 million.
Other purchase and sales commitments - See Note 12 - Derivatives, Hedges, Financial Instruments and Carbon Credits for our commitments relating to derivative contracts and carbon credits at December 31, 2014. During 2014, certain subsidiaries within the Chemical Business entered into contracts to purchase natural gas for anticipated production needs at certain of our chemical facilities. Since these contracts are considered normal purchases because they 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, these contracts are exempt from the accounting and reporting requirements relating to derivatives. At December 31, 2014, our purchase commitments under these contracts included approximately 2.9 million MMBtu of natural gas. These contracts extend through December 2015 at a weighted-average cost of $3.25 per MMBtu ($9.5 million) and a weighted-average market value of $3.01 per MMBtu ($8.8 million). In addition, we had standby letters of credit outstanding of approximately $2.6 million at December 31, 2014. We also had deposits from customers of $6.8 million for forward sales commitments, most of which relate to our Chemical Business at December 31, 2014.
Notification of Termination of Sales Commitment - Ammonium nitrate supply agreement—Pursuant to a long-term cost-plus supply agreement, EDC has agreed to supply Orica International Pte Ltd ("Orica") with an annual minimum of 240,000 tons of industrial grade ammonium nitrate ("AN") produced at our El Dorado Facility. The agreement includes a provision for Orica to pay for product not taken. The agreement also includes a required notice of termination of one year, with the termination date to be no sooner than April 9, 2015. On March 31, 2014, EDC sent to Orica the required one-year notice that EDC will not renew the agreement on or after April 9, 2015.
Planned Capital Additions – A subsidiary of EDC is party to various agreements with Leidos Constructors, LLC and others to engineer, procure and construct an ammonia plant and certain support facilities. The estimated cost for this project ranges from $275 million to $300 million, of which $128 million has been incurred and capitalized at December 31, 2014.
EDC is party to an agreement with Weatherly Inc. for the licensing, engineering, and procurement of major manufacturing equipment for a new 65% strength nitric acid plant ("Nitric Acid Plant") to be constructed at our El Dorado Facility. EDC is also party to various agreements with Leidos Constructors, LLC and others to engineer, procure and construct the Nitric Acid Plant, a nitric acid concentrator and certain support facilities at the El Dorado Facility. The estimated cost for this project ranges from $125 million to $130 million, of which $96 million has been incurred and capitalized at December 31, 2014.
Wastewater Pipeline Operating Agreement – EDC is party to an operating agreement for the right to use a pipeline to dispose its wastewater. EDC is contractually obligated to pay a portion of the operating costs of the pipeline, which portion is estimated to be $100,000 to $150,000 annually. The initial term of the operating agreement is through December 2053.
Performance and Payment Bonds – We are contingently liable to sureties in respect of certain insurance bonds issued by the sureties in connection with certain contracts entered into by certain subsidiaries in the normal course of business. These insurance bonds primarily represent guarantees of future performance of our subsidiaries. As of December 31, 2014, we have agreed to indemnify the sureties for payments, up to $10.6 million, made by them in respect of such bonds. All of these insurance bonds are expected to expire or be renewed in 2015.
Universal Shelf Registration Statement - In November 2012, we filed a universal shelf registration statement on Form S-3, with the SEC. The shelf registration statement provides that we could offer and sell up to $200 million of our securities consisting of equity (common and preferred), debt (senior and subordinated), warrants and units, or a combination thereof. The shelf registration statement expires in November 2015 unless we decide to file a post effective amendment.
Employment and Severance Agreements - We have an employment agreement and severance agreements with several of our officers. The agreements, as amended, provide for annual base salaries, bonuses and other benefits commonly found in such agreements. In the event of termination of employment due to a change in control (as defined in the agreements), the agreements provide for payments aggregating $15.8 million at December 31, 2014.
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 ("Environmental Laws") and to other laws regarding health and safety matters ("Health Laws"). In particular, the manufacture, production and distribution of products by our Chemical Business are activities that entail environmental and public health risks and impose obligations under the Environmental Laws and the Health Laws, many of which provide for certain performance obligations, substantial fines and criminal sanctions for violations. 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. The Environmental Laws and Health Laws and enforcement policies thereunder 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. Historically, significant expenditures have been incurred by subsidiaries within our Chemical Business in order to comply with the Environmental Laws and Health Laws and are reasonably expected to be incurred in the future. We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at our Chemical Business facilities should we discontinue the operations of a facility. We do not operate the natural gas wells where we own a working interest and compliance with Environmental Laws and Health Laws is controlled by others, with our Chemical Business being responsible for its proportionate share of the costs involved. As of December 31, 2014, our accrued liabilities for environmental matters totaled $408,000 relating primarily to matters discussed below. It is reasonably possible that a change in the estimate of our liability could occur in the near term. Also see discussion in Note 8 - Asset Retirement Obligations.
1. Discharge Water Matters
Each of our chemical manufacturing facilities generates process wastewater, which may include cooling tower and boiler water quality control streams, contact storm water (rain water inside the facility area that picks up contaminants) 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 by the United States Environmental Protection Agency ("EPA"), subject to oversight by the EPA. These permits limit the type and amount of effluents that can be discharged and controls the method of such discharge. The following are discharge water matters in relation to the respective permits.
The El Dorado Facility is subject to a state National Pollutant Discharge Elimination System ("NPDES") discharge water permit issued by the Arkansas Department of Environmental Quality ("ADEQ"). The El Dorado Facility is currently operating under an NPDES discharge water permit, which became effective in 2004 ("2004 NPDES permit"). In 2010, a preliminary draft of a discharge water permit renewal for the El Dorado Facility, which contains more restrictive limits, was issued by the ADEQ.
EDC believes that the El Dorado Facility has generally demonstrated its ability to comply with applicable ammonia and nitrate permit limits, but has, from time to time, had difficulty demonstrating consistent compliance with the more restrictive dissolved minerals permit levels We do not believe this matter regarding meeting the permit requirements as to the dissolved minerals will continue to be an issue as the result of the El Dorado Facility disposing its wastewater (beginning in September 2013), via a pipeline constructed by the City of El Dorado, Arkansas.
During 2012, EDC paid a penalty of $100,000 to settle an Administrative Complaint issued by the EPA, and thereafter handled by the United States Department of Justice ("DOJ"), relating to certain alleged violations of EDC's 2004 NPDES permit for alleged violations through 2010. The DOJ advised that some action would be taken for alleged violations occurring after 2010. As of the date of this report, no action has been filed by the DOJ against EDC. The cost (or range of costs) cannot currently be reasonably estimated regarding this matter. Therefore, no liability has been established at December 31, 2014.
In addition, the El Dorado Facility is currently operating under a consent administrative order ("2006 CAO") that recognizes the presence of nitrate contamination in the shallow groundwater. The 2006 CAO required EDC to continue semiannual groundwater monitoring, to continue operation of a groundwater recovery system and to submit a human health and ecological risk assessment to the ADEQ relating to the El Dorado Facility. The risk assessment was submitted in August 2007. The final remedy for shallow groundwater contamination, should any remediation be required, will be selected pursuant to a new consent administrative order and based upon the risk assessment. The cost of any additional remediation that may be required will be determined based on the results of the investigation and risk assessment, of which cost (or range of costs) cannot currently be reasonably estimated. Therefore, no liability has been established at December 31, 2014, in connection with this matter.
2. Air Matters
One of our subsidiaries, PCC, within our Chemical Business, has been advised that the Oklahoma Department of Environmental Quality, ("ODEQ") is conducting an investigation into whether the chemical production facility located in Pryor, Oklahoma (the "Pryor Facility") was in compliance with certain rules and regulations of the ODEQ and whether PCC's reports of certain air emissions relating primarily to 2011 were intentionally reported incorrectly to the ODEQ. Pursuant to the request of the ODEQ, PCC submitted information and a report to the ODEQ as to the reports filed by the Pryor Facility relating to the air emissions in question. In 2013, investigators with the ODEQ obtained documents from the Pryor Facility in connection with this investigation pursuant to a search warrant and interviewed several employees at the facility. PCC has cooperated with the ODEQ in connection with this investigation. As of December 31, 2014, we are not aware of any recommendations made or to be made by the ODEQ with respect to legal action to be taken or recommended as a result of this ongoing investigation.
3. Other Environmental Matters
In 2002, two subsidiaries within our Chemical Business sold substantially all of their operating assets relating to a Kansas chemical facility ("Hallowell Facility") but retained ownership of the real property. Even though we continued to own the real property, we did not assess our continuing involvement with our former Hallowell Facility to be significant and therefore accounted for the sale as discontinued operations. 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 and develop a corrective action strategy based on the investigation. In addition, certain of our subsidiaries agreed to indemnify the buyer of such assets for these environmental matters. Based on the assessment discussed above, we account for transactions associated with the Hallowell Facility as discontinued operations.
The successor ("Chevron") of a prior owner of the Hallowell Facility 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 Environmental Quality, subject to reallocation.
Our subsidiary and Chevron are pursuing with the state of Kansas a course of long-term surface and groundwater monitoring to track the natural decline in contamination. Currently, our subsidiary and Chevron are in the process of performing additional surface and groundwater testing. We have accrued for our allocable portion of costs for the additional testing, monitoring and risk assessments that could be reasonably estimated, which is included in our accrued liabilities for environmental matters discussed above. The estimated amount is not discounted to its present value.
In addition during 2010, the Kansas Department of Health and Environment ("KDHE") notified our subsidiary and Chevron that the Hallowell Facility has been referred to the KDHE's Natural Resources Trustee, which is to consider and recommend restoration, replacement and/or whether to seek compensation. KDHE will consider the recommendations in its evaluation. Currently, it is unknown what remediation and damages the KDHE would require, if any, but we believe that certain remediation activities will be required to begin during 2015. The ultimate required remediation, if any, is unknown. The nature and extent of a portion of the requirements are also not currently defined, and the associated costs (or range of costs) are not currently reasonably estimable. Therefore, no liability has been established at December 31, 2014, in connection with the KDHE's Natural Resources Trustee matter.
B. Other Pending, Threatened or Settled Litigation
In 2013, an explosion and fire occurred at the West Fertilizer Co. ("West Fertilizer"), located in West, Texas, causing death, bodily injury and substantial property damage. West Fertilizer is not owned or controlled by us, but West Fertilizer had been a customer of EDC, purchasing AN from EDC from time to time. LSB and EDC previously received letters from counsel purporting to represent subrogated insurance carriers, personal injury claimants and persons who suffered property damages informing them that their clients are conducting investigations into the cause of the explosion and fire to determine, among other things, whether AN manufactured by EDC and supplied to West Fertilizer was stored at West Fertilizer at the time of the explosion and, if so, whether such AN may have been one of the contributing factors of the explosion. Other manufacturers of AN also supplied AN to West Fertilizer. Initially, the lawsuits that had been filed named West Fertilizer and another supplier of AN as defendants. There have been certain responses to discovery in connection with the pending lawsuits that possibly some of the AN products at West Fertilizer at the time of the explosion may have been produced by EDC. In 2014, EDC and LSB were named as defendants, together with other AN manufactures and brokers that arranged the transport and delivery of AN to West Fertilizer, in the case styled City of West, Texas v CF Industries, Inc., et al, in the District Court of McLennan County, Texas. Plaintiffs are alleging, among other things, that LSB and EDC were negligent in the production and marketing of fertilizer products sold to West Fertilizer resulting in death, personal injury and property damage. EDC has retained a firm specializing in cause and origin investigations, with particular experience with fertilizer facilities, to assist EDC in its own investigation. LSB and EDC have placed its liability insurance carrier on notice, which carrier is handling the defense for LSB and EDC concerning this matter. Our product liability insurance policies have aggregate limits of general liability totaling $100 million, with a self-insured retention of $250,000. Our legal counsel in this matter has represented to us that while it is extremely early in this litigation, they believe our chances of ultimately confirming the merits of EDC's legal position are probable. However, if there is an adverse outcome in this matter as to EDC, we are unable to estimate a possible range of loss at this time. As of December 31, 2014, no liability has been established in connection with this matter, but we have incurred professional fees up to our self-insured retention amount.
We are also involved in various other claims and legal actions including claims for damages resulting from water leaks related to our Climate Control products and other product liability occurrences. Most of the product liability claims are covered by our general liability insurance, which generally includes a deductible of $250,000 per claim. For any claims or legal actions that we have assessed the likelihood of our liability as probable, we have recognized our estimated liability up to the applicable deductible. At December 31, 2014, our accrued general liability insurance claims were $541,000 and are included in accrued and other liabilities. It is possible that the actual future development of claims could be different from our estimates but, after consultation with legal counsel, we believe that changes in our estimates will not have a material effect on our business, financial condition, results of operations or cash flows.
Name: us-gaap_CommitmentsAndContingenciesDisclosureAbstract
The entire disclosure for commitments and contingencies.
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Derivative Instruments and Hedging Activities Disclosure [Abstract]
12. Derivatives, Hedges, Financial Instruments and Carbon Credits
Periodically, we have three classes of contracts that are accounted for on a fair value basis, which are commodities futures/forward contracts ("commodities contracts"), foreign exchange contracts and interest rate contracts as discussed below. All of these contracts are used as economic hedges for risk management purposes but are not designated as hedging instruments. In addition as discussed below, we are issued climate reserve tonnes ("carbon credits"), of which a certain portion of the carbon credits are to be sold and the proceeds given to Bayer. The assets for carbon credits are accounted for on a fair value basis as discussed below. Also, the contractual obligations to give the related proceeds to Bayer are accounted for on a fair value basis (as discussed below) unless we enter into a firm sales commitment to sell the carbon credits as discussed in Note 1 - Summary of Significant Accounting Policies. The valuations of these assets and liabilities were determined based on quoted market prices or, in instances where market quotes are not available, other valuation techniques or models used to estimate fair values.
The valuations of contracts classified as Level 1 are based on quoted prices in active markets for identical contracts. The 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. At December 31, 2014, the valuations of contracts classified as Level 2 related to certain futures/forward natural gas contracts, a foreign exchange contract and an interest rate swap contract. At December 31, 2013, the valuations of contracts classified as Level 2 related to an interest rate swap contract.
For the natural gas contracts, these contracts are valued using the prices pursuant to the terms of the contracts and using market information for futures/forward natural gas prices. At December 31, 2014, the valuation inputs included the contractual weighted-average cost of $3.24 per MMBtu and the estimated weighted-average market value of $2.99 per MMBtu.
For foreign exchange contracts, these contracts are valued using the foreign currency exchange rates pursuant to the terms of the contract and using market information for foreign currency exchange rates. The valuation inputs included the total contractual exchange rate of 1.27 and the total estimated market exchange rate of 1.22 (U.S. Dollar/Euro). For interest rate swap contracts, we utilize valuation software and market data from a third-party provider. These contracts are valued using a discounted cash flow model that calculates the present value of future cash flows pursuant to the terms of the contracts and using market information for forward interest-rate yield curves. At December 31, 2014, the valuation inputs included the contractual weighted-average pay rate of 3.23% and the estimated market weighted-average receive rate of 0.53%. No valuation input adjustments were considered necessary relating to nonperformance risk for the contracts as discussed above.
The 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. At December 31, 2014 and 2013, the valuations ($2.50 and $1.00 per carbon credit, respectively) of the carbon credits and the contractual obligations associated with these carbon credits are classified as Level 3 and are based on the most recent sales transaction and reevaluated for market changes, if any, and on the range of ask/bid prices obtained from a broker adjusted for minimal market volume activity, respectively. The valuations are using undiscounted cash flows based on management's assumption that the carbon credits would be sold and the associated contractual obligations would be extinguished in the near term. In addition, no valuation input adjustments were considered necessary relating to nonperformance risk for the carbon credits and associated contractual obligations.
Commodities Contracts
Raw materials for use in our manufacturing processes include copper used by our Climate Control Business and natural gas and platinum used by our Chemical Business. As part of our raw material price risk management, we periodically enter into futures/forward contracts for these materials, which contracts may be required to be accounted for on a mark-to-market basis. At December 31, 2014, our futures/forward copper contracts include 1,750,000 pounds of copper, extend through May 2015 at a weighted-average cost of $2.98 per pound. At December 31, 2013, we did not have any futures/forward copper contracts. At December 31, 2014, our futures/forward natural gas contracts (accounted for on a mark-to-market basis) include approximately 8,279,000 MMBtu of natural gas, extend through June 2016 at a weighted-average cost of $3.24 per MMBtu. At December 31, 2013, our futures/forward natural gas contracts include 1,530,000 MMBtu of natural gas, extend through October 2014 at a weighted-average cost of $3.98 per MMBtu. At December 31, 2014, our futures/forward platinum contracts include 3,000 ounces of platinum, extend through April 2015 at a weighted-average cost of $1,224.26 per ounce. At December 31, 2013, we did not have any futures/forward platinum contracts. The cash flows relating to these contracts are included in cash flows from continuing operating activities.
Foreign Exchange Contracts
One of our business operations purchases industrial machinery and related components from vendors outside of the United States. As part of our foreign currency risk management, we periodically enter into foreign exchange contracts, which set the U.S. Dollar/Euro exchange rates. At December 31, 2014, our foreign exchange contract was for the receipt of approximately 819,000 Euros through May 2015 at the contractual exchange rate of 1.27 (U.S. Dollar/Euro). At December 31, 2013, we did not have any foreign exchange contracts. These contracts are free-standing derivatives and are accounted for on a mark-to-market basis. The cash flows relating to these contracts are included in cash flows from continuing operating activities.
Interest Rate Contracts
As part of our interest rate risk management, we periodically purchase and/or enter into various interest rate contracts. In February 2011, we entered into an interest rate swap at no cost, which sets a fixed three-month LIBOR rate of 3.23% on a declining balance (from $23.8 million to $18.8 million) for the period beginning in April 2012 through March 2016. This contract is a free-standing derivative and is accounted for on a mark-to-market basis. During each of the three years ended December 31, 2014, no cash flows occurred relating to the purchase or sale of interest rate contracts. The cash flows associated with the interest rate swap payments are included in cash flows from continuing operating activities.
Carbon Credits and Associated Contractual Obligation
Periodically, we are issued carbon credits by the Climate Action Reserve in relation to a greenhouse gas reduction project ("Project") performed at the Baytown Facility. Pursuant to the terms of the agreement with Bayer, a certain portion of the carbon credits are to be used to recover the costs of the Project, and any balance thereafter to be allocated between Bayer and EDN. We have no obligation to reimburse Bayer for their costs associated with the Project, except through the transfer or sale of the carbon credits when such credits are issued to us. The assets for carbon credits are accounted for on a fair value basis and the contractual obligations associated with these carbon credits are also accounted for on a fair value basis (unless we enter into a sales commitment to sell the carbon credits). At December 31, 2014 and 2013, we had approximately 1,112,000 and 1,284,000 carbon credits, respectively, all of which were subject to contractual obligations. The cash flows associated with the carbon credits and the associated contractual obligations are included in cash flows from continuing investing activities.
The following details our assets and liabilities that are measured at fair value on a recurring basis at December 31, 2014 and 2013:
Fair Value Measurements at
December 31, 2014 Using
Total Fair
Value at
2014 Quoted Prices
in Active
Markets for
Identical
(Level 1) Significant
Inputs (Level
2) Significant
Unobservable
(Level 3) Total Fair
Assets - Supplies, prepaid items and other:
$ — $ — $ — $ — $ 31
2,779 — — 2,779 1,284
$ 2,779 $ — $ — $ 2,779 $ 1,315
Liabilities - Current and noncurrent accrued and other liabilities:
$ 2,440 $ 316 $ 2,124 $ — $ —
Contractual obligations - carbon credits
671 — 671 — 1,240
44 — 44 — —
$ 5,934 $ 316 $ 2,839 $ 2,779 $ 2,524
None of our assets or liabilities measured at fair value on a recurring basis transferred between Level 1 and Level 2 classifications for the periods presented below except for certain futures/forward natural gas contracts (an asset with an estimated fair value of $31,000 at December 31, 2013) that were transferred from Level 1 to Level 2 since a portion of these contracts were expected to be settled on dates that quoted prices were not available. As a result, we are utilizing observable market data other than quoted prices to value these contracts. The classification transfer of the contracts was deemed to occur in the first quarter of 2014. In addition, the following is a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Assets Liabilities
$ 1,284 $ 91 $ 42 $ (1,284 ) $ (91 ) $ (42 )
Transfers into Level 3
Transfers out of Level 3
Total realized and unrealized gains (losses) included in earnings
3,089 1,233 876 (2,799 ) (1,233 ) (721 )
(1,594 ) (40 ) (827 ) — — —
— — — 1,304 40 672
$ 2,779 $ 1,284 $ 91 $ (2,779 ) $ (1,284 ) $ (91 )
Total gains (losses) for the period included in earnings attributed to the change in unrealized gains or losses on assets and liabilities still held at the reporting date
Net gains (losses) included in earnings and the income statement classifications are as follows:
Total net gains (losses) included in earnings:
Cost of sales - Undesignated commodities contracts
$ (1,198 ) $ (244 ) $ 14
Cost of sales - Undesignated foreign exchange contracts
(49 ) — (19 )
Other income - Carbon credits
Other expense - Contractual obligations relating to carbon credits
(2,799 ) (1,233 ) (721 )
Interest expense - Undesignated interest rate contracts
(71 ) (33 ) (523 )
Total net losses included in earnings
$ (1,028 ) $ (277 ) $ (373 )
At December 31, 2014 and 2013, we did not have any financial instruments with fair values significantly different from their carrying amounts, except for the Senior Secured Notes. At December 31, 2014, the estimated fair value of the Senior Secured Notes exceeded the carrying value by approximately $17 million based on a quoted price of 104.0. At December 31, 2013, the estimated fair value of the Senior Secured Notes exceeded the carrying by approximately $20 million based on a range of ask/bid prices (104.5 to 104.9). These valuations are classified as Level 2. The valuations of our other long-term debt agreements are classified as Level 3 and are based on valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. The fair value measurements of our other long-term debt agreements are valued using a discounted cash flow model that calculates the present value of future cash flows pursuant to the terms of the debt agreements and applies estimated current market interest rates. The estimated current market interest rates are based primarily on interest rates currently being offered on borrowings of similar amounts and terms. In addition, no valuation input adjustments were considered necessary relating to nonperformance risk for our debt agreements. 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. Also see discussions concerning certain assets and liabilities initially accounted for on a fair value basis under Note 8 - Asset Retirement Obligations.
Name: us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
-Paragraph 4C
-Paragraph 4B
-Paragraph 4D
-Paragraph 1A
Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Paragraph 4H
-Paragraph 4K
-Paragraph 4J
-Paragraph 4E
-Subparagraph (SX 210.4-08.(n))
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
13. Stockholders' Equity
2008 Stock Incentive Plan - During 2014, our stockholders approved an amendment to our Incentive Stock Plan (the "2008 Plan"). As amended, the total number of shares of our common stock for which awards may be granted under the 2008 Plan is 1,975,000 shares, subject to adjustment. Under the 2008 Plan, awards may be made to any employee, officer or director of the Company and its affiliated companies. An award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any affiliate (as defined in the 2008 Plan), subject to certain conditions. The 2008 Plan is being administered by the compensation and stock option committee (the "Committee") of our Board of Directors.
Our Board of Directors or the Committee may amend the 2008 Plan, except that if any applicable statute, rule or regulation requires shareholder approval with respect to any amendment of the 2008 Plan, then to the extent so required, shareholder approval will be obtained. Shareholder approval will also be obtained for any amendment that would increase the number of shares stated as available for issuance under the 2008 Plan. Unless sooner terminated by our Board of Directors, the 2008 Plan expires on June 5, 2018.
The following may be granted by the Committee under the 2008 Plan:
Stock Options - The Committee may grant either incentive stock options or non-qualified stock options. The Committee sets option exercise prices and terms, except that the exercise price of a stock option may be no less than 100% of the fair market value, as defined in the 2008 Plan, of the shares on the date of grant. At the time of grant, the Committee will have sole discretion in determining when stock options are exercisable and when they expire, except that the term of a stock option cannot exceed 10 years.
Stock Appreciation Rights ("SARs") - The Committee may grant SARs as a right in tandem with the number of shares underlying stock options granted under the 2008 Plan or on a stand-alone basis. SARs are the right to receive payment per share of the SAR exercised in stock or in cash equal to the excess of the share's fair market value, as defined in the 2008 Plan, on the date of exercise over its fair market value on the date the SAR was granted. Exercise of a SAR issued in tandem with stock options will result in the reduction of the number of shares underlying the related stock option to the extent of the SAR exercise.
Stock Awards, Restricted Stock, Restricted Stock Units, and Other Awards - The Committee may grant awards of restricted stock, restricted stock units, and other stock and cash-based awards, which may include the payment of stock in lieu of cash (including cash payable under other incentive or bonus programs) or the payment of cash (which may or may not be based on the price of our common stock).
Outside Director Stock Option Plan - In addition to the 2008 Plan discussed above, we have an Outside Director Stock Option Plan (the "Outside Director Plan"). The Outside Director Plan authorizes the grant of non-qualified stock options to each member of our Board of Directors who is not an officer or employee of LSB or its subsidiaries.
The Outside Director Plan also provides that each outside director may elect to receive all or any portion of his or her director fee for services rendered as a director of LSB in shares of LSB's common stock, provided that the outside director elects to receive shares in payment of his or her director fee each calendar quarter.
Stock-Based Compensation - During 2014, the Committee approved the grants under the 2008 Plan of 489,000 shares of stock options (the "2014 Options") to certain employees. The exercise price of the 2014 Options was equal to the market value of our common stock at the date of grant. The 2014 Options vest at the end of each one-year period at the rate of 16.5% per year for the first five years and the remaining unvested options will vest at the end of the sixth year. The 2014 Options expire in 2024. The fair value for the 2014 Options was estimated, using an option pricing model, as of the date of the grant, which date was also the service inception date. During 2013 and 2012, the Committee did not grant any awards under the 2008 Plan.
The fair value for the 2014 Options was estimated using a Black-Scholes-Merton option pricing model with the following assumptions:
• risk-free interest rate based on an U.S. Treasury zero-coupon issue with a term approximating the estimated expected life as of the grant date;
• a dividend yield based on historical data;
• volatility factors of the expected market price of our common stock based on historical volatility of our common stock primarily over approximately six years from the date of grant; and
• a weighted-average expected life of the options based on the historical exercise behavior of these employees and outside director, if applicable.
The following table summarizes information about these granted stock options:
Weighted-average risk-free interest rate
1.83 % N/A N/A
— N/A N/A
Weighted-average expected volatility
45.18 % N/A N/A
Total weighted-average expected forfeiture rate
Weighted-average expected life (years)
5.90 N/A N/A
Total weighted-average remaining vesting period in years (1)
Total fair value of options granted
$ 7,262,000 N/A N/A
Stock-based compensation expense - Cost of sales (1)
$ 255,000 $ 227,000 $ 278,000
Stock-based compensation expense - SG&A (1)
$ 1,660,000 $ 1,315,000 $ 1,374,000
Income tax benefit (1)
$ (747,000 ) $ (601,000 ) $ (603,000 )
(1) Information relates to stock options granted since 2006.
At December 31, 2014, the total stock-based compensation expense not yet recognized is $9,072,000 relating to non-vested stock options, which we will be amortizing (subject to adjustments for forfeitures) through the respective remaining vesting periods.
Stock Option Plans and Grants - At December 31, 2014, we have options outstanding under a 1998 Stock Option Plan ("1998 Plan") and the 2008 Plan as discussed above. The 1998 Plan has expired, and accordingly, no additional options may be granted from the 1998 Plan. Options granted prior to the expiration of this plan continue to remain valid thereafter in accordance with their terms. The exercise price of the outstanding options granted under the 1998 and 2008 Plans was equal to the market value of our common stock at the date of grant.
The following information relates to our stock option plans:
2008 Plan 1998 Plan Outside
Maximum number of securities for issuance
1,975,000 N/A 400,000
Number of awards available to be granted
869,170 N/A 280,000
Number of options outstanding
828,848 7,000 —
Number of options exercisable
In addition to our stock option plans, in 2006 our stockholders approved the grant of 450,000 shares of stock options (the "2006 Options") to certain Climate Control Business employees. The exercise price of the 2006 Options is $8.01 per share. At December 31, 2014, there were 120,000 options outstanding related to the 2006 Options, of which 30,000 are exercisable.
The following information relates to our stock options:
Shares Weighted-
Outstanding at beginning of year
599,630 $ 18.57
(121,742 ) $ 8.82
Cancelled, forfeited or expired
(11,040 ) $ 33.71
Outstanding at end of year
Exercisable at end of year
Weighted-average fair value per option granted during year
$ 14.85 N/A N/A
Total intrinsic value of options exercised during the year
Total fair value of options vested during the year
Stock Options Outstanding At December 31, 2014
Exercise Prices
Outstanding Weighted-
Contractual Life
in Years Weighted-
Average Exercise
Price Intrinsic Value of
$ 5.10 7,000 0.92 $ 5.10 $ 184,000
$ 7.86 - $8.17 162,950 2.19 $ 7.97 3,825,000
$ 9.69 - $9.97 75,248 3.73 $ 9.69 1,636,000
$29.99 - $34.50 710,650 8.81 $ 33.53 8,000
$ 5.10 - $34.50 955,848 7.22 $ 27.09 $ 5,653,000
Stock Options Exercisable At December 31, 2014
Preferred Share Rights Plan - On January 5, 2009, a renewed shareholder rights plan became effective upon the expiration of our previous shareholder rights plan. The rights plan will impact a potential acquirer unless the acquirer negotiates with our Board of Directors and the Board of Directors approves the transaction. Pursuant to the renewed plan, one preferred share purchase right (a "Right") is attached to each currently outstanding or subsequently issued share of our common stock. Prior to becoming exercisable, the Rights trade together with our common stock. In general, if a person or group acquires or announces a tender or exchange offer for 15% or more of our common stock (except for the Golsen Group and certain other limited excluded persons), then the Rights become exercisable. Each Right entitles the holder (other than the person or group that triggers the Rights being exercisable) to purchase from us one one-hundredth of a share of Series 4 Junior Participating Preferred Stock, no par value (the "Preferred Stock"), at an exercise price of $47.75 per one one-hundredth of a share, subject to adjustment. If a person or group acquires 15% or more of our common stock, each Right will entitle the holder (other than the person or group that triggered the Rights being exercisable) to purchase shares of our common stock (or, in certain circumstances, cash or other securities) having a market value of twice the exercise price of a Right at such time. Under certain circumstances, each Right will entitle the holder (other than the person or group that triggered the Rights being exercisable) to purchase the common stock of the acquirer having a market value of twice the exercise price of a Right at such time. In addition, under certain circumstances, our Board of Directors may exchange each Right (other than those held by the acquirer) for one share of our common stock, subject to adjustment. Our Board of Directors may redeem the Rights at a price of $0.01 per Right generally at any time before 10 days after the Rights become exercisable. Our Board of Directors may exchange all or part of the Rights (except to the person or group that triggered the Rights being exercisable) for our common stock at an exchange ratio of one common share per Right until the person triggering the Right becomes the beneficial owner of 50% or more of our common stock.
Other – As of December 31, 2014, we have reserved 1.9 million shares of common stock issuable upon potential conversion of preferred stocks and stock options pursuant to their respective terms.
Name: us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details.
Name: us-gaap_ShareholdersEquityAndShareBasedPaymentsTextBlock
Text Block [Abstract]
14. Non-Redeemable Preferred Stock
Series B Preferred - The 20,000 shares of Series B 12% cumulative, convertible preferred stock ("Series B Preferred"), $100 par value, are convertible, in whole or in part, into 666,666 shares of our common stock (33.3333 shares of common stock for each share of preferred stock) at any time at the option of the holder and entitle the holder to one vote per share. The Series B Preferred provides for annual cumulative dividends of 12% from date of issue, payable when and as declared. All of the outstanding shares of the Series B Preferred are owned by the Golsen Group.
Series D Preferred - The 1,000,000 shares of Series D 6% cumulative, convertible Class C preferred stock ("Series D Preferred") have no par value and are convertible, in whole or in part, into 250,000 shares of our common stock (1 share of common stock for 4 shares of preferred stock) at any time at the option of the holder. Dividends on the Series D Preferred are cumulative and payable annually in arrears at the rate of 6% per annum of the liquidation preference of $1.00 per share. Each holder of the Series D Preferred shall be entitled to .875 votes per share. All of the outstanding shares of Series D Preferred are owned by the Golsen Group.
Cash Dividends Paid – During 2014, 2013 and 2012, we paid the following cash dividends on our non-redeemable preferred stock in each of the respective year:
• $240,000 on the Series B Preferred ($12.00 per share) and
• $60,000 on the Series D Preferred ($0.06 per share).
At December 31, 2014, there were no dividends in arrears.
Other - At December 31, 2014, we are authorized to issue an additional 230,000 shares of $100 par value preferred stock and an additional 4,000,000 shares of no par value preferred stock. Upon issuance, our Board of Directors will determine the specific terms and conditions of such preferred stock.
The entire disclosure for terms, amounts, nature of changes, rights and privileges, dividends, and other matters related to non-redeemable preferred stock.
Name: lxu_NonRedeemablePreferredStockTextBlock
Name: us-gaap_TextBlockAbstract
15. Executive Benefit Agreements and Employee Savings Plans
We are party to various individual benefit agreements ("1992 Agreements") and death benefit agreements ("1981 Agreements") with certain key executives and a death benefit agreement ("2005 Agreement") with our Executive Chairman. The 1992 Agreements provide for annual benefit payments for life (in addition to salary) payable in monthly installments when the employee reaches age 65. In addition, should the executive die prior to attaining the age of 65, we will pay the beneficiary named in the agreement a monthly amount as specified in the agreement over a ten-year period. These benefits are forfeited if the respective executive's employment is terminated prior to age 65 for any reason other than death. The 1992 Agreements may be terminated by the Company at any time and for any reason prior to the death of the employee.
The 1981 Agreements provide for death benefits should the executive die while employed. Upon such of an event, we will pay the beneficiary named in the agreement a monthly amount as specified in the agreement over a ten-year period. These benefits are forfeited if the respective executive's employment is terminated for any reason prior to death. The 1981 Agreements may be terminated by the Company at any time and for any reason prior to the death of the employee.
The 2005 Agreement provides that, upon our Executive Chairman's death, we will pay to our Executive Chairman's designated beneficiary, a lump-sum payment of $2,500,000 to be funded from the net proceeds received by us under certain life insurance policies on our Executive Chairman's life that are owned by us. We are obligated to keep in existence life insurance policies with a total face amount of no less than $2,500,000 of the stated death benefit. The benefit under the 2005 Agreement is not contingent upon continued employment and may be amended at any time by written agreement executed by the Executive Chairman and the Company.
The following table includes information about these agreements:
Total undiscounted death benefits
Total accrued death benefits
Total undiscounted executive benefits
Total accrued executive benefits
Costs associated with executive benefits included in SG&A, net
$ 166 $ (2 ) $ 186
Accrued death and executive benefits under the above agreements are included in current and noncurrent accrued and other liabilities. We accrue for such liabilities when they become probable and discount the liabilities to their present value.
To assist us in funding the benefit agreements discussed above and for other business reasons, we purchased life insurance policies on various individuals in which we are the beneficiary. The net cash surrender values of these policies are included in other assets. The following table summarizes certain information about these life insurance policies.
Total face value of life insurance policies
Total cash surrender values of life insurance policies
Cost of life insurance premiums
Increases in cash surrender values
Net cost of life insurance premiums included in SG&A
Employee Savings Plans - We sponsor a savings plan under Section 401(k) of the Internal Revenue Code under which participation is available to substantially all full-time employees. We do not presently contribute to this plan except for certain employees within the Chemical Business, which amounts were not material for each of the three years ended December 31, 2014.
The entire disclosure for the entity's benefit agreements with certain key executives.
Name: lxu_ExecutiveBenefitAgreementsAndEmployeeSavingsPlansDisclosureTextBlock
Other Income and Expenses [Abstract]
16. Other Expense, Income and Non-Operating Other Income, net
Other expense:
Realized and unrealized losses on contractual obligations associated with carbon credits
Losses on sales and disposals of property and equipment
Dismantle and demolition expense (1)
559 2,578 —
Miscellaneous penalties
Miscellaneous expense
Total other expense
Realized and unrealized gains on carbon credits
Settlements of litigation and potential litigation (2)
— 545 2,303
Miscellaneous income
Total other income
Other expense (income), net
$ 1,120 $ 3,351 $ (1,693 )
Non-operating other expense (income), net:
$ (301 ) $ (165 ) $ (87 )
— (1 ) (263 )
Total non-operating other income, net
$ (281 ) $ (100 ) $ (281 )
(1) Amount relates to the dismantling and demolition of certain plant and equipment at our chemical facilities.
(2) Amounts relate primarily to settlements reached with certain vendors of our Chemical Business.
Name: us-gaap_OtherIncomeAndExpensesAbstract
The entire disclosure for other income or other expense items (both operating and nonoperating). Sources of nonoperating income or nonoperating expense that may be disclosed, include amounts earned from dividends, interest on securities, profits (losses) on securities, net and miscellaneous other income or income deductions.
-Subparagraph (SX 210.5-03.3,6,7,9)
-Paragraph 3, 6, 7, 9
Name: us-gaap_OtherIncomeAndOtherExpenseDisclosureTextBlock
17. Segment Information
Factors Used by Management to Identify the Enterprise's Reportable Segments and Measurement of Segment Income or Loss and Segment Assets
We have three operating segments (business segments) but only two reportable segments: the Chemical Business and the Climate Control Business. A reportable segment may include several business units that offer similar products and services. The reportable segments are managed separately from each other because they manufacture and distribute distinct products with different production processes.
We evaluate performance and allocate resources based on operating results. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.
Description of Each Reportable Segment
Chemical Business -The Chemical Business segment primarily manufactures and sells:
• anhydrous ammonia, fertilizer grade AN, UAN, and AN ammonia solution for agricultural applications,
• high purity and commercial grade anhydrous ammonia, high purity AN, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid for industrial applications, and
• industrial grade AN and solutions for the mining industry.
Our chemical production facilities are located in El Dorado, Arkansas; Cherokee, Alabama; Pryor, Oklahoma; and Baytown, Texas. Sales to customers of this segment primarily 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 explosive manufacturers in the United States.
During the last three years, our Chemical Business encountered a number of significant issues including an explosion in one of our nitric acid plants at the El Dorado Facility in May 2012, a pipe rupture that damaged the ammonia plant at the Cherokee Facility in November 2012, unplanned downtime at the Cherokee Facility in December 2014, and numerous mechanical issues at the Pryor Facility, all resulting in lost production and causing an adverse effect on our sales and operating income for the periods presented. Also see footnotes (2) and (3) below and Note 20 – Property and Business Interruption Insurance Claims and Recoveries relating to business interruption and property insurance recoveries.
Other products relate to working interests in certain natural gas properties. In 2012 and 2013, a subsidiary within our Chemical Business acquired these working interests. Since our Chemical Business purchases a significant amount of natural gas as a feedstock for the production of anhydrous ammonia, management considers these acquisitions as economic hedges against a portion of a potential rise in natural gas prices in the future for a portion of our future natural gas production requirements. We report the working interests as part of the Chemical Business reportable segment. All of our natural gas producing activities are within the United States (in Pennsylvania).
As of December 31, 2014, our Chemical Business employed 545 persons, with 166 represented by unions under agreements, which will expire in November of 2016 through October of 2018.
Climate Control Business - The Climate Control Business segment manufactures and sells the following variety of heating, ventilation, and air conditioning ("HVAC") products:
• water source and geothermal heat pumps,
• hydronic fan coils, and
• other HVAC products including large custom air handlers, modular geothermal and other chillers and other products and services.
These HVAC products are primarily for use in commercial/institutional and residential new building construction, renovation of existing buildings and replacement of existing systems. Our various facilities located in Oklahoma City, Oklahoma comprise substantially all of the Climate Control segment's operations. Sales to customers of this segment primarily include original equipment manufacturers, contractors and independent sales representatives located throughout the world.
Other - The business operation classified as "Other" primarily sells industrial machinery and related components to machine tool dealers and end users located primarily in North America.
Information about our continuing operations in different business segments is detailed below.
Chemical (1):
Total Chemical
Water source and geothermal heat pumps
Hydronic fan coils
Other HVAC products
Total Climate Control
Chemical (1) (2)
Chemical (1) (2) (3)
General corporate expenses (4)
53,362 105,308 95,655
Interest expense, net (5)
21,599 13,986 4,237
Losses on extinguishment of debt
— 1,296 —
Non-operating expense (income), net:
(249 ) (1 ) (1 )
— (1 ) (1 )
Corporate and other business operations
Equity in earnings of affiliate - Climate Control
(79 ) (436 ) (681 )
Income from continuing operations
(1) As discussed above under "Chemical Business", during the last three years, our Chemical Business encountered a number of significant issues at certain of our facilities resulting in lost production and adverse effects on operating results. However, some of these issues were covered by our business interruption and property insurance policies.
(2) For 2014, 2013, and 2012, we recognized business interruption insurance recoveries, of which $22.9 million, $28.4 million, and $7.3 million, respectively, were classified as reductions to cost of sales.
(3) For 2014 and 2013, we recognized property insurance recoveries, of which $5.1 million and $66.3 million, were classified as property insurance recoveries in excess of losses incurred (none for 2012).
(4) General corporate expenses consist of the following:
Selling, general and administrative:
Personnel costs
$ (8,434 ) $ (8,096 ) $ (8,110 )
Fees and expenses relating to certain activist shareholders' proposals (A)
$ (4,163 ) $ — $ —
Total selling, general and adminsitrative
Other expense
(17 ) (28 ) —
Total general corporate expenses
$ (21,365 ) $ (14,561 ) $ (14,371 )
(A) During the first quarter of 2014, we incurred fees and expenses in evaluating and analyzing proposals received from certain activist shareholders and dealing, negotiating and settling with those shareholders in order to avoid a proxy contest in 2014.
(5) For 2014, 2013 and 2012, interest expense is net of capitalized interest of $14.1 million, $4.0 million and $0.4 million, respectively.
Information about our PP&E and total assets by business segment is detailed below:
Depreciation, depletion and amortization of PP&E:
Corporate assets
Total depreciation, depletion and amortization of PP&E
Additions to PP&E:
Total additions to PP&E
Total assets at December 31:
$ 1,137,005 $ 1,083,097 $ 576,612
Net sales by business segment include net sales to unaffiliated customers as reported in the consolidated financial statements. Net sales classified as "Other" consist of sales of industrial machinery and related components. Intersegment net sales are not significant.
Gross profit by business segment represents net sales less cost of sales. Gross profit classified as "Other" relates to the sales of industrial machinery and related components.
Our chief operating decision makers use operating income by business segment for purposes of making decisions that include resource allocations and performance evaluations. Operating income by business segment represents gross profit by business segment less SG&A incurred by each business segment plus other income and other expense earned/incurred by each business segment before general corporate expenses. General corporate expenses consist of SG&A, other income and other expense that are not allocated to one of our business segments.
Identifiable assets by business segment are those assets used in the operations of each business. Corporate assets are those principally owned by LSB or by subsidiaries not involved in the three business segments.
All net sales and long-lived assets relate to domestic operations for the periods presented.
Net sales to unaffiliated customers are to U.S. customers except foreign export sales as follows:
In general, foreign export sales are attributed based upon the location of the customer.
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
Name: us-gaap_SegmentReportingDisclosureTextBlock
Related Party Transactions [Abstract]
18. Related Party Transactions
In 2014, 2013 and 2012, we paid annual dividends totaling $300,000 on our Series B Preferred and our Series D Preferred. The Series B Preferred and Series D Preferred are non-redeemable preferred stocks issued in 1986 and 2001, respectively, of which all outstanding shares are owned by the Golsen Group.
Name: us-gaap_RelatedPartyTransactionsAbstract
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
-Paragraph b
-Article 3A
Name: us-gaap_RelatedPartyTransactionsDisclosureTextBlock
Supplemental Cash Flow Elements [Abstract]

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