Lsb Industries Inc.

Company Overview

Business Model: LSB Industries, Inc. (LSB) is a Delaware corporation, formed in 1968 and headquartered in Oklahoma City, Oklahoma. The Company manufactures and markets essential chemical products for the agricultural and industrial markets, with a strategic emphasis on low and no carbon products. Its primary products are derived from natural gas. LSB operates three owned multi-plant facilities in El Dorado, Arkansas (the El Dorado Facility), Cherokee, Alabama (the Cherokee Facility), and Pryor, Oklahoma (the Pryor Facility), and also operates a facility on behalf of Covestro LLC in Baytown, Texas (the Baytown Facility). Products are sold through distributors and directly to end customers, including farmers, ranchers, fertilizer dealers, and explosives manufacturers, primarily across the United States and parts of Canada and North America.

Market Position: LSB Industries, Inc. benefits from a diversified revenue base serving a broad range of agricultural and industrial end markets, which is believed to mitigate cyclicality in financial performance. The Company's production processes and storage capabilities offer flexibility to adjust its product mix based on market demand. A core strategy involves balancing spot or short-duration pre-sales in the agricultural sector with long-term contractual arrangements in the industrial sector, which often include raw material cost pass-through provisions, thereby moderating volatility. Key competitive strengths include strategically located chemical assets providing logistical and distribution advantages (e.g., access to the Sunoco LP ammonia pipeline, rail, and river barge access), and an advantaged raw material cost position due to access to low-cost natural gas in the United States relative to international markets. The industrial market is characterized by robust demand for nitric acid (supported by tariffs and anti-dumping duties on methylene diphenyl diisocyanate imports) and ammonium nitrate for mining applications (driven by high copper and gold prices, infrastructure projects, and coal production for electricity). The agricultural market faces constrained global ammonia inventories, expected to ease in the first half of 2026, with new U.S. production potentially pressuring prices mid-year. Urea ammonium nitrate prices have recently improved due to low domestic inventory.

Recent Strategic Developments: LSB Industries, Inc. is committed to leadership in low and no carbon product manufacturing. The Company is leveraging its existing business platform and assets to produce low carbon products, optimizing liquidity and free cash flows for growth, and building a network of strategic partners. A key focus is on upgrading margins by maximizing downstream production. Strategic initiatives include:

• Low Carbon Ammonium Nitrate Solution (ANS) Supply: In May 2024, LSB Industries, Inc. announced a five-year agreement, commencing January 1, 2025, to supply up to 150,000 short tons per year of low carbon ANS to Freeport Minerals Corporation for its U.S. copper mining operations. Conventional ANS supply began in early 2025, with low carbon volumes expected to phase in late 2026.
• CO2 Capture and Sequestration Project: In April 2022, LSB Industries, Inc. partnered with Lapis Carbon Solutions to develop a project at the El Dorado Facility to capture and sequester CO2. Lapis Carbon Solutions will invest the majority of the capital. The project is expected to be operational by the end of 2026, pending Class VI permit approval from the United States Environmental Protection Agency (EPA). Once operational, it aims to capture and sequester 400,000 to 500,000 metric tons of CO2 annually, potentially qualifying for federal tax credits under Internal Revenue Code Section 45Q ($85 per metric ton). This is expected to reduce LSB Industries, Inc.'s Scope 1 greenhouse gas emissions by approximately 25% and enable the production of 305,000 to 380,000 metric tons of low carbon ammonia annually. A pre-construction Class VI permit application was filed in February 2023 and resubmitted in December 2025.

Geographic Footprint: LSB Industries, Inc. operates primarily within the United States, with owned facilities in El Dorado, Arkansas; Cherokee, Alabama; and Pryor, Oklahoma. It also operates a facility in Baytown, Texas. The Company's products are distributed and sold throughout the United States and parts of Canada, and to explosives manufacturers in the United States and other parts of North America. All long-lived assets are located in the United States, and substantially all net sales are to U.S. customers.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 17.0% (2025) vs. 9.1% (2024)
• Operating Margin: 9.3% (2025) vs. -1.1% (2024)
• Net Margin: 4.0% (2025) vs. -3.7% (2024)

Investment in Growth:

• Capital Expenditures: $77.5 million (2025) vs. $92.3 million (2024)
• Strategic Investments: Approximately $24.8 million of 2025 capital expenditures were allocated to growth initiatives.

Business Segment Analysis

LSB Industries, Inc. is managed on a consolidated basis with a single reportable segment: chemical manufacturing. The Company's approach to allocating resources is driven by maximizing profit to the consolidated entity.

Chemical Manufacturing

Financial Performance:

• Revenue: $615.2 million (+18% YoY)
• Gross Profit: $104.3 million (+118% YoY)
• Operating Income: $57.3 million (vs. $(5.5) million operating loss in 2024)
• Key Growth Drivers: The increase in revenue and profitability was primarily driven by higher sales volumes of AN & Nitric Acid and Urea ammonium nitrate (UAN), reflecting improved plant reliability, throughput, and operational efficiency, coupled with the absence of major Turnaround activities during 2025. Improved pricing, particularly for UAN, also contributed.

Product Portfolio:

• Agricultural Products: Ammonia, Urea ammonium nitrate (UAN).
• Industrial Products: High purity and commercial grade ammonia, high purity ammonium nitrate, sulfuric acids, concentrated, blended and regular nitric acid, mixed nitrating acids, carbon dioxide, industrial grade ammonium nitrate (LDAN), and ammonium nitrate (AN) solutions.
• Product Mix Shift: In 2025, LSB Industries, Inc. completed a transition from fertilizer grade ammonium nitrate (HDAN) to ammonium nitrate solution (ANS), a product used in industrial and mining applications. This shift aligns with the Company's strategy to transition a portion of its sales from volatile agricultural spot market pricing to multi-year contracts with natural gas feedstock cost pass-through.

Market Dynamics:

• Industrial Market: Sales volumes are influenced by general economic conditions, energy prices, metals market prices, and contractual arrangements. Demand for nitric acid is robust domestically, supported by tariffs and preliminary anti-dumping duties on imports of methylene diphenyl diisocyanate. Demand for AN for mining applications is robust across commodities like copper and gold, driven by record prices. AN demand for explosives in quarrying/aggregate production and coal for electricity production remains steady.
• Agricultural Market: Product selling prices depend on nitrogen fertilizer supply and demand, world grain production, transportation and storage costs, weather conditions, competitive pricing, and imports. Demand is seasonal, primarily during the spring (March-June) and fall (September-November) planting seasons.
• Customer Concentration: Five customers accounted for approximately 32% of consolidated net sales in 2025. One customer accounted for 12% of total net sales in 2025.

Sub-segment Breakdown (Percentage of Consolidated Net Sales):

• AN & Nitric Acid: 39% (2025) vs. 41% (2024)
• Urea ammonium nitrate (UAN): 31% (2025) vs. 27% (2024)
• Ammonia: 24% (2025) vs. 26% (2024)
• Other: 6% (2025) vs. 6% (2024)

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: LSB Industries, Inc. repurchased approximately 0.3 million shares of common stock at an average cost of $9.15 per share, totaling $2.8 million, during 2025.
• Dividend Payments: The Company has not paid cash dividends on its outstanding common stock in many years and does not currently anticipate paying cash dividends in the near future.
• Future Capital Return Commitments: A $150 million stock repurchase program was authorized by the Board in May 2023, with $106.6 million of repurchase authority remaining as of December 31, 2025. The program has no set expiration date and can be suspended, terminated, or modified.

Balance Sheet Position:

• Cash and Equivalents: $19.5 million (2025) vs. $20.2 million (2024)
• Short-term Investments: $129.0 million (2025) vs. $164.0 million (2024)
• Total Cash and Cash Equivalents and Short-term Investments: $148.5 million (2025) vs. $184.2 million (2024)
• Total Debt (net of unamortized debt issuance costs): $441.0 million (2025) vs. $485.2 million (2024)
• Net Cash Position: $(292.5) million (calculated as Total Cash & ST Investments minus Total Debt)
• Debt Maturity Profile:
  • Senior Secured Notes: $438.6 million outstanding, due October 15, 2028, with a 6.25% interest rate.
  • Finance Leases: $6.2 million total, with maturities extending through 2030 and thereafter.
  • Revolving Credit Facility: Undrawn as of December 31, 2025, with approximately $44.3 million of availability. It matures on December 21, 2028, subject to a springing maturity clause. The Secured Financing Agreement due 2025 was paid off in the third quarter of 2025.

Cash Flow Generation:

• Operating Cash Flow: $95.5 million (2025) vs. $86.6 million (2024)
• Free Cash Flow: Approximately $18.0 million (Operating Cash Flow of $95.5 million minus Capital Expenditures of $77.5 million) for 2025.

Operational Excellence

Production & Service Model: LSB Industries, Inc. manufactures ammonia and ammonia-related products, primarily derived from natural gas. Its facilities are designed to produce marketable products at various stages of production, allowing for optimization of the product mix to capture market value and balance production. The Company operates with a focus on customer experience excellence. LSB Industries, Inc. also operates the Baytown Facility on behalf of Covestro LLC under a long-term operating contract, receiving a management fee.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Material Suppliers: Natural gas is the primary raw material. LSB Industries, Inc. purchased approximately 30.5 million MMBtus of natural gas in 2025 at an average cost of $3.46 per MMBtu. The Company periodically enters into forward contracts to fix natural gas costs, with approximately 0.2 million MMBtus under contract at an average cost of $4.39 per MMBtu as of December 31, 2025, extending through March 2026.
• Logistics Partners: Relies on third-party railroad, trucking, pipeline, and other transportation service providers for raw material inbound and finished product outbound logistics.
• Technology Partners: Lapis Carbon Solutions is a key partner in the CO2 capture and sequestration project at the El Dorado Facility.

Facility Network:

• Manufacturing:
  • El Dorado Facility (El Dorado, Arkansas): 150 plant acres, 1,400 site acres, with an annual ammonia production capacity of 493,000 tons.
  • Cherokee Facility (Cherokee, Alabama): 160 plant acres, 1,300 site acres, with an annual ammonia production capacity of 188,000 tons.
  • Pryor Facility (Pryor, Oklahoma): 47 plant acres, 104 site acres, with an annual ammonia production capacity of 246,000 tons.
  • Baytown Facility (Baytown, Texas): Operated for Covestro LLC, noted as one of the largest and most technologically advanced nitric acid manufacturing units in the United States.
• Distribution: Facilities benefit from strategic locations with access to the Sunoco LP ammonia pipeline, rail, and the Tennessee River for barge transport.

Operational Metrics:

• Total Ammonia Production: 826,000 tons in 2025, an increase from 2024 due to improved operating performance and the absence of significant planned Turnarounds. The target for 2026 is 780,000 to 810,000 tons, reflecting planned Turnaround activities.
• Turnaround Activities: In 2025, a minor planned Turnaround was completed on the nitric acid plants at the El Dorado Facility, with no major planned ammonia Turnarounds. For 2026, planned Turnarounds include an ammonia plant Turnaround at the El Dorado Facility (Q2) and a full-site Turnaround at the Pryor Facility (Q3), along with a minor Turnaround on the urea plant at the Cherokee Facility (Q3).
• Environmental Compliance Expenses: $4.1 million in 2025, compared to $5.2 million in 2024. Expected expenses for 2026 are approximately $5.8 million.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: LSB Industries, Inc. generates sales through its internal marketing and sales force.
• Channel Partners: Products are sold through a network of distributors and directly to end customers.

Customer Portfolio: Enterprise Customers:

• Customer Concentration: Five customers collectively accounted for approximately 32% of LSB Industries, Inc.'s consolidated net sales in 2025. One specific customer represented 12% of total net sales in 2025 (16% in 2024, 14% in 2023).
• Strategic Partnerships: Key partnerships include the long-term operating contract with Covestro LLC for the Baytown Facility and the supply agreement with Freeport Minerals Corporation for low carbon ammonium nitrate solution.

Geographic Revenue Distribution:

• United States: Substantially all net sales are to customers within the United States.
• Canada: The Company also serves customers in parts of Canada.
• North America: Explosives manufacturers in other parts of North America are also customers.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: LSB Industries, Inc. operates in a highly competitive market where competition is primarily based on service, price, location of production and distribution sites, and product quality and performance. The nitrogen fertilizer industry is influenced by global supply and demand for nitrogen fertilizers, world grain production levels, transportation and storage costs, weather conditions, competitive pricing, and the availability of imports. The industrial markets are driven by general economic conditions, energy prices, metals market prices, and specific contractual arrangements. The market for low carbon ammonia is nascent and evolving, with demand influenced by the broader low carbon hydrogen market, clean energy initiatives, technological advancements, and carbon emissions policies.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: LSB Industries, Inc. competes with numerous domestic and foreign chemical companies, many of which possess greater financial and other resources. Key competitors include:

• CF Industries Holdings, Inc.
• CVR Partners
• Dyno Nobel (a subsidiary of Incitec Pivot Limited)
• Eurochem North America
• Helm AG
• Koch Industries
• Macro-Source L.L.C.
• Nutrien
• Orica Limited
• Yara International

Emerging Competitive Threats: The Company faces potential threats from the announcement and consideration of many other proposed low carbon ammonia projects globally. Future hydrogen, energy, or environmental/carbon policies could support additional nitrogen production in regions outside North America. There is a risk that the growth in supply of low carbon ammonia and hydrogen could outpace demand, leading to lower selling prices. The development of alternative decarbonization technologies also poses a competitive threat.

Competitive Response Strategy: LSB Industries, Inc. employs a product and market diversification strategy to mitigate risk and reduce volatility. This includes developing and maintaining industrial customers with contractual obligations that often include raw material cost pass-through. The Company is focused on maximizing downstream production to enhance margins and is actively evaluating investments in low carbon opportunities, potential acquisitions of strategic assets or companies, joint ventures, and additional production capacity to enhance value and returns.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Raw Material Price Volatility: Sales and profits are significantly affected by the costs and availability of primary raw materials, particularly natural gas, which is subject to considerable price volatility. The Company may not always be able to timely increase sales prices to cover higher raw material costs, especially in agricultural spot markets where prices may not correlate with natural gas costs.
• Low Carbon Ammonia Market Uncertainty: The market for low carbon ammonia is nascent and its growth rate is uncertain, dependent on the developing market for low carbon hydrogen, clean energy demand, technological advancements, and carbon emissions policies. An imbalance where supply exceeds demand could lead to lower selling prices.
• Intense Competition: Operating in a highly competitive market with larger domestic and foreign companies that have greater financial and marketing resources could necessitate price reductions or increased spending, adversely affecting financial performance.
• Ethanol Production Dependence: Demand for nitrogen-based fertilizer products is significantly influenced by U.S. ethanol production and corn usage. Decreases in ethanol production or increases in imports could materially affect demand.
• Increased Imports: Substantial nitrogen fertilizer production capacity in regions like Russia, Northern Africa, the Middle East, and China (some benefiting from below-market natural gas prices) could lead to increased imports into the U.S., negatively impacting domestic selling prices.
• Economic Cycles & Global Conditions: The business is sensitive to cyclical factors such as inflation, currency exchange rates, global energy policy, tariffs, and economic downturns, which can adversely affect operating results, liquidity, and financial condition.
• Customer Concentration: Five customers accounted for approximately 32% of consolidated net sales in 2025. The loss of, or a material reduction in purchases by, one or more of these customers could have a material adverse effect.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Raw Material Dependency: Reliance on certain vendors for natural gas and other key components. Disruptions in supply could result in lost production or delayed shipments.
• Transportation Reliance: Dependence on third-party railroad, trucking, pipeline, and other transportation service providers exposes the Company to risks such as adverse operating conditions, extreme weather, system failures, and regulatory changes, which could affect delivery and costs.
• Facility Reliability: Operations are reliant on a limited number of key facilities. Operational disruptions due to natural disasters, unplanned maintenance, equipment failures, or labor unrest could significantly impact production and ability to fulfill commitments.
• Aging Facilities: The age of chemical manufacturing facilities increases the risk of unplanned downtime, which can be significant due to specialized equipment with long replacement lead times.
• Hazards of Chemical Operations: The manufacture, transportation, storage, and distribution of chemical products involve inherent hazards (e.g., explosions, fires, toxic releases) that could lead to injury, property damage, operational suspensions, and civil/criminal penalties.

Financial & Regulatory Risks

Market & Financial Risks:

• Debt Service: The ability to make scheduled payments on debt, including $438.6 million in Senior Secured Notes, depends on financial condition and operating performance. Insufficient cash flows could lead to liquidity problems or necessitate additional capital or debt restructuring.
• Substantial Indebtedness: Current debt levels could limit financial and operating flexibility, restrict the ability to incur additional debt, and increase vulnerability to interest rate fluctuations or economic downturns.
• Debt Covenants: Debt agreements contain covenants and restrictions that limit business operations. A breach could trigger an event of default, leading to acceleration of debt and potential cross-defaults.
• Derivatives & Hedging: While used to mitigate commodity price risk, hedging activities are imperfect and may not prevent all adverse impacts, and expose the Company to counterparty credit risk.
• Inflation & Interest Rates: Higher inflation leads to increased costs, and central bank interest rate increases impact borrowing costs, potentially contributing to recessionary periods.

Regulatory & Compliance Risks:

• Environmental, Health & Safety Laws: Subject to numerous federal, state, and local laws and regulations. Non-compliance can result in substantial fines, injunctive relief, and criminal sanctions. Permits are subject to modification or revocation, which could materially affect operations.
• Climate Change Regulations: Current and future legislative or regulatory requirements related to greenhouse gas emissions, carbon taxes, or other climate change initiatives could lead to increased costs, operational restrictions, or reduced product sales.
• Chemical Facility Security Regulations: Increased government scrutiny on security issues for chemical facilities, particularly those handling ammonia and ammonium nitrate, could result in substantial additional costs for security measures and compliance with new regulations.
• Legal Proceedings: The Company is involved in various legal matters. While the Global Industrial, Inc. matter has been settled, LSB Industries, Inc. intends to vigorously pursue claims against the Leidos Entities, with trial scheduled for late 2026.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Low Carbon Ammonia Production: A strategic focus area, involving significant investment and aiming for a competitive position in the emerging low carbon economy.
• CO2 Capture and Sequestration: Central to the low carbon ammonia strategy, with a major project underway at the El Dorado Facility.
• Wastewater Treatment: Development of biological processes for nitrogen-containing wastewater streams at the Pryor Facility to comply with environmental regulations.

Innovation Pipeline:

• El Dorado Low Carbon Ammonia Project: Expected to be completed and operational by the end of 2026, pending regulatory approvals, to capture 400,000 to 500,000 metric tons of CO2 annually and produce low carbon ammonia.
• Pryor Wastewater Treatment Process: Currently in the early stages of design for a biological wastewater treatment process to replace the existing disposal well.

Intellectual Property Portfolio:

• The filing does not provide specific details on patent strategy, licensing programs, or IP litigation.

Technology Partnerships:

• Lapis Carbon Solutions: A strategic alliance for the development and investment in the CO2 capture and sequestration project at the El Dorado Facility.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: LSB Industries, Inc. has employment agreements with certain executive officers, including Mark T. Behrman and Cheryl A. Maguire. The CEO, CHRO, and executive leadership team conduct annual talent reviews and identify development actions to support succession planning and long-term growth.

Board Composition: The Board of Directors oversees enterprise-wide risks through its Audit Committee, which is responsible for monitoring and reporting on management’s cybersecurity and risk management processes. TLB-LSB, LLC, an affiliate of Todd Boehly, beneficially owns approximately 21% of the Company's outstanding common stock and holds certain board member nomination rights, with two directors on the Board being employees of Todd Boehly's affiliates. The Board also includes Barry H. Golsen and operates with a staggered structure.

Human Capital Strategy

Workforce Composition:

• Total Employees: As of December 31, 2025, LSB Industries, Inc. employed 513 persons.
• Skill Mix: Approximately 28% of employees (144 persons) are represented by unions under collective bargaining agreements. The Company has three 3-year union contracts, with one ratified in 2024 and two in 2025.

Talent Management: Acquisition & Retention:

• Hiring Strategy: The Company is committed to attracting and retaining highly skilled and qualified personnel, particularly engineers and those with technical expertise, despite high competition in rural areas where facilities are located.
• Employee Value Proposition: Annual benefits benchmarking studies are conducted to ensure competitive benefits, and employee recognition programs are implemented to enhance engagement.

Diversity & Development:

• Development Programs: LSB Industries, Inc. supports employee development through formal training programs, annual performance reviews, and individualized development action plans. Structured training is provided for frontline supervisors and managers focusing on foundational leadership capabilities. Annual talent reviews are conducted to support succession planning and continuous improvement.
• Culture & Engagement: Feedback is proactively gathered through employee discussions, surveys, and focus groups to implement targeted initiatives designed to enhance engagement.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: The CO2 capture and sequestration project at the El Dorado Facility is expected to reduce LSB Industries, Inc.'s overall Scope 1 greenhouse gas emissions by approximately 25% from current levels.
• Product Impact: LSB Industries, Inc. is committed to playing a leadership role in the production of low and no carbon products that build, feed, and power the world.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Demand for fertilizer products in the agricultural industry is seasonal, with primary selling seasons typically extending from March through June (spring planting) and September through November (fall planting). The Company typically increases inventory prior to these seasons.
• Economic Sensitivity: Sales into the industrial sectors are generally less susceptible to seasonal conditions or cycles, with volumes dependent on general economic conditions in industries such as housing, automotive, mining, and paper.
• Industry Cycles: The agricultural market's demand and pricing are influenced by world grain demand and production levels, transportation and storage costs, weather conditions, competitive pricing, and the availability of imports.

Planning & Forecasting: The unpredictable nature of global climate conditions (e.g., excessive moisture, cold, drought, heat) has made it increasingly difficult to forecast market demand and financial performance for agricultural products, leading growers and distributors to adopt more conservative procurement practices. LSB Industries, Inc. utilizes forward sales of fertilizer products to optimize asset utilization, planning, and production scheduling.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Environmental, Health & Safety Laws: LSB Industries, Inc.'s facilities and operations are subject to numerous federal, state, and local environmental, health, and safety laws and regulations, including those concerning hazardous substances, waste generation, and pollutant discharge. Compliance requires obtaining and maintaining permits, with potential for substantial fines, injunctive relief, and criminal sanctions for violations.
• Wastewater Discharge: The Pryor Facility operates an injection well under a Consent Order with the Oklahoma Department of Environmental Quality (ODEQ) to allow continued use until a new wastewater treatment process is operational. The El Dorado Facility received a Notice of Violation for wastewater discharges in August 2023, with a penalty paid in Q3 2025.
• Chemical Facility Security: The chemical industry, particularly producers of ammonia and ammonium nitrate, faces government scrutiny on security issues. Regulations such as the "Secure Handling of Ammonium Nitrate Act of 2007" and revisions to the EPA's Risk Management Program (effective 2024, with many requirements by 2027) could impose substantial additional costs and operational changes.
• Greenhouse Gas Emissions: Federal and state actions, including EPA regulations under the Clean Air Act, are targeting greenhouse gas emissions. These could increase energy and raw material costs, restrict access to certain materials, and require significant capital expenditures for facility retrofits.

Trade & Export Controls:

• Tariffs: U.S. government tariffs and retaliatory tariffs from other countries (e.g., on agricultural products) can impact selling prices, input costs, and supply chains. Domestic demand for nitric acid is currently supported by tariffs and anti-dumping duties on imports.

Legal Proceedings:

• Global Industrial Matter: A lawsuit involving mechanic liens and breach of contract related to the construction of the ammonia plant at the El Dorado Facility was settled in August 2025. LSB Industries, Inc. waived its remaining claims against Global Industrial, Inc. in exchange for a full release and dismissal of claims by Global Industrial, Inc. LSB Industries, Inc. intends to vigorously pursue its claims against the Leidos Entities, with trial scheduled for the end of October 2026.
• Other Legal Actions: The Company is involved in various other claims and legal actions in the ordinary course of business, which are not expected to have a material effect on its financial condition or results of operations.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: LSB Industries, Inc.'s effective tax rate was 24.4% on pre-tax income in 2025, compared to 25.7% on pre-tax loss in 2024.
• Geographic Tax Planning: All income (loss) before taxes relates to domestic operations.
• Net Operating Losses (NOLs): In 2025, the Company utilized approximately $17.3 million of federal and $26.5 million of state NOL carryforwards. As of December 31, 2025, remaining federal NOL carryforwards totaled $226.4 million (beginning to expire in 2037), and state NOL carryforwards totaled $321.2 million (beginning to expire in 2026).
• Tax Credits: The Company holds $6.0 million in gross state tax credits ($4.7 million net of federal benefit), most of which carryforward indefinitely, and $8.1 million in gross federal tax credits, which carryforward for 20 years and begin expiring in 2034.
• Valuation Allowance: A valuation allowance of $14.3 million was recorded against deferred tax assets as of December 31, 2025, primarily related to state deferred tax assets. No federal valuation allowance remained.
• NOL Rights Agreement: LSB Industries, Inc. is party to an Amended and Restated Section 382 Rights Agreement, intended to preserve its NOLs and other tax attributes by deterring any person or group from acquiring beneficial ownership of 4.9% or more of its outstanding common stock. This agreement is set to expire on August 22, 2026.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: LSB Industries, Inc. maintains liability, property, and business interruption insurance, including some coverage for environmental contamination. This coverage is subject to limits and may exclude certain types of damages. There is a risk that coverage may not be available on commercially reasonable terms or may be insufficient for potential liabilities.
• Risk Transfer Mechanisms: The Company is contingently liable to sureties for insurance bonds totaling up to $10.2 million as of December 31, 2025, which primarily guarantee the future performance of its subsidiaries. These bonds are expected to remain in place in 2026.