LSB Industries, Inc.

2021 ANNUAL REPORT

2021 President’s Letter to Shareholders

Dear Fellow Shareholders,

As we report one of the most significant years in the history of LSB Industries, it’s critical for us to pause for a
moment and reflect on the life-changing events taking place around the world. Many have suffered, or are
suffering greatly, whether through the horror of war, the tragedy of the COVID pandemic, the devastation of a
natural disaster or some other catastrophic event. While we remain diligently focused on doing the work of the
company for the benefit of all our stakeholders, we are also cognizant of our interconnectedness with the world
around us and our thoughts and prayers are with all who have been affected by these events.

As we concluded 2020, we felt very optimistic, as it did to most of the country, that the worst of the COVID
pandemic was behind us. It wasn’t long, however, before the Delta and Omicron variants made it clear that
COVID was going to remain a major concern throughout 2021. The difficulties of the pandemic were further
complicated by new supply chain issues and contractor labor shortages. By all counts, 2021 was yet another year
where the business environment in which we operate was anything but normal.

In the face of these challenges, the LSB team once again rose above the difficulties brought on by the pandemic.
For a second consecutive year, our teams met the challenge of operating our plants safely and efficiently in a
COVID environment, enabling us to capitalize on the favorable pricing trends for our products that unfolded in
our end markets and deliver record profitability for the year.

Further, we executed a series of transactions in the fourth quarter that simplified our previously expensive capital
structure and alleviated a significant constraint to our growth, which has proven immediately transformative to
our Company.

Looking forward through the balance of 2022, market fundamentals are expected to remain strong across our
agricultural, industrial and mining end markets, which, combined with several company-specific growth
initiatives we have underway, and our significantly improved balance sheet, leads us to anticipate another year of
strong bottom-line improvement.

2021 Results

Safety is our Top Priority.

Over the past several years, LSB has undergone a fundamental evolution in the way our entire team thinks about
safety and operations. In our pursuit of excellence, we are committed to best-in-class performance and in 2021,
we were successful on several fronts. First and foremost was our continued response to the ongoing COVID
pandemic. Our Environmental, Health & Safety and Human Resources teams worked diligently throughout the
year to provide strong, consistent guidance and oversight to employees across all our locations. They effectively
managed the execution of our programs and protocols to ensure we kept our teams as safe as possible, allowing
us to keep our facilities staffed and running.

Our total recordable incident rate for 2021 was 1.15 incidents per 200,000-man hours. While this is slightly better
than the industry average, our goal will always be zero. Our entire team has embraced the cultural change
required to be successful with our “Goal Zero” initiative.

We want all our employees and contractors to go home safe every day and are committed to providing a safe and
healthy workplace by implementing high standards to minimize potential risks to our people, communities, and
the environment. Safety performance is typically indicative of how effectively and efficiently a manufacturing
company operates its facilities. A best-in-class safety culture and performance will typically translate into a
best-in-class manufacturing performance.

We know it can be done. Our Baytown, Texas facility, which we operate for a large chemical producer, has
recently surpassed the six-year mark without a recordable safety incident. This achievement represents a
best-in-class model and is what we’re working toward with our three LSB-owned facilities. In addition, our
agricultural retail sites are approaching two years without a recordable event, a reflection of the diligence of our
teams in those locations.

There’s no question I am proud of what our team has accomplished over the past several years. When it comes to
safety and the health and well-being of the lives we touch every day, however, there is no finish line, there is just
the daily effort to be perfect, which is what we will always be continually pursuing.

Financial Performance Overview

We delivered record results in 2021. Our net sales were $556.2 million with adjusted EBITDA(1) of
$191.0 million, compared to $351.3 million and $65.5 million in 2020, respectively. Additionally, we generated
adjusted earnings per share of $0.85 as compared to a loss of $1.37 in 2020. Our strong performance reflects a
confluence of positive factors including favorable trends in selling prices across all of our products and end
markets coupled with our success in operating our facilities reliably and selling everything we produced thanks to
the substantial enhancements we made to our commercial efforts to start off the year.

Adjusted EBITDA(1)

s
n
o

i
l
l
i

m
$

$220

$200

$180

$160

$140

$120

$100

$80

$60

$40

$20

$-

$69

$65

$67

$111

$84

$191

Expect continued
growth in adjusted
EBITDA in 2022
driven by strong
product demand and
pricing, continued
operational
improvements and
margin enhancement
projects

FY2019

FY2020

TTM 3/31/21

TTM 6/30/21

TTM 9/30/21

FY2021

FY2022E

(1)

This is a Non-GAAP measure. Refer to the Non-GAAP reconciliation section.

2021 Highlights Include:

Increased Product Sales

Our product sales increased significantly compared the prior year, due largely to strong year-over-year increases
in the selling prices of all our products. This, despite a 40-day turnaround at our Cherokee facility, as compared
to 2020 when we had no turnarounds at any of our plants. With respect to our agricultural business, the price of
corn traded at or above eight-year highs for much of the year. The robust corn pricing reflected multiple factors
which have constricted global corn supplies.

The attractive corn prices acted as an incentive for farmers to plant as much corn as possible, translating into
nearly 93 million acres planted in 2021, according to USDA estimates and significant demand for nitrogen
fertilizers in order to maximize the yield of those acres. For 2022 we’re expecting a similar, albeit modestly
lower level of plantings of between 90 million and 92 million acres, which should continue to support strong
demand for fertilizers given the continuing high prices for corn that we’re seeing thus far in 2022.

 
5 Year Corn Prices

$8

$6

$4

$2

$0

Feb-17

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

(1) Sources: USDA, Federal Reserve Economic Data

Along with the strong corn market fundamentals that emerged in 2021, nitrogen prices were driven to multi-year
highs by constraints on global ammonia production resulting from a variety of factors including weather related
events, the delay of facility turnarounds from 2020 to 2021 and sharp increases in the price of natural gas, which
prompted cuts to production at a number of facilities across Europe. While gas prices in the U.S. increased
significantly over the past year, domestic prices have only seen a minor increase relative to the inflation that
Europe has experienced, creating an advantage for North American nitrogen producers. As of the writing of this
letter, the spread in natural gas prices between the U.S. and Europe has widened further, which we expect to
result in persistent strong pricing for nitrogen products through 2022 and into 2023.

$60

$50

$40

$30

$20

$10

$0

International Natural Gas Benchmarks - Front Month ($/MMBtu)

Henry Hub

TTF

NBP

0
2
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a
J

0
2
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F

0
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2
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Our industrial business was also a meaningful source of our growth in sales and profits in 2021. This was due in
large part to the increase in sales volumes of our nitric acid as we ramped up a sizeable multi-year contract with a
large chemical company that began at the beginning of the year. Key drivers to demand for nitric acid include the
homebuilding sector which has seen housing starts near 15-year highs, as well as the auto and power generation
markets.

US New Housing Starts (1)
(thousands)

1800

1600

1400

1200

1000

800

600

400

2
1
-
c
e
D

3
1
-
r
p
A

3
1
-
g
u
A

3
1
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D

4
1
-
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A

4
1
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A

4
1
-
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D

5
1
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A

5
1
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A

5
1
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D

6
1
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p
A

6
1
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A

6
1
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D

7
1
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A

7
1
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A

7
1
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D

8
1
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A

8
1
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A

8
1
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9
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A

9
1
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9
1
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D

0
2
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A

0
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0
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D

1
2
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1
2
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A

1
2
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D

Monthly Starts

12-Month Rolling Avg.

1

Housing starts obtained from Federal Reserve Economic Data

As it relates to our mining products, production of construction aggregates – including crushed stone – has
increased over the past decade driven by infrastructure repair, upgrade and expansion and increased commercial
and residential development. Additionally, copper prices sit near all-time highs above $4.75 per pound as a result
of rising demand from various end markets, including electric vehicle (EV) production. This should translate into
increased copper mine production in the coming years as demand for EV’s continues to grow.

U.S. Crushed Stone Production (2)

s
n
o
T
c

i
r
t
e
M
n
o

i
l
l
i

M

1,600

1,500

1,400

1,300

1,200

1,100

1,000

2012

2013

2014

2015

2016

2017

2018

2019

2020 2021e

2

Crushed stone production obtained from USGS.gov

The Conference Board is forecasting full year 2022 GDP expansion of approximately 3.0%, which represents a
healthy rate of economic growth, resulting in what we expect will be continued strong demand for our products.
Our industrial business tends to be cost-plus and contract-based, which gives us good visibility into our sales for
upcoming quarters and insulates us from input cost inflation, particularly for natural gas and enabling us to
maintain our favorable margins.

Significantly Improved Capital Structure

Toward the end of 2021, we completed a series of steps that transformed the financial foundation of our
Company and positioned LSB to enter a new phase of growth and value creation. In late September, we closed on
a transaction with Eldridge Industries, the former holder of $310 million of LSB Series E preferred stock, to

 
 
 
exchange those preferred shares for shares of our common stock. Upon the removal of this liability from our
balance sheet, we received credit rating upgrades from the major rating agencies which enabled us to proceed in
refinancing our debt through an offering of new senior notes. Both transactions have helped us significantly
reduce our cost of capital and bolster our liquidity. We recently followed this up with an additional debt offering
in March, securing another $200 million at very attractive rates. We now have the flexibility to pursue earnings
and cash flow growth opportunities through both organic initiatives and accretive acquisitions.

Looking Ahead

As we progress into 2022, we find ourselves better positioned and with more opportunity to grow than we have at
any time in our Company’s history. We believe the favorable trends in end market demand and pricing for our
products to continue through all of this year and into next year. Our significantly improved balance sheet affords
us with the ability to make investments that can help us increase our production volume and expand the
profitability of the products we sell. In order to capitalize on this broad range of opportunity, we have established
four priorities for 2022.

• Advancing safety programs

already underway and
implementing new ones

• Investing capital to

promote safe, reliable
operations and expand
production volume

.

• Evaluating Blue Ammonia
projects to sequester CO2,
with attractive economics

• Assessing Green Ammonia

projects to produce
ammonia using zero CO2 
feedstock and energy

Becoming
Best in Class
Operator

Optimizing
Product Mix

• Full year sold-out position 

in nitric acid

• Investing $10-$15 million
for margin enhancement
projects to optimize
storage and distribution

• Evaluate de-bottlenecking

Pursuing
Accretive
Acquisitions

Advancing
Low CO2
and Clean
Energy
Strategy

• Geographic expansion

• Extend existing product

line

• Leverage existing ammonia

capacity 

Becoming a Best-in-Class Operator

The guiding principle in the way we run our company is to protect what matters, and what matters most are our
people. The health and safety of our employees is and will always be paramount to everything we do, and in
2022 we’re taking our efforts to the next level as we advance the safety programs that we have currently
underway, implement new ones, and invest capital at all three of our facilities to promote safe and reliable
operations.

We have several plant reliability initiatives underway that we expect will enable us to produce greater volumes of
product, lower our cost of production and increase our profitability. These initiatives include enhancing our
leadership at the facility level, continuing to mature our operating and maintenance procedures, and leveraging
the technology investments we’ve made so we can better monitor our equipment and plant performance. As part
of these efforts, we will conduct a 24-day turnaround at our El Dorado facility and a 30-day turnaround at our
Pryor facility during the third quarter of the year which we expect to lead to improved operating performance at
both sites.

Two-Year Rolling Average Annual Ammonia Production (1)

 800,000

 790,000

 780,000

 770,000

s
n
o
T

 760,000

 750,000

 740,000

 730,000

 720,000

2019 averages impacted by
turnarounds at each location
including an extensive 67-day
turnaround at our Pryor facility

2018

2019

2020

2021

Two-Year Period Ended 12/31

(1) 2 – Year rolling average annual ammonia production is the total tons produced of the stated year and preceding year.

Optimizing our Product Mix

The continued strategic distribution and optimization of our product mix provides an excellent opportunity to
expand our profitability in 2022. Our 2021 results benefitted from our ramping up on the sizeable nitric acid
contract we commenced during the first quarter. This year we will recognize a full year of sales under this
agreement, which puts us in a sold-out position for nitric acid at our El Dorado facility – an advantageous
situation from a margin perspective given the operating leverage inherent in our business model.

In addition, we’re targeting approximately $15 million of capital investment for margin enhancement projects to
optimize our storage and distribution capabilities, as well as to upgrade additional ammonia into higher value
downstream products.

Lastly, during the year we plan to evaluate potential debottlenecking projects at our facilities that would expand
our production capacity and increase our sales volumes. We believe through debottlenecking, we have the ability
to increase production at our plants between 20% - 40%, depending on the plant.

Pursuing Accretive Acquisitions

In addition to expanding volumes and profits from our existing portfolio of facilities, we will pursue accretive
M&A opportunities that have overlap to our existing business and where we would expect to be able to realize
operating synergies. I believe that our current leadership team and the systems we have in place can effectively
manage a meaningfully larger business.

ESG - Advancing Low Carbon Ammonia and Clean Energy

At LSB, we strongly believe our industry is on the threshold of becoming a major contributor to the global effort
to reduce carbon emissions. Through the production of Blue Ammonia, which involves capturing and storing
CO2 emissions from the ammonia manufacturing process, and Green Ammonia, which is emerging as one of the
most feasible sources of hydrogen for use as a zero-CO2 emission energy source.

Many new applications for ammonia are currently being evaluated by a variety of industries, including its use as
a fuel source for the marine industry. The marine industry, a major emitter of CO2, currently consumes
tremendous quantities of diesel, marine gasoil and bunker fuel in their large cargo ships and other vessels.
Ammonia can help the industry significantly reduce the CO2 emissions of the tens of thousands of these ships,
that are crossing our oceans at any given time.

The economic opportunity for Blue and Green ammonia is significant and our existing knowledge in ammonia
manufacturing, handling, storage and logistics position us extremely well to become a significant player in this
arena. We are convinced of our ability to create long-term value, both socially and financially as we help create a
more sustainable, environmentally friendly world.

Our current focus is on performing feasibility studies at our facilities to determine the infrastructure and plant
modifications needed to produce either Blue or Green ammonia in support of both our clean energy strategy and
medium and long-term sustainability objectives. We anticipate the commencement of one or more feasibility
studies, after which we will present our plans to our Board of Directors with approval targeted by the end of the
second quarter of this year.

In Conclusion

2021 was a pivotal year in the life of our Company. Our enhanced operational discipline, more reliable
manufacturing facilities and the actions we took to recapitalize our balance sheet, combined with a historically
strong market for our products translated into record financial results for the Company. With the free cash flow
generated in 2021 and our significantly lower cost of capital, we are extremely excited to have the financial
flexibility to pursue a number of earnings and cash flow growth opportunities in the form of further improvement
of our operating rates and margin and volume enhancement investments along with the acquisition of new
businesses and/or assets. In addition, in 2022 we will intensify our focus on planning and implementing our
decarbonization activities, including the production of low carbon/no carbon ammonia. Putting all of this
together, we believe we have the opportunity to deliver continued strong growth in profitability in 2022 and
increased value for our shareholders, while at the same time, making a positive impact on our environment and
the lives of our employees and the communities in which we operate.

Mark Behrman

President & Chief Executive Officer,
April 2022

Forward-Looking Statements

Statements in this letter that are not historical are forward-looking statements within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known
and unknown risks, uncertainties and assumptions about us, may include projections of our future financial
performance including the effects of the COVID-19 pandemic and anticipated performance based on our growth
and other strategies and anticipated trends in our business. These statements are only predictions based on our
current expectations and projections about future events. There are important factors that could cause our actual
results, level of activity, performance or actual achievements to differ materially from the results, level of
activity, performance or anticipated achievements expressed or implied by the forward-looking statements.
Significant risks and uncertainties may relate to, but are not limited to, business and market disruptions related to
the COVID-19 pandemic, market conditions and price volatility for our products and feedstocks, as well as
global and regional economic downturns, including as a result of the COVID-19 pandemic, that adversely affect
the demand for our end-use products; disruptions in production at our manufacturing facilities; and other
financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk
factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC).

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties
emerge from time to time, and it is not possible for our management to predict all risks and uncertainties, nor can
management assess the impact of all factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot
guarantee future results, level of activity, performance or achievements. Neither we nor any other person assumes
responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely

upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws,
we undertake no obligation to update or revise any forward-looking statements, whether because of new
information or future developments.

LSB Industries, Inc.
Non-GAAP Reconciliations

This news release includes certain “non-GAAP financial measures” under the rules of the Securities and
Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP
amounts in our consolidated financial statements.

EBITDA and Adjusted EBITDA Reconciliation

EBITDA is defined as net income (loss) plus interest expense, less gain (loss) on extinguishment of debt, plus
depreciation and amortization (D&A) (which includes D&A of property, plant and equipment and amortization
of intangible and other assets), plus provision (benefit) for income taxes. Adjusted EBITDA is reported to show
the impact of one time/non-cash or non-operating items-such as, loss (gain) on sale of a business and/or other
property and equipment, one-time income or fees, certain fair market value (FMV) adjustments, non-cash stock-
based compensation, and consulting costs associated with reliability and purchasing initiatives (Initiatives). We
historically have performed turnaround activities on an annual basis; however, we have moved towards extending
Turnarounds to a two or three-year cycle. Rather than being capitalized and amortized over the period of benefit,
our accounting policy is to recognize the costs as incurred. Given these Turnarounds are essentially investments
that provide benefits over multiple years, they are not reflective of our operating performance in a given year.

We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt
service obligations and evaluating our financial performance. In addition, we believe that certain investors
consider adjusted EBITDA as more meaningful to further assess our performance. We believe that the inclusion
of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about
certain items.

EBITDA and adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for
net income, operating income, cash flow from operations or other consolidated income or cash flow data
prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of
EBITDA and adjusted EBITDA may not be comparable to a similarly titled measure of other companies. The
following table provides a reconciliation of net income (loss) to EBITDA and adjusted EBITDA for the periods
indicated. Adjusted EBITDA margin is calculated by taking adjusted EBITDA divided by Net Sales.

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per share have been adjusted for the impact of the
closing of the Exchange Transaction on September 27, 2021 as well as the one time/non-cash or non-operating
items referred to in the above section relating to Adjusted EBITDA.

LSB Industries, Inc.

Non-GAAP Reconciliations (continued)

Net Income (loss)

Plus:

Interest expense

Depreciation and amortization

Loss on extinguishment of debt

Benefit for income taxes

EBITDA

Stock-based compensation

Unrealized loss (gain) on commodity contracts

Legal fees (Leidos)

Loss on disposal of assets

Fair market value adjustment on preferred stock embedded derivatives

Consulting costs associated with reliability and purchasing initiatives

Change of Control

Turnaround costs

Adjusted EBITDA

Twelve Months Ended
December 31,

2021

2020

(In Thousands)

$ 43,545

($61,911)

49,378

69,943

10,259

51,115

70,841

—

(4,556)

(4,749)

$168,569

$ 55,296

5,516

(1,205)

1,894

823

2,258

—

3,223

9,953

1,761

1,205

5,715

921

(55)

558

—

76

$191,031

$ 65,477

Twelve Months Ended
December 31,

2021

2020

(In Thousands, Except Per
Share Amounts)

Numerator:

Net income (loss) attributable to common stockholders

$(220,002) $(99,419)

Adjustments for Exchange Transaction:

Dividend requirements on Series E Redeemable Preferred

Deemed dividend on Series E and Series F Redeemable Preferred

Accretion of Series E Redeemable Preferred

Adjusted net income (loss) attributable to common stockholders, excluding

Exchange Transaction

Other Adjustments:

Stock-based compensation
Change of control

Noncash loss (gain) on natural gas contracts

Legal fees (Leidos)

Loss on disposal of assets

FMV adjustment on preferred stock embedded derivative

Consulting costs associated with reliability and purchasing initiatives

Turnaround costs

Net loss on extinguishments of debt

29,914

35,182

231,812

—

1,523

2,026

43,247

(62,211)

5,516
3,223

(1,205)

1,894

823

2,258

—

9,953

10,259

1,761
—

1,205

5,715

921

(55)

558

76

—

Adjusted net income (loss) attributable to common stockholders, excluding

Exchange Transaction and other adjustments

$ 75,968

$(52,030)

Denominator:

Adjusted weighted-average shares for basic net income (loss) per share and for
adjusted net income (loss) per share, excluding Exchange Transaction (1)

49,963

36,664

Adjustment:

Unweighted shares, including unvested restricted stock subject to forfeiture

39,830

1,187

Outstanding shares, net of treasury, at period end for adjusted net income (loss) per

share, excluding Exchange Transaction and other adjustments

89,793

37,851

Basic net income (loss) per common share

Adjusted net income (loss) per common share, excluding Exchange Transaction

Adjusted net income (loss) per common share, excluding Exchange Transaction and

other adjustments

$

$

$

(4.40) $

(2.71)

0.87

$

(1.70)

0.85

$

(1.37)

(1) Excludes the weighted-average shares of unvested restricted stock that are subject to forfeiture

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2021 FORM 10-K

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(cid:26)(cid:22)(cid:16)(cid:20)(cid:19)(cid:20)(cid:24)(cid:21)(cid:21)(cid:25)
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(cid:26)(cid:22)(cid:20)(cid:20)(cid:25)
(cid:11)(cid:61)(cid:76)(cid:83) (cid:38)(cid:82)(cid:71)(cid:72)(cid:12)

Securities registered pursuant to Section 12(b) of the Act(cid:29)

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(cid:55)(cid:85)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74) (cid:54)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:11)(cid:86)(cid:12)
(cid:47)(cid:59)(cid:56)
(cid:49)(cid:18)(cid:36)

(cid:49)(cid:68)(cid:80)(cid:72) (cid:82)(cid:73) (cid:72)(cid:68)(cid:70)(cid:75) (cid:72)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:82)(cid:81) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)
(cid:49)(cid:72)(cid:90) (cid:60)(cid:82)(cid:85)(cid:78) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)
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(cid:55)(cid:76)(cid:87)(cid:79)(cid:72) (cid:82)(cid:73) (cid:72)(cid:68)(cid:70)(cid:75) (cid:70)(cid:79)(cid:68)(cid:86)(cid:86)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15) (cid:51)(cid:68)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72) (cid:7)(cid:17)(cid:20)(cid:19)
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Securities registered pursuant to Section 12(g) of the Act(cid:29) (cid:49)(cid:82)(cid:81)(cid:72)
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. (cid:4) (cid:60)es (cid:3) No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. (cid:4) (cid:60)es (cid:3) No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. (cid:3) (cid:60)es (cid:4) No
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
((cid:134) 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports submit such files).
(cid:3) (cid:60)es (cid:4) No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer

Accelerated filer

(cid:3)

(cid:4)

Non-accelerated filer

(cid:4)

Smaller reporting company

Emerging growth company

(cid:3)

(cid:4)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:4)
Indicate by check mark whether the registrant has filed a reportrr on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firmrr
that prepared or issued its audit report.
(cid:3)
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). (cid:4) (cid:60)es (cid:3) No
The aggregate market value of the Registrant’s voting common equity
held by non-affiliates of the Registrant, computed by reference to the price at which the voting
common stock was last sold as of (cid:45)une 30, 2021, was approximately $141 million. As a result, the Registrant is an accelerated filer as of December 31, 2021. For
purposes of this computation, shares of the Registrant’s common stock beneficially
owned by each executive officer and director of the Registrant and LSB Funding
LLC were deemed to be owned by affiliates of the Registrant as of (cid:45)une 30, 2021. Such determination should not be deemed an admission that such executive officers,
directors or entity of our common stock are, in facff

iates of the Registrant or affiliates as of the date of this Form 10-K.

t, affilff

qq

ff

As of February 18, 2022, the Registrant had 89,564,162 shares of common stock outstanding.
DOCUMENTS INCORPORATED B(cid:60) REFERENCE
Portions of the Registrant’s proxy statement for its annual meeting of stockholders will be filed with the Securities and Exchange Commission within 120
days after the end of its 2020 fiscal year, are incorporated by reference in Part III.

Auditor Firm Id(cid:29)

00042

Auditor Name(cid:29)

Ernst (cid:9) (cid:60)oung LLP

Auditor Location(cid:29)

Oklahoma City, OK, United States

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4.

Mine Safety Disclosures

PART I

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Item 6.

(cid:62)RESER(cid:57)ED(cid:64)

Item 7.

Management(cid:10)s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign (cid:45)urisdictions that Prevent Inspections

PART III

(Items 10, 11, 12, 13, and 14)

The information required by Part III, shall be incorporated
by reference from our definitive proxy statement to
be filed pursuant to Regulation 14A which involves the election of directors that we expect to be filed with the
Securities and Exchange Commission not later than 120 days after the end of its 2021 fiscal year covered by
this report.

r

Item 15.

Exhibits and Financial Statement Schedules

PART I(cid:57)

Page

3

9

24

25

26

26

26

26

27

42

42

42

43

44

44

45

45

2

(cid:44)(cid:55)(cid:40)(cid:48) (cid:20)(cid:17) (cid:37)(cid:56)(cid:54)(cid:44)(cid:49)(cid:40)(cid:54)(cid:54)

(cid:50)(cid:89)(cid:72)(cid:85)(cid:89)(cid:76)(cid:72)(cid:90)

(cid:51)(cid:36)(cid:53)(cid:55) (cid:44)

All references to “LSB Industries,” “LSB,” “the Company,” “we,” “us,” and “our” refer to LSB Industries, Inc. and its subsidiaries,
except where the context makes clear that the reference is only to LSB Industries, Inc. itself and not its subsidiaries. Notes referenced
throughout this document refer to consolidated financial statement footnote disclosures that are found in Item 8.

The Company was formed in 1968 as an Oklahoma corporation and became a Delaware corporation in 1977. We manufacture and
market chemical products for the agricultural, industrial and mining markets. We own and operate three multi plant facilities in El
“Cherokee Facility”), and Pryor, Oklahoma (the “Pryor
Dorado, Arkansas (the “El Dorado Facility”), Cherokee, Alabama
Facility”), and we operate a facility on behalf of Covestro LLC (“Covestro”) in Baytown, Texas (the “Baytown Facility”). Our products
are sold through distributors and directly to end customers throughout the United States and parts of Mexico and Canada.

(thet

a

(cid:50)(cid:88)(cid:85) (cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)

Our business manufactures products for three principal markets(cid:29)

•

•

•

Agricultural Markets: ammonia, fertilizer grade ammonium nitrate (“AN” and “HDAN”) and urea ammonia nitrate
(“UAN”)(cid:30)

Industrial Markets: high purity and commercial grade ammonia, high purity AN, sulfuric
and regular nitric acid, mixed nitrating acids, carbon dioxide, and diesel exhaust fluid (“DEF”)(cid:30) and

ff

acids, concentrated, blended

Mining Markets: industrial grade AN (“LDAN”) and AN solutions.

The products we manufacture at our facilities are primarily derived from natural gas (a raw material feedstock). Our facilities and
production processes have been designed to produce products that are marketable at nearly each stage of production. This design has
allowed us to develop and deploy a business model optimizing the mix of products to capture the value opportunities in the end
markets we serve with a focus on balancing our production.

The chart below highlights representative products and applications in each of our end markets.

(cid:40)(cid:81)(cid:71) (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)

(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)

(cid:36)(cid:83)(cid:83)(cid:79)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

Agricultural

UAN, HDAN and
ammonia

Industrial

Nitric acid, metallurgical
and commercial grade
ammonia, sulfuric acid,
diesel exhaust fluid and
other urea solutions,
Specialty E-2 ammonium
nitrate and CO2

Mining

LDAN, AN solution and
HDAN

Fertilizer and fertilizer blends
for corn and other crops(cid:30) NPK
fertilizer blends

Semi-conductor and
polyurethane intermediates,
ordnance(cid:30) Pulp and paper, alum,
water treatment, metals and
vanadium processing(cid:30) Power
plant emissions abatement,
water treatment, refrigerants,
metals processing(cid:30) Exhaust
stream additive, horticulture (cid:18)
greenhouse applications(cid:30)
refrigeration

Ammonium nitrate fuel oil
(ANFO) and specialty emulsions
for mining applications, surface
mining, quarries, and
construction

3

The following table summarizes net sales information relating to our products(cid:29)

Percentage of consolidated net sales(cid:29)

Agricultural products
Industrial products
Mining products

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

48%
42%
10%
100%

51%
38%
11%
100%

For information regarding our net sales, operating results and total assets for the past three fiscal years, see the Consolidated Financial
Statements included in this report.

(cid:50)(cid:88)(cid:85) (cid:54)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:92)

We pursue a strategy of balancing the sale of product as fertilizer into the agriculture markets at spot prices or short duration pre-sales
and developing industrial and mining customers that purchase substantial quantities of products, primarily under contractual
obligations and(cid:18)dd or pricing arrangements that generally provide for the pass through of some raw material and other manufacturing
costs. We believe this product and market diversification strategy allows us to have more consistent levels of production compared to
some of our competitors and helps reduce the volatility risk inherent in the prices of our raw material feedstock and(cid:18)dd or the changes in
demand for our products.

The strategy of developing industrial and mining customers helps to moderate the risk inherent in the agricultural markets where spot
sales prices of our agricultural products may not have a correlation to the natural gas feedstock costs but rather reflect market
conditions for like and competing nitrogen sources. This volatility of sales pricing in our agricultural products may, from time to time,
compromise our ability to recover our full cost to produce the product. Additionally, the lack of sufficient non-seasonal agricultural
sales volume to operate our manufacturing facilities at optimum levels can preclude us from balancing production and storage
capabilities. Looking forward, we remain focused on upgrading margins by maximizing downstream production. Our strategy calls for
further development of industrial customers who assume the volatility risk associated with the raw material costs and mitigate the
effects of seasonality in the agricultural sector.

rr

Our strategy also includes evaluating and pursuing acquisitions of strategic assets or companies, mergers with other companies and
investment in additional production capacity where we believe those acquisitions, mergers or expansion of production capacity will
enhance the value of the Company and provide appropriate returns.

(cid:46)(cid:72)(cid:92) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:44)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86) (cid:73)(cid:82)(cid:85) (cid:21)(cid:19)(cid:21)(cid:21)

As discussed in more detail under “Key Operating Initiatives for 2022” of “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” (“MD(cid:9)A”) contained in Item 7 of this report, we believe our future results of operations and
financial condition will depend significantly on our ability to successfully implement the following key initiatives(cid:29)

•

Investing in Safety and Reliability at our Facilities to further our Progress Towards Becoming a “Best
Plant Operator Supplying our Customers with Products of the Highest Quality.
Continue Broadening the Distribution and Optimization of our Product mix.

•
• Development and Implementation of a Strategy to Capitalize on Low Carbon Ammonia and Clean Energy Opportunities.
•

Pursue Acquisition of Strategic Assets or Companies.

“

in Class” Chemical

As for our liquidity, we had approximately $143.5 million of combined cash and borrowing capacity at the end of 2021, which we
believe provides us with ample liquidity to fund our operations and meet our current obligations. Also see discussions under
“Liquidity and Capital Resources” of our MD(cid:9)A.

(cid:50)(cid:88)(cid:85) (cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72) (cid:54)(cid:87)(cid:85)(cid:72)(cid:81)(cid:74)(cid:87)(cid:75)(cid:86)

(cid:54)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92) (cid:47)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71) (cid:38)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79) (cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74) (cid:38)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:86)

Our business benefits from highly advantageous locations with logistical and distribution benefits. We have access to the Nustar
ammonia pipeline from the U.S. Gulf at our El Dorado Facility, which provides low-cost transportation to distribution points. The El
Dorado Facility also has rail access providing favorable freight logistics to our industrial and agricultural customers and cost
advantaged when selling a number of our products West of the Mississippi River. Our Cherokee Facility is located east of the
Mississippi River, allowing it to reach customers that are not freight logical for others. Our Cherokee Facility sits adjacent to the
Tennessee River, providing barge receipt and shipping access, in addition to truck and rail delivery access. Our Pryor Facilitytt
is
located in the heart of the Southern Plains with close proximitytt
to the Port of Catoosa along with strategic rail and truck delivery
access.

4

(cid:36)(cid:71)(cid:89)(cid:68)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)(cid:71) (cid:53)(cid:68)(cid:90) (cid:48)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79) (cid:38)(cid:82)(cid:86)(cid:87) (cid:51)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)

We produce ammonia at our El Dorado, Cherokee and Pryor Facilities, which allows us to take advantage of the spread between
producing and purchasing ammonia at those facilities.

(cid:39)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71) (cid:54)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)(cid:86) (cid:82)(cid:73) (cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)

Our business serves a broad range of end markets, which we believe diminishes the cyclicality of our financial performance. Ouruu
business serves the agricultural, industrial and mining markets. The flexible nature of our production process and storage capability
allows us the abia lity to shift our product mix based on end market

demand.

rr

(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:48)(cid:88)(cid:79)(cid:87)(cid:76)(cid:83)(cid:79)(cid:72) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:43)(cid:76)(cid:74)(cid:75) (cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81) (cid:38)(cid:68)(cid:83)(cid:68)(cid:70)(cid:76)(cid:87)(cid:92)

We operate our business through several facilities. Operating multiple facilities diversifies the risk and impact of operational issues
that may occur at a single plant, which gives us a strategic advantage
over competitors that operate their company through a single
facility. Additionally, our competitive production capacity of our combined plants allows us to decrease manufacturing costs, helping
us to achieve enhanced margins.

dd

(cid:36)(cid:74)(cid:85)(cid:76)(cid:70)(cid:88)(cid:79)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87) (cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

As discussed in more detail under “Key Industry Factors” of MD(cid:9)A, the price at which our agricultural products are ultimately sold
depends on numerous factors, including the supply and demand for nitrogen fertilizers which, in turn, depends upon world grain
demand and production levels, the cost and availability of transportation and storage, weather conditions, competitive pricing and the
availability of imports. Additionally, expansions or upgrades of competitors’ facilities and international and domestic political and
economic developments continue to play an important role in the global nitrogen fertilizer industry economics. These factors can
affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect productdd margins.

ff

Looking forward to 2022, corn prices for the vast majority of 2021 remained above levels not seen since 2014, and at current prices
exceeding $6 per bushel, are significantly above the $4 per bushel level that we believe represents a very favorable level for farmff
ers to
earn significant
income on their crops. The strong corn prices over the past year have been driven, in part, by a rebound in the
production of ethanol, a gasoline additive that represents approximately 40% of total U.S. corn use annually, as miles driven have
returned to near pre-pandemic levels. Also supporting the strong corn pricing over the past year has been Chinese demand for corn for
use as feed for swine as part of the nation’s efforts to rebuild its swine production in the wake of a virus that dramatically reduced its
swine population several years ago. This demand for feed is expected to remain robust as China has moved to large institutional hog
farms which consume significant quantities of corn. Globally, corn supplies have been constrained by drought conditions in South
America and the Western U.S., which has served to further bolster corn prices. Early forecasts point to U.S. corn acreage to be planted
in the 2022-2023 planting season to be approximately 90 to 92 million acres, modestly lower than the 2021-2022 estimate of 93.4
million acres, but still at a very healthy level to support strong demand for fertilizers.

(cid:36)(cid:74)(cid:85)(cid:76)(cid:70)(cid:88)(cid:79)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)

fertilizers. We sell these agricultural products to
We produce and sell UAN, HDAN and ammonia, all of which are nitrogen-based
farmers, ranchers, fertilizer dealers and distributors primarily in the ranch land and grain production markets in the U.S. Our nitrogen-
based fertilizers are used to grow food
crops, biofuel feedstock crops, pasture land for grazing livestock and forage production. We
maintain long-term relationships with wholesale agricultural distributors and retailers and also sell directly to agricultural end-users
through our network of wholesale and retail distribution centers.

ff

t

The price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for
nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation
and storage, weather conditions, competitive pricing and the availability of imports. Additionally, expansions or upgrades of
competitors’ facilities combined with international and domestic political and economic developments continue to play an important
role in the global nitrogen fertilizer industry economics. These factors can affect, in addition to selling prices, the level of inventories
in the market which can cause price volatility and affect product margins.

rr

We develop our market position in these areas by emphasizing high quality products, customer service and technical advice.

In addition, we have an agreement with a third-party purchaser, Coffeyville Resources Nitrogen Fertilizers, LLC, (“C(cid:57)R”), to market
and sell a portion of our UAN. Demand for sales under this agreement is based on the expected needs of the purchaser’s customers.
The agreement provides the exclusive right (but not the obligation) to purchase, at market prices, substantially all of the UANAA
produced at our Pryor Facility. The term of the agreement runs through (cid:45)une 2022, with automatic one-year extensions, subject to a
a
180-day advance notice of termination from C(cid:57)R or a 90-day advance

notice from us.

We sell most of our agricultural products at the current spot market price in effect
enter into forward sales commitments for some of these products.

ff

at the time of shipment, although we periodically

5

(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:48)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74) (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87) (cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

As discussed in more detail under “Key Industry Factors” of MD(cid:9)A, in our industrial markets, our sales volumes are typically driven
by changes in general economic conditions, energy prices, metals market prices and our contractual arrangements with certain large
customers. In our mining markets, our sales volumes are typically driven by changes in the overall North American consumption
levels of mining products that can be impacted by weather. Additionally, changes in natural gas prices and demand in renewable
power sources, such as wind and solar in the electrical generation sector, will impact demand for our mining products and impact
competition within the other sectors of this market.

Looking forward to 2022, selling prices have continued to improve as the supply of ammonia remains tight due to strong global
demand, curtailed global supply due to rising natural gas prices, numerous global unplanned outages and lower than expected product
imports. As a result, the Tampa Ammonia benchmark price increased to, and remains at multi-year high levels, which has translated
into higher selling prices for our products as many of our industrial contracts are indexed to this benchmark price. Demand trends for
the industrial products we sell, primarily nitric acid and ammonia, have remained robust despite disruptions to certain end markets,
such as auto manufacturing which has been constrained due to a shortage of microprocessors, as activity in other markets, such as
homebuilding and power generation has remained strong. In addition, our sales of nitric acid increased steadily throughout 2021
pursuant to the new long-term nitric acid supply contract discussed below. Demand for our mining products continues to improve as
quarryrr and construction
activity has been elevated due to robust levels of residential, commercial and civil infrastructure buildout
along with strong demand for precious metals, including expectations for rising copper production to support the growing domestic
production of electronic vehicles.

a

r

(cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:48)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74) (cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)

We manufacture and sell industrial acids and other chemical products primarily to the polyurethane intermediates, paper, fibers,
emission control, and electronics industries.
In addition, we produce and sell blended and regular nitric acid and industrial and high
purity ammonia for many specialty applications, including the reduction of air emissions from power plants.

d

Sales of our industrial and mining products are generally made to customers pursuant to sales contracts or pricing arrangements on
terms that include the cost of the primary raw materials as a pass-through component in the sales price. These contractual sales
t of commodity cost changes and fluctuations in demand for these products due to the cyclicality of the end markets.
stabilize the effecff

During 2020, one of our subsidiaries, El Dorado Chemical Company (“EDC”) entered into a contract with a customer to supply nitrictt
acid. Under the agreement, EDC will supply between 70,000 to 100,000 tons of nitric acid annually. The initial contract term began in
(cid:45)anuaryrr 2021 and extends through 2027 and includes automatic one-year renewal terms.

In addition, EDC and Koch Fertilizer LLC (“Koch Fertilizer”) are parties to an ammonia purchase and sale agreement, under which
Koch Fertilizer agreed to purchase, with minimum purchase requirements, a portion of the ammonia that is in excess of EDC’s
internal needs. The term of the agreement runs until (cid:45)une 2023, with annual renewal options thereafter.

We operate the Baytown Facility on behalf of Covestro and we believe it is one of the largest and most technologically advanced nitric
of this
acid manufacturing units in the U.S. We operate and maintain this facility pursuant to a long-term operating contract. The termrr
agreement runs until October 2029 with options for renewal.

Our industrial products sales volumes are dependent upon general economic conditions primarily in the housing, automotive, and
paper industries. Our sale prices generally vary with the market price of ammonia, sulfur or natural gas, as applicable, in our pricing
arrangements with customers.

Our industrial business competes based upon service, price and location of production and distribution sites, product quality and
performance and provides inventory management as part of the value-added services offered to certain customers.

We also produce and sell LDAN, HDAN and AN solution to the mining industry, which are primarily used as AN fuel oil and
specialty emulsions for usage in the quarry and the construction industries, for metals mining, and to a lesser extent, for coal mining.
We have signed long-term contracts with certain customers that provide for the annual sale of LDAN, which a portion include various
natural-gas-based pricing arrangements. One of our customers has a plant located at our El Dorado Facility.

(cid:53)(cid:68)(cid:90) (cid:48)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86)

The products we manufacture at our facilities are primarily derived from natural gas. This raw material feedstock is a commodity and
subject to price fluctuations. Natural gas is the primary raw material for producing ammonia, UAN, nitric acid and acid blends and
other products at our El Dorado, Cherokee and Pryor Facilities. For 2021, we purchased approximately 28.3 million MMBtus of
natural gas.

The chemical facilities’ natural gas feedstock requirements are generally purchased at spot market price. Periodically, we enter into
volume purchase commitments and(cid:18)dd or forward contracts to lock in the cost of certain of the expected natural gas requirements
primarily to match quantities needed to produce product that has been sold forward. At December 31, 2021, we had natural gas
contracts of approximately 5.4 million MMBtus, at an average cost of $4.53 per MMBtu. These contracts extend through March 2022.

6

See further discussion relating to the outlook for our business under “Key Industry Factors.”

(cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)

We operate in a highly competitive market with many other larger chemical companies, such as Austin Powder Company, CF
Industries Holdings, Inc., Chemtrade Logistics L.L.C.(cid:30) Cornerstone Chemical, Eco Services Operation Corp., a subsidiary of PQ
Holding Group, OCI Partners N(cid:57), Dyno Nobel, a subsidiary of Incitec Pivot Limited, The Gavilon Group, Helm AG, Koch Industries,
Norfalco, Nutrien, Orica Limited(cid:30) Praxair, Inc., Quad Chemical Corporation, Southern States Chemical, Trammo Inc. and (cid:57)eolia
North America (some of whom are our customers), many of whom have greater financial and other resources than we do. We believe
that competition within the markets we serve is primarily based upon service, price, location of production and distribution sites, and
product quality and performance.

(cid:43)(cid:88)(cid:80)(cid:68)(cid:81) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

As of December 31, 2021, we employed 545 persons, 180 of whom are represented by unions under agreements, including agreements
being negotiated, that expire in (cid:45)uly 2022 through (cid:45)uly 2024. We believe we have good relationships with our employees.

(cid:50)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:74)(cid:75)(cid:87) (cid:9) (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

Our success depends on the capabilities and strength of our workforce. Our Human Resources Director is responsible for developing
and executing our human capital strategy. This strategy includes the acquisition, development, and retention of talent to deliver on our
overall strategy. Our Chief Executive Officer (“CEO”) regularly updates our Board of Directors (“Board”) on the operation and status
of these human capital activities including(cid:29)

•

•

Training & Development (cid:177) We are committed to the continued development of our employees. Quarterly reviews of
operations and talent occur across all operational business units and corporate functions. It is the responsibility of the CEO
to review talent data on an annual basis and plan development actions to ensure succession and
and the executive staffff
continuous improvement and growth.

Engagement (cid:177) We believe that we have favorable relations with our employees. Approximately 33% of our employees are
represented under collective bargaining agreements. We take proactive measures, such as conducting employee surveys to
to ensure that
understand and drive employee engagement. Additionally, we conductd
any changes to benefits are improvements or add value for employees. Each of our business units conducts roundtable
discussions to develop action plans to improve the work environment. We have continued to increase our communication
efforts with employees, which our workforce has recognized favorably.

benefit surveys annually in an effff ort

ff

• Health and Safety (cid:177) Our Health and Safety Management System continues to build to establish a consistent approach to
enhance the work environment, culture and compliance at each business unit. This system is guided by a newly formed
executive committee that provides focus and priority to compliance
and industry best practices that protect our employees
while performing work within our operations. Each business team is responsible for evaluating its unique operations and
risk. We use leading and lagging metrics, such as near
applying the defined controls to engage employees and manage injury
miss tracking, assigning potential risk consequences to events, incident tracking, and releases to monitor our performance and
effff eff ctiveness across our operations and individual business teams. Events are investigated based on risk using root cause
analysis tools and corrective actions are tracked to ensure prevention. In addition, the management system includes periodic
third-party audits and internal self-assessment to continuously improve.

n

a

Like many other companies, we have experienced challenges resulting from the CO(cid:57)ID-19 pandemic and have focused energy
dand
effort on protecting our employees and their families from potential virus exposure while continuing safe and compliant operations.
Since the beginning of the pandemic, we established detailed plans and protocols, executed remote work arrangements, and
increased
d
communication to employees. To date, our focused actions, which have aligned with the guidance from the Centers for Disease
Control and Prevention, have not resulted in any work

stoppage
.

(cid:42)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87) (cid:47)(cid:68)(cid:90)(cid:86) (cid:68)(cid:81)(cid:71) (cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

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

a

tt

There can be no assurance that we will not incur material costs or liabilities in complying with such laws or in paying fines or
penalties for violation of such laws. Our insurance may not cover all environmental risks and costs or may not provide sufficient
coverage if an environmental claim is made against us. These laws and regulations (including enforcement policies thereunder) have

7

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,
our subsidiaries have incurred significant expenditures in order to comply with these laws and regulations and are reasonably expected
to do so in the future. We will also be obligated to manage certain discharge water outlets and monitor groundwater contaminants at
our chemical facilities should we discontinue the operations of a facility.

ff

Also see discussions concerning our risk factors under Item 1A of this report.

(cid:36)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

We make available free of charge through our Internet website (www.lsbindustries.com) or by calling Investor Relations (405) 510-
3550 our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable,
amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the SEC.
In addition to the reports filed or furnished with the SEC, we
publicly disclose material information from time to time in press releases, at annual meetings of stockholders, in publicly accessible
conferences and investor presentations, and through our website. The information included in our website does not constitute part of
this Annual Report on Form 10-K.

Section 16(a) of the Exchange Act requires our directors, officers, and beneficial owners of more than 10% of our common stock to
file with the SEC reports of holdings and changes in beneficial ownership of our stock. Based solely on a review of copies of the
Forms 3, 4 and 5 furnished to us with respect to 2021, or written representations that no Form 5 was required to be filed, we believe
that during 2021 all our directors and officers and beneficial owners of more than 10% of our common stock timely filed their required
Forms 3, 4, or 5.

8

(cid:44)(cid:55)(cid:40)(cid:48) (cid:20)(cid:36)(cid:17) (cid:53)(cid:44)(cid:54)(cid:46) (cid:41)(cid:36)(cid:38)(cid:55)(cid:50)(cid:53)(cid:54)

(cid:20)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:50)(cid:88)(cid:85) (cid:47)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92)

(cid:58)(cid:72) (cid:80)(cid:68)(cid:92) (cid:81)(cid:82)(cid:87) (cid:69)(cid:72) (cid:68)(cid:69)(cid:79)(cid:72) (cid:87)(cid:82) (cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72) (cid:86)(cid:88)(cid:73)(cid:73)(cid:76)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87) (cid:70)(cid:68)(cid:86)(cid:75) (cid:87)(cid:82) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72) (cid:82)(cid:88)(cid:85) (cid:71)(cid:72)(cid:69)(cid:87) (cid:68)(cid:81)(cid:71) (cid:80)(cid:68)(cid:92) (cid:69)(cid:72) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71) (cid:87)(cid:82) (cid:87)(cid:68)(cid:78)(cid:72) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:87)(cid:82) (cid:86)(cid:68)(cid:87)(cid:76)(cid:86)(cid:73)(cid:92) (cid:87)(cid:75)(cid:72)
(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85) (cid:82)(cid:88)(cid:85) (cid:71)(cid:72)(cid:69)(cid:87) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:80)(cid:68)(cid:92) (cid:81)(cid:82)(cid:87) (cid:69)(cid:72) (cid:86)(cid:88)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:73)(cid:88)(cid:79)(cid:17)

Our ability to make scheduled payments on our debt obligations depends on our financial condition and operating performance,
prevailing economic and competitive conditions, and certain financial, business and other factors, some of which may be beyond our
control. We may not be able to maintain a level of cash flows sufficient to pay the principal and interest on our debt, including the
$500 million principal amount of our 6.250% Senior Secured Notes due 2028 (the “New Notes”).

If cash flows and capital resources are insufficient to fund ouru debt obligations, we could face substantial liquidity problems and will
need to seek additional capital through the issuance of debt, the issuance of equity, asset sales or a combination of the foregoing. If we
are unsuccessful, we will need to reduce or delay investments and capita
l expenditures, or to dispose of other assets or operations, seek
a
additional capital, or restructure or refinance debt. These alternative measures may not be successful, may not be completed on
economically attractive terms, or may not be adequate for us to meet our debt obligations when due. Additionally, our debt agreements
limit the use of the proceeds from many dispositions of assets or operations. As a result, we may not be permitted to use the proceeds
from these dispositions to satisfy our debt obligations. If we cannot make scheduled payments on our debt, we will be in default and
the outstanding principal and interest on our debt could be declared to be due and payable, in which case we could be forced into
bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations. In such an event,
we may not have sufficient assets to repay all of our debt.

Further, if we suffer or appear to suffer from a lack of availablea
liquidity, the evaluation of our creditworthiness by counterparties and
rating agencies and the willingness of third parties to do business with us could be materially and adversely affected. In partirr cular, our
credit ratings could be lowered, suspended or withdrawn entirely at any time by the rating agencies. Downgrades in our long-term debt
ratings generally cause borrowing costs to increase and the potential pool of investors and funding sources to decrease and could
trigger liquidity demands pursuant to the terms of contracts, leases or other agreements. Any future transactions by us, including the
issuance of additional debt, the sale of any operating assets, or any other transaction to manage our liquidity, could result in temporary
or permanent downgrades of our credit ratings.

(cid:50)(cid:88)(cid:85) (cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79) (cid:76)(cid:81)(cid:71)(cid:72)(cid:69)(cid:87)(cid:72)(cid:71)(cid:81)(cid:72)(cid:86)(cid:86) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87) (cid:82)(cid:88)(cid:85) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:15) (cid:68)(cid:81)(cid:71) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:87)(cid:82) (cid:76)(cid:81)(cid:70)(cid:88)(cid:85)
(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:71)(cid:72)(cid:69)(cid:87) (cid:87)(cid:82) (cid:73)(cid:88)(cid:81)(cid:71) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:81)(cid:72)(cid:72)(cid:71)(cid:86)(cid:17)

We currently have a substantial amount of indebtedness. As a result, this level could, among other things(cid:29)

•

•
•

•
•
•

•

require us to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing
the funds available for operations and future business opportunities(cid:30)
make it more difficult for us to satisfy our obligations, including our repurchase obligations(cid:30)
limit our ability to borrow additional money if needed for other purposes, including working capital, capital expenditures,
debt service requirements, acquisitions and general corporate or other purposes, on satisfactory terms or at all(cid:30)
limit our ability to adjust to changing economic, business and competitive conditions(cid:30)
place us at a competitive disadvantage with competitors who may have less indebtedness or greater access to financing(cid:30)
make us more vulnerable to an increase in interest rates, a downturn in our operating performance or a decline in general
economic conditions(cid:30) and
make us more susceptible to changes in credit ratings, which could affect our ability to obtain financing in the future and
increase the cost of such financing.

Any of the foregoing could adversely affect our liquidity, operating results and finff ancial condition.

(cid:50)(cid:88)(cid:85) (cid:71)(cid:72)(cid:69)(cid:87) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81) (cid:70)(cid:82)(cid:89)(cid:72)(cid:81)(cid:68)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:87)(cid:75)(cid:68)(cid:87) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87) (cid:82)(cid:85) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87) (cid:82)(cid:88)(cid:85) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)
(cid:68)(cid:81)(cid:71) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17) (cid:36) (cid:69)(cid:85)(cid:72)(cid:68)(cid:70)(cid:75) (cid:82)(cid:73) (cid:87)(cid:75)(cid:72)(cid:86)(cid:72) (cid:70)(cid:82)(cid:89)(cid:72)(cid:81)(cid:68)(cid:81)(cid:87)(cid:86) (cid:82)(cid:85) (cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87) (cid:76)(cid:81) (cid:68)(cid:81) (cid:72)(cid:89)(cid:72)(cid:81)(cid:87) (cid:82)(cid:73) (cid:71)(cid:72)(cid:73)(cid:68)(cid:88)(cid:79)(cid:87) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85) (cid:82)(cid:81)(cid:72) (cid:82)(cid:85) (cid:80)(cid:82)(cid:85)(cid:72) (cid:82)(cid:73)
(cid:82)(cid:88)(cid:85) (cid:71)(cid:72)(cid:69)(cid:87) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:82)(cid:85) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86) (cid:68)(cid:87) (cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:87) (cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81) (cid:82)(cid:88)(cid:85) (cid:70)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:15) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74) (cid:68)(cid:86) (cid:68) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87) (cid:82)(cid:73) (cid:70)(cid:85)(cid:82)(cid:86)(cid:86) (cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:85)
(cid:71)(cid:72)(cid:73)(cid:68)(cid:88)(cid:79)(cid:87) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)

Our debt agreements and the Exchange Agreement contain various covenants and other restrictions that, among other things, limit
flexibility in operating our businesses. A breach of any of these covenants or restrictions could result in a significant portion of our
debt becoming due and payable or could result in significant contractual liability. These covenants and other restrictions limit our
ability to, among other things(cid:29)

•
•
•
•

incur additional debt or issue preferred shares(cid:30)
pay dividends on, repurchase or make distributions in respect of capital stock, make other restricted payments(cid:30)
make investments or certain capital expenditures(cid:30)
sell or transfer assets(cid:30)

9

•
•
•
•
•
•
•

create liens on assets to secure debt(cid:30)
engage in certain fundamental corporate changes or changes to our business activities(cid:30)
make certain material acquisitions(cid:30)
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets(cid:30)
enter into transactions with affiliates(cid:30)
designate subsidiaries as unrestricted subsidiaries(cid:30) and
repay, repurchase or modify certain subordinated and other material debt.

The Working Capital Revolver Loan also contains certain affirmative
charge coverage ratio (as defined
Revolver Loan) falls below a certain level.

aa
in the Working Capital Revolver Loan) if their excess availability

covenants and requires the borrowers to comply with a fixed
(as defined in the Working Capital

a

ff

These covenants and restrictions could affect
our ability to operate our business and may limit our ability to react to market conditions
or take advantage of potential business opportunities as they arise. Additionally, our ability to comply with these covenants may be
affected by events beyond our control, including general economic and credit conditions and industry downturns.

ff

r

under
In addition, certain failures to make payments when due on, or the acceleration of, significant indebtedness constitutes a default
some of our debt instruments, including the indenture governing the notes. Further, a breach of any of the covenants or restrictions in a
debt instrumen
t could result in an event of defaff ult under such debt instrument. Upon the occurrence of an event of default under one of
these debt instruments, our lenders or noteholders could elect to declare all amounts outstanding under such debt instrument to be
immediately due and payable and(cid:18)dd or terminate all commitments to extend further credit. Such actions by those lenders or noteholders
could cause cross defaults or accelerations under our other debt. If we were unable to repay those amounts, the lenders or noteholders
could proceed against any collateral granted to them to secure such debt. In the case of a default under debt that is guaranteed, holders
of such debt could also seek to enforce the guarantees. If lenders or noteholders accelerate the repayment of all borrowings, we would
likely not have sufficient assets and funds to repay those borrowings. Such occurrence could result in our or our applicable subsidiary
going into bankruptcy,

liquidation or insolvency.

u

u

ff

(cid:55)(cid:75)(cid:72) (cid:68)(cid:74)(cid:72) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:70)(cid:75)(cid:72)(cid:80)(cid:76)(cid:70)(cid:68)(cid:79) (cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86) (cid:87)(cid:75)(cid:72) (cid:85)(cid:76)(cid:86)(cid:78) (cid:73)(cid:82)(cid:85) (cid:88)(cid:81)(cid:83)(cid:79)(cid:68)(cid:81)(cid:81)(cid:72)(cid:71) (cid:71)(cid:82)(cid:90)(cid:81)(cid:87)(cid:76)(cid:80)(cid:72)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:80)(cid:68)(cid:92) (cid:69)(cid:72) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:17)

Our business is comprised of operating units of various ages and levels of automated control. While we have continued to make
significant annual capital improvements, potential age or control related issues have occurred in the past and may occur in the future,
which could cause damage to the equipment and ancillary facilities. As a result, we have experienced and may continue to experience
additional downtime at our chemical facilities in the future.

The equipment required for the manufacture of our products is specialized, and the time for replacement of such equipment can be
lengthy, resulting in extended downtime in the affected unit. In addition, the cost for such equipment could be influenced by changes
in regulatory policies (including tariffs) of foreign governments, as well as the U.S. laws and policies affecting foreign trade and
investment.

Although we use various reliability and inspection programs and maintain a significant inventory of spare equipment, which are
intended to mitigate the extent of production losses, unplanned outages may still occur. As a result, these planned and unplanned
downtime events at our chemical facilities have in the past and could in the future
adversely affect our liquidity, operating results and
financial condition.

ff

(cid:47)(cid:54)(cid:37) (cid:76)(cid:86) (cid:68) (cid:75)(cid:82)(cid:79)(cid:71)(cid:76)(cid:81)(cid:74) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92) (cid:68)(cid:81)(cid:71) (cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:86)(cid:15) (cid:76)(cid:81) (cid:79)(cid:68)(cid:85)(cid:74)(cid:72) (cid:83)(cid:68)(cid:85)(cid:87)(cid:15) (cid:82)(cid:81) (cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:76)(cid:81)(cid:74) (cid:73)(cid:88)(cid:81)(cid:71)(cid:86) (cid:73)(cid:85)(cid:82)(cid:80) (cid:76)(cid:87)(cid:86) (cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86) (cid:87)(cid:82) (cid:73)(cid:88)(cid:81)(cid:71) (cid:82)(cid:88)(cid:85) (cid:76)(cid:81)(cid:71)(cid:72)(cid:69)(cid:87)(cid:72)(cid:71)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

LSB is a holding company with no significant operations or material assets other than the equity interests it holds in its subsidiaries
and conducts all of its operations through its subsidiaries. As a result, LSB’s ability to meet its obligations depends, in largea
part, on
the operating performance and cash flows of its subsidiaries, which will be affected by general economic, industry, financial,
competitive, operating and other factors beyond our control, and the ability of its subsidiaries to make distributions and pay dividends
to LSB.

Each of LSB’s subsidiaries is a separate and distinct legal entity and, under certain circumstances, legal and contractual restrictions, as
well as the financial condition and operating requirements of such subsidiaries, may limit LSB’s ability to obtain cash from its
subsidiaries. Any payment of dividends, distributions, loans or advances to LSB by its subsidiaries could also be subject to taxes or
restrictions on dividends or transfers under applicable local law in the jurisdictions in which LSB’s subsidiaries operate.

(cid:21)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:50)(cid:88)(cid:85) (cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)

(cid:51)(cid:68)(cid:81)(cid:71)(cid:72)(cid:80)(cid:76)(cid:70)(cid:86) (cid:82)(cid:85) (cid:71)(cid:76)(cid:86)(cid:72)(cid:68)(cid:86)(cid:72) (cid:82)(cid:88)(cid:87)(cid:69)(cid:85)(cid:72)(cid:68)(cid:78)(cid:86)(cid:15) (cid:86)(cid:88)(cid:70)(cid:75) (cid:68)(cid:86) (cid:38)(cid:50)(cid:57)(cid:44)(cid:39)(cid:16)(cid:20)(cid:28)(cid:15) (cid:75)(cid:68)(cid:89)(cid:72) (cid:68)(cid:81)(cid:71) (cid:80)(cid:68)(cid:92) (cid:76)(cid:81) (cid:87)(cid:75)(cid:72) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:71)(cid:76)(cid:86)(cid:85)(cid:88)(cid:83)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)
(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)

CO(cid:57)ID-19 has evolved into a global pandemic and the full extent of its impact will depend on future developments that are uncertain
and cannot be accurately predicted, including new information that may emerge concerning the CO(cid:57)ID-19 pandemic and the actions
to contain the CO(cid:57)ID-19 pandemic or treat its impact. Currently, all of the facilities we own and operate have been designated as

10

essential critical infrastructure based on guidelines issued by the United States Department of Homeland Security’s Cybersecurity and
Infrastructure Security Agency. Since we produce fertilizer products used by the agriculture industry, as well as chemical products
required in a variety of industrial manufacturing processes, LSB has been determined to be a critical service, and therefore, our
facilities are remaining in operation despite the evolving global health crisis resulting from the CO(cid:57)ID-19 pandemic. However, if
additional mandatory closures of businesses are imposed by the federal, state and local governments to control the spread of the virus,
these closures could disrupt the operations of our management, business and finance teams. In addition, a significant
downturn in
global economic growth, or recessionary conditions in major geographic regions, may lead to reduced demand for a portion or all our
products. Legislative, regulatory,
influences related to the CO(cid:57)ID-19 pandemic may affect our financial
pperformance and our ability to conductd

judicial or social
our business.

ff

An extended period of remote work arrangements due to the CO(cid:57)ID-19 pandemic could exacerbate cybersecurity risks. Our business
adata
depends on the proper functioning and availability of our information
rr
pprocessing systems. We are also required to effect
electronic transmissions with third parties including clients, vendors and others with
whom we do business, and with our Board. We believe we have implemented appropriate security measures, controls and procedures
to safeguard our information technology systems and to prevent unauthorized access to such systems and any data processed or sto dred
in such systems, and we periodically evaluate and test the adequacy of such systems, measures, controls and procedures and perform
third-party risk assessments(cid:30) however, there can be no guarantee that such systems, measures, controls and procedures will be
effective, that we will be able to establish secure capabil
ities with all of third parties, or that third parties will have appropriate controls
in place to protect the confidentiality of our information. Security breaches could expose us to a risk of loss or misuse of ourr
information, litigation and potential liability.

technology platform, including communications and

a

ff

The Omicron variant of CO(cid:57)ID-19 began to spread rapidly across the globe in the fourth quarter of fiscal year 2021 and began to
affect our business, as well as our customers’ and suppliers’ business in similar ways as the initial surge of CO(cid:57)ID-19. In addition,
inflation and supply chain disruptions, in part exacerbated by the spread of the Omicron variant, have impacted companies
dand
consumers in the United States. We have begun to experience increased inventory shipping costs and could see annual price increases
from some of our vendors. In light of these trends, our management has taken, and will continue to take, a number of steps aimed to
mitigate the impact of the Omicron variant, supply chain disruptions and inflation.

As the CO(cid:57)ID-19 pandemic continues to impact communities, our business operations could be disrupted or delayed, and our
business, financial condition, and results of operations could be adversely affected.

(cid:55)(cid:72)(cid:85)(cid:85)(cid:82)(cid:85)(cid:76)(cid:86)(cid:87) (cid:68)(cid:87)(cid:87)(cid:68)(cid:70)(cid:78)(cid:86) (cid:68)(cid:81)(cid:71) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:68)(cid:70)(cid:87)(cid:86) (cid:82)(cid:73) (cid:89)(cid:76)(cid:82)(cid:79)(cid:72)(cid:81)(cid:70)(cid:72) (cid:82)(cid:85) (cid:90)(cid:68)(cid:85)(cid:15) (cid:68)(cid:81)(cid:71) (cid:81)(cid:68)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:71)(cid:76)(cid:86)(cid:68)(cid:86)(cid:87)(cid:72)(cid:85)(cid:86) (cid:11)(cid:86)(cid:88)(cid:70)(cid:75) (cid:68)(cid:86) (cid:75)(cid:88)(cid:85)(cid:85)(cid:76)(cid:70)(cid:68)(cid:81)(cid:72)(cid:86)(cid:15) (cid:72)(cid:87)(cid:70)(cid:17)(cid:12)(cid:15) (cid:75)(cid:68)(cid:89)(cid:72) (cid:81)(cid:72)(cid:74)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)
(cid:68)(cid:81)(cid:71) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:81)(cid:72)(cid:74)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:56)(cid:17)(cid:54)(cid:17) (cid:68)(cid:81)(cid:71) (cid:73)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81) (cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:76)(cid:72)(cid:86)(cid:15) (cid:87)(cid:75)(cid:72) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:15) (cid:87)(cid:75)(cid:72) (cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:76)(cid:72)(cid:86) (cid:90)(cid:75)(cid:72)(cid:85)(cid:72) (cid:90)(cid:72) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:15) (cid:82)(cid:88)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
(cid:68)(cid:81)(cid:71) (cid:82)(cid:88)(cid:85) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:17)

Terrorist attacks in the U.S and elsewhere and natural disasters (such as hurricanes or pandemic health crises) have in the past and can
in the future negatively affff ecff
t our operations. We cannot predict further terrorist attacks and natural disasters in the U.S. and
elsewhere. These attacks or natural disasters have contributed to economic instability in the U.S. and elsewhere, and further acts of
terrorism, violence, war or natural disasters could affect the industries where we operate, our ability to purchase raw materials, our
our
business, results of operations and financial condition. In addition, terrorist attacks and natural disasters may directly affect
physical facilities, especially our chemical facilities, or those of our suppliers or customers and could affect our sales, our production
capability and our ability to deliver products to our customers. In the past, hurricanes affecting the Gulf Coast of the U.S. have
negatively affected our operations and those of our customers. As previously noted, some scientists have concluded that increasing
concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such
as increased frequency and severity of storms, droughts and floods and other climatic events. If any such effects, whether
anthropogenic or otherwise, were to occur in areas where we or our clients operate, they could have an adverse effect on our business,
financial condition and results of operations.

ff

(cid:36) (cid:80)(cid:68)(cid:77)(cid:82)(cid:85) (cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:79)(cid:92)(cid:76)(cid:81)(cid:74) (cid:87)(cid:75)(cid:72) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:75)(cid:76)(cid:74)(cid:75) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79) (cid:82)(cid:73) (cid:71)(cid:72)(cid:80)(cid:68)(cid:81)(cid:71) (cid:73)(cid:82)(cid:85) (cid:82)(cid:88)(cid:85) (cid:81)(cid:76)(cid:87)(cid:85)(cid:82)(cid:74)(cid:72)(cid:81)(cid:16)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71) (cid:73)(cid:72)(cid:85)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:85) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86) (cid:76)(cid:86) (cid:87)(cid:75)(cid:72) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73)
(cid:72)(cid:87)(cid:75)(cid:68)(cid:81)(cid:82)(cid:79)(cid:17) (cid:36) (cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:76)(cid:81) (cid:72)(cid:87)(cid:75)(cid:68)(cid:81)(cid:82)(cid:79) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:85) (cid:68)(cid:81) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:76)(cid:81) (cid:72)(cid:87)(cid:75)(cid:68)(cid:81)(cid:82)(cid:79) (cid:76)(cid:80)(cid:83)(cid:82)(cid:85)(cid:87)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:75)(cid:68)(cid:89)(cid:72) (cid:68) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:81) (cid:82)(cid:88)(cid:85) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)
(cid:82)(cid:73) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:87)(cid:82) (cid:80)(cid:68)(cid:78)(cid:72) (cid:70)(cid:68)(cid:86)(cid:75) (cid:71)(cid:76)(cid:86)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)

A major factor underlying the solid level of demand for our nitrogen-ba
sed fertilizer products is the production of ethanol in the
tt
United States and the use of corn in ethanol production. Ethanol production in the United States is highly dependent upon a myriad of
federal statutes and regulations and is made significantly more competitive by various federal and state incentives and mandated usage
of renewable fuels pursuant to the federal renewable fuel standards (“RFS”). To date, the RFS has been satisfied primarily witht
fuel
ethanol blended into gasoline. However, a number of factors, including the continuing “food versus fuel” debate and studies showing
that expanded ethanol usage may increase the level of greenhouse gases in the environment as well as be unsuitable for small engine
use, have resulted in calls to reduce subsidies for ethanol, allow increased ethanol imports and to repeal or waive (in whole or in part)
the current RFS, any of which could have an adverse effect on corn-based ethanol production, planted corn acreage and fertilizer
demand. Therefore, ethanol incentive programs may not be renewed, or if renewed, they may be renewed on terms significantly less
favorable to ethanol producers than current incentive programs. Therefore, a decrease in ethanol production or an increase in ethanol
imports could have a material adverse effect on our overall business, results of operations, financial condition and liquidity.

11

(cid:58)(cid:72) (cid:68)(cid:85)(cid:72) (cid:85)(cid:72)(cid:79)(cid:76)(cid:68)(cid:81)(cid:87) (cid:82)(cid:81) (cid:68) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71) (cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85) (cid:82)(cid:73) (cid:78)(cid:72)(cid:92) (cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:17)

Our nitrogen production is concentrated in four separate complexes. The suspension of operations at any of these complexes could
adversely affect our ability to produce our products and fulfill our commitments and could have a material adverse effect on liquidity,
financial condition, results of operations and business.

(cid:54)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:79)(cid:76)(cid:87)(cid:92) (cid:70)(cid:68)(cid:81) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

If seasonal demand is less than we expect, we may be left with excess inventory that will have to be stored (in which case our results
of operations will be negatively affected by any related increased storage costs) or liquidated (in which case the selling price may be
below our production, procurement and storage costs). The risks associated with excess inventory and product shortages are
exacerbated by the volatility of natural gas and nitrogen fertilizer prices and the relatively brief periods during which farmers can
apply nitrogen fertilizers. If prices for our products rapidly decrease, we may be subject to inventory write-downs, adversely affecting
our operating results. If seasonal demand is greater than we expect, we may experience product shortages, and customers of ours may
turn to our competitors for products that they would otherwise have purchased from us.

ff

(cid:58)(cid:72)(cid:68)(cid:87)(cid:75)(cid:72)(cid:85) (cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

by
The products (primarily agricultural) produced and sold by us have been in the past, and could be in the future, materially affected
adverse weather conditions (such as excessive rain or drought) in the primary markets for our fertilizer and related agriculturau l
products. In addition, weather can cause an interruption
to the operations of our chemical facilities. Many scientists have concluded
that increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant
physical effects, such as increased frequency and severity of storms, droughts and floods and other climatic events. These climate
changes might also occur as the result of other phenomena that human activity is unable to influence, including changes in solar
activity and volcanic activity. Regardless of the cause, if any of these unusual weather events occur during the primary seasons for
sales of our agricultural
products (March-(cid:45)une and September-November), this could have a material adverse effect on our agricultural
sales and our financial condition and results of operations.

u

ff

t

(cid:38)(cid:79)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72) (cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:80)(cid:68)(cid:92) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86).

Over the course of the past several years, global climate conditions have become increasingly inconsistent, volatile and unpredictable.
Many of the regions in which we do business have experienced excessive moisture, cold, drought and(cid:18)dd or heat of an unprecedented
nature at various times of the year. In some cases, these conditions have either reduced or obviated the need for our products,
particularly in the agriculture space, whether pre-plant, at-plant, post-emergent or at harvest. Due to the unpredictable nature of these
conditions, growers and distributors appear to have become increasingly conservative in procurement practices and the accumulation
of inventory. Further, the random nature of climactic change has made it increasingly difficult to forecast market demand and,
consequently, financial performance, from year-to-year. There is no guarantee that climate change will abate in the near future, and it
to forecast sales performance with accuracy and otherwise adversely
is possible that such change will continue to hinder our abilitytt
affect our financial performance.

(cid:50)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:68)(cid:81)(cid:71) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) (cid:68)(cid:85)(cid:72) (cid:86)(cid:72)(cid:81)(cid:86)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72) (cid:87)(cid:82) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72) (cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70) (cid:70)(cid:92)(cid:70)(cid:79)(cid:72)(cid:86)(cid:17)

Our business can be affected by cyclical factors such as inflation, currency exchange rates, global energy policy and costs, regulatory
policies (including tariffs), global market conditions and economic downturns in specific industries. Certain sales are sensitive to the
level of activity in the agricultural, mining, automotive and housing industries. Therefore, substantial changes could adversely affect
al resources.
our operating results, liquidity, financial condition and capita

(cid:55)(cid:75)(cid:72)(cid:85)(cid:72) (cid:76)(cid:86) (cid:76)(cid:81)(cid:87)(cid:72)(cid:81)(cid:86)(cid:72) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:76)(cid:81) (cid:87)(cid:75)(cid:72) (cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86) (cid:90)(cid:72) (cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:17)

Substantially all of the markets in which we participate are highly competitive with respect to product quality, price, distribution,
service, and reliability. We compete with many companies, domestic and foreign, that have greater financial, marketing and other
resources. Competitive factors could require us to reduce prices or increase spending on product development, marketing and sales,
which could have a material adverse effect on our business, results of operation and financial condition.

We compete with many U.S. producers and producers in other countries, including state-owned and government-subsidized entities.
Some competitors have greater total resources and are less dependent on earnings from chemical sales, which make them less
vulnerable to industry downturns and better positioned to pursue new expansion and development opportunities. Our competitive
position could suffer to the extent we are not able to expand our own resources sufficiently either through investments in new or
existing operations or through acquisitions, joint ventures or partnerships. An inability to compete successfully could result in the loss
of customers, which could adversely affect our sales and profitability.

(cid:36)(cid:81) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:82)(cid:73) (cid:76)(cid:80)(cid:83)(cid:82)(cid:85)(cid:87)(cid:72)(cid:71) (cid:68)(cid:74)(cid:85)(cid:76)(cid:70)(cid:88)(cid:79)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:73)(cid:73) (cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

Russia, Ukraine and Trinidad have substantial capacity to produce and export fertili
below-market prices for natural gas, due to government regulation and other factors.

ff

zers. Producers in these countries also benefit from

In addition, producers in China have substantial capacity to produce and export urea. Depending on various factors, including
prevailing prices from other exporters, the price of coal, and the price of China’s export tariff, higher volumes of urea from China

12

could be imported into the U.S. at prices that could have an adverse
the nitrogen products we manufacture and sell.

d

effect on the selling prices of other nitrogen products, including

(cid:36) (cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79) (cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (cid:76)(cid:86) (cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87) (cid:88)(cid:83)(cid:82)(cid:81) (cid:68) (cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71) (cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85) (cid:82)(cid:73) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:17)

For 2021, ten customers accounted for approximately 47% of our consolidated net sales. The loss of, or a material reduction in
purchase levels by, one or more of these customers could have a material adverse effect on our business, results of operations,
financial condition and liquidity if we are unable to replace a customer with other sales on substantially similar terms.

(cid:36) (cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:76)(cid:81) (cid:87)(cid:75)(cid:72) (cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72) (cid:82)(cid:73) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86) (cid:87)(cid:75)(cid:68)(cid:87) (cid:82)(cid:88)(cid:85) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) (cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72) (cid:82)(cid:81) (cid:68) (cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71) (cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:15) (cid:82)(cid:85) (cid:87)(cid:75)(cid:72) (cid:83)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (cid:89)(cid:82)(cid:79)(cid:88)(cid:80)(cid:72)
(cid:87)(cid:75)(cid:68)(cid:87) (cid:76)(cid:86) (cid:86)(cid:82)(cid:79)(cid:71) (cid:87)(cid:82) (cid:82)(cid:88)(cid:85) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) (cid:82)(cid:81) (cid:68) (cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71) (cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:15) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:82)(cid:88)(cid:85) (cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72) (cid:87)(cid:82) (cid:73)(cid:79)(cid:88)(cid:70)(cid:87)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:76)(cid:81) (cid:82)(cid:88)(cid:85) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87) (cid:80)(cid:68)(cid:85)(cid:74)(cid:76)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71)
(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:82)(cid:73) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:70)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:17)

d

products from us on a forward basis at prices and delivery
u
We offer our customers from time-to-time, the opportunity to purchase
dates we propose. Under our forward sales programs, customers generally make an initial cash down payment at the time of order and
pay the remaining portion of the contract sales under their usual invoice terms when the performance obligation is satisfied. Forward
sales improve our liquidity due to the cash payments received from customers in advance of shipment of the product and allow us to
g and planning and the utilization of our manufacturing and distribution assets. Any cash payments
improve our production schedulin
received in advance from customers in connection with forward sales are reflected on our consolidated balance sheets as a current
liability until the related performance obligations are satisfied, which can take up to several months. We believe the ability to
purchase products on a forward basis is most appealing to our customers during periods of generally increasing prices for nitrogen
fertilizers. Our customers may be less willing or even unwilling to purchase products on a forward basis during periods of generally
decreasing or stable prices or during periods of relatively high fertilizer prices due to the expectation of lower prices in the future or
limited capital resources. In periods of rising fertilizer prices, selling our nitrogen fertilizers on a forward basis may result in lower
profit margins than if we had not sold fertilizer on a forward basis. Conversely, in periods of declining fertilizer prices, selling our
nitrogen fertilizers on a forward basis may result in higher profit margins than if we had not sold fertilizer on a forward basis. In
in advance of their ultimate delivery to customers, typically causes our
addition, fixing the selling prices of our products, often monthst
reported selling prices and margins to differ from spot market prices and margins available at the time the performance obligation is
satisfied.

(cid:38)(cid:82)(cid:86)(cid:87) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:79)(cid:68)(cid:70)(cid:78) (cid:82)(cid:73) (cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:82)(cid:73) (cid:85)(cid:68)(cid:90) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:83)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:68)(cid:81)(cid:71) (cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92)(cid:17)

u

to considerable price volatility, and recent global suppl

Our sales and profits are heavily affected by the costs and availability of primary raw materials. These primary raw materials are
typically subject
y chain disruptions and increased inflation in the United States
u
have led to further heightened volatility. Historically, when there have been rapid increases in the cost of these primary raw materials,
we have sometimes been unable to timely increase our sales prices to cover all of the higher costs incurred. While we periodically
enter into futures(cid:18)forward contracts to economically hedge against price increases in certain of these raw materials, there cana be no
assurance that we will effectively manage against price fluctuations in those raw materials.

Natural gas represents the primary raw material feedstock in the production of most of our chemical products. Although we enter into
contracts with certain customers that provide for the pass-through of raw material costs, we have a substantial amount of sales that do
not provide for the pass-through of raw material costs. Also, the spot sales prices of our agricultural products may not correlate to the
cost of natural gas but rather reflect market conditions for similar and competing nitrogen sources. This lack of correlation can
compromise our ability to recover our full cost to produce the products in this market. As a result, in the future, we may not be able to
pass along to all of our customers the full amount of any increases in raw material costs. Future price fluctuations in our raw materials
may have an adverse effect on our business, financial condition, liquidity and results of operations.

Additionally, we depend on certain vendors to deliver natural gas and other key components that are required in the production of our
products. Any disruption in the supply of natural gas and other key components could result in lost production or delayed shipments.

The price of natural gas in North America and worldwide has been volatile in recent years and had declined on average due in part to
the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques,
such as hydraulic fracturing and horizontal drilling. However, recent disruptions in the global supply chain and increased inflaff
tion in
the United States have led to reduced availability and increased prices of natural gas in the fourth quarter of fiscal year 2021, and they
may continue to have an impact in the near term in fiscal year 2022. Future production of natural gas from shale formations could be
reduced by regulatory changes that restrict drilling or hydraulic fracturing or increase its cost or by reduction in oil exploration and
development prompted by lower oil prices and resulting in production of less associated natural gas. Additionally, increased demand
for natural gas, particularly in the Gulf Coast Region, due to increased industrial demand and increased natural gas exports could
result in increased natural gas prices.

We have suspended in the past, and could suspend in the future, production at our chemical facilities due to, among other things, the
high cost or lack of availability of natural gas and other key components, which could adversely affect our competitiveness in the
markets we serve. Accordingly, our business, financial condition, liquidity and results of operations could be materially affected in the
future by the lack of availability of natural gas and other key components and increase costs relating to the purchase of natural gas and
other key components.

13

(cid:50)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:76)(cid:86) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87) (cid:87)(cid:82) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86) (cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:76)(cid:81)(cid:74) (cid:71)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:85)(cid:76)(cid:86)(cid:78) (cid:87)(cid:75)(cid:68)(cid:87) (cid:82)(cid:88)(cid:85) (cid:75)(cid:72)(cid:71)(cid:74)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:80)(cid:76)(cid:74)(cid:75)(cid:87) (cid:81)(cid:82)(cid:87) (cid:69)(cid:72) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:17)

We may utilize natural gas derivatives to hedge our financial exposure to the price volatility of natural gas, the principal raw material
used in the productd
ion of nitrogen-based products. We may use futures, financial swaps and option contracts traded in the over-the-
counter markets or on exchanges to hedge our risk. Our use of derivatives can result in volatility in reported earnings due to the
unrealized mark-to-market adjustments that occur from changes in the value of the derivatives that do not qualify for, or to which we
do not apply, hedge accounting. To the extent that our derivative positions lose value, we may be required to post collateral with our
counterparties, adversely affecting our liquidity. We have also used fixed-price, physical purchase and sales contracts to hedge our
exposure to natural gas price volatility. Hedging arrangements are imperfect and unhedged risks will always exist. In addition, our
hedging activities may themselves give rise to various risks that could adversely affect us. For example, we are exposed to
counterparty credit risk when our derivatives are in a net asset position. The counterparties to our derivatives are multi-national
institutions or large energy companies. Our liquidity could be negatively impacted by a
commercial banks, major financial
counterparty default on settlement of one or more of our derivative financial instruments or by the trigger of any cross-default
provisions or credit support requirements. Additionally,
the International Swaps and Derivative Association master netting
arrangements for most of our derivative instruments contain credit-risk-related contingent features, such as cross-default and(cid:18)dd or
acceleration provisions and credit support requirements. In the event of certain defaults or a credit ratings downgrade, our counterparty
may request early termination and net settlement of certain derivative trades or may require us to collateralize derivatives in a net
liability position. At other times we may not utilize derivatives or derivative strategies to hedge certain risks or to reduce the financial
exposure of price volatility. As a result, we may not prevent certain material adverse impacts that could have been mitigated through
the use of derivative strategies.

(cid:50)(cid:88)(cid:85) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:83)(cid:82)(cid:85)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:71)(cid:76)(cid:86)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:85)(cid:72)(cid:79)(cid:92) (cid:82)(cid:81) (cid:87)(cid:75)(cid:76)(cid:85)(cid:71)(cid:16)(cid:83)(cid:68)(cid:85)(cid:87)(cid:92) (cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:85)(cid:86)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87) (cid:88)(cid:86) (cid:87)(cid:82) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86) (cid:68)(cid:81)(cid:71) (cid:88)(cid:81)(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81)(cid:87)(cid:76)(cid:72)(cid:86)
(cid:69)(cid:72)(cid:92)(cid:82)(cid:81)(cid:71) (cid:82)(cid:88)(cid:85) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:87)(cid:75)(cid:68)(cid:87) (cid:80)(cid:68)(cid:92) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)

We rely on railroad, trucking, pipeline and other transportation service providers to transport raw materials to our manufacturing
facilities, to coordinate and deliver finished products to our storage and distribution system and our retail centers and to ship finished
products to our customers. These transportation operations, equipment and services are subject to various hazards, including adverse
operating conditions, extreme weather conditions, system failures, work stoppages, equipment and personnel shortages, delays,
accidents such as spills and derailments and other accidents and operating hazards.

u

In the event of a disruption of existing transportation or terminaling facilities for our products or raw materials, alternative
transportation and terminaling facilities may not have sufficient capacity to fully serve all of our customers or facilities. An extended
interrupr
on facilities
u
could adversely affect

tion in the delivery of our products to our customers or the supply

of natural gas, ammonia or sulfur to our producti

sales volumes and margins.

d

ff

These transportation operations, equipment and services are also subject to environmental, safety, and regulatory oversight. Due to
concerns related to accidents, terrorism or increasing concerns regarding transportation of potentially hazardous substances, local,
provincial, state and federal governments could implement new regulations affecting the transportation of raw materials or our
finished products. If transportation of our products is delayed or we are unable to obtain raw materials as a result of any third party’s
failure to operate properly or the other hazards described above, or if new and more stringent regulatory requirements are implemented
affecting transportation operations or equipment, or if there are significant increases in the cost of these services or equipment, our
revenues and cost of operations could be adversely affected.
In addition, we may experience increases in our transportation costs, or
changes in such costs relative to transportation costs incurred by our competitors.

ff

(cid:41)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:82)(cid:79)(cid:82)(cid:74)(cid:76)(cid:70)(cid:68)(cid:79) (cid:76)(cid:81)(cid:81)(cid:82)(cid:89)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

Future technological innovation, such as the development of seeds that require less crop nutrients, or developments in the application
of crop nutrients, if they occur, could have the potential to adversely affect the demand for our products and results of operations.

(cid:38)(cid:92)(cid:69)(cid:72)(cid:85) (cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:92) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

As we continue to increase our dependence on information technologies to conduct our operations, including as a result of remote
work environments due to CO(cid:57)ID-19, the risks associated with cyber security also increase. We rely on our enterprise resource
planning software (“ERP”) and other information systems, among other things, to manage our manufacturing, supply chain,
accounting and financial functions. Additionally, third parties on whose systems we place significant reliance for the conduct of our
business are also subject
to cyber security risks. We are significantly dependent upon internet connectivity and a third-party cloud
hosting vendor. We have implemented security procedures and measures in order to protect our information from being vulnerable to
theft, loss, damage or interruption from a number of potential sources or events. Although we believe these measures and procedures
are appropriate, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving
types of cyber-attacks. Compromises to our information systems could have an adverse effect on our business, results of operations,
liquidity and financial condition.

b

14

(cid:58)(cid:72) (cid:80)(cid:68)(cid:92) (cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72) (cid:76)(cid:81) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81) (cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:72)(cid:74)(cid:76)(cid:70) (cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:80)(cid:68)(cid:92) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)

An important part of our business strategy is the acquisition of strategic assets or companies. Our management is currently evaluating
and pursing certain such opportunities, and from time to time separately provides indications of interest in respect of similar
transactions, which may be significant. Any such discussions may or may not result in the consummation of a transaction, and we
may not be able to identify or complete any of these potential acquisitions. We cannot predict the effect, if any, that any
announcement or consummation of a transaction would have on the price of our securities. While the documents governing our
indebtedness include certain restrictions on our ability to finance any acquisitions of new assets, such restrictions contain various
exceptions and limitations.

There is no guarantee that any such transactions will be successful or, even if consummated, improve our operating results. We may
incur costs, breakage fees or other expenses in connection with any such transactions or may not be able to obtain the necessary
financing for such transactions on acceptable terms. Accordingly, any such transactions may ultimately have a material adverse effect
on our operating results.

In addition, any future

ff

acquisitions could present a number of risks, including(cid:29)

•
•
•

•

the risk of using management time and resources to pursue acquisitions that are not successfully completed(cid:30)
the risk of incorrect assumptions regarding the future results of acquired operations or business(cid:30)
the risk of failing to integrate the operations or management of any acquired operations or assets successfully and timely(cid:30)
and
the risk of diversion of management’s attention from existing operations or other priorities.

If we are unsuccessful in integrating acquisitions in a timely and cost-effective manner, our financial condition and results of
operations could be adversely affected.

(cid:22)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:47)(cid:72)(cid:74)(cid:68)(cid:79)(cid:15) (cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72) (cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)

(cid:50)(cid:88)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:75)(cid:68)(cid:81)(cid:71)(cid:79)(cid:76)(cid:81)(cid:74) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86) (cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86) (cid:68)(cid:81)(cid:71) (cid:75)(cid:68)(cid:93)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)

Our operations are subject to hazards inherent in the manufacture, transportation, storage and distribution of chemical products,
including some products that are highly toxic and corrosive. These hazards include, among other things, explosions(cid:30) fires(cid:30) severe
weather and natural disasters(cid:30) train derailments, collisions, vessel groundings and other transportation and maritime incidents(cid:30) leaks
and ruptures involving storage tanks, pipelines and rail cars(cid:30) spills, discharges and releases of toxic or hazardous substances or gases(cid:30)
deliberate sabotage and terrorist incidents(cid:30) mechanical failures(cid:30) unscheduled plant downtime(cid:30) labor difficulties and other risks. Some
of these hazards can cause bodily injury and loss of lifeff , severe damage to or destruction of property and equipment and environmental
damage and may result in suspension of operations for an extended period of time and(cid:18)dd or the imposition of civil or criminal penalties
and liabilities. We periodically experience minor releases of ammonia related to leaks from our equipment. Similar events may occur
in the future. As a result, such events could have a material adverse effect

on our results of operations and financial condition.

ff

(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:79)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:82)(cid:85) (cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:80)(cid:68)(cid:92) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87) (cid:76)(cid:81) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)
(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:86)(cid:15) (cid:70)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:86) (cid:68)(cid:81)(cid:71) (cid:79)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:76)(cid:87)(cid:92) (cid:82)(cid:85) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:75)(cid:68)(cid:89)(cid:72) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:81)(cid:72)(cid:74)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:86) (cid:82)(cid:81) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

Our business is subject to numerous health, safety, security and environmental laws and regulations. The manufacture and distribution
of chemical products are activities that entail health, safety and environmental risks and impose obligations under health, safety and
environmental laws and regulations, many of which provide for substanti
al fines and potential criminal sanctions for violations.
Although we believe we have established processes to monitor, review and manage our businesses to comply with the numerous
health, safety and environmental laws and regulations, we previously were, and in the future, may be, subject to fines, penalties and
sanctions for violations and substantial expenditures for cleanupn
costs and other liabilities relating to the handling, manufacture, use,
emission, discharge or disposal of effluents at or from our chemical facilities. Further, a number of our chemical facilities are
dependent on environmental permits to operate, the loss or modification of which could have a material adverse effect on their
operations and our results of operation and financial condition. These operating permits are subject to modification, renewal and
revocation. In addition, third parties may contest our ability to receive or renew certain permits that we need to operate, which can
lengthen the application process or even prevent us from obtaining necessary permits. We regularly monitor and review our
operations, procedures and policies for compliance with permits, laws and regulations. Despite these compliance efforts, risk of
noncompliance or permit interpretation

is inherent in the operation of our business.

u

r

There can be no assurance as to the amount or timing of future expenditures for environmental compliance or remediation, and actual
future expenditures may be differeff
to anticipate future regulatory requirements that
might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize
the costs of compliance.

nt from the amounts we currently anticipate. We tryrr

Changes to the production equipment at our chemical facilities that are required in order to comply with health, safety and
environmental regulations may require substantial capital expenditures.

15

Explosions and(cid:18)dd or losses at other chemical facilities that we do not own (such as the April 2013 explosion in West, Texas) could also
result in new or additional legislation or regulatory changes, particularly relating to public health, safety or any of the products
manufactured and(cid:18)dd or sold by us or the inability on the part of our customers to obtain or maintain insurance as to certain products
manufactured and(cid:18)dd or sold by us, which could have a negative effect

on our revenues, cash flow and liquidity.

ff

In summary, new or changed laws and regulations or the inabilitytt of our customers to obtain or maintain insurance in connection with
any of our chemical products could have an adverse effect on ouru operating results, liquidity and financial condition.

(cid:58)(cid:72) (cid:80)(cid:68)(cid:92) (cid:81)(cid:82)(cid:87) (cid:75)(cid:68)(cid:89)(cid:72) (cid:68)(cid:71)(cid:72)(cid:84)(cid:88)(cid:68)(cid:87)(cid:72) (cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)

While we maintain liability, property and business interruption insurance,
including certain coverage for environmental
contamination, it is subject to coverage limits and policies that may exclude coverage for some types of damages. Although there may
currently be sources from which such coverage may be obtained, the coverage may not continue to be available to us on commercially
reasonable terms or the possible types of liabilities that may be incurred by us may not be covered by our insurance. In addition, our
insurance carriers may not be able to meet their obligations under the policies, or the dollar amount of the liabilities may exceed our
policy limits. Even a partially uninsured claim, if successful and of significant magnitude, could have a material adverse effect
on our
business, results of operations, financial condition and liquidity.

ff

Furthermore, we are subject to litigation for which we could be obligated to bear legal, settlement and other costs, which may be in
excess of any available insurance coverage. If we are required to incur all or a portion of the costs arising out of any litigation or
investigation as a result of inadequate insurance proceeds, if any, our business, results of operations, financial condition and liquidity
could be materially adversely affected. For further discussion of our litigation, please see “Other Pending, Threatened or Settled
Litigation” in Note 9 to the Consolidated Financial Statements included in this report.

(cid:58)(cid:72) (cid:80)(cid:68)(cid:92) (cid:69)(cid:72) (cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71) (cid:87)(cid:82) (cid:80)(cid:82)(cid:71)(cid:76)(cid:73)(cid:92) (cid:82)(cid:85) (cid:72)(cid:91)(cid:83)(cid:68)(cid:81)(cid:71) (cid:82)(cid:88)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:87)(cid:82) (cid:76)(cid:81)(cid:86)(cid:87)(cid:68)(cid:79)(cid:79) (cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:72)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87) (cid:76)(cid:81)
(cid:82)(cid:85)(cid:71)(cid:72)(cid:85) (cid:87)(cid:82) (cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:92) (cid:90)(cid:76)(cid:87)(cid:75) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:83)(cid:82)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72) (cid:73)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87) (cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)

The chemical industry in general, and producers and distributors of ammonia and AN specifically,
are scrutinized by the government,
industry and public on security issues. Under current and proposed regulations, we may be required to incur substantial additional
costs relating to security at our chemical facilities and distribution centers, as well as in the transportation of our products. These costs
could have a material effect on our results of operations, financial
condition, and liquidity. The cost of such regulatory changes, if
significant, could lead some of our customers to choose other products over ammonia and AN, which may have a significant adverse
effect on our business.

aa

ff

The “Secure Handling of Ammonium Nitrate Act of 2007” was enacted by the U.S. Congress, and subsequently the U.S. Department
of Homeland Security (“DHS”) published a notice of proposed rulemaking in 2011. This regulation proposes to require sellers, buyers,
their agents and transporters of solid AN and certain solid mixtures containing AN to possess a valid registration issued by DHS, keep
certain records, report the theftff or unexplained loss of regulated materials, and comply with certain other new requirements. We and
others affected
by this proposal have submitted appropriate comments to DHS regarding the proposed regulation. It is possible that
ff
DHS could significantly revise the requirements currently being proposed. Depending on the provisions of the final regulation to be
promulgated by DHS and on our ability to pass these costs to our customers, these requirements may have a negative effect on the
profitability of our AN business and may result in fewer distributors who are willing to handle the product. DHS has not finalized this
rule, and has indicated that its next action, and the timing of such an action, is undetermined.

On August 1, 2013, U.S. President Obama issued an executive order addressing the safety and security of chemical facilities in
response to recent incidents involving chemicals such as the explosion at West, Texas. The President directed federal agencies to
enhance existing regulations and make recommendations to the U.S. Congress to develop new laws that may affect our business. In
(cid:45)anuary 2016, the U.S. Chemical Safety and Hazard Investigation Board (“CSB”) released its final report on the West, Texas incident.
The CSB report identifies several federal and state regulations and standards that could be strengthened to reduce the risk of a similar
incident occurring in the future. While the CSB does not have authority to directly regulate our business, the findings in this report,
and other activities taken in response to the West, Texas incident by federal, state, and local regulators may result in additional
regulation of our processes and products.

In (cid:45)anuary 2017, the U.S. Environmental Protection Agency (“EPA”) finalized revisions to its Risk Management Program (“RMP”).
The revisions include new requirements for certain facilities to perform hazard analyses, third-party auditing, incident investigations
and root cause analyses, emergency response exercises, and to publicly
share chemical and process information. Compliance with
u
many of the rule’s new requirements will be required beginning in 2021. The EPA temporarily delayed the rule’s effeff ctive date
however, the delay was subsequently vacated with an immediate effective
date. On December 3, 2018, the EPA published a final rule
ff
that incorporates amendments to the RMP under 40 CFR Part 68. However, on November 21, 2019, EPA finalized its Risk
Management Program Reconsideration Rule which rescinded third-party auditing, incident investigation and root cause analysis, and
the public sharing of specific chemical and process information. The passage of the Reconsideration Rule has reduced the potential
negative effect on the profitability of our AN business compared to the (cid:45)anuary 2017 RMP amendments. The Occupational Safety and
Health Administration (“OSHA”) is likewise considering changes to its Process Safety Management standards. In addition, DHS, the

16

EPA, and the Bureau of Alcohol, Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling,
and management of AN. While these actions may result in additional regulatory requirements or changes to our operators, it is
difficult to predict at this time how these and any other possible regulations, if and when adopted, will affect our business, operations,
liquidity or financial results.

(cid:51)(cid:85)(cid:82)(cid:83)(cid:82)(cid:86)(cid:72)(cid:71) (cid:68)(cid:81)(cid:71) (cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74) (cid:74)(cid:82)(cid:89)(cid:72)(cid:85)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:79)(cid:68)(cid:90)(cid:86) (cid:68)(cid:81)(cid:71) (cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:74)(cid:85)(cid:72)(cid:72)(cid:81)(cid:75)(cid:82)(cid:88)(cid:86)(cid:72) (cid:74)(cid:68)(cid:86) (cid:68)(cid:81)(cid:71) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:68)(cid:76)(cid:85) (cid:72)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86) (cid:80)(cid:68)(cid:92) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)
(cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86) (cid:87)(cid:82) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:81)(cid:72)(cid:90) (cid:70)(cid:82)(cid:86)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:85)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:82)(cid:81) (cid:87)(cid:75)(cid:72)(cid:76)(cid:85) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:80)(cid:68)(cid:92) (cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:72) (cid:86)(cid:68)(cid:79)(cid:72)(cid:86) (cid:82)(cid:73)
(cid:82)(cid:88)(cid:85) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:86)(cid:17)

Our chemical manufacturing facilities use significant amounts of electricity, natural gas and other raw materials necessary for the
production of their chemical products that result, or could result, in certain greenhouse gas emissions into the environment. Federal
and state legislatures and administrative agencies, including the EPA, are considering the scope and scale of greenhouse gas or other
air emission regulation. Legislation and administrative actions have been considered that would regulate greenhouse gas emissions at
some point in the future for our facilities, and existing and possible actions have already affected certain of our customers, leading to
closure or rate reductions of certain facilities.

In response to findings that emissions of carbon dioxide, methane and other greenhouse gases present an endangerment to public
health and the environment, the EPA adopted regulations pursuant to the federal Clean Air Act to reduce greenhouse gas emissions
from various sources. For example, the EPA requires certain large stationary sources to obtain preconstruction and operating permits
for pollutants regulated under the Prevention of Significant Deterioration and Title (cid:57) programs of the Clean Air Act. Facilities
required to obtain preconstruction permits for such pollutants are also required to meet “best available control technology” standards
that are being established by the states. These regulatory requirements could adversely affect our operations and restrict or delay our
ability to obtain air permits for new or modifiedff

sources.

Although greenhouse gas regulation could(cid:29) increase the price of the electricity and other energy sources purchased by our chemical
facilities(cid:30) increase costs for natural gas and other raw materials (such as ammonia)(cid:30) potentially restrict access to or the use of certain
raw materials necessary to produce our chemical products(cid:30) and require us to incur substantial expenditures to retrofit our chemical
facilities to comply with the proposed new laws and regulations regulating greenhouse gas emissions. Federal, state and local
governments may also pass laws mandating the use of alternative energy sources, such as wind power and solar energy, which may
increase the cost of energy use in certain of our chemical and other manufacturing
operations. For instance, the EPA published a rule,
known as the Clean Power Plan, to limit greenhouse gases from electric power plants. The EPA is currently reviewing the Clean
Power Plan however, it could result in increased electricity costs due to increased requirements for use of alternative energy sources,
and a decreased demand for coal-generated electricity.

ff

(cid:47)(cid:68)(cid:90)(cid:86)(cid:15) (cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:82)(cid:85) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:86) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:87)(cid:82) (cid:70)(cid:79)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72) (cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:75)(cid:68)(cid:89)(cid:72) (cid:68) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:81) (cid:88)(cid:86)(cid:17)

If we, or other companies with which we do business become subject to laws or regulations related to climate change, it could have a
material adverse effect on us. The United States may enact new laws, regulations and interpretations relating to climate change,
including potential cap-and-trade systems, carbon taxes and other requirements relating to reduction of carbon footprints
and(cid:18)dd or
greenhouse gas emissions. Other countries have enacted climate change laws and regulations, and the United States has been involved
in discussions regarding international climate change treaties. The federal government and some of the states and localities in which
we operate have enacted certain climate change laws and regulations and(cid:18)dd or have begun regulating carbon footprints and greenhouse
gas emissions. Although these laws and regulations have not had any known material adverse effect on us to date, they could result in
substantial costs, including compliance costs, monitoring and reporting costs and capital. Furthermore, our reputation could be
damaged if we violate climate change laws or regulations. We cannot predict how future laws and regulations, or future interprr etations
of current laws and regulations, related to climate change will affect our business, results of operations, liquidity and financial
condition. Lastly, the potential physical impacts of climate change on our operations are highly uncertain and would be particular to
the geographic circumstances in areas in which we operate. These may include changes in rainfall and storm patterns and intensities,
water shortages and changing temperatures. Any of these matters could have a material adverse effecff

t on us.

t

(cid:23)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:39)(cid:72)(cid:69)(cid:87)

(cid:39)(cid:72)(cid:86)(cid:83)(cid:76)(cid:87)(cid:72) (cid:82)(cid:88)(cid:85) (cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:79)(cid:72)(cid:89)(cid:72)(cid:79)(cid:86) (cid:82)(cid:73) (cid:71)(cid:72)(cid:69)(cid:87)(cid:15) (cid:90)(cid:72) (cid:80)(cid:68)(cid:92) (cid:86)(cid:87)(cid:76)(cid:79)(cid:79) (cid:76)(cid:81)(cid:70)(cid:88)(cid:85) (cid:80)(cid:82)(cid:85)(cid:72) (cid:71)(cid:72)(cid:69)(cid:87) (cid:85)(cid:68)(cid:81)(cid:78)(cid:76)(cid:81)(cid:74) (cid:86)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85) (cid:82)(cid:85) (cid:72)(cid:84)(cid:88)(cid:68)(cid:79) (cid:76)(cid:81) (cid:85)(cid:76)(cid:74)(cid:75)(cid:87) (cid:82)(cid:73) (cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87) (cid:90)(cid:76)(cid:87)(cid:75) (cid:82)(cid:88)(cid:85) (cid:72)(cid:91)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)
(cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:15) (cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74) (cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:71)(cid:72)(cid:69)(cid:87)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:90)(cid:82)(cid:88)(cid:79)(cid:71) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:87)(cid:75)(cid:72) (cid:85)(cid:76)(cid:86)(cid:78)(cid:86) (cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:69)(cid:72)(cid:71) (cid:75)(cid:72)(cid:85)(cid:72)(cid:76)(cid:81)(cid:17)

limit but do not prohibit our ability to incur additional debt,

The agreements relating to our debt, including the Senior Secured Notes Indenture and the credit agreement governing our Working
Capital Revolver Loan,
including additional secured debt.
Notwithstanding the fact that the Senior Secured Notes Indenture and the credit agreement governing our Working Capital Revolver
Loan limit our ability to incur additional debt or grant certain liens on our assets, the restrictions on the incurrence of additional
indebtedness and liens are subject to a number of important qualifications and exceptions, and the additional indebtedness and liens
incurred in compliance with these restrictions could be substantial. If new debt is added to our current debt levels, the related risks that
we now face could intensify.

17

(cid:37)(cid:82)(cid:85)(cid:85)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:86) (cid:88)(cid:81)(cid:71)(cid:72)(cid:85) (cid:82)(cid:88)(cid:85) (cid:58)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:53)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:85) (cid:47)(cid:82)(cid:68)(cid:81) (cid:69)(cid:72)(cid:68)(cid:85) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87) (cid:68)(cid:87) (cid:68) (cid:89)(cid:68)(cid:85)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72) (cid:85)(cid:68)(cid:87)(cid:72)(cid:15) (cid:90)(cid:75)(cid:76)(cid:70)(cid:75) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:86) (cid:88)(cid:86) (cid:87)(cid:82) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87) (cid:85)(cid:68)(cid:87)(cid:72) (cid:85)(cid:76)(cid:86)(cid:78)
(cid:68)(cid:81)(cid:71) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:70)(cid:68)(cid:88)(cid:86)(cid:72) (cid:82)(cid:88)(cid:85) (cid:71)(cid:72)(cid:69)(cid:87) (cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72) (cid:82)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:87)(cid:82) (cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:17)

All of our borrowings under our Working Capital Revolver Loan are at variable rates of interest and expose us to interest rate risk. If
interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount
borrowed remained the same. Although we may enter into interest rate swaps to reduce interest rate volatility, we cannot provide
assurances that we will be able to do so or that such swaps will be effective.

ff

(cid:24)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:43)(cid:88)(cid:80)(cid:68)(cid:81) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)

(cid:47)(cid:82)(cid:86)(cid:86) (cid:82)(cid:73) (cid:78)(cid:72)(cid:92) (cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:81)(cid:72)(cid:74)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:17)

of our principal executive officers. We cannot ensure
Our performance has been and will continue to be dependent upon the efforts
that our principal executive officers will continue to be available. Although we have employment agreements with certain of our
principal executive officers, including Mark T. Behrman and Cheryl A. Maguire, we do not have employment agreements with all of
our key personnel. The loss of any of our principal executive officers could have a material adverse effect on us. We believe that our
future success will depend in large part on our continued ability to attract and retain highly skilled and qualified personnel.

ff

(cid:58)(cid:72) (cid:68)(cid:85)(cid:72) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87) (cid:87)(cid:82) (cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72) (cid:69)(cid:68)(cid:85)(cid:74)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74) (cid:68)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:90)(cid:76)(cid:87)(cid:75) (cid:70)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81) (cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:17)

Approximately 33% of our employees are covered by collective bargaining agreements. We may not be able to renew our collective
bargaining agreements on terms similar to current terms or renegotiate collective bargaining agreements on terms acceptable to us.
The prolonged failure to renew or renegotiate a collective bargaining agreement could result in work stoppages. Additionally, if a
collective bargaining agreement is negotiated at higher-than-anticipated cost, absorbing those costs or passing them through to
customers in the form of higher prices may make us less competitive.

(cid:25)(cid:17)

(cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)

(cid:38)(cid:72)(cid:85)(cid:87)(cid:68)(cid:76)(cid:81) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86) (cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:68) (cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:89)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15) (cid:68)(cid:81)(cid:71) (cid:87)(cid:75)(cid:72)(cid:76)(cid:85) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:70)(cid:82)(cid:81)(cid:73)(cid:79)(cid:76)(cid:70)(cid:87) (cid:90)(cid:76)(cid:87)(cid:75) (cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:86) (cid:82)(cid:73)
(cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:17)

LSB Funding LLC (“LSB Funding”), our largest voting shareholder, owned approximately 54 million shares of our common stock,
which represent approximately 61% of the voting power of our common stock as of December 31, 2021, an aggregate of
approximately 50 million shares of which were issued to LSB Funding in connection with the Exchange Transaction and the Special
Dividend. As a result, LSB Funding could significantly influence our business and affairs if it chooses to use its significant voting
power to do so. For instance, LSB Funding would be able to significantly affect most matters brought before the stockholders,
including the election of all directors and the approval of mergers and other business combination transactions.

Pursuant to a Board Representation and Standstill Agreement, as amended, LSB Funding has the right to designate three directors on
our Board, subject to reducd tion in certain circumstances. This is in addition to their ability to vote generally in the election of directors.
As a result, LSB Funding has significant influence over the election of directors to our Board.

The interests of LSB Funding may conflict with interests of other stockholders. As a result of the voting power and board designation
rights of LSB Funding, the ability of other stockholders to influence

our management and policies could be limited.

ff

(cid:58)(cid:72) (cid:68)(cid:85)(cid:72) (cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87) (cid:87)(cid:82) (cid:68) (cid:89)(cid:68)(cid:85)(cid:76)(cid:72)(cid:87)(cid:92) (cid:82)(cid:73) (cid:73)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86) (cid:87)(cid:75)(cid:68)(cid:87) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:71)(cid:76)(cid:86)(cid:70)(cid:82)(cid:88)(cid:85)(cid:68)(cid:74)(cid:72) (cid:82)(cid:87)(cid:75)(cid:72)(cid:85) (cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:72)(cid:86) (cid:73)(cid:85)(cid:82)(cid:80) (cid:68)(cid:87)(cid:87)(cid:72)(cid:80)(cid:83)(cid:87)(cid:76)(cid:81)(cid:74) (cid:87)(cid:82) (cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72) (cid:88)(cid:86)(cid:17)

Our certificate of incorporation provides for a staggered Board and, except in limited circumstances, a two-thirds vote of outstanding
voting shares to approve a merger, consolidation or sale of all, or substantially all, of our assets. In addition, we have entered into
severance agreements with our executive officers and some of the executive officers of certain subsidiaries that provide, among other
things, that if, within a specified period of time after the occurrence of a change in control of LSB, these officers are terminated, other
than for cause, or the officer terminates his employment for good reason, the officer would be entitled to certain severance benefits.
Certain of our preferred stock series and debt instruments also provide special rights in a change of control, including in some cases
the ability to be repaid in full or redeemed.

We have authorized and unissued (including shares held in treasury) approximately 60.2 million shares of common stock and
approximately 5.2 million shares of preferred stock as of December 31, 2021. These unissued shares could be used by our
management to make it more diffff iff cult, and thereby discourage an attempt to acquire control of us.

The foregoing provisions and agreements may discourage a third-party tender offer, proxy contest, or other attempts to acquire control
of us and could have the effect
of making it more difficult to remove incumbent management. In addition, LSB Funding and the
Golsen Holders have significant voting power and rights to designate board representatives, all of which may further discourage a
third-party tender offer, proxy contest, or other attempts to acquire control of us.

ff

18

Delaware has adopted an anti-takeover law which, among other things, will delay for three years business combinations with acquirers
of 15% or more of the outstanding voting stock of publicly-held companies (such as us), unless(cid:29)

q

•

•

•

•

prior to such time the Board of the corporation approved the business combination that results in the stockholder
becoming an invested stockholder(cid:30)
the acquirer owned at least 85% of the outstanding voting stock of such company prior to commencement of the
transaction(cid:30)
two-thirds of the stockholders, other than the acquirer, vote to approve the business combination after approval thereof by
the Board(cid:30) or
the stockholders of the corporation amend its articles of incorporation or by-laws electing not to be governed by this
provision.

(cid:58)(cid:72) (cid:75)(cid:68)(cid:89)(cid:72) (cid:81)(cid:82)(cid:87) (cid:83)(cid:68)(cid:76)(cid:71) (cid:70)(cid:68)(cid:86)(cid:75) (cid:71)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86) (cid:82)(cid:81) (cid:82)(cid:88)(cid:85) (cid:82)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78) (cid:76)(cid:81) (cid:80)(cid:68)(cid:81)(cid:92) (cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:17)

We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash
dividends on our outstanding common stock in the near future. Our Board of Directors (the “Board”) has not made a decision whether
or not to pay dividends on our common stock in 2022. In addition, there are certain limitations contained in our loan agreements that
may limit our ability to pay dividends on our outstanding common stock.

(cid:41)(cid:88)(cid:87)(cid:88)(cid:85)(cid:72) (cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86) (cid:82)(cid:85) (cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79) (cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78) (cid:82)(cid:85) (cid:83)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92) (cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:87)(cid:75)(cid:72) (cid:83)(cid:85)(cid:76)(cid:70)(cid:72) (cid:82)(cid:73) (cid:82)(cid:88)(cid:85)
(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78) (cid:68)(cid:81)(cid:71) (cid:82)(cid:88)(cid:85) (cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:87)(cid:82) (cid:85)(cid:68)(cid:76)(cid:86)(cid:72) (cid:73)(cid:88)(cid:81)(cid:71)(cid:86) (cid:76)(cid:81) (cid:81)(cid:72)(cid:90) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78) (cid:82)(cid:73)(cid:73)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:86) (cid:68)(cid:81)(cid:71) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72) (cid:87)(cid:75)(cid:72) (cid:83)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72) (cid:82)(cid:90)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83) (cid:82)(cid:85) (cid:89)(cid:82)(cid:87)(cid:76)(cid:81)(cid:74) (cid:83)(cid:82)(cid:90)(cid:72)(cid:85)
(cid:82)(cid:73) (cid:82)(cid:88)(cid:85) (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:17)

Future sales of substantial amounts of our common stock, preferred stock or equity-related securities in the public market, or the
perception that such sales could occur, could adversely affect
prevailing trading prices of our common stock and could dilute the value
of common stock held by our existing stockholders. No prediction can be made as to the effect, if any, that future sales of common
stock, preferred stock, or equity-related securities, or the availability of shares of common stock for future sale will have on the trading
price of our common stock. Such future sales could also significantly reduce the percentage ownership and voting power of our
existing common stockholders.

ff

(cid:26)(cid:17)

(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79) (cid:53)(cid:76)(cid:86)(cid:78) (cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)

(cid:39)(cid:72)(cid:87)(cid:72)(cid:85)(cid:76)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:74)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79) (cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87) (cid:68)(cid:81)(cid:71) (cid:72)(cid:70)(cid:82)(cid:81)(cid:82)(cid:80)(cid:76)(cid:70) (cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:70)(cid:82)(cid:88)(cid:79)(cid:71) (cid:75)(cid:68)(cid:89)(cid:72) (cid:68) (cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79) (cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72) (cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87) (cid:82)(cid:81) (cid:82)(cid:88)(cid:85) (cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:15) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)
(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:82)(cid:73) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:70)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:17)

A slowdown of, or persistent weakness in, economic activity caused by a deterioration of global market and economic conditions
could adversely affect our business in the following ways, among others(cid:29) conditions in the credit markets could impact the ability of
our customers and their customers to obtain sufficient credit to support their operations(cid:30) the failure of our customers to fulfill their
purchase obligations could result in increases in bad debts and affect our working capital(cid:30) and the failure of certain key suppliers could
increase our exposure to disruptions in supply or to financial losses. We also may experience declining demand and falling prices for
some of our products due to our customers’ reluctance to replenish inventories. The overall impact of a global economic downturnu
or
reduced overall global trade on us is difficult to predict, and our business could be materially adversely impacted.

In addition, conditions in the international market for nitrogen fertilizer significantly influence our operating results. The international
market for fertilizers is influenced by such factors as the relative value of the U.S. currency and its impact on the importation of
fertilizers, foreign agricultural policies, the existence of, or changes in, import or foreign currency exchange barriers in certain foreign
markets and other regulatory policies (including tariffs) of foreign governments, as well as the U.S. laws and policies affecting foreign
trade and investment.

19

(cid:54)(cid:51)(cid:40)(cid:38)(cid:44)(cid:36)(cid:47) (cid:49)(cid:50)(cid:55)(cid:40) (cid:53)(cid:40)(cid:42)(cid:36)(cid:53)(cid:39)(cid:44)(cid:49)(cid:42) (cid:41)(cid:50)(cid:53)(cid:58)(cid:36)(cid:53)(cid:39)(cid:16)(cid:47)(cid:50)(cid:50)(cid:46)(cid:44)(cid:49)(cid:42) (cid:54)(cid:55)(cid:36)(cid:55)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:54)

Certain statements contained within this report may be deemed “Forward-Looking Statements” within the meaning of Section 27A of
the Securities Act of 1933 (as amended, the “Securities Act”) and Section 21E of the Securities Exchange Act. All statements in this
report other than statements of historical fact are Forward-Looking Statements that are subject to known and unknown risks,
uncertainties and other factors which could cause actual results and performance of the Company to differ materially from such
statements. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “may,” “could” and similar expressions identify Forward-
Looking Statements. Forward-Looking Statements contained herein include, but are not limited to, the following(cid:29) our ability to invest
in projects that will generate best returns for our stockholders(cid:30)

rr

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

our ability to invest in projects that will generate the best returns for our stockholders

our future liquidity outlook(cid:30)

the outlook our chemical products and related markets(cid:30)

the amount, timing and effect on the nitrogen market from the current nitrogen expansion projects(cid:30)

ff
the effect

from the lack of non-seasonal volume(cid:30)

our belief that competition is based upon service, price, location of production and distribution sites, and product quality
(cid:30)
and performance
ff

our outlook for the coal industry(cid:30)

the availability of raw materials(cid:30)

the result of our product and market diversification strategy(cid:30)

changes in domestic fertilizer production(cid:30)

the increasing output

t

and capacity of our existing production facilities(cid:30)

production volumes at our production facilities(cid:30)

our ability to moderate risk inherent in agricultural markets(cid:30)

the sources to fund our cash needs and how this cash will be used(cid:30)

the ability to enter into the additional borrowings(cid:30)

the anticipated cost and timing of our capital projects(cid:30)

certain costs covered under warranty provisions(cid:30)

our ability to pass to our customers cost increases in the formff

of higher prices(cid:30)

our belief as to whether we have sufficient sources for materials and components(cid:30)

annual natural gas requirements(cid:30)

compliance by our facilities with the terms of our permits(cid:30)

the costs of compliance with environmental laws, health laws, security regulations and transportation regulations(cid:30)

our belief as to when Turnarounds will be performed and completed(cid:30)

expenses in connection with environmental projects(cid:30)

ff
the effect

of litigation and other contingencies(cid:30)

the increase in interest expense(cid:30)

our ability to comply with debt servicing and covenants(cid:30)

our ability to meet debt maturities or redemption obligations when due(cid:30)

ff
the effects

of the ongoing CO(cid:57)ID-19 pandemic and related response(cid:30) and

our beliefs as to whether we can meet all required covenant tests for the next twelve months.

20

While we believe, the expectations reflected in such Forward-Looking Statements are reasonable, we can give no assurance such
expectations will prove to have been correct. There are a variety of factors which could cause future outcomes to differ materially
from those described in this report, including, but not limited to, the following(cid:29)

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

changes in general economic conditions, both domestic and foreign(cid:30)

material reductions in revenues(cid:30)

material changes in interest rates(cid:30)

our ability to collect in a timely manner a material amount of receivables(cid:30)

increased competitive pressures(cid:30)

adverse effects of increases in prices of raw materials(cid:30)

changes in federal, state and local
Reinvestment and Recovery Act, or in the interpretation of such(cid:30)

laws and regulations, especially environmental regulations or the American

changes in laws, regulations or other issues related to climate change(cid:30)

releases of pollutants into the environment exceeding our permitted limits(cid:30)

material increases in equipment, maintenance, operating or labor costs not presently anticipated by us(cid:30)

the requirement to use internally generated funds for purposes not presently anticipated(cid:30)

a
the inability

to secure additional financing for planned capital expenditures or financing obligations due in the near future(cid:30)

our substantial existing indebtedness(cid:30)

material changes in the cost of natural gas and certain precious metals(cid:30)

limitations due to fiff nancial covenants(cid:30)

changes in competition(cid:30)

the loss of any significant customer(cid:30)

increases in cost to maintain internal controls over financial reporting(cid:30)

changes in operating strategy or development plans(cid:30)

a
an inability

to fund the working capital

a

and expansion of our businesses(cid:30)

changes in the production efficiency of our facilities(cid:30)

adverse results in our contingencies including pending litigation(cid:30)

unplanned downtime at one or more of our chemical facilities(cid:30)

changes in production rates at any of our chemical plants(cid:30)

a
an inability

to obtain necessary raw materials and purchased components(cid:30)

material increases in cost of raw materials(cid:30)

material changes in our accounting estimates(cid:30)

significant problems within our production equipment(cid:30)

fire or natural disasters(cid:30)

a
an inability

to obtain or retain our insurance coverage(cid:30)

difficulty obtaining necessary permits(cid:30)

difficulty obtaining third-party financing(cid:30)

risks associated with proxy contests initiated by dissident stockholders(cid:30)

changes in fertilizer production(cid:30)

reduction in acres planted for crops requiring fertilizer(cid:30)

21

•

•

•

•

•

•

•

•

•

decreases in duties for products we sell resulting in an increase in imported products into the U.S.(cid:30)

adverse effects from regulatory policies, including tariffs(cid:30)

volatility of natural

t

gas prices(cid:30)

price increases resulting from increased inflation(cid:30)

weather conditions, including the effecff

ts of climate change(cid:30)

increases in imported agricultural products(cid:30)

global supply chain disruptions(cid:30)

other factors described in the MD(cid:9)A contained in this report(cid:30) and

other factors described in “Risk Factors” contained in this report.

Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements. We disclaim any
obligation to update any such factors or to publicly announce the result of any revisions to any of the Forward-Looking Statements
contained herein to reflect future events or developments.

(cid:39)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71) (cid:55)(cid:72)(cid:85)(cid:80)(cid:86)

The following is a list of terms used in this report.

(cid:36)(cid:39)(cid:40)(cid:52)

(cid:36)(cid:49)

(cid:36)(cid:53)(cid:50)

(cid:36)(cid:54)(cid:38)

(cid:36)(cid:54)(cid:56)

- The Arkansas Department of Environmental Quality.

- Ammonium nitrate.

- Asset retirement obligation.

- Accounting Standard Codification.

- Accounting Standard Update.

(cid:37)(cid:68)(cid:92)(cid:87)(cid:82)(cid:90)(cid:81) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)

- The nitric acid production facility located in Baytown, Texas.

(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)

(cid:38)(cid:36)(cid:50)

(cid:38)(cid:36)(cid:53)(cid:40)(cid:54)

(cid:38)(cid:40)(cid:50)

- Board of Directors

- A consent administrative order.

- Coronavirus Aid, Relief, and Economic Security Act.

- Chief Executive Officer.

(cid:38)(cid:75)(cid:72)(cid:85)(cid:82)(cid:78)(cid:72)(cid:72) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)

- Our chemical production facility located in Cherokee, Alabama.

(cid:38)(cid:75)(cid:72)(cid:89)(cid:85)(cid:82)(cid:81)

(cid:38)(cid:82)(cid:38)

(cid:38)(cid:82)(cid:89)(cid:72)(cid:86)(cid:87)(cid:85)(cid:82)

(cid:38)(cid:50)(cid:57)(cid:44)(cid:39)(cid:16)(cid:20)(cid:28)

(cid:38)(cid:57)(cid:53)

(cid:39)(cid:9)(cid:36)

(cid:39)(cid:40)(cid:41)

(cid:39)(cid:43)(cid:54)

(cid:40)(cid:39)(cid:36)

(cid:40)(cid:39)(cid:38)

(cid:40)(cid:39)(cid:49)

(cid:40)(cid:44)(cid:36)

- Chevron Environmental Management Company.

- Change of Control

- Covestro L.L.C.

- The novel coronavirus disease of 2019.

- Coffeyville Resources Nitrogen Fertilizers, L.L.C.

- Depreciation and amortization.

- Diesel Exhaust Fluid.

- The U.S. Department of Homeland Security.

- El Dorado Ammonia L.L.C.

- El Dorado Chemical Company.

- El Dorado Nitrogen L.L.C.

- U.S. Energy Information Administration

(cid:40)(cid:79) (cid:39)(cid:82)(cid:85)(cid:68)(cid:71)(cid:82) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)

- Our chemical production facility located in El Dorado, Arkansas.

(cid:40)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:43)(cid:72)(cid:68)(cid:79)(cid:87)(cid:75)
(cid:47)(cid:68)(cid:90)(cid:86)

- Numerous federal, state and local environmental, health and safety laws.

(cid:40)(cid:51)(cid:36)

- The U.S. Environmental Protection Agency.

22

(cid:40)(cid:56)(cid:38)

- Environmental Use Control.

(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

- A Securities Exchange Agreement between LSB Funding L.L.C. and affiliate of Eldridge L.L.C.

and LSB.

(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)

- The exchange of shares of the Series E and Series F Redeemable Preferred for shares of

common stock pursuant to the Exchange Agreement.

(cid:41)(cid:36)(cid:54)(cid:37)

- Financial Accounting Standards Board.

(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:38)(cid:82)(cid:89)(cid:72)(cid:81)(cid:68)(cid:81)(cid:87)

- Certain springing financial covenants associated with the working capital revolver loan.

(cid:42)(cid:36)(cid:36)(cid:51)

(cid:42)(cid:79)(cid:82)(cid:69)(cid:68)(cid:79)

(cid:42)(cid:82)(cid:79)(cid:86)(cid:72)(cid:81) (cid:43)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)

- U.S. Generally Accepted Accounting Principles.

- Global Industrial, Inc., a subcontractor asserting mechanics liens for work rendered to LSB and

EDC.

-

(cid:45)ack E. Golsen, Barry H. Golsen and certain of their related parties, as defined in the Board
Representation and Standstill Agreement, as amended.

(cid:43)(cid:68)(cid:79)(cid:79)(cid:82)(cid:90)(cid:72)(cid:79)(cid:79) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)

- A chemical facility previously owned by two of our subsidiaries located in Kansas.

(cid:43)(cid:39)(cid:36)(cid:49)

(cid:43)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)

(cid:44)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)

(cid:45)(cid:17) (cid:42)(cid:82)(cid:79)(cid:86)(cid:72)(cid:81)

(cid:46)(cid:39)(cid:43)(cid:40)

- High density ammonium nitrate prills used in the agricultural industry.

- LSB Funding L.L.C., the holder of all of the shares of the Series E and Series F Redeemable

Preferred.

- The agreement governing the 6.25% Senior Secured Notes.

-

(cid:45)ack E. Golsen.

- The Kansas Department of Health and Environment.

(cid:46)(cid:82)(cid:70)(cid:75) (cid:41)(cid:72)(cid:85)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:85)

- Koch Fertilizer L.L.C.

(cid:47)(cid:39)(cid:36)(cid:49)

(cid:47)(cid:72)(cid:76)(cid:71)(cid:82)(cid:86)

- Low density ammonium nitrate prills used in the mining industry.rr

- Leidos Constructors L.L.C.

(cid:47)(cid:76)(cid:84)(cid:88)(cid:76)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)

(cid:73)(cid:73)

- The Series E Redeemable Preferred liquidation preference of $1,000 per share plus accrued and

unpaid dividends plus the participation rights value.

(cid:47)(cid:54)(cid:37)

(cid:47)(cid:54)(cid:37) (cid:41)(cid:88)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)

(cid:48)(cid:39)(cid:9)(cid:36)

- LSB Industries, Inc.

- LSB Funding L.L.C.

- Management’s Discussion and Analysis of Financial Condition and Results of Operations found

in Item 7 of this report.

(cid:49)(cid:72)(cid:90) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86)

- The senior secured notes issued on October 14, 2021 with an interest rate of 6.250%, which

(cid:49)(cid:50)(cid:47)

(cid:49)(cid:82)(cid:87)(cid:72)

(cid:49)(cid:51)(cid:39)(cid:40)(cid:54)

(cid:49)(cid:51)(cid:46)

(cid:50)(cid:39)(cid:40)(cid:52)

(cid:50)(cid:79)(cid:71) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86)

(cid:51)(cid:36)(cid:53)

(cid:51)(cid:37)(cid:53)(cid:54)

(cid:51)(cid:38)(cid:38)

(cid:51)(cid:51)(cid:9)(cid:40)

(cid:51)(cid:51)(cid:51)

(cid:51)(cid:85)(cid:92)(cid:82)(cid:85) (cid:41)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)

(cid:53)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:39)(cid:68)(cid:87)(cid:72)

(cid:53)(cid:41)(cid:54)

mature in October 2028.

- Net Operating Loss.

- A note in the accompanying notes to the consolidated financial statements.

- National Pollutant Discharge Elimination.

- Compound fertilizer products which are a solid granular fertilizer product for which the nutrient

content is a combination of nitrogen, phosphorus, and potassium.

- The Oklahoma Department of Environmental Quality.

- The notes issued on April 28, 2018 with an interest rate of 9.625%, which mature in May 2023.

- Permit Appeal Resolution

- Performance-based restricted stock.

- Pryor Chemical Company.

- Plant, property and equipment.

- Paycheck Protection Program

- Our chemical production facility located in Pryor, Oklahoma.

- Date of retirement of (cid:45)ack E. Golsen as Executive Chairman of the Board, December 31, 2017.

- Federal renewable fuel standards.

23

(cid:53)(cid:48)(cid:51)

(cid:53)(cid:54)(cid:56)

(cid:54)(cid:37)(cid:36)

(cid:54)(cid:40)(cid:38)

- Risk Management Program.

- Restricted stock unit.

- U.S. Small Business Administration.

- The U.S. Securities and Exchange Commission.

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:22)

- A secured financing arrangement between EDC and an affiliate of LSB Funding L.L.C. which

matures in (cid:45)une 2023.

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)
(cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:24)

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:47)(cid:82)(cid:68)(cid:81) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:71)(cid:88)(cid:72)
(cid:21)(cid:19)(cid:21)(cid:24)

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:51)(cid:85)(cid:82)(cid:80)(cid:76)(cid:86)(cid:86)(cid:82)(cid:85)(cid:92) (cid:49)(cid:82)(cid:87)(cid:72) (cid:71)(cid:88)(cid:72)
(cid:21)(cid:19)(cid:21)(cid:20)

- A secured financing arrangement between EDA and an affiliate of LSB Funding L.L.C. which

matures in August 2025.

- A secured loan agreement between EDC and an affiliate of LSB Funding L.L.C. which matures

in March 2025.

- A secured promissory note between EDC and a lender which, matured in March 2021.

(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86)

- Senior secured notes with a stated interest rate of 9.625%, which were redeemed in October

2021.

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:37) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:39) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)

- The Series B 12% cumulative convertible Class C Preferred stock.

- The Series D 6% cumulative convertible Class C preferred stock.

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:40) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) - The 14% Series E Redeemable Preferred stock with participating rights and liquidating

distributions based on a certain number of shares of our common stock.

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:41) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) - The Series F Redeemable Preferred stock with one share to vote as a single class on all matters

(cid:54)(cid:42)(cid:9)(cid:36)

(cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79) (cid:39)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)

(cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79) (cid:48)(cid:72)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)

with our common stock equal to 456,225 shares of our common stock.

- Selling, general and administrative expense.

- A stock split in the form of a common stock dividend declared by our Board.

- Meeting of our stockholders held during the third quarter of 2021.

(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

- An agreement between (cid:45)ack E. Golsen and LSB, dated (cid:45)une

(cid:45)

30, 2017.

(cid:55)(cid:88)(cid:85)(cid:81)(cid:68)(cid:85)(cid:82)(cid:88)(cid:81)(cid:71)

- A planned majora maintenance activity.

(cid:56)(cid:36)(cid:49)

(cid:56)(cid:17)(cid:54)(cid:17)

(cid:56)(cid:54)(cid:39)(cid:36)

(cid:58)(cid:36)(cid:54)(cid:39)(cid:40)

- Urea ammonia nitrate.

- United States.

- United States Department of Agriculture.

- World Agricultural Supply and Demand Estimates Report.

(cid:58)(cid:72)(cid:86)(cid:87) (cid:41)(cid:72)(cid:85)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:85)

- West Fertilizer Company.

(cid:58)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:53)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:85)
(cid:47)(cid:82)(cid:68)(cid:81)

- Our secured revolving credit facility.

(cid:21)(cid:19)(cid:19)(cid:24) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

- A death benefit agreement with (cid:45)ack E. Golsen.

(cid:21)(cid:19)(cid:19)(cid:27) (cid:51)(cid:79)(cid:68)(cid:81)

(cid:21)(cid:19)(cid:20)(cid:25) (cid:51)(cid:79)(cid:68)(cid:81)

(cid:21)(cid:19)(cid:21)(cid:19) (cid:38)(cid:85)(cid:82)(cid:83)

(cid:21)(cid:19)(cid:21)(cid:20) (cid:38)(cid:85)(cid:82)(cid:83)

(cid:21)(cid:19)(cid:21)(cid:21) (cid:38)(cid:85)(cid:82)(cid:83)

- The 2008 Incentive Stock Plan.

- The 2016 Long Term Incentive Plan.

- Corn crop marketing year (September 1 - August 31), which began in 2019 and ended in 2020

and primarily relates to corn planted and harvested in 2019.

- Corn crop marketing year (September 1 - August 31), which began in 2020 and ended in 2021

and primarily relates to corn planted and harvested in 2020.

- Corn crop marketing year (September 1 - August 31), which began in 2021 and will end in 2022

and primarily relates to corn planted and harvested in 2021.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:20)(cid:37)(cid:17) (cid:56)(cid:49)(cid:53)(cid:40)(cid:54)(cid:50)(cid:47)(cid:57)(cid:40)(cid:39) (cid:54)(cid:55)(cid:36)(cid:41)(cid:41) (cid:38)(cid:50)(cid:48)(cid:48)(cid:40)(cid:49)(cid:55)(cid:54)

Not applicable.

24

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2

(cid:44)(cid:55)(cid:40)(cid:48) (cid:22)(cid:17) (cid:47)(cid:40)(cid:42)(cid:36)(cid:47) (cid:51)(cid:53)(cid:50)(cid:38)(cid:40)(cid:40)(cid:39)(cid:44)(cid:49)(cid:42)(cid:54)

See Legal Matters under Note 9 to the Consolidated Financial Statements included in this report.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:23)(cid:17) (cid:48)(cid:44)(cid:49)(cid:40) (cid:54)(cid:36)(cid:41)(cid:40)(cid:55)(cid:60) (cid:39)(cid:44)(cid:54)(cid:38)(cid:47)(cid:50)(cid:54)(cid:56)(cid:53)(cid:40)(cid:54)

Not applicable

(cid:51)(cid:36)(cid:53)(cid:55) (cid:44)(cid:44)

(cid:44)(cid:55)(cid:40)(cid:48) (cid:24)(cid:17) (cid:48)(cid:36)(cid:53)(cid:46)(cid:40)(cid:55) (cid:41)(cid:50)(cid:53) (cid:53)(cid:40)(cid:42)(cid:44)(cid:54)(cid:55)(cid:53)(cid:36)(cid:49)(cid:55)(cid:182)(cid:54) (cid:38)(cid:50)(cid:48)(cid:48)(cid:50)(cid:49) (cid:40)(cid:52)(cid:56)(cid:44)(cid:55)(cid:60)(cid:15) (cid:53)(cid:40)(cid:47)(cid:36)(cid:55)(cid:40)(cid:39) (cid:54)(cid:55)(cid:50)(cid:38)(cid:46)(cid:43)(cid:50)(cid:47)(cid:39)(cid:40)(cid:53) (cid:48)(cid:36)(cid:55)(cid:55)(cid:40)(cid:53)(cid:54) (cid:36)(cid:49)(cid:39) (cid:44)(cid:54)(cid:54)(cid:56)(cid:40)(cid:53)
(cid:51)(cid:56)(cid:53)(cid:38)(cid:43)(cid:36)(cid:54)(cid:40)(cid:54) (cid:50)(cid:41) (cid:40)(cid:52)(cid:56)(cid:44)(cid:55)(cid:60) (cid:54)(cid:40)(cid:38)(cid:56)(cid:53)(cid:44)(cid:55)(cid:44)(cid:40)(cid:54)

(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

Our common stock is trading on the New (cid:60)ork Stock Exchange under the symbol “L(cid:59)U.”

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)

As of February 18, 2022, we had approximately 361 record holders of our common stock. This number does not include investors
whose ownership is recorded in the name of their brokerage company.

(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) (cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:51)(cid:79)(cid:68)(cid:81)(cid:86)

Discussions relating to our equity compensation plans under Item 12 of Part III are incorporated by reference to our definitive proxy
statement which we intend to file with the SEC on or before April 29, 2022.

(cid:54)(cid:68)(cid:79)(cid:72) (cid:82)(cid:73) (cid:56)(cid:81)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

There were no unregistered sales of equity securities in 2021 that have not been previously reported in a Quarterly Report on Form 10-
Q or Current Report on Form 8-K.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:25)(cid:17) (cid:62)(cid:53)(cid:40)(cid:54)(cid:40)(cid:53)(cid:57)(cid:40)(cid:39)(cid:64)

26

(cid:44)(cid:55)(cid:40)(cid:48) (cid:26)(cid:17) (cid:48)(cid:36)(cid:49)(cid:36)(cid:42)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:182)(cid:54) (cid:39)(cid:44)(cid:54)(cid:38)(cid:56)(cid:54)(cid:54)(cid:44)(cid:50)(cid:49) (cid:36)(cid:49)(cid:39) (cid:36)(cid:49)(cid:36)(cid:47)(cid:60)(cid:54)(cid:44)(cid:54) (cid:50)(cid:41) (cid:41)(cid:44)(cid:49)(cid:36)(cid:49)(cid:38)(cid:44)(cid:36)(cid:47) (cid:38)(cid:50)(cid:49)(cid:39)(cid:44)(cid:55)(cid:44)(cid:50)(cid:49) (cid:36)(cid:49)(cid:39) (cid:53)(cid:40)(cid:54)(cid:56)(cid:47)(cid:55)(cid:54) (cid:50)(cid:41)
(cid:50)(cid:51)(cid:40)(cid:53)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)(cid:54)

The following MD(cid:9)A should be read in conjunction with a review of the other Items included in this Form 10-K and our December
31, 2021 consolidated financial statements included elsewhere in this report. A reference to a “Note” relates to a note in the
accompanying notes to the consolidated financial statements. Certain statements contained in this MD(cid:9)A may be deemed to be
forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”

(cid:50)(cid:89)(cid:72)(cid:85)(cid:89)(cid:76)(cid:72)(cid:90)

(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)

LSB is headquartered in Oklahoma City, Oklahoma and through our subsidiaries, we manufacture and sell chemical products for the
agricultural, mining, and industrial markets. We own and operate three multi plant facilities in Cherokee, Alabama, El Dorado,
Arkansas and Pryor, Oklahoma, and operate a facility on behalf of Covestro in Baytown, Texas. Our products are sold through
distributors and directly to end customers, primarily throughout the U.S. and parts of Mexico and Canada.

(cid:46)(cid:72)(cid:92) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:44)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86) (cid:73)(cid:82)(cid:85) (cid:21)(cid:19)(cid:21)(cid:21)

We expect our future results of operations and financial condition to benefit from following key initiatives(cid:29)

•

•

Investing to improve Environmental, Health &Safetyff
Becoming a “Best

“

in Class” Chemical Plant Operator while Supplying our Customers with Products of the Highest Quality.tt

and Reliabilityt at our Facilities to further our Progress Towards

(cid:3) We believe that our operational progress over the past several years represents proof that high safety standards not only
enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant
performance. With that in mind, in 2022 we remain acutely focused on our efforts to further the progress we’ve made
in creating a high performing safety culture as we advance the safety programs, we have underway and implement new
ones. Additionally, we will be investing capital at all three of our facilities to further promote safe and reliable
operations in order to build upon the success we have had in implemm
enting enhanced safety programs during the last
three years.

(cid:3) We have several initiatives currently underway focused on further improving the reliability of our plants which we
expect will allow us to produce greater volumes of product for sale, lower our cost of production and increase our
overall profitability. These initiatives are focused on operations excellence through enhancements in leadership at
certain of our facilities, bolstering our operating procedures, leveraging the technology investments we’ve made for the
purpose of advancing the optimization of our asset health monitoring through asset care excellence maintenance
programs. Additionally, our product quality program continues to focus on providing products to our customers that
meet the highest quality standards.

Continue Broadening the Distribution and Optimization of our Product mix. Over the course of 2021 we were successful in
maximizing the production capacity of our plants, and plan to continue to expand the distribution of our products by partnering
with customers to take product into different markets while also focusing our efforts to upgrade our margins through the
optimization of our product mix.

(cid:3)

In the first quarter of 2021, we commenced a new long-term nitric acid supply contract with a customer under which
we agreed to supply between 70,000 to 100,000 tons of nitric acid per year. We progressively ramped the volume of
product supplied to the customer over the course of 2021, and in 2022, we will recognize a full year of sales under this
agreement putting us in a sold-out position for nitric acid at our El Dorado facility and achieving our objective to fully
utilize our production capacity for this product.

(cid:3) We are targeting $10 million to $15 million of capital for margin enhancement projects in 2022 to optimize our storage
and distribution capability. Additionally, we are evaluating opportunities to upgrade more of the ammonia we produce
into higher value downstream products in order to capture additional margin. We also believe we have opportunities to
increase our productd
ion volume of certain products through debottlenecking projects and will be analyzing the potential
returnsr

from these investments over the course of the year.

• Development and Implementation of a Strategy to Capitalize on Low Carbon Ammonia and Clean Energy Opportunities. The
reduction of greenhouse gas emissions, particularly related to carbon dioxide, has been, and, we expect will increasingly
become a global environmental priority as part of efforts to stem the deleterious effects of climate change. There is increasing
evidence from a variety of industry studies to indicate that ammonia can play a significant role in making meaningful progress
towards this objective. As a result, we are currently in the process of formulating a strategy to become a producer and marketer
of blue and green ammonia and other derivative products over the coming years. Blue ammonia is produced using natural gas
and conventional processes but includes the additional stage where the CO2 emissions are captured and permanently stored in
deep underground rock formations, resulting in a low carbon emission product that can be sold at a premium to agricultural,
rial, mining, power generation and marine customers seeking to reduce their carbon footprint and potentially capitalize on
industd

27

government incentives. Green ammonia is ammonia produced using renewable energy to power electrolyzers that extract
hydrogen from water, resulting in the zero-carbon production of ammonia that, we believe can, also be sold at a premium to a
variety of industries around the world.

Ammonia has been increasingly emerging as one of the most viable alternatives to serve as a hydrogen-based energy source for
a variety of applications given its higher energy density and ease of storage relative to hydrogen gas. Blue and green ammonia
can be used as zero carbon fuel in the maritime sector, a carbon free fertilizer and as a coal substitute in power generation. If
ammonia were to be used for energy consumption globally, some studies have indicated that future demand could equate to five
times the amount of current global annual production of ammonia, or approximately 50 times the current seaborne trade. We
believe we are well-positioned to capitalize on this opportunitytt and be market leaders given our potential to retrofit our existing
plants rather than investing in greenfield projects, thereby reducing the time to market and the upfront capital expenditures,
enhancing the economic attractiveness to such investments. With that said, we will also consider investing in greenfield projects
that have the potential to offer attractive returns

•

Pursue Acquisitions of Strategic Assets or Companies. We are actively engaged in evaluating and pursuing various
opportunities to acquire strategic assets or companies (including through mergers), where we believe those acquisitions will
enhance the value of the Company and provide attractive returns. Targets under consideration could provide us with geographic
expansion, extend an existing product line, add a new product line, leverage our existing ammonia production capabilities, or
complement our existing business lines, among other accretive opportunities. We are considering options across our
agricultural, industria
l and mining business. The opportunities we consider as meeting our investment criteria generally range in
value from $200 million to $500 million, although we may consider other attractive opportunities outside of this range. We are
also evaluating investments that would add additional production capacity in business lines where we believe the returns will be
ce any of the foregoing through the incurrence of additional indebtedness (including through
attractive. We may choose to finan
loans or the issuance of debt securities) or the issuance of equity,
in each case subject to financial analysis that we believe
would support an increase to shareholder value and favorable market conditions at the time of issuance.

d

q

ff

is
We may not successfully implement any or all of these initiatives. In addition, the consummation of any acquisition opportunitytt
subject to the negotiation of definitive documentation with any counterparties
and, if applicable, regulatory approvals, as well as the
satisfaction of negotiated closing conditions, none of which cana be assured, and there can be no guarantee that any opportunity we
choose to pursue will ultimately be consummated. Even if we successfully implement the initiatives, they may not achieve the results
that we expect or desire.

r

(cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:16)(cid:21)(cid:19)(cid:21)(cid:20)

Exchange Transaction and Special Common Stock Dividend

On September 27, 2021, we closed a Securities Exchange Transaction (the “Exchange Transaction”) with LSB Funding LLC (the
“Holder”), an affiliate of Eldridge, in which we exchanged the shares of Series E and Series F Redeemable Preferff
red Stock held by the
Holder for shares of our common stock. In summary, we exchanged the approximately $310 million liquidation preference of
preferred stock held by the Holder into our common stock based on an exchange price of $6.16, which was equal to the 30-day
volume weighted average price as of the date of the Exchange Agreement. However, the exchange consideration paid under the
Exchange Agreement was reduced by approximately 1.2 million shares, which shares were included in the Special Dividend and
received by the Holder. In connection with the transaction, on October 8, 2021, our common stockholders, including the Holder,
received the Special Dividend in the form of 0.30 shares of our common stock for every share owned as of the September 24, 2021,
is that it relieved our Company and our common stockholders
the Special Dividend record date. The main benefit of the exchange
from the expensive, compounding burden of the preferred stock dividend, improving the current capital structure.

a

Reduced Cost of Capital through Debt Refinancing

The Exchange Transaction discussed above prompted the major credit rating agencies, Moody’s and S(cid:9)P, to upgrade their credit
ratings on our debt, which combined with the favorable credit markets, enabled us to complete a refinancing of our senior notes on
significantly improved terms, reducing our cost of capital, bolstering our liquidity and extending the maturity of our debt. More
specifically, on October 14, 2021, we closed on an offering of $500 million of senior secured notes due 2028, bearing an interest rate
of 6.250%, which we used to redeem our $435 million of 9.625% senior notes that were due to mature in 2023, with the balance being
used to enhance the liquidity of our balance sheet and for general corporate purposes. The reduction of the rate of interest on our
outstanding notes by more than 300 basis points represents a meaningful reduction in our annual cash interest expense and puts us in a
position to more aggressively pursue our key operating initiatives discussed above.

Continued Improvement in Product Sales

Selling prices for all of our major products improved over the course of 2021 as compared to the prior year driven by a combination of
supply and demand factors. With respect to our agricultural business, corn prices for the vast majority of 2021 sat above levels not
seen since 2014, and the current prices exceeding $6 per bushel, are significantly above the $4 per bushel level that we believe
represents a very favorable level for farmers to earn significant income on their crops. The strong corn prices over the past year have

28

been driven, in part, by a rebound in the production of ethanol, a gasoline additive that represents approximately 40% of total U.S.
corn use annually, as miles driven have returned to near pre-pandemic levels. Also supporting the strong corn pricing over the past
year has been Chinese demand for corn for use as feed for swine as part of the nation’s efforts to rebuild its swine production in the
wake of a virus that dramatically reduced its swine population several years ago. This demand for feed is expected to remain robust as
China has moved to large institutional hog farms which consume significant quantities of corn. Globally, corn supplies have been
constrained by drought conditions in South America and the Western U.S., which has served to further bolster corn prices. Early
forecasts point to U.S. corn acreage to be planted in the 2022-2023 planting season to be approximately 90 to 92 million acres,
modestly lower than the 2021-2022 estimate of 93.4 million acres, but still at a very healthy level to support strong demand for
fertilizers.

In addition to strong corn pricing, which has prompted farmers to increase fertilizer purchases in order to maximize yields, a series of
supply related factors that unfolded over the course of 2021 have served to create a global shortage of ammonia, driving the strong
increase in the prices for nitrogen products. This began in February 2021, as winter storm Uri and the resultant severe cold weather
experienced in many areas of the U.S. caused many nitrogen producers
to idle their plants resulting in a tightening in the supply of
dd
nitrogen products headed into the spring planting season. Exacerbating this supply constraint, during the third quarter of 2021 a
number of ammonia facilities underwent turnarounds that were originally scheduled for third quarter of 2020 but were postponed due
to the CO(cid:57)ID-19 pandemic. Additionally, in late August, Hurricane Ida, a Category 4 storm caused production along the U.S. Gulf
coast to be shut down for a period of time, further reducing production. Also supporting the strength in fertilizer prices has been the
significant increase in the cost of natural gas, the primary feedstock for production of ammonia, which has prompted various
producers to cease operations of some facilities, particularly in Europe where natural gas prices have surged to more than $30 per
MMBtu, rendering some ammonia plants uneconomical to operate. The resultant decrease in global production of ammonia has fueled
further strength in nitrogen-based fertilizer prices, which have thus far materially outstripped the impact to production costs of rising
natural gas prices in the U.S. The factors discussed above have led to continued strong pricing into the first quarter of 2022, which we
expect to support continued favorable pricing levels over the balance of the year.

tt

As for our industrial and mining products, selling prices have continued to improve as the supply of ammonia remains tight due to
strong global demand, curtailed global supply due to rising natural
gas prices, numerous global unplanned outages and lower than
expected product imports. As a result, the Tampa Ammonia benchmark price increased to, and remains at multi-year high levels,
which have translated into higher selling prices for our products as many of our industrial contracts are indexed to this benchmark
price. Demand trends for the industrial products we sell, primarily nitric acid and ammonia, have remained robust despite disruptions
to certain end markets, such as auto manufacturing which has been constrained due to a shortage of microprocessors, as activity in
other markets, such as homebuilding and power generation has remained strong. In addition, our sales of nitric acid increased steadily
throughout 2021 pursuant to the new long-term nitric acid supply contract discussed above. Demand for our mining products
continues to improve as quarry and construction activity has been elevated due to robust levels of residential, commercial and civil
infrastructure buildout along with strong demand for precious metals, including expectations for rising copper production to support
the growing domestic production of electric vehicles.

u

rr

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

Long-Term Nitric Acid Supply Contract

During October 2020, EDC entered into a new long-term nitric acid supply contract with a customer. Under the agreement, EDC
agreed to supply between 70,000 to 100,000 tons of nitric acid annually, with sales that began in the first quarter of 2021. The initial
contract term extends through 2027 but includes automatic one-year renewal terms unless terminated by either party pursuant to the
terms of the contract.

PPP Loan Forgiven

In April 2020, we entered into a federally guaranteed Paycheck Protection Program (“PPP”) loan for $10 million with a lender
pursuant to a new loan program through the U.S. Small Business Administration (“SBA”) as the result of the PPP established by the
Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and amended by the Paycheck Protection Program Flexibility Act of
2020. We have used all of the proceeds from the PPP loan for payroll, rent, utilities, and other specified costs that qualify for loan
forgiveness. In April 2021, we submitted the PPP loan forgiveness application to the lender. In (cid:45)une 2021, the PPP loan was fully
forgiven by the SBA and lender.

2021 Winter Storm Uri, Natural Gas Curtailment and Settlement of Natural Gas Contracts

On February 12, 2021, the Pryor Facility was taken out of service due to extreme cold weather associated with the winter storm Uri
that caused a surge in natural gas prices in the region, along with the curtailment of gas distribution by the operator of the pipeline that
supplies natural gas to the facility. On February 21, 2021, this facility began a phased restart and the facility’s ammonia plant was in
production shortly thereafter.

29

Also, as a result of unprecedented cold weather conditions, on February 17, 2021, the primary natural gas supplier to our El Dorado
Facility asserted a claim of force majeure and materially restricted the supply of gas to the facility. However, effective February 23,
.
2021, the force majeure was lifted, and the facility’s ammonia plant was in production shortly thereafter

ff

As weather across the middle of the country improved and temperatures warmed, natural gas prices normalized, and supply were
restored to levels required for full operation of our facilities.

Notably, our Cherokee Facility was not materially impacted by the extreme cold weather and related natural gas price and supply
issues and operated at targeted levels throughout February 2021.

In order to mitigate a portion of the commodity price risk associated with natural gas, we periodically enter into natural gas forward
contracts and volume purchase commitments that locked in the cost of certain volumes of natural gas. Prior to this weather event, we
had both types of arrangements. During the first quarter of 2021, we settled all of our natural gas forward contracts and certain volume
purchase commitments outstanding at that time. As a result of the settlement of these natural gas contracts, we were able to
significantly mitigate the impact from lost production, lost sales and higher costs resulting from the impact of the natural gas shortage
caused by winter storm Uri.

(cid:46)(cid:72)(cid:92) (cid:44)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92) (cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)

Supply and Demand

Agricultural

The price at which our agricultural products are ultimately sold depends on numerous factors, including the supply and demand for
nitrogen fertilizers which, in turn, depends upon world grain demand and production levels, the cost and availability of transportation
and storage, weather conditions, competitive pricing and the availability of imports. Additionally, expansions or upgrades of
competitors’ facilities and international and domestic political and economic developments continue to play an important role in the
global nitrogen fertilizer industry economics, including the impact from the Phase 1 trade agreement between the U.S and China.
These factors can affect, in addition to selling prices, the level of inventories in the market which can cause price volatility and affect
product margins.

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

pcrops pplanted.

Additionally, changes in corn prices and those of soybean, cotton and wheat prices, can affect the number of acres of corn plantea
given year, and the number of acres planted will drive the level of nitrogen fertilizer consumption, likely effecting prices.

d in a

For 2021 as noted in the table below, the USDA estimates the number of acres of corn planted in the U.S. was approximately 93
million acres, up 3% compared to the 2020 planting season. In addition, the USDA estimates the U.S ending stocks for the 2022 Crop
will be approximately 39 million metric tons, a 25% increase from the 2021 Crop. The USDA also is estimating a record yield for the
2022 Crop, up approximately 3% from a year ago.

The following February estimates are associated with the corn market(cid:29)

U.S. Area Planted (Million acres)
U.S. (cid:60)ield per Acre (Bushels)
U.S. Production (Million bushels)
U.S. Ending Stocks (Million metric tons)
World Ending Stocks (Million metric tons)

(cid:21)(cid:19)(cid:21)(cid:21) (cid:38)(cid:85)(cid:82)(cid:83)
(cid:11)(cid:21)(cid:19)(cid:21)(cid:20) (cid:43)(cid:68)(cid:85)(cid:89)(cid:72)(cid:86)(cid:87)(cid:12)
(cid:41)(cid:72)(cid:69)(cid:85)(cid:88)(cid:68)(cid:85)(cid:92) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:11)(cid:20)(cid:12)
93.4
177.0
15,115
39.1
302.2

(cid:21)(cid:19)(cid:21)(cid:20) (cid:38)(cid:85)(cid:82)(cid:83)
(cid:11)(cid:21)(cid:19)(cid:21)(cid:19) (cid:43)(cid:68)(cid:85)(cid:89)(cid:72)(cid:86)(cid:87)(cid:12)
(cid:41)(cid:72)(cid:69)(cid:85)(cid:88)(cid:68)(cid:85)(cid:92) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:11)(cid:20)(cid:12)
90.7
171.4
14,111
31.4
292.1

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:11)(cid:21)(cid:12)

3.0%
3.3%
7.1%
24.5%
3.5%

(cid:21)(cid:19)(cid:21)(cid:19) (cid:38)(cid:85)(cid:82)(cid:83)
(cid:11)(cid:21)(cid:19)(cid:20)(cid:28) (cid:43)(cid:68)(cid:85)(cid:89)(cid:72)(cid:86)(cid:87)(cid:12)
(cid:41)(cid:72)(cid:69)(cid:85)(cid:88)(cid:68)(cid:85)(cid:92) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:11)(cid:20)(cid:12)
89.7
167.5
13,620
48.8
306.3

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72) (cid:11)(cid:22)(cid:12)

4.1%
5.7%
11.0%
(19.9%)
(1.3%)

(1) Information obtained from WASDE report dated February 9, 2022 (“February Report”) for the 2021(cid:18)2022 (“2022 Crop”),
2020(cid:18)2021 (“2021 Crop”) and 2019(cid:18)2020 (“2020 Crop”) corn marketing years. The marketing year is the twelve-month
period during which a crop normally is marketed. For example, the marketing year for the current corn crop is from
September 1 of the current year to August 31 of the next year. The year begins at the harvest and continues until just before
harvest of the following year.

(2) Represents the percentage change between the 2022 Crop amounts compared to the 2021 Crop amounts.
pCrop amounts.
( )(3)

change between the 2022

compared to the 2020

pRepresents the p

pCrop amounts

percentage
g

p

g

The current USDA corn outlook for the U.S. is for slightly higher production, higher food, seed and industrial use, ethanol and larger
ending stocks. From a demand perspective, corn prices remain well above historical 5-year averages and remain significantly higher

30

than $4 per bushel, the level that we believe represent a key threshold as it relates to favorable farmer economics. In addition,
domestic corn demand to produce ethanol has rebounded to pre-pandemic
levels as the continued roll-out of vaccines has allowed for
a
the re-opening of the vast majority of the U.S. economy, promoting increased mobility and a return to historical levels of gasoline
consumption. Most gasoline has 10% ethanol content. Ethanol is commonly made from corn and ethanol production is the largest user
of U.S. corn, currently representing roughly 36% of total U.S. corn demand.

The available U.S. supply of ammonia and other nitrogen products has tightened in 2021, primarily as the result of higher demand for
such products, in addition to the idling of many nitrogen plants in February 2021 due to the severe cold weather and ongoing industry
downtime caused the lingering problems of that event coupled with more turnaround activity in 2021 as many companies chose to
delay turnarounds in 2020 as a result of the pandemic and lost production from several hurricane events in 2021. The significant
increase in the cost of natural gas, the primary feedstock for production of ammonia, which has prompted various producers to cease
operations of some facilities further reducing supplies, particularly in Europe where natural gas prices have surged to more than $30
per MMBtu, rendering some ammonia plants uneconomical to operate.

As a result of these factors discussed above, we have experienced a price rally for fertilizers during 2021, and we expect these price
levels will continue into the 2022 spring planting season.

Industrial and Mining

Our industrial products sales volumes are dependent upon general economic conditions primarily in the housing, automotive, and
paper industries. According to the American Chemistry Council, the U.S. economic indicators are improving and pointing towards
continued improvement in the markets we serve. Our sales prices generally vary with the market price of ammonia or natural gas, as
applicable, in our pricing arrangements with customers. See discussion above concerning a new long-term nitric acid supply contract
under “Business Developments-2021.”

Our mining products are LDAN and AN solution, which are primary used as AN fuel oil and specialty emulsions for usage in the
quarry and the construction industries, for metals mining, and to a lesser extent, for coal. In our mining markets, our sales volumes are
typically driven by changes in the overall North American consumption levels of mining products that can be impacted by weather.
Demand for our mining products continues to improve as quarry and construction activity has been elevated due to robust levels of
residential, commercial and civil infrastructure buildout along with strong demand for precious metals, including expectations for
rising copper production to support the growing domestic production of electric vehicles.

NN
Natural

Gas Prices

Natural gas is the primary feedstock used to produce nitrogen fertilizers at our manufacturing facilities. In recent years, U.S. natural
gas reserves have increased significantly due to, among other factors, advances in extracting shale gas, which has reduced and
stabilized natural gas prices, providing North America with a cost advantage over certain imports. As a result, our competitive position
and that of other North American nitrogen fertilizer producers has been positively affected.

We historically have purchased natural gas either on the spot market, through forward purchase contracts, or a combination of both
and have used forward purchase contracts to lock in pricing for a portion of our natural gas requirements. These forward purchase
contracts are generally either fixed-price or index-price, short-term
in nature and for a fixed supply quantity. We are able to purchase
natural gas at competitive prices due to our connections to large distribution systems and their proximity to interstate pipeline systems.
The following tablea

shows the annual volume of natural gas we purchased and the average cost per MMBtu(cid:29)

rr

NNatural gas volumes (MMBtu in millions)
NNatural gas average cost per MMBtu

Transportation Costs

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

28.3
3.51

$

30.1
2.09

$

Costs for transporting nitrogen-based products can be significant relative to their selling price. We continue to evaluate the recent
rising costs of rail and truck freight domestically. Since the Magellan ammonia pipeline was permanently shut down in 2020, certain
Oklahoma and Texas producers that relied on the pipeline to transport their ammonia are relying on other transportation modes,
primarily trucks, but also rail and barge transport. As a result of increases in demand for available trucks to transport ammonia,
primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins, if we
were unable to fully pass through these costs to our customers. Additionally, continued truck driver shortages could impact ouru ability
to fulfill customer demand. As a result, we continue to evaluate supply chain efficiencies to reduce or counter the impact of higher
logistics costs.

31

(cid:46)(cid:72)(cid:92) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79) (cid:41)(cid:68)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)

Facilityii

Reliabilitytt

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

Our Cherokee Facility is currently on a three-year ammonia plant Turnaround cycle completing a planned Turnaround during 2021
with the next ammonia plant Turnaround planned in the third quarter

of 2024.

a

Our El Dorado and Pryor Facilities are currently on a three-year ammonia plant Turnaround cycle with both currently scheduled for
their next ammonia plant Turnarounds

in the third quarter of 2022.

r

Ammonia Production

Ammonia is the basic product used to produce all of our upgraded products. The ammonia production rates of our plants affect the
total cost per ton of each product produced and the overall sales of our products.

Total ammonia production in 2021 was 765,000 tons. For 2022, we are targeting total ammonia production of approximately 780,000
tons to 800,000 tons despite a 30-day Turnaround at our Pryor Facility and a 24-day Turnaround at our El Dorado Facility, which will
lower ammonia production during the third quarter by approximately 50,000 tons.

We believe that our focus on continuous improvement in reliability as discussed in key operating initiatives will result in year over
year improvement in ammonia production for 2022.

Forward Sales Contracts

We use forward sales of our fertilizer products to optimize our asset utilization, planning process and production scheduling. These
sales are made by offering customers the opportunity to purchase product on a forward basis at prices and delivery dates that are
agreed upon, with dates typically occurring within 12 months. We use this program to varying degrees during the year depending on
market conditions and our view of changing price environments. Fixing the selling prices of our products months in advance of their
ultimate delivery to customers typically causes our reported selling prices and margins to differ from spot market prices and margins
available at the time of shipment.

(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71) (cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:73)(cid:82)(cid:85) (cid:21)(cid:19)(cid:21)(cid:20)

Our consolidated net sales for 2021 were $556.2 million compared to $351.3 million for 2020. Our consolidated operating income for
2021 was $101.0 million compared to an operating loss of $15.5 million for 2020. The items affecting our operating results are
discussed below and under “Results of Operations.”

(cid:44)(cid:87)(cid:72)(cid:80)(cid:86) (cid:36)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:81)(cid:74) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92) (cid:82)(cid:73) (cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)

Sellingii

Prices

Our 2021 average agricultural selling prices for our ammonia, UAN,A and HDAN increased 111%, 87% and 46%, respectively,
compared to 2020. As discussed above under “Business Developments-2021,” increased demand, higher corn prices and tighter
supplies of nitrogen products contributed to the improved pricing.

were also higher compared to the same period of 2020, primarily
Our 2021 average industrial selling prices for most of our products
driven by the $359 per metric ton increase in the Tampa Ammonia benchmark price, as many of our industrial contracts are indexed to
the Tampa Ammonia benchmark price.

d

Turnaround Activities (2021 only)

When a Turnaround is performed, overall results are negatively impacted. This impact includes lost contribution margin from lost
sales, lost fixed cost absorption from lower production, and increased costs associated with repairs and maintenance. The effects of
our Turnaround, exclusive of the impacts due to lost ammonia production during the downtime, are shown below(cid:29)

Facility
Cherokee

2021 Related Period
3rd Quarter

32

Turnaround
Downtime
40 days

Turnaround
Expense
(In Thousands)

$

7,976

Estimated Lost
Ammonia Production
(In Tons)

21,000

Settlement of Natural Gas Contracts (2021 only)

As discussed above under “Business Developments-2021”, we settled all of our natural gas forward contracts and certain volume
purchase commitments and recognized a realized gain of approximately $6.8 million, which is classified as a reduction to cost of
sales. As a result of the settlement of these natural gas contracts, we were able to significantly mitigate the impact from lost
production, lost sales and higher costs resulting from the impact of the natural gas shortage caused by the February cold weather
event.

t

Change of Control and Special Dividend (2021 only)

As the result of the Exchange Transaction discussed above under “Business Developments-2021” and in Note 2, Eldridge held over
60% of our outstanding shares of common stock on the closing date of the Exchange Transaction. As a result, a change of control
(“CoC”) event occurred as defined in certain agreements, including stock-based awards and cash-based awards. As a result, additional
expense was recognized due to the CoC event. In addition, pursuant to anti-dilutive terms included in the cash-based awards, the
number of units of cash-based awards increased due to the Special Dividend, also resulting in additional expense being recognized. In
summary,rr we recognized approximately $5.0 million in additional expense, of which $1.2 million is classified as cost of sales and $3.8
million is classified as SG(cid:9)A.

Net Loss on Extinguishments of Debt (2021 only)

As discussed above under “Business Developments-2021” and in Note 5, we redeemed all of the Senior Secured Notes due 2023 and
recognized a loss on extinguishment of debt of approximately $20.3 million. Partially offsetting this loss was a gain on extinguishment
of debt of $10 million associated with the PPP loan that was fully forgiven by the SBA and lender.

Settlements with Certain Vendors (2020 only)

During 2020, EDC and certain vendors mediated settlements totaling $7.6 million for EDC to recover certain costs associated with our
on of this plant was completed and began production in 2016. Of the
new nitric acid plant at our El Dorado Facility. The constructi
$7.6 million, approximately $5.7 million is classified as a reduction
to cost of sales and approximately $1.9 million is classified as a
dd
reduction to PP(cid:9)E. The recovery amount was applied against the original classification of the underlying costs.

r

Legal Fees-Leidos

For 2021 and 2020, certain legal fees were approximately $1.9 million and $5.7 million, respectively. These fees relate to claims we
are pursuing against Leidos to recover damages and losses associated with the construction of the ammonia plant at the El Dorado
Facility as discussed in footnote B of Note 9. Due to the impact from the CO(cid:57)ID-19 pandemic, the trial date has been delayed, which
resulted in reduced costs in 2021. We are awaiting a new trial date.

33

(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86) (cid:82)(cid:73) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

The following Results of Operations should be read in conjunction with our consolidated financial statements for the years ended
December 31, 2021 and 2020 and accompanying notes and the discussions under “Overview” and “Liquidity and Capital Resources”
included in this MD(cid:9)A. (cid:60)ou should carefully review and consider the information in the MD(cid:9)A of our 2020 Form 10-K, filed with
the SEC on February 25, 2021, for an understanding of our results of operations and liquidity discussions and analysis comparing
2020 to 2019.

We present the following information about our results of operations. Net sales to unaffili
consolidated financial statements and gross profitff
cost of freight being recorded in cost of sales.

ated customers are reported in the
represents net sales less cost of sales. Net sales are reported on a gross basis with the

ff

(cid:60)(cid:72)(cid:68)(cid:85) (cid:40)(cid:81)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15) (cid:21)(cid:19)(cid:21)(cid:20) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71) (cid:87)(cid:82) (cid:60)(cid:72)(cid:68)(cid:85) (cid:40)(cid:81)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15) (cid:21)(cid:19)(cid:21)(cid:19)

The following table contains certain financial information(cid:29)

NNet sales(cid:29)

l products
Industrial and mining products

Total net sales

profit(cid:29)

gross profit (1)
Depreciation and amortization (2)
Turnaround expense
Recovery from settlements with certain vendors (3)

Total gross profit

Selling, general and administrative expense
Other (income) expense, net
Operating income (loss)

Interest expense, net
NNet loss on extinguishments of debt
NNon-operating other expense, net
Benefit forff

income taxes

Net income (loss)

information(cid:29)

profit percentage (4)

Adjusted gross profit percentage (4)
Property, plant and equipment expenditures

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

(Dollars In Thousands)

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:74)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

(cid:38)

264,502
291,737
556,239

$

$

180,036
171,280
351,316

$

$

84,466
120,457
204,923

217,515
(68,583)
(9,953)
(cid:178)
138,979
38,028
(97)
101,048
49,378
10,259
2,422
(4,556)
43,545

$

80,960
(69,500)
(76)
5,664
17,048
32,084
499
(15,535)
51,115
(cid:178)
10
(4,749)
(61,911)

$

136,555
917
(9,877)
(5,664)
121,931
5,944
(596)
116,583
(1,737)
10,259
2,412
193
105,456

25.0%
39.1%

4.9%
23.0%

35,128

$

30,471

$

20.1%
16.1%
4,657

47%
70%
58%

169%
(1)%

715%
19%

750%
(3)%

(170)%

15%

$

$

$

$

(1)

(2)
(3)
(4)

Represents a non-GAAP measure since the amount excludes unallocated depreciation and amortization, Turnaround expenses and a recovery
from settlements.
Represents amount classified as cost of sales.
See discussion above under “Items Affecting Comparability of Results.”
As a percentage of total net sales.

34

The following tables provide key sales metrics for the agricultural

tt

products(cid:29)

(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87) (cid:11)(cid:87)(cid:82)(cid:81)(cid:86) (cid:86)(cid:82)(cid:79)(cid:71)(cid:12)

UAN
HDAN
Ammonia
Other

Total

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

440,270
265,918
70,331
13,505
790,024

498,738
292,679
97,367
18,024
906,808

(cid:38)

(cid:74)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)
(58,468)
(26,761)
(27,036)
(4,519)
(116,784)

(cid:42)(cid:85)(cid:82)(cid:86)(cid:86) (cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72) (cid:54)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74) (cid:51)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86) (cid:11)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72) (cid:83)(cid:72)(cid:85) (cid:87)(cid:82)(cid:81)(cid:12)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

UAN
HDAN
Ammonia

$
$
$

281
347
485

$
$
$

150
237
230

$
$
$

131
110
255

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:74)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

(cid:38)

(12)%
(9)%
(28)%
(25)%
(13)%

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

87%
46%
111%

With respect to sales of industrial and mining products, the folff

lowing tablea

indicates key operating metrics of our major products

dd

(cid:29)

(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87) (cid:11)(cid:87)(cid:82)(cid:81)(cid:86) (cid:86)(cid:82)(cid:79)(cid:71)(cid:12)
Ammonia
AN, Nitric Acid and Other

Total

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

234,258
442,066
676,324

269,485
303,787
573,272

(35,227)
138,279
103,052

(cid:51)(cid:72)(cid:85)(cid:70)(cid:72)(cid:81)(cid:87)(cid:68)(cid:74)(cid:72)
(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

(13)%
46%
18%

Ammonia Benchmark (price per metric ton)

$

592

$

233

$

359

154%

(cid:49)(cid:72)(cid:87) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86)

Agricultural product sales increased driven primarily by higher sales prices for all of our agricultural products partially offset
by lower
sales volumes of our products resulting from lower production, including ammonia, due to the February 2021 weather event, the
completion of a Turnaround at our Cherokee Facility during 2021, and product mix shifts to our industrial and mining products. As
discussed above under “Business Developments-2021,” increased demand, higher corn prices, and tighter supplies of nitrogen
products contributed to the improved pricing.

ff

Industrial product sales increased primarily from higher sales prices due primarily to higher Tampa Ammonia benchmark pricing and
higher nitric acid sales volume due in part to sales beginning in 2021 pursuant to the new long-term nitric acid supply agreement, and
product mix shifts. The average Tampa Ammonia pricing was approximately $359 per ton higher compared to the same period in
2020.

Mining products sales improved driven by primarily from increased sales volumes. Demand for our mining products improved as
quarry and construction activity has been elevated due to robust levels of residential, commercial and civil infrastructure buildout
along with strong demand for precious metals, including expectations for rising copper production to support the growing domestic
production of electric vehicles. Also, certain mining sales contracts are linked to natural gas indexes and as the cost of natural
gas
increases, the pricing for these products increase accordingly.

tt

(cid:42)(cid:85)(cid:82)(cid:86)(cid:86) (cid:51)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)

As noted in the table above, we recognized a gross profit of $139 million for 2021 compared to $17 million for the same period in
2020, or a $122 million improvement. Overall, our gross profit percentage was 25% for 2021 compared to 5% for 2020. Our adjusted
gross profit percentage increased to 39% for 2021 from 23% for 2020.

d

The increase in gross profit was primarily driven by higher sales prices for our products coupled with an overall increase in sales
volume of upgraded industr
by lower volumes of our agricultural products. The improvement in
gross profit was also partially offset by the net impact of the February weather disruption and overall higher average natural gas costs,
which averaged $3.51 per MMBtu for 2021 as compared to $2.09 per MMBtu for 2020 and the impact of the Turnaround completed at
our Cherokee Facility as discussed above under “Turnaround Activities”. Also, 2020 included settlements with certain vendors
resulting in a recovery of approximately $5.7 million.

ial and mining products partially offset

ff

35

(cid:54)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:15) (cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:36)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)

Our SG(cid:9)A expenses were $38.0 million for 2021, an increase of $5.9 million compared to 2020. The net increase was primarily
driven by approximately $3.8 million of expense due to CoC and anti-dilutive provisions included in certain agreements as discussed
above under “Change of Control and Special Dividend.”, approximately $5.4 million associated with short and long-term
compensation incentives and other payroll related costs partially offset by lower professional fees of $4.0 million.

(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87) (cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:15) (cid:81)(cid:72)(cid:87)

Interest expense for 2021 was $49.4 million compared to $51.1 million for 2020. The decrease relates primarily to the interest expense
incurred in 2020 associated with a litigation judgment discussed in footnote (B) of Note 9.

(cid:49)(cid:72)(cid:87) (cid:79)(cid:82)(cid:86)(cid:86) (cid:82)(cid:81) (cid:40)(cid:91)(cid:87)(cid:76)(cid:81)(cid:74)(cid:88)(cid:76)(cid:86)(cid:75)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:82)(cid:73) (cid:39)(cid:72)(cid:69)(cid:87)

As discussed above under “Business Developments-2021” and in Note 5, during 2021, we redeemed all of the Senior Secured Notes
due 2023 and recognized a loss on extinguishment of debt of approximately $20.3 million. Partially offsetting this loss was a gain on
extinguishment of debt of $10 million associated with the PPP loan that was fully forgiven by the SBA and lender.

(cid:49)(cid:82)(cid:81)(cid:16)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:11)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:12)(cid:15) (cid:81)(cid:72)(cid:87)

Non-operating other expense for 2021 was $2.4 million (minimal for 2020). This change primarily relates to the change in fair value
of the embedded derivative included in the Series E Redeemable Preferred prior to its extinguishment through the completion of the
Exchange Transaction discussed above under “Business Developments-2021”.

(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87) (cid:73)(cid:82)(cid:85) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86)

The benefit for income taxes for 2021 was $4.6 million compared to $4.7 million for 2020. The resulting effective tax rate for 2021
ive tax rate on pre-tax income
was (11.7)% on pre-tax income compared to 7.1% for 2020 on pre-tax loss. For 2021, the negative effect
was driven by the benefit from the exclusion of PPP Loan forgiveness income from taxable income, tax credits, and the impact of
adjustments made to valuation allowances, partially offset by the impact of state law changes. For 2020, the effective tax rate was
impacted by adjustments made to our valuation allowances. Also see discussion in Note 8.

ff

36

(cid:47)(cid:44)(cid:52)(cid:56)(cid:44)(cid:39)(cid:44)(cid:55)(cid:60) (cid:36)(cid:49)(cid:39) (cid:38)(cid:36)(cid:51)(cid:44)(cid:55)(cid:36)(cid:47) (cid:53)(cid:40)(cid:54)(cid:50)(cid:56)(cid:53)(cid:38)(cid:40)(cid:54)

The following table summarizes our cash flow activities for 2021 and 2020(cid:29)

NNet cash flows from operating activities

NNet cash flows from investing activities

NNet cash flows from financing activities

(cid:49)(cid:72)(cid:87) (cid:38)(cid:68)(cid:86)(cid:75) (cid:41)(cid:79)(cid:82)(cid:90) (cid:73)(cid:85)(cid:82)(cid:80) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)

(In Thousands)

87,627

$

(2,513) $ 90,140

(34,694) $

(28,426) $ (6,268)

12,947

$

24,412

$ (11,465)

$

$

$

Net cash provided by operating activities was $87.6 million for 2021 compared to net cash used of $2.5 million for 2020, a change of
$90.1 million.

For 2021, net cash provided is the result of a net income of $43.5 million plus adjustments of $68.7 million for depreciation and
amortization of PP(cid:9)E, net loss on extinguishments of debt of $10.3 and other adjustments of $8.4 million and net cash used of $43.3
million primarily from our working capital, including accounts receivable.

For 2020, net cash provided is the result of a net loss of $61.9 million plus adjustments of $69.6 million for depreciation and
amortization of PP(cid:9)E, and other adjustments of $9.4 million less an adjustment of $4.8 million for deferred taxes and net cash used of
approximately $14.8 million primarily from our working capital, including accounts payable, accounts receivable and prepaid
deposits.

(cid:49)(cid:72)(cid:87) (cid:38)(cid:68)(cid:86)(cid:75) (cid:41)(cid:79)(cid:82)(cid:90) (cid:73)(cid:85)(cid:82)(cid:80) (cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74) (cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

Net cash used by investing activities was $34.7 million for 2021 compared to $28.4 million for 2020, a change of $6.3 million.

For 2021 and 2020, net cash used relates primarily to expendituresu

for PP(cid:9)E.

(cid:49)(cid:72)(cid:87) (cid:38)(cid:68)(cid:86)(cid:75) (cid:41)(cid:79)(cid:82)(cid:90) (cid:73)(cid:85)(cid:82)(cid:80) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:36)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

Net cash provided by financing activities was $12.9 million for 2021 compared to $24.4 million for 2020, a change of $11.5 million.

For 2021, net cash provided primarily consists of proceeds of $500 million from the New Notes, $16.7 million from insurance
premium short-term financing partially offset by $435 million redemption of the Old Notes, payments of debt-related costs of $27.3
million, payments on other long-term debt and short-term financing of $28.0 million, payments of costs of $7.4 million related to the
Exchange Transaction, and payments of $6.1 million for other financing activities.

For 2020, net cash provided primarily consists of proceeds of $57.2 million from other long-term debt and insurance premium short-
term financing partially offset by payments on other long-term debt and short-term financing of $32.3 million and payments of $0.5
million for other financing activities.

37

(cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:76)(cid:93)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

The following is our total current cash, long-term debt and stockholders’ equity(cid:29)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

Cash and cash equivalents
Revolving credit facility and long-term debt(cid:29)

Working Capital Revolver Loan
Senior Secured Notes due 2028 (1)
Senior Secured Notes due 2023 (1)
Secured Financing due 2023
Secured Loan Agreement due 2025
Secured Financing Agreement due 2025
Unsecured Loan Agreement due 2022 (1)
Secured Promissory Note due 2021
Other
Unamortized discount and debt issuance costs
Total long-term debt, including current portion, net
Series E and F redeemable preferred stock (2)
Total stockholders(cid:10) equity

$

(In Millions)
82.1

$

(cid:178)
500.0
(cid:178)
7.7
5.3
24.0
(cid:178)
(cid:178)
0.3
(9.7)
527.6

$
(cid:178) $
$

460.5

16.3

(cid:178)
(cid:178)
435.0
10.7
6.8
28.6
10.0
1.2
0.5
(8.6)
484.2
272.1
149.6

(1)
(2)

See discussions above under “Business Developments-2021 relating to the debt agreement.
See discussion above under “Business Developments-2021” and Note 2 relating to the Exchange Transaction associated with the
Series E and Series F redeemable preferred stock.

We currently have a revolving credit facility, our Working Capital Revolver Loan, with a borrowing base of $65 million. As of
December 31, 2021, our Working Capital Revolver Loan was undrawn and had approximately $61.3 million of availability.

In connection with the implementation of our strategy, we may pursue acquisitions of strategic assets or companies (including through
mergers), or additional investment in our production capacity, for which we may require additional funds. We may choose to finance
any of the foregoing through the incurrence of additional indebtedness (including through loans or the issuance of debt securities) (cid:62)or
the issuance of equity(cid:64), in each case subject to market conditions.

We expect capital expenditures to be approximately $65 million for 2022, which includes approximately $15 million for margin
enhancement projects. The remaining capital

spending is planned for reliability and maintenance capital projects.

a

We believe that the combination of our cash on hand, the availability
operations will be sufficient to fund our anticipated liquidity needs for the next twelve months.

a

on our revolving credit facility, and our cash flow from

(cid:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72) (cid:90)(cid:76)(cid:87)(cid:75) (cid:47)(cid:82)(cid:81)(cid:74) (cid:16) (cid:55)(cid:72)(cid:85)(cid:80) (cid:39)(cid:72)(cid:69)(cid:87) (cid:38)(cid:82)(cid:89)(cid:72)(cid:81)(cid:68)(cid:81)(cid:87)(cid:86)

As discussed below under “Loan Agreements,” the Working Capital Revolver Loan requires, among other things, that we meet certain
financial covenants. The Working Capital Revolver Loan does not include financial covenant requirements unless a defined covenant
trigger event has occurred and is continuing. As of December 31, 2021, no trigger event had occurred.

(cid:47)(cid:82)(cid:68)(cid:81) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

(cid:54)(cid:72)(cid:81)(cid:76)(cid:82)(cid:85) (cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:49)(cid:82)(cid:87)(cid:72)(cid:86) (cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:27) (cid:177) LSB has $500 million aggregate principal amountuu
of the 6.25% Senior Secured Notes outstanding, as
discussed in footnote (B) of Note 7. Interest is to be paid semiannually on May 15th and October 15th. Due to the redemption of the Old
Notes, our interest expense is expected to decrease as compared to 2021.

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:22) (cid:177) EDC is party to a secured financing arrangement with an affiliate of LSB Funding. Principal and
interest are payable in 48 equal monthly installments with a final balloon payment of approximately $3 million due in (cid:45)une 2023.

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:47)(cid:82)(cid:68)(cid:81) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:24) (cid:16) EDC is party to a secured loan agreement with an affiliate of LSB Funding. Principal and
interest are payable in 60 equal monthly installments through Marca h 2025.

(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:72)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:71)(cid:88)(cid:72) (cid:21)(cid:19)(cid:21)(cid:24) (cid:177) EDA is party to a secured financing agreement with an affiliate of LSB Funding. Principal
and interest are payable in 60 equal monthly installments with a final balloon payment of approximately $5 million due in August
2025.

38

(cid:58)(cid:82)(cid:85)(cid:78)(cid:76)(cid:81)(cid:74) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:53)(cid:72)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:85) (cid:47)(cid:82)(cid:68)(cid:81) (cid:177) At December 31, 2021, the Working Capital Revolver Loan was undrawn
and the net credit
available for borrowings under our Working Capital Revolver Loanaa was approximately $61.3 million, based on our eligible collateral,
less outstanding standby letters of credit as of that date. Also see discussion above under “Compliance with Long-Term Debt Covenants.

dd

(cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:71)(cid:76)(cid:87)(cid:88)(cid:85)(cid:72)(cid:86) (cid:177) (cid:21)(cid:19)(cid:21)(cid:20)

For 2021, capital expenditures relating to PP(cid:9)E were $35.1 million, which expenditures include approximately $0.6 million
associated with maintaining compliance with environmental laws, regulations and guidelines. The capital expenditures were funded
primarily from cash and working capital.

See discussion above under “Capitaliz

a

ation” for our expected annual capital expenditures for 2022.

(cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86) (cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71) (cid:90)(cid:76)(cid:87)(cid:75) (cid:40)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92) (cid:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72)

We are subject to numerous federal, state and local laws and regulations, including matters regarding environmental, health and safety
matters. As a result, we incurred expenses of $3.4 million in 2021 in connection with environmental projects. For 2022, we expect to
incur expenses ranging from $3.8 million to $4.2 million in connection with additional environmental projects. However, it is possible
that the actual costs could be significantly different than our estimates.

(cid:39)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71)(cid:86)

See discussions above under “Business Developments-2021” and Notes 1 and 2 regarding the common stock Special Dividend.

We have not paid cash dividends on our outstanding common stock in many years, and we do not currently anticipate paying cash
dividends on our outstanding common stock in the near future.

t

See discussion under Notes 12 and 14 regarding the conversion and payment of the accumulated dividends during 2021 relating to the
Series D 6% cumulative convertible Class C preferr
ed stock (the “Series D Preferred”) and Series B 12% cumulative convertible Class
C Preferred Stock (the “Series B Preferred”).

ff

(cid:54)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:79)(cid:76)(cid:87)(cid:92)

We believe fertilizer products sold to the agricultural industryrr are seasonal while sales into the industrial and mining sectors generally
are primarily during the spring and fall planting seasons, which
are less susceptible. The selling seasons for agricultural products
typically extend from March through (cid:45)une and from September through November in the geographical markets we distribute the
majority of our agricultural products. As a result, we typically increase our inventory of fertilizer products prior to the beginning of
each planting season in order to meet the demand for our products. In addition, the amount and timing of sales to the agriculturatt
l
markets depend upon weather conditions and other circumstances beyond our control.

dd

(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72) (cid:68)(cid:81)(cid:71) (cid:51)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87) (cid:37)(cid:82)(cid:81)(cid:71)(cid:86)

We are contingently liable to sureties in respect of insurance bonds issued by the sureties in connection with certain contracts entered
into by subsidiaries in the normal course of business. These insurance bonds primarily represent guarantees of future performance of
our subsidiaries. As of December 31, 2021, we have agreed to indemnify the sureties for payments, up to $9.7 million, made by them
in respect of such bonds. All of these insurance bonds are expected to expire or be renewed in 2022.

(cid:50)(cid:73)(cid:73)(cid:16)(cid:73)(cid:73) (cid:37)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72) (cid:54)(cid:75)(cid:72)(cid:72)(cid:87) (cid:36)(cid:85)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange
Act of 1934.

39

(cid:178)

(cid:178)

(cid:178)

(cid:178)

7
8
5
,
5
6
5

$

1
3
2
,
5
3

$

1
9
9
,
6
4

$

7
9
2
,
9
4

$

$

2
5
3
,
6
4
1

$

0
8
1
,
1
0
9

$

$

(cid:178)

$

(cid:178)

$

(cid:178)

$

(cid:178)

$

(cid:85)
(cid:72)
(cid:87)
(cid:73)
(cid:68)
(cid:72)
(cid:85)
(cid:72)
(cid:75)
(cid:55)

(cid:25)
(cid:21)
(cid:19)
(cid:21)

(cid:24)
(cid:21)
(cid:19)
(cid:21)

(cid:23)
(cid:21)
(cid:19)
(cid:21)

)
s
d
n
a
s
u
o
h
T
n
I
(

(cid:15)
(cid:20)
(cid:22)
(cid:85)
(cid:72)
(cid:69)
(cid:80)
(cid:72)
(cid:70)
(cid:72)
(cid:39)
(cid:74)
(cid:81)
(cid:76)
(cid:71)
(cid:81)
(cid:40)
(cid:85)
(cid:68)
(cid:72)
(cid:60)
(cid:72)
(cid:75)
(cid:87)
(cid:81)
(cid:76)

(cid:22)
(cid:21)
(cid:19)
(cid:21)

(cid:21)
(cid:21)
(cid:19)
(cid:21)

(cid:79)
(cid:68)
(cid:87)
(cid:82)
(cid:55)

(cid:86)
(cid:81)
(cid:82)
(cid:76)
(cid:87)
(cid:68)
(cid:74)
(cid:76)
(cid:79)

(cid:69)
(cid:50)

(cid:79)
(cid:68)
(cid:88)
(cid:87)
(cid:70)
(cid:68)
(cid:85)
(cid:87)
(cid:81)
(cid:82)
(cid:38)

(cid:72)
(cid:88)
(cid:39)
(cid:86)
(cid:87)
(cid:81)
(cid:72)
(cid:80)
(cid:92)
(cid:68)
(cid:29) (cid:51)
e
l
b
a
t

g
n
i
w
o
l
l
o
f

e
h
t

n
i

d
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(cid:49)(cid:72)(cid:90) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:85)(cid:82)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

Refer to Note 1 for recently adopted and issued accounting standards.

(cid:38)(cid:85)(cid:76)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:40)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amount of
assets, liabilities, revenues and expenses, and disclosures of contingencies and fair values. It is reasonably possible that the estimates
and assumptions utilized as of December 31, 2021, could change in the near term. The more critical areas of financial reporting
affected by management(cid:10)s judgment, estimates and assumptions include the following(cid:29)

(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86) (cid:177) 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.

We are involved in various legal matters that require management to make estimates and assumptions as discussed in Note 9.

It is reasonably possible that the actuat

l costs could be significantly

ff

different than our estimates.

(cid:53)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:87)(cid:82)(cid:85)(cid:92) (cid:38)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72) (cid:177) As discussed under “Government Laws and Regulations” in Item 1 of this report, we are subject to
numerous federal, state, and local laws and regulations, including matters regarding environmental, health and safety matters. We have
We must continually monitor whether we have maintained
developed policies and procedures related to regulatory compliance.
a
compliance with such laws and regulations and the operating implications, if any, and amount of penalties, fines and assessments that
may result from noncompliance. We will also be obligated to manage certain discharge water outlets and monitor groundwater
contaminants at our chemical facilities should we discontinue the operations of a facility. However, certain conditions exist which may
result in a loss, but which will only be resolved when future events occur relating to these matters. We are involved in various
environmental matters that require management to make estimates and assumptions, including matters discussed under footnote A of
Note 9. At December 31, 2021 and 2020, liabilities totaling $0.5 million have been accrued relating to these matters. It is also
reasonably possible that the estimates and assumptions utilized as of December 31, 2021 could change in the near term. Actual results
could differ materially from these estimates and judgments, as additional informati

on becomes known.

ff

(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91) (cid:177) As discussed under “Income Taxes” in Note 1 and in Note 8, income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those differences are expected to be recovered or settled. 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. Significant judgment is applied in evaluating the need for
and the magnitude of appropriate valuation allowances against deferred tax assets. At December 31, 2021 and 2020, our valuation
allowance on deferred tax assets was $47.0 million and $64.7 million, respectively.

(cid:73)(cid:73)

- As discussed in Note 1, the Series E and Series F Redeemable Preferre

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:40) (cid:68)(cid:81)(cid:71) (cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:41) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)
d Stocks, prior
to their redemption as discussed in Note 2, were redeemable outside our control and therefore were historically classified as
temporary(cid:18)mezzanine equity. These redeemable preferred stocks were recorded at fair value upon issuance, net of issuance costs or
discounts. In addition, certain embedded features included in the Series E Redeemable Preferred required bifurcation and were
classified as derivative liabilities. The carrying values of the redeemable preferred stocks were being increased by periodic accretions
(including the amount for dividends earned but not yet declared or paid) using the interest method so that the carrying amount would
equal the redemption value as of the earliest possible redemption date by the holder (October 25, 2023). The accretion was recorded to
retained earnings.

ff

As discussed in Note 2, in (cid:45)uly 2021, we entered into the Exchange Agreement with the Holder, an affiliate of Eldridge, which
Exchange Agreement was voted on and approved by our stockholders at the Special Meeting held in September 2021. Pursuant to the
terms of the Exchange Agreement, the Holder exchanged all of the shares of the Series E and Series F Redeemable Preferred into our
common stock based on the Liquidation Preference and an exchange price of $6.16, which is equal to the 30-day volume weighted
average price as of the date of the Exchange Agreement. The Liquidation
Preference primarily consists of $1,000 per share of Series E
Redeemable Preferred plus accrued and unpaid dividends plus the participation rights value. However, the exchange consideration
paid under the Exchange Agreement would be reduced by approximately 1.2 million shares, which shares were included in the Special
Dividend and received by the Holder.

qq

41

On September 27, 2021, the closing of the Exchange Agreement occurred, and the Exchange Transaction was consummated. Pursuant
to the terms of the Exchange Agreement, the Holder exchanged all of the shares of the Series E and Series F Redeemable Preferred
for
approximately 49.1 million shares of our common stock.

ff

The total fair value of the approximately 49.1 million shares of common stock issued was approximately $531.1 million (based on the
average per share price on the date of closing). The fair value of the common stock issued was in excess of the Series E and Series F
Redeemable Preferred carrying amount, net of the bifurcated embedded derivative and unamortized issuance costs, by approximately
$231.8 million and is treated as a deemed dividend. Because we were in an accumulated deficit position on the closing date, the
deemed dividend was charged to capital in excess of par value.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:26)(cid:36)(cid:17) (cid:52)(cid:56)(cid:36)(cid:49)(cid:55)(cid:44)(cid:55)(cid:36)(cid:55)(cid:44)(cid:57)(cid:40) (cid:36)(cid:49)(cid:39) (cid:52)(cid:56)(cid:36)(cid:47)(cid:44)(cid:55)(cid:36)(cid:55)(cid:44)(cid:57)(cid:40) (cid:39)(cid:44)(cid:54)(cid:38)(cid:47)(cid:50)(cid:54)(cid:56)(cid:53)(cid:40)(cid:54) (cid:36)(cid:37)(cid:50)(cid:56)(cid:55) (cid:48)(cid:36)(cid:53)(cid:46)(cid:40)(cid:55) (cid:53)(cid:44)(cid:54)(cid:46)

(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)

Our results of operations and operating cash flows are affected by changes in market prices of ammonia and natural gas and changes
in market interest rates.

a

(cid:41)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:53)(cid:76)(cid:86)(cid:78)

Periodically, we enter into forward firm sales commitments for products to be delivered in future periods. As a result, we could be
exposed to embedded losses should our product costs exceed the firm sales prices at the end of a reporting period. At December 31,
2021, we had no embedded losses associated with sales commitments with firm sales prices.

(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:71)(cid:76)(cid:87)(cid:92) (cid:51)(cid:85)(cid:76)(cid:70)(cid:72) (cid:53)(cid:76)(cid:86)(cid:78)

A substantial portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand
fundamentals change. Since we are exposed to commodity price risk, we periodically enter into contracts to purchase natural gas for
anticipated production needs to manage risk related to changes in prices of natural gas commodities. Generally, 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, these contracts are exempt from the accounting and reporting
requirements relating to derivatives. At December 31, 2021, we had no outstanding natural gas contracts, which are accounted for on a
mark-to-market basis.

(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87) (cid:53)(cid:68)(cid:87)(cid:72) (cid:53)(cid:76)(cid:86)(cid:78)

Generally, we are exposed to variable interest rate risk with respect to our revolving credit facility. As of December 31, 2021, we had
no outstanding borrowings on this credit faff cility and no other variable rate borrowings. We currently do not hedge our interest rate risk
associated with these variable interest loans.

The following table presents principal amounts by maturity date and weighted-average interest rates for the periods presented for our
debt agreements as of December 31, 2021(cid:29)

(cid:40)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71) (cid:80)(cid:68)(cid:87)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:82)(cid:73) (cid:79)(cid:82)(cid:81)(cid:74)(cid:16)(cid:87)(cid:72)(cid:85)(cid:80) (cid:71)(cid:72)(cid:69)(cid:87) (cid:11)(cid:20)(cid:12)(cid:29)

(cid:21)(cid:19)(cid:21)(cid:21)

(cid:21)(cid:19)(cid:21)(cid:22)

(cid:60)(cid:72)(cid:68)(cid:85)(cid:86) (cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)
(cid:21)(cid:19)(cid:21)(cid:23)
(Dollars In Thousands)

(cid:21)(cid:19)(cid:21)(cid:24)

(cid:21)(cid:19)(cid:21)(cid:25)

(cid:55)(cid:75)(cid:72)(cid:85)(cid:72)(cid:68)(cid:73)(cid:87)(cid:72)(cid:85)

(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)

Fixed interest rate debt

$ 9,454

$ 10,900

$ 7,427

$ 9,585

$

(cid:178) $500,000

$537,366

Weighted-average interest rate

6.40%

6.36%

6.31%

6.27%

6.25%

6.25%

6.26%

(1)

The debt balances and weighted-average interest rate are based on the aggregate amount of debt outstanding as of December 31,
2021.

At December 31, 2021 and 2020, we did not have any financial instruments with fair values materially different from their carrying
amounts (which excludes issuance costs, if applicablea
). The fair value of financial instruments is not indicative of the overall fair value
of our assets and liabila

ities since financial instruments do not include all assets, including intangibles, and all liabilities.

rr

(cid:44)(cid:55)(cid:40)(cid:48) (cid:27)(cid:17) (cid:41)(cid:44)(cid:49)(cid:36)(cid:49)(cid:38)(cid:44)(cid:36)(cid:47) (cid:54)(cid:55)(cid:36)(cid:55)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:54) (cid:36)(cid:49)(cid:39) (cid:54)(cid:56)(cid:51)(cid:51)(cid:47)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:36)(cid:53)(cid:60) (cid:39)(cid:36)(cid:55)(cid:36)

We have included the financial statements and supplementary financial information required by this item immediately following
Part I(cid:57) of this report and hereby incorporate by reference the relevant portions of those statements and information into this Item 8.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:28)(cid:17) (cid:38)(cid:43)(cid:36)(cid:49)(cid:42)(cid:40)(cid:54) (cid:44)(cid:49) (cid:36)(cid:49)(cid:39) (cid:39)(cid:44)(cid:54)(cid:36)(cid:42)(cid:53)(cid:40)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:54) (cid:58)(cid:44)(cid:55)(cid:43) (cid:36)(cid:38)(cid:38)(cid:50)(cid:56)(cid:49)(cid:55)(cid:36)(cid:49)(cid:55)(cid:54) (cid:50)(cid:49) (cid:36)(cid:38)(cid:38)(cid:50)(cid:56)(cid:49)(cid:55)(cid:44)(cid:49)(cid:42) (cid:36)(cid:49)(cid:39) (cid:41)(cid:44)(cid:49)(cid:36)(cid:49)(cid:38)(cid:44)(cid:36)(cid:47)
(cid:39)(cid:44)(cid:54)(cid:38)(cid:47)(cid:50)(cid:54)(cid:56)(cid:53)(cid:40)

None.

42

(cid:44)(cid:55)(cid:40)(cid:48) (cid:28)(cid:36)(cid:17) (cid:38)(cid:50)(cid:49)(cid:55)(cid:53)(cid:50)(cid:47)(cid:54) (cid:36)(cid:49)(cid:39) (cid:51)(cid:53)(cid:50)(cid:38)(cid:40)(cid:39)(cid:56)(cid:53)(cid:40)(cid:54)

As of the end of the period covered by this report, we carried out an evaluation, with the participation of our Principal Executive
Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as
defined in Rule 13a-15 under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance
that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms. These include controls and
procedures designed to ensure that this information is accumulated and communicated to the Company’s management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based
upon that evaluation, our Principal Executive Officer and our Principal Financial Officer have concluded that our disclosure controls
and procedures
were effective. There were no changes to our internal control over financial reporting during the quarter ended
December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

d

(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:82)(cid:81) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:82)(cid:89)(cid:72)(cid:85) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)

Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act). Our internal control system is a process, under the supervision of the Company’s Chief
Executive Officer and Chief Financial Officer, designed to provide reasonable assurance to our management and Board of Directors
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States. All internal control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial
statement preparation and presentation.

ff

Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, assessed the effectiveness of our
ff
internal control over financial reporting as of December 31, 2021. In making this assessment, it used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013 Framework).
Based on our assessment, we believe that, as of December 31, 2021, our internal control over financial reporting is effective based on
those criteria.

Our independent registered public accounting firm has issued an attestation report on our internal control over financial reporting. This
report appears on the following page.

43

(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:82)(cid:73) (cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87) (cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71) (cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:41)(cid:76)(cid:85)(cid:80)

To the Shareholders and the Board of Directors of LSB Industries, Inc.

(cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81) (cid:82)(cid:81) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:50)(cid:89)(cid:72)(cid:85) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)

control over financial reporting as of December 31, 2021, based on criteria established
We have audited LSB Industries, Inc.’s internal
in Internal Control(cid:178)Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria).
In our opinion, LSB Industries, Inc. (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

a

r

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States)
(PCAOB), the 2021 consolidated financial statements of the Company and our report dated February 24, 2022 expressed an
unqualified opinion thereon.

u

(cid:37)(cid:68)(cid:86)(cid:76)(cid:86) (cid:73)(cid:82)(cid:85) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
internal control over financial reporting was maintained in all material respects.
to obtain reasonable assurance about whether effective
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effecff
ng such
other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

tiveness of internal control based on the assessed risk, and performi

ff

ff

(cid:39)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:47)(cid:76)(cid:80)(cid:76)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:82)(cid:73) (cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79) (cid:50)(cid:89)(cid:72)(cid:85) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company(cid:30) (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company(cid:30) and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effeff ct
on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

a

(cid:18)s(cid:18) Ernst (cid:9) (cid:60)oung LLP

Oklahoma City, Oklahoma

February 24, 2022

(cid:44)(cid:55)(cid:40)(cid:48) (cid:28)(cid:37)(cid:17) (cid:50)(cid:55)(cid:43)(cid:40)(cid:53) (cid:44)(cid:49)(cid:41)(cid:50)(cid:53)(cid:48)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)

None.

(cid:44)(cid:55)(cid:40)(cid:48) (cid:28)(cid:38)(cid:17) (cid:39)(cid:44)(cid:54)(cid:38)(cid:47)(cid:50)(cid:54)(cid:56)(cid:53)(cid:40) (cid:53)(cid:40)(cid:42)(cid:36)(cid:53)(cid:39)(cid:44)(cid:49)(cid:42) (cid:41)(cid:50)(cid:53)(cid:40)(cid:44)(cid:42)(cid:49) (cid:45)(cid:56)(cid:53)(cid:44)(cid:54)(cid:39)(cid:44)(cid:38)(cid:55)(cid:44)(cid:50)(cid:49)(cid:54) (cid:55)(cid:43)(cid:36)(cid:55) (cid:51)(cid:53)(cid:40)(cid:57)(cid:40)(cid:49)(cid:55) (cid:44)(cid:49)(cid:54)(cid:51)(cid:40)(cid:38)(cid:55)(cid:44)(cid:50)(cid:49)(cid:54)

Not Applicable.

44

Item 10, Item 11, Item 12, Item 13 and Item 14 are incorporated by reference to our definitive proxy statement which we intend to file
with the SEC on or before April 29, 2022.

(cid:51)(cid:36)(cid:53)(cid:55) (cid:44)(cid:44)(cid:44)

(cid:44)(cid:55)(cid:40)(cid:48) (cid:20)(cid:24)(cid:17) (cid:40)(cid:59)(cid:43)(cid:44)(cid:37)(cid:44)(cid:55)(cid:54) (cid:36)(cid:49)(cid:39) (cid:41)(cid:44)(cid:49)(cid:36)(cid:49)(cid:38)(cid:44)(cid:36)(cid:47) (cid:54)(cid:55)(cid:36)(cid:55)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55) (cid:54)(cid:38)(cid:43)(cid:40)(cid:39)(cid:56)(cid:47)(cid:40)(cid:54)

(cid:11)(cid:68)(cid:12) (cid:11)(cid:20)(cid:12) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

The following consolidated financial statements of the Company appear immediately following this Part I(cid:57)(cid:29)

(cid:51)(cid:36)(cid:53)(cid:55) (cid:44)(cid:57)

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2021 and 2020

Consolidated Statements of Operations for each of the three years in the period ended December 31, 2021

Consolidated Statements of Stockholders(cid:10) Equity for each of the three years in the period ended December 31, 2021

Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2021

Notes to Consolidated Financial Statements

Quarterly Financial Data (Unaudited)

(cid:11)(cid:68)(cid:12) (cid:11)(cid:21)(cid:12) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:54)(cid:70)(cid:75)(cid:72)(cid:71)(cid:88)(cid:79)(cid:72)

The Company has included the following schedule in this report(cid:29)

II - (cid:57)aluation and Qualifying Accounts

Page

F-2

F-4

F-6

F-7

F-8

F-10

F-37

F-39

We have omitted all other schedules because the conditions requiring their filing do not exist or because the required information
appears in our Consolidated Financial Statements, including the notes to those statements.

45

(cid:11)(cid:68)(cid:12)(cid:11)(cid:22)(cid:12) (cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:86)

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)
3(i).1

3(i).2

3(ii).1

4.1(P)

4.2

4.3

4.4

4.5

4.6

4.7(a)

4.8

4.9

4.10

4.11

4.12

4.13

4.14

4.15

4.16

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)
Restated Certificate of Incorporation of LSB Industries, Inc.,
dated (cid:45)anuary 21, 1977, as amended August 27, 1987
Certificate of Amendment
Incorporation of LSB Industries, dated September 23, 2021

to the Restated Certificate of

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)
Exhibit 3(i).1 to the Company’s Form 10-K filed
on February 28, 2013
Exhibit 3(i).2 to the Company’s Registration
Statement on From S-3 filed on November 16,
2021
Exhibit 3.1 to the Company’s Form 8-K filed (cid:45)uly
19, 2021

Second Amended and Restated Bylaws of LSB Industries,
dated (cid:45)uly 19, 2021
Specimen Certificate for the Company’s Series B Preferred Stock Exhibit 4.27 to the Company’s Registra

Inc.
,

ntion

Specimen Certificaff
Convertible Class C Preferred Stock
Specimen Certificate for the Company’s Common Stock

the Company’s Series D 6% Cumulative,

te forff

Certificate of Designations of Series E Cumulative Redeemable
Class C Preferred Stock of LSB Industries, Inc., dated as of
December 4, 2015
Certificate of Designations of Series E-1 Cumulative Redeemable
Class C Preferred Stock of LSB Industries, Inc., dated as of
October 18, 2018

Certificate of Correction to Certificate of Designations of the
Series E-1 Cumulative Redeemable Class C Preferred Stock of
LSB Industries, Inc.
Certificate of Amendment to Certificate of Designations of the
Series E-1 Cumulative Redeemable Class C Preferred Stock of
LSB Industries, Inc.
Certificate of Designations of Series F Cumulative Redeemable
Class C Preferred Stock of LSB Industries, Inc., dated as of
December 4, 2015
Certificate of Designations of Series F-1 Redeemable Class C
Preferred Stock of LSB Industries, Inc., dated as of October 18,
2018
Certificate of Designations of Series G Class C Preferred Stock of
LSB Industries, Inc., as filed with the Secretary of State of the
State of Delaware on (cid:45)uly 6, 2020
Section 382 Rights Agreement, dated as of (cid:45)uly 6, 2020, between
LSB Industries, Inc. and Computershare Trust Company, N.A., as
rights agent
Indenture, dated August 7, 2013, among LSB Industries, Inc., the
guarantors named therein and UMB Bank, n.a., as trustee
First Supplemental Indenture, dated as of September 7, 2016, by
and among LSB Industries, Inc., the guarantors party thereto and
UMB Bank, n.a., as trustee and notes collateral agent
Intercreditor Agreement, dated August 7, 2013, by and among
Wells Fargo Capital Finance, Inc., as agent and UMB Bank, n.a.,
as collateral agent, and acknowledged and agreed to by LSB
Industries, Inc. and the other grantors named therein
Indenture, dated as of April 25, 2018, among LSB Industries, Inc.,
the subsidiary guarantors party thereto and Wilmington Trust,
National Association, as trustee and collateral agent.
Form of 9.625% Senior Secured Notes due 2023 (included in
Exhibit 4.1).

46

Statement on Form S-3 No. 33-9848
Exhibit 4.3 to the Company’s Form 10-K filed
March 3, 2011
Exhibit 4.3 to the Company’s Registration
Statement on Form S-3 ASR filed November 16,
2012
Exhibit 4.1 to the Company’s Form 8-K filed
December 8, 2015

Exhibit 4.1 to the Company’s Form 8-K filed
October 19, 2018

Exhibit 4.1 to the Company’s Form 8-K filed
November 2, 2018

Exhibit 4.2 to the Company’s Form 8-K filed
December 8, 2015

Exhibit 4.2 to the Company’s Form 8-K filed
October 19, 2018

Exhibit 3.1 to the Company’s Form 8-K filed (cid:45)uly
6, 2020

Exhibit 4.1 to the Company’s Form 8-K filed (cid:45)uly
6, 2020

Exhibit 4.1 to the Company’s Form 8-K filed
August 14, 2013
Exhibit 4.1 to the Company’s Form 8-K filed
October 4, 2016.

Exhibit 99.1 to the Company’s Form 8-K filed
August 14, 2013

Exhibit 4.1 to the Company’s Form 8-K filed
April 25, 2018

Exhibit 4.2 to the Company’s Form 8-K filed
April 25, 2018

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)

4.17(a)

10.1(cid:13)

10.2(cid:13)

10.3(cid:13)

10.4(cid:13)

10.5(cid:13)

10.6(cid:13)

10.7(cid:13)

10.8(cid:13)

10.9(cid:13)

10.10(cid:13)

10.11(cid:13)

10.12(cid:13)

10.13(cid:13)

10.14(cid:13)

10.15(cid:13)

10.16(cid:13)

10.17(cid:13)

10.18(cid:13)

10.19(cid:13)

10.20(cid:13)

10.21(cid:13)

10.22(cid:13)

10.23(cid:13)

10.24(cid:13)

10.25(cid:13)

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)

Description of Registrant’s Securities Registered Pursuant
Section 12 of the Securities Exchange Act of 1934
Form of Death Benefit Plan Agreement, dated April 1, 1981

to

LSB Industries, Inc. Outside Directors Stock Purchase Plan, dated
May 24, 1999
LSB Industries, Inc. 2008 Incentive Stock Plan, effective (cid:45)une 5,
2008, as amended by First Amendment, effective (cid:45)une 5, 2014
Form of Restricted Stock Agreement

Form of Incentive Stock Option Agreement for 2008 Plan

LSB Industries, Inc. 2016 Long Term Incentive Plan

Form of LSB Industries, Inc. 2016 Long Term Incentive Plan
Stock Option Agreement
Form of LSB Industries, Inc. 2016 Long Term Incentive Plan
Restricted Stock Unit Agreement (Director Award)
Form of LSB Industries, Inc. 2016 Long Term Incentive Plan
Restricted Stock Agreement
Form of Time-Based Restricted Stock Agreement of LSB
Industries, Inc.
Form of Performance-Based Restricted Stock Agreement of LSB
Industries, Inc.
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Mark Behrman
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Mark Behrman
Employment Agreement, dated December 30, 2018, between LSB
Industries, Inc. and Mark T. Behrman
Restricted Stock Agreement by and between LSB Industries, Inc.
and Mark Behrman, dated as of December 31, 2015
Employment Agreement by and between LSB Industries, Inc. and
Daniel D. Greenwell, dated as of December 31, 2015
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Daniel D. Greenwell
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Daniel D. Greenwell
General Release Agreement by and between LSB Industries, Inc.
and Daniel D. Greenwell, dated as of (cid:45)anuary 14, 2019
Restricted Stock Agreement by and between LSB Industries, Inc.
and Daniel D. Greenwell, dated as of December 31, 2015
Employment Agreement by and between LSB Industries, Inc. and
Michael Foster, dated as of (cid:45)anuary 5, 2016
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Michael (cid:45). Foster
Notice Period Extension Regarding Employment Agreement by
and between LSB Industries, Inc. and Michael (cid:45). Foster
Employment Agreement, dated December 30, 2018, between LSB
Industries, Inc. and Michael (cid:45). Foster
Restricted Stock Agreement by and between LSB Industries, Inc.
and Michael Foster, dated as of (cid:45)anuary 5, 2016

47

dfiled

Exhibit 10.2 to the Company’s Form 10-K filed
March 31, 2006
Exhibit 99.2 to the Company’s Form 8-K filed
October 23, 2014
Exhibit 99.3 to the Company’s Form 8-K filed
(cid:45)une 11, 2014
Exhibit 10.3 to the Company’s Form 8-K
(cid:45)anuary 8, 2016
Exhibit 10.8 to the Company’s Form 10-K filedd
February 29, 2016
Exhibit 4.8 to the Company’s Form S-8 filed (cid:45)une
28, 2016
Exhibit 4.9 to the Company’s Form S-8 filed (cid:45)une
28, 2016
Exhibit 4.10 to the Company’s Form S-8 filed
(cid:45)une 28, 2016
Exhibit 4.11 to the Company’s Form S-8 filed
(cid:45)une 28, 2016
Exhibit 10.4 to the Company’s Form 8-K filed
(cid:45)anuary 3, 2019
Exhibit 10.5 to the Company’s Form 8-K filed
(cid:45)anuary 3, 2019
Exhibit 10.12 to the Company’s Form 10-K fileff
February 26, 2019
Exhibit 10.4 to the Company’s Form 10-Q filed
October 24, 2018
Exhibit 10.1 to the Company’s Form 8-K filed
(cid:45)anuary 3, 2019
Exhibit 10.17 to the Company’s Form 10-K fileff
February 29, 2016
Exhibit 10.1 to the Company’s Form 8-K(cid:18)KK A filed
(cid:45)anuary 7, 2016
Exhibit 10.3 to the Company’s Form 10-Q filed
October 24, 2018
Exhibit 10.18 to the Company’s Form 10-K fileff
February 26, 2019
Exhibit 10.19 to the Company’s Form 10-K fileff
February 26, 2019
Exhibit 10.2 to the Company’s Form 8-K(cid:18)KK A fileff
(cid:45)anuary 7, 2016
Exhibit 10.25 to the Company’s Form 10-K fileff
February 29, 2016
Exhibit 10.5 to the Company’s Form 10-Q filed
October 24, 2018
Exhibit 10.23 to the Company’s Form 10-K filed
February 26, 2019
Exhibit 10.3 to the Company’s Form 8-K filed
(cid:45)anuary 3, 2019
Exhibit 10.26 to the Company’s Form 10-K filed
February 29, 2016

d

d

d

d

d

d

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)
10.26(cid:13)

10.27(cid:13)

10.28(cid:13)

10.29(cid:13)

10.30(cid:13)

10.31(cid:13)

10.32

10.33

10.34

10.35

10.36

10.37

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)
Employment Agreement by and between LSB Industries, Inc. and
(cid:45)ohn Diesch, executed as of (cid:45)uly 21, 2016
Employment Agreement by and between LSB Industries, Inc. and
(cid:45)ohn Diesch, executed as of February 8, 2019
Employment Agreement, dated December 30, 2018, between LSB
Industries, Inc. and Cheryl Maguire
Employment Agreement, dated December 20, 2019 and to be
effective not later than February 3, 2020, between LSB Industries,
Inc. and (cid:45)ohn Burns
Severance and Change in Control Agreement, dated April 6,
2020, between LSB Industries, Inc. and Kristy Carver
Form of Retention Bonus Agreement

schedule

identifying other

Agreement, dated October 14, 2015, by and
Indemnification
ff
between the Company and (cid:45)ack E. Golsen,
together with a
schedule identifying other substantially identical agreements
between the Company and each of the other directors identified
on the schedule
Agreement, dated October 14, 2015 by and
Indemnification
ff
between the Company and David M. Shear,
together with a
schedule identifying other substantially identical agreements
between the Company and each of its executive officers identified
on the schedule
Indemnification
Agreement, dated as of December 4, 2015, by
ff
and between LSB Industries, Inc. and (cid:45)onathan S. Bobb, together
substantially identical
with a
agreements between the Company and each of the other directors
identified on the schedule
Asset Purchase Agreement, dated as of December 6, 2002, by and
among Energetic Systems Inc. LLC, UTeC Corporation, LLC,
SEC Investment Corp. LLC, DetaCorp Inc. LLC, Energetic
Properties, LLC, Slurry Explosive Corporation, Universal Tech
Corporation, El Dorado Chemical Company, LSB Chemical
Corp., LSB Industries, Inc. and Slurry Explosive Manufacturing
Corporation, LLC
Exhibits and Disclosure Letters to the Asset Purchase Agreement,
dated as of December 6, 2002, by and among Energetic Systems
Inc. LLC, UTeC Corporation, LLC, SEC Investment Corp. LLC,
DetaCorp Inc. LLC, Energetic Properties, LLC, Slurry Explosive
Corporation, Universal Tech Corporation, El Dorado Chemical
Company, LSB Chemical Corp., LSB Industries, Inc. and Slurry
Explosive Manufacturing Corporation, LLC
Ammonia Purchase and Sale Agreement by and between El
Dorado Chemical Company and Koch Fertilizer, LLC, dated as of
November 2, 2015

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)
Exhibit 10.1 to the Company’s Form 8-K filed
August 2, 2016
Exhibit 10.1 to the Company’s Form 8-K filed
February 11, 2019
Exhibit 10.2 to the Company’s Form 8-K filed
(cid:45)anuary 3, 2019
Exhibit 10.30 to the Company’s Form 10-K filed
February 25, 2019

Exhibit 10.1 to the Company’s Form 10-Q filed
May 7, 2020
Exhibit 10.28 to the Company’s Form 10-K filed
February 29, 2016
Exhibit 10.1 to the Company’s Form 8-K filed
October 19, 2015

Exhibit 10.2 to the Company’s Form 8-K filed
October 19, 2015

Exhibit 10.5 to the Company’s Form 8-K filed
December 8, 2015

Exhibit 2.1 to the Company’s Form 8-K dated
December 27, 2002

Exhibit 10.1b to the Company’s Form 10-Q filed
August 6, 2010

Exhibit 10.49 to the Company’s Form 10-K filed
February 29, 2016

CERTAIN INFORMATION WITHIN THIS
E(cid:59)HIBIT HAS BEEN OMITTED AS IT IS THE
SUB(cid:45)ECT OF A COMMISSION ORDER CF
(cid:6)33502, DATED APRIL 4, 2016, GRANTING
REQUEST
COMPAN(cid:60) FOR
CONFIDENTIAL TREATMENT B(cid:60) THE
E(cid:59)CHANGEAA
AND
SECURITIES
COMMISSION UNDER THE FREEDOM OF
INFORMATION ACT.

B(cid:60) THE

48

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)
10.38

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)
Second Amendment to Ammonia Purchase and Sale Agreement
Between Koch Fertilizer, LLC and El Dorado Chemical
Company, dated as of September 30, 2019

10.39

Urea Ammonium Nitrate Purchase and Sale Agreement dated as
of March 3, 2016 and effective as of (cid:45)une 1, 2016 between
Coffeyville Resources Nitrogen Fertilizers, LLC and Pryor
Chemical Company

10.40

10.41

10.42

10.43

10.44

10.45

10.46

10.47

10.48

10.49

Stock Purchase Agreement by and among Consolidated Industries
L.L.C. The Climate Control Group, Inc., NIBE Energy Systems
Inc. and, solely for purposes of Sections 6.8, 6.19 and 11.15
therein, LSB Industries, Inc., and solely for purposes of Section
11.16 therein, NIBE Industrier AB (publ), dated as of May 11,
2016.
Contract on the supply of Basic Engineering Package, Detail
Engineering Package, Tagged Major Equipment and related
Advisory Services, between Weatherly Inc. and El Dorado
Chemical Company, dated November 30, 2012
Engineering, Procurement and Construction Agreement, dated
August 12, 2013, between El Dorado Ammonia L.L.C. and SAIC
Constructors, LLC
Construction Agreement-DMW2, dated November 6, 2013,
between El Dorado Chemical Company and SAIC Constructors,
LLC
Construction Agreement (cid:177) NACSAC, dated November 6, 2013,
between El Dorado Chemical Company and SAIC Constructors,
LLC
Engineering, Procurement and Construction Agreement, dated
December 31, 2013, between El Dorado Chemical Company and
SAIC Constructors, LLC
Engineering,
Contract,
Amendment No. 1 dated October 20, 2015, by and between El
Dorado Ammonia LLC and SAIC Constructors, LLC
Settlement Agreement, dated April 26, 2015, by and among the
Company and Starboard (cid:57)alue LP and its certain affiliates and
associates
Consent Decree, dated May 28, 2014, by and among, LSB
Industries, Inc., El Dorado Chemical Co., Cherokee Nitrogen Co.,
Pryor Chemical Co., El Dorado Nitrogen, L.P.,
the U.S.
the U.S. Environmental Protection
Department of
Agency,
Environmental
of
Management, and the Oklahoma Department of Environment
Quality
Second Amended and Restated Loan and Security Agreement,
dated December 31, 2013, by and among LSB Industries, Inc.,
each of its subsidiaries that are signatories thereto, the lenders
signatories thereto, and Wells Fargo Capital Finance, LLC

the Alabama Department

Construction

Procurement

(cid:45)ustice,

and

49

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)
Exhibit 10.1 to the Company’s Form 10-Q filed
October 29, 2019

CERTAIN CONFIDENTIAL INFORMATION
WITHIN THIS
BEEN
OMITTED.
Exhibit 10.1 to the Company’s Form 10-Q filed
August 8, 2016

E(cid:59)HIBIT HAS

DATED AUGUST 30,

CERTAIN INFORMATION WITHIN THIS
E(cid:59)HIBIT HAS BEEN OMITTED AS IT IS THE
SUB(cid:45)ECT OF A COMMISSION ORDER CF
(cid:6)33783.
2016,
GRANTING REQUEST B(cid:60) THE COMPAN(cid:60)
FOR CONFIDENTIAL TREATMENT B(cid:60) THE
SECURITIES
E(cid:59)CHANGEAA
AND
COMMISSION UNDER THE FREEDOM OF
INFORMATION ACT.
Exhibit 10.1 to the Company’s Form 8-K filed
May 13, 2016

Exhibit 99.2 to the Company’s Form 8-K filed
December 6, 2012

Exhibit 10.1 to the Company’s Form 8-K filed
August 15, 2013

Exhibit 99.1 to the Company’s Form 8-K filed
November 12, 2013

Exhibit 99.2 to the Company’s Form 8-K filed
November 12, 2013

Exhibit 99.1 to the Company’s Form 8-K filed
(cid:45)anuary 7, 2014

Exhibit 10.1 to the Company’s Form 8-K filed
October 26, 2015

Exhibit 99.1 to the Company’s Form 8-K filed
April 30, 2015

Exhibit 99.1 to the Company’s Form 8-K filed
(cid:45)une 3, 2014

Exhibit 4.9 to the Company’s Form 10-K filed
February 27, 2014

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)

10.50

10.51

10.52

10.53

10.54

10.55

10.56

10.57

10.58

10.59

10.60

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)

Amendment No. 1 to the Second Amended and Restated Loan
and Security Agreement, dated as of (cid:45)une 11, 2015, by and among
LSB Industries, Inc. its subsidiaries identified on the signature
pages thereof, the lenders identifiedff
on the signature pages thereof
and Wells Fargo Capital Finance, LLC, as the arranger and
administrative agent for the Lenders
Amendment No. 2 to the Second Amended and Restated Loan
and Security Agreement, dated as of November 9, 2015, by and
among LSB Industries, Inc., its subsidiaries identified on the
signature pages thereof, the lenders identified on the signature
pages thereof, and Wells Fargo Capital Finance, LLC, as the
arranger and administrative agent for the Lenders
Third Amended and Restated Loan and Security Agreement,
dated as of (cid:45)anuary 17, 2017, by and among LSB Industries, Inc.,
the subsidiaries of LSB Industries, Inc. party thereto, the lenders
party thereto, and Wells Fargo Capital Finance, LLC, as the
arranger and administrative agent.
to Third Amended and Restated Loan and
First Amendment
Security Agreement, dated as of April 16, 2018, by and among
Wells Fargo Capital Finance, LLC, as
the arranger and
administrative agent, the lenders party thereto, LSB Industries,
Inc. and its subsidiaries identified on the signature pages thereto
as borrowers and the Company’s subsidiaries identified on the
signature pages thereto as guarantors.
Second Amendment to Third Amended and Restated Loan and
Security Agreement, dated as of February 26, 2019, by and
among Wells Fargo Capital Finance, LLC, as the arranger and
administrative agent, the lenders party thereto, LSB Industries,
Inc. and its subsidiaries identified on the signature pages thereto
as borrowers and the Company’s subsidiaries identified on the
signature pages thereto as guarantors.
Third Amendment to Third Amended and Restated Loan and
Security Agreement, dated as of April 20, 2020, by and among
Wells Fargo Capital Finance, LLC, as
the arranger and
administrative agent, the lenders party thereto, LSB Industries,
Inc. and its subsidiaries identified on the signature pages thereto
as borrowers and the Company’s subsidiaries identified on the
signature pages thereto as guarantors
Consent and Fourth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of September 22, 2021,
by and among Wells Fargo Capital Finance, LLC, as the arranger
and administrative agent,
the lenders party thereto, LSB
Industries, Inc. and its subsidiaries identified on the signature
pages thereto as borrowers and the Company’s subsidiaries
identified on the signature pages thereto as guarantors
Security Agreement dated as of August 7, 2013, among LSB
Industries, Inc. and the other grantors identified therein in favor of
UMB Bank, N.A. as Collateral Agent
Supplement No. 1 to Security Agreement February 12, 2014
among LSB Industries, Inc. and the other grantors identified
therein in favor of UMB Bank, N.A., as Collateral Agent
Note Purchase Agreement, dated November 9, 2015, by and
among LSB Industries, Inc., the guarantors party thereto and LSB
Funding LLC
Promissory Note, dated November 9, 2015, by LSB Industries,
Inc.

50

Exhibit 99.1 to the Company’s Form 8-K filed
(cid:45)une 17, 2015

Exhibit 10.3 to the Company’s Form 8-K filed
November 16, 2015

Exhibit 10.1 to the Company’s Form 8-K filed
(cid:45)anuary 20, 2017

Exhibit 10.1 to the Company’s Form 8-K filed
April 20, 2018

Exhibit 4.1 to the Company’s Form 8-K filed
February 28, 2019

Exhibit 10.3 to the Company’s Form 10-Q filed
May 7, 2020

Exhibit 10.1 to the Company’s Form 8-K filed
September 27, 2021

Exhibit 10.72 to the Company’s Form 10-K filed
February 29, 2016

Exhibit 10.73 to the Company’s Form 10-K fileff
February 29, 2016

d

Exhibit 10.1 to the Company’s Form 8-K filed
November 16, 2015

Exhibit 10.2 to the Company’s Form 8-K filed
November 16, 2015

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)

10.61

10.62

10.63

10.64

10.65

10.66

10.67(cid:13)

10.68

10.69

21.1(a)
23.1(a)
31.1(a)

31.2(a)

32.1(b)

32.2(b)

101.INS(a)
101.SCH(a)
101.CAL(a)

101.DEF(a)

101.LAB(a)
101.PRE(a)

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)

Exhibit 10.4 to the Company’s Form 8-K filed
November 16, 2015

Exhibit 10.1 to the Company’s Form 8-K filed
April 25, 2018

Exhibit 10.5 to the Company’s Form 8-K filed
November 16, 2015

Exhibit 10.3 to the Company’s Form 8-K filed
December 8, 2015

Exhibit 10.4 to the Company’s Form 8-K filed
December 8, 2015
Exhibit 10.1 to the Company’s Form 8-K filed
August 12, 2016

Exhibit 10.1 to the Company’s Form 8-K filed on
(cid:45)une 30, 2017
Exhibit 10.1. to the Company’s Form 8-K Filed
on October 26, 2017

Exhibit 10.2 to the Company’s Form 8-K filed
October 19, 2018

(cid:45)oinder Agreement to Intercreditor Agreement, dated November
9, 2015, by and among LSB Funding LLC, Wells Fargo Capital
Finance, Inc., as ABL Agent, UMB Bank, N.A., as Notes Agent,
LSB Industries, Inc. and the guarantors party thereto
Amendment No. 1 to Intercreditor Agreement, dated as of April
25, 2018, among Wells Fargo Capital Finance, LLC, UMB Bank,
n.a.
and
and Wilmington Trust, National Association,
acknowledged by LSB Industries,
Inc. and the subsidiary
guarantors party thereto.
(cid:45)oinder Agreement to Security Agreement, dated November 9,
2015, by and among LSB Funding LLC, UMB Bank, N.A., as
Collateral Agent, LSB Industries, Inc. and the guarantors party
thereto
Board Representation and Standstill Agreement by and among
LSB Industries,
Inc., LSB Funding LLC, Security Benefit
Corporation, Todd Boehly and the Golsen Holders (as defined
therein), dated as of December 4, 2015
Registration Rights Agreement by and between LSB Industries,
Inc. and LSB Funding LLC, dated as of December 4, 2015
Letter Agreement, dated as of August 12, 2016, by and among
LSB Industries, Inc., LSB Funding LLC and Security Benefit
Corporation
Transition Agreement dated (cid:45)une 30, 2017 by and between (cid:45)ack
E. Golsen and LSB Industries, Inc.
Amendment, dated October 26, 2017, to the Board Representation
and Standstill Agreement by and between LSB Industries, Inc.,
LSB Funding LLC, Security Benefit Corporation, Todd Boehly,
(cid:45)ack E. Golsen, Barry H. Golsen, Linda Golsen Rappaport,
Golsen Family LLC, SBL LLC and Golsen Petroleum Corp.,
dated as of December 4, 2015
Amendment to Board Representation and Standstill Agreement,
dated as of October 18, 2018, by and among LSB Industries, Inc.,
LSB Funding LLC, Security Benefit Corporation, Todd Boehly
and the Golsen Holders (as defined therein)
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm
Certification of Mark T. Behrman, Chief Executive Officer,
pursuant to Sarbanes-Oxley Act of 2002, Section 302
Certification of Cheryl A. Maguire, Chief Financial Officer
pursuant to Sarbanes-Oxley Act of 2002, Section 302
Certification of Mark T. Behrman, Chief Executive Officer,
furnished pursuant to Sarbanes-Oxley Act of 2002, Section 906
Certification of Cheryl A. Maguire, Chief Financial Officer
furnished pursuant to Sarbanes-Oxley Act of 2002, Section 906
Inline (cid:59)BRL Instance Document
Inline (cid:59)BRL Taxonomy Extension Schema Document
Inline (cid:59)BRL Taxonomy Extension Calculation Linkbase
Document
Inline (cid:59)BRL Taxonomy Extension Definition Linkbase
Document
Inline (cid:59)BRL Taxonomy Extension Labels Linkbase Document
Inline (cid:59)BRL Taxonomy Extension Presentation Linkbase
Document

ff

ff

,

,

51

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:49)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)
104

(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87) (cid:55)(cid:76)(cid:87)(cid:79)(cid:72)
Cover Page Interactive Data File (formatted as Inline (cid:59)BRL and
contained in Exhibit 101)

(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71) (cid:69)(cid:92) (cid:53)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72) (cid:87)(cid:82) (cid:87)(cid:75)(cid:72) (cid:41)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)

(cid:13)
(a)
(b)
(P)

Executive Compensation Plan or Arrangement
Filed herewith
Furnished herewith
Paper copy filed

52

LSB Industries, Inc.

(cid:54)(cid:76)(cid:74)(cid:81)(cid:68)(cid:87)(cid:88)(cid:85)(cid:72)(cid:86)

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated(cid:29)
February 24, 2022

By(cid:29)

(cid:18)s(cid:18) Mark T. Behrman
Mark T. Behrman, President, Chief Executive Officer

ff

and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

Dated(cid:29)
February 24, 2022

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

By(cid:29)

(cid:18)s(cid:18) Mark T. Behrman
Mark T. Behrman, President and Chief Executive Officer
(Principal Executive Officer) and Director

(cid:18)s(cid:18) Cheryl A. Maguire
Cheryl A. Maguire, Executive (cid:57)ice President and Chief Financial
Officer (Principal Financial and Accounting Officer

Officer)

ff

(cid:18)s(cid:18) Richard W. Roedel
Richard W. Roedel, Chairman of the Board of Directors

(cid:18)s(cid:18) (cid:45)onathan S. Bobb
(cid:45)onathan S. Bobb, Director

(cid:18)s(cid:18) Barry H. Golsen
Barry H. Golsen, Director

(cid:18)s(cid:18) Kanna Kitamura
Kanna Kitamura, Director

(cid:18)s(cid:18) Steven L. Packebush
Steven L. Packebush, Director

(cid:18)s(cid:18) Diana M. Peninger
Diana M. Peninger, Director

(cid:18)s(cid:18) Richard S. Sanders (cid:45)r.
Richard S. Sanders (cid:45)r., Director

(cid:18)s(cid:18) Lynn F. White
Lynn F. White, Director

53

LSB Industries, Inc.

Consolidated Financial Statements
And Schedule for Inclusion in Form 10-K
For the Fiscal (cid:60)ear ended December 31, 2021

Table of Contents

Financial Statements

Report of Independent Registered Public Accounting Firm .............................................................................................................

Consolidated Balance Sheets ............................................................................................................................................................

Consolidated Statements of Operations ............................................................................................................................................

Consolidated Statements of Stockholders’ Equity............................................................................................................................

Consolidated Statements of Cash Flows ...........................................................................................................................................

Page

F(cid:177)2

F(cid:177)4

F(cid:177)6

F(cid:177)7

F(cid:177)8

Notes to Consolidated Financial Statements.....................................................................................................................................

F(cid:177)10

Quarterly Financial Data (Unaudited)...............................................................................................................................................

F(cid:177)37

Financial Statement Schedule

Schedule II (cid:177) (cid:57)aluation and Qualifying Accounts ...........................................................................................................................

F(cid:177)39

F-1

(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:82)(cid:73) (cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87) (cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71) (cid:51)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:41)(cid:76)(cid:85)(cid:80)

To the Shareholders and the Board of Directors of LSB Industries, Inc.

(cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81) (cid:82)(cid:81) (cid:87)(cid:75)(cid:72) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

We have audited the accompanying consolidated balance sheets of LSB Industries, Inc. (the Company) as of December 31, 2021 and
2020, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2021, and the related notes and the financial statement schedule listed in the index at Item 15(a) (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting
principles.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework)
and our report dated February 24, 2022 expressed an unqualified opinion thereon.

u

(cid:37)(cid:68)(cid:86)(cid:76)(cid:86) (cid:73)(cid:82)(cid:85) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

u

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
and significant
that our audits provide a reasonable basis for our opinion.

ff

(cid:38)(cid:85)(cid:76)(cid:87)(cid:76)(cid:70)(cid:68)(cid:79) (cid:68)(cid:88)(cid:71)(cid:76)(cid:87) (cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committeett
and that(cid:29) (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the
critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,
by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.

Description
of the Matter

Extinguishment of preferred

ff

stock in exchange for common stock

As discussed in Note 2 to the consolidated financial statements, the Company entered into an Exchange
Agreement with LSB Funding LLC, requiring approval from the Company’s common stockholders,
which was subsequently voted on and approved by the Company’s common stockholders. Pursuant to the
terms of the Exchange Agreement, which closed on September 27, 2021, LSB Funding LLC and the
Company agreed to exchange the outstanding Series E-1 and Series F-1 Redeemable Preferred Stock for
common stock of the Company at an agreed upon exchange price of $6.16 per common share. In
connection with the exchange, each common stockholder prior to the exchange received a special
dividend in the form of 0.30 shares of common stock for every share owned as of, September 24, 2021,
the dividend record date. The Company applied the related accounting guidance and disclosure
requirements, recognizing a deemed dividend of $231.8 million within capital in excess of par value. The
deemed dividend increased the reported net loss to arrive at the net loss attributable to common
stockholders, which is used in the basic and diluted net loss per share calculation using the two-class
method, with retrospective application of the special dividend.

Auditing the Company(cid:10)s application of the accounting guidance related to the exchange and special
dividend required special consideration, given the non-recurring nature of the transaction and the
complexity involved in applying the relevant accounting standards

F-2

How We
Addressed
the Matter in
Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls
relating to the accounting for the exchange and special dividend. To test the accounting for the exchange
and special dividend, our audit procedures included, among others, examining the terms of the relevant
Exchange Agreement and special dividend, the Company’s provisions over change in control activities,
reading the minutes and meeting materials of the committees of the board of directors, and performing
inquiries of members of management. As part of these procedures, we involved our subject matter
resources and evaluated the Company’s application of the related accounting guidance to the accounting
conclusions and financial statement presentation of equity and the basic and diluted net loss per share.

(cid:18)s(cid:18) Ernst (cid:9) (cid:60)oung

We have served as the Company’s auditor since 1968.

Oklahoma City, Oklahoma

February 24, 2022

F-3

(cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)
Current assets(cid:29)

Cash and cash equivalents
Accounts receivable
Allowance forff

doubtful accounts

Accounts receivable, net

Inventories(cid:29)

Finished goods
Raw materials

Total inventories

Supplies, prepaid items and other(cid:29)

Prepaid insurance
Precious metals
Supplies
Other

Total supplies, prepaid items and other

Total current assets

Property, plant and equipment, net

Other assets(cid:29)

Operating lease assets
Intangible and other assets, net

LSB Industries, Inc.

Consolidated Balance Sheets

(cid:7)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)

$

(cid:27)(cid:21)(cid:15)(cid:20)(cid:23)(cid:23)
(cid:27)(cid:25)(cid:15)(cid:28)(cid:19)(cid:21)
(cid:11)(cid:23)(cid:26)(cid:23)(cid:12)
(cid:27)(cid:25)(cid:15)(cid:23)(cid:21)(cid:27)

(cid:20)(cid:23)(cid:15)(cid:25)(cid:27)(cid:27)
(cid:20)(cid:15)(cid:27)(cid:28)(cid:24)
(cid:20)(cid:25)(cid:15)(cid:24)(cid:27)(cid:22)

(cid:20)(cid:23)(cid:15)(cid:21)(cid:23)(cid:23)
(cid:20)(cid:23)(cid:15)(cid:28)(cid:23)(cid:24)
(cid:21)(cid:25)(cid:15)(cid:24)(cid:24)(cid:27)
(cid:21)(cid:15)(cid:21)(cid:22)(cid:23)
(cid:24)(cid:26)(cid:15)(cid:28)(cid:27)(cid:20)
(cid:21)(cid:23)(cid:22)(cid:15)(cid:20)(cid:22)(cid:25)

(cid:27)(cid:24)(cid:27)(cid:15)(cid:23)(cid:27)(cid:19)

(cid:21)(cid:26)(cid:15)(cid:22)(cid:20)(cid:26)
(cid:22)(cid:15)(cid:28)(cid:19)(cid:26)
(cid:22)(cid:20)(cid:15)(cid:21)(cid:21)(cid:23)

16,264
42,929
(378)
42,551

17,778
1,795
19,573

12,315
6,787
25,288
6,802
51,192
129,580

891,198

26,403
6,121
32,524

(cid:7)

(cid:20)(cid:15)(cid:20)(cid:22)(cid:21)(cid:15)(cid:27)(cid:23)(cid:19)

$

1,053,302

on following page)

F-4

LSB Industries, Inc.

Consolidated Balance Sheets (continued)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)

(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:10) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Current liabilities(cid:29)

Accounts payable
Short-term financing
Accrued and other liabilities
Current portion of long-term debt

Total current liabilities

Long-term debt, net

NNoncurrent operating lease liabilities

Other noncurrent accrued and other liabilities

Deferred income taxes

Commitments and contingencies (Note 8)

prefeff rred stocks(cid:29)

Series E 14% cumulative, redeemable Class C preferred stock, no par value,
no shares issued or outstanding at December 31, 2021(cid:30) (210,000 shares
issued(cid:30) 139,768 outstanding(cid:30) aggregate liquidation preference

$278 million at December 31, 2020)
Series F redeemable Class C preferred stock, no par value, no shares
issued or outstanding at December 31, 2021(cid:30) (1 share issued and

outstanding(cid:30) aggregate liquidation preference of $100
at December 31, 2020)

Stockholders(cid:10) equity(cid:29)

Series B 12% cumulative, convertible preferred stock, $100 par value(cid:30)

no shares issued or outstanding at December 31, 2021(cid:30) (20,000 shares
issued and outstanding(cid:30) aggregate liquidation prefeff rence $3.3 million
at December 31, 2020)

Series D 6% cumulative, convertible Class C preferred stock, no par value(cid:30)
no shares issued or outstanding at December 31, 2021(cid:30) (1 million shares
issued and outstanding(cid:30) aggregate liquidation prefeff rence $1.3 million
December 31, 2020)

Common stock, $.10 par value(cid:30) 150 million shares authorized, 91.1

million shares issued (75 million shares authorized, 39.9 million shares
issued at December 31, 2020)

Capital in excess of par value
Accumulated deficit

Less treasury stock, at cost(cid:29)

Common stock, 1.4 million shares (2.1 million shares at

December 31, 2020)
Total stockholders(cid:10) equity

See accompanying notes.

F-5

(cid:7)

$

(cid:23)(cid:28)(cid:15)(cid:23)(cid:24)(cid:27)
(cid:20)(cid:21)(cid:15)(cid:26)(cid:20)(cid:25)
(cid:22)(cid:22)(cid:15)(cid:22)(cid:19)(cid:20)
(cid:28)(cid:15)(cid:23)(cid:24)(cid:23)
(cid:20)(cid:19)(cid:23)(cid:15)(cid:28)(cid:21)(cid:28)

(cid:24)(cid:20)(cid:27)(cid:15)(cid:20)(cid:28)(cid:19)

(cid:20)(cid:28)(cid:15)(cid:24)(cid:25)(cid:27)

(cid:22)(cid:15)(cid:19)(cid:22)(cid:19)

(cid:21)(cid:25)(cid:15)(cid:25)(cid:22)(cid:22)

(cid:178)

(cid:178)

(cid:178)

(cid:178)

(cid:28)(cid:15)(cid:20)(cid:20)(cid:26)
(cid:23)(cid:28)(cid:22)(cid:15)(cid:20)(cid:25)(cid:20)
(cid:11)(cid:22)(cid:20)(cid:15)(cid:21)(cid:24)(cid:24)(cid:12)
(cid:23)(cid:26)(cid:20)(cid:15)(cid:19)(cid:21)(cid:22)

46,551
13,576
30,367
16,801
107,295

467,389

19,845

6,090

30,939

272,101

(cid:178)

2,000

1,000

3,993
197,350
(41,487)
162,856

(cid:20)(cid:19)(cid:15)(cid:24)(cid:22)(cid:22)
(cid:23)(cid:25)(cid:19)(cid:15)(cid:23)(cid:28)(cid:19)
(cid:20)(cid:15)(cid:20)(cid:22)(cid:21)(cid:15)(cid:27)(cid:23)(cid:19)

$

13,213
149,643
1,053,302

(cid:7)

LSB Industries, Inc.

Consolidated Statements of Operations

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:60)(cid:72)(cid:68)(cid:85) (cid:40)(cid:81)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)
(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands, Except Per Share Amounts)

(cid:21)(cid:19)(cid:20)(cid:28)

NNet sales
Cost of sales
Gross profit

Selling, general and administrative expense
Other expense (income), net
Operating income (loss)

Interest expense, net
NNet loss on extinguishments of debt
NNon-operating other expense (income), net

Income (loss) beforeff
Benefit for income taxes
NNet income (loss)

benefit for income taxes

Dividends on convertible preferred stocks
Dividends on Series E redeemable preferred stock
Accretion of Series E redeemable preferred stock
Deemed dividend on Series E and Series F

redeemable preferred stocks

NNet loss attributable to common stockholders

Basic and diluted net loss per common share

(cid:7)

$

(cid:24)(cid:24)(cid:25)(cid:15)(cid:21)(cid:22)(cid:28)
(cid:23)(cid:20)(cid:26)(cid:15)(cid:21)(cid:25)(cid:19)
(cid:20)(cid:22)(cid:27)(cid:15)(cid:28)(cid:26)(cid:28)

$

351,316
334,268
17,048

365,070
360,085
4,985

(cid:22)(cid:27)(cid:15)(cid:19)(cid:21)(cid:27)
(cid:11)(cid:28)(cid:26)(cid:12)
(cid:20)(cid:19)(cid:20)(cid:15)(cid:19)(cid:23)(cid:27)

(cid:23)(cid:28)(cid:15)(cid:22)(cid:26)(cid:27)
(cid:20)(cid:19)(cid:15)(cid:21)(cid:24)(cid:28)
(cid:21)(cid:15)(cid:23)(cid:21)(cid:21)

(cid:22)(cid:27)(cid:15)(cid:28)(cid:27)(cid:28)
(cid:11)(cid:23)(cid:15)(cid:24)(cid:24)(cid:25)(cid:12)
(cid:23)(cid:22)(cid:15)(cid:24)(cid:23)(cid:24)

(cid:21)(cid:28)(cid:27)
(cid:21)(cid:28)(cid:15)(cid:28)(cid:20)(cid:23)
(cid:20)(cid:15)(cid:24)(cid:21)(cid:22)

32,084
499
(15,535)

51,115
(cid:178)
10

(66,660)
(4,749)
(61,911)

300
35,182
2,026

34,172
9,904
(39,091)

46,389
(cid:178)
(1,139)

(84,341)
(20,924)
(63,417)

300
30,729
1,995

(cid:21)(cid:22)(cid:20)(cid:15)(cid:27)(cid:20)(cid:21)
(cid:11)(cid:21)(cid:21)(cid:19)(cid:15)(cid:19)(cid:19)(cid:21)(cid:12) $

(cid:178)
(99,419) $

(cid:178)
(96,441)

(cid:11)(cid:23)(cid:17)(cid:23)(cid:19)(cid:12) $

(2.71) $

(2.65)

(cid:7)

(cid:7)

See accompanying notes.

F-6

LSB Industries, Inc.

Consolidated Statements of Stockholders’ Equity

(cid:55)(cid:85)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:92)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:16)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)
(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)

(cid:49)(cid:82)(cid:81)(cid:16)
(cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72)
(cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)

(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)

(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)
(cid:51)(cid:68)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72)

(cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79) (cid:76)(cid:81)
(cid:40)(cid:91)(cid:70)(cid:72)(cid:86)(cid:86) (cid:82)(cid:73)
(cid:51)(cid:68)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72)

(In Thousands)

(cid:53)(cid:72)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)
(cid:40)(cid:68)(cid:85)(cid:81)(cid:76)(cid:81)(cid:74)(cid:86)
(cid:11)(cid:36)(cid:70)(cid:70)(cid:88)(cid:80)(cid:88)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)
(cid:39)(cid:72)(cid:73)(cid:76)(cid:70)(cid:76)(cid:87)(cid:12)

(cid:55)(cid:85)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:92)
(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:16)
(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)

(cid:55)(cid:82)(cid:87)(cid:68)(cid:79)

39,725 (2,438) $

3,000 $ 3,972 $ 197,638 $

153,773 $(16,186) $ 342,197
(63,417)
(63,417)

176

428
39,901 (2,010)

3,000

18
3,990

25

(65)
39,926 (2,075)

3,000

3
3,993

2,220
(3,887)
195,971

1,761
(382)
197,350

(cid:23)(cid:28)(cid:15)(cid:19)(cid:25)(cid:25)

(cid:23)(cid:15)(cid:28)(cid:19)(cid:26)

(cid:24)(cid:21)(cid:25)(cid:15)(cid:21)(cid:22)(cid:21)

(30,729)
(1,995)

57,632
(61,911)

(35,182)
(2,026)

(41,487)
(cid:23)(cid:22)(cid:15)(cid:24)(cid:23)(cid:24)

2,920
(13,266)

53
(13,213)

(30,729)
(1,995)
2,220
(949)
247,327
(61,911)

(35,182)
(2,026)
1,761
(326)
149,643
(cid:23)(cid:22)(cid:15)(cid:24)(cid:23)(cid:24)

(cid:24)(cid:22)(cid:20)(cid:15)(cid:20)(cid:22)(cid:28)

(cid:11)(cid:21)(cid:22)(cid:20)(cid:15)(cid:27)(cid:20)(cid:21)(cid:12)

(cid:11)(cid:21)(cid:22)(cid:20)(cid:15)(cid:27)(cid:20)(cid:21)(cid:12)

(cid:11)(cid:21)(cid:28)(cid:15)(cid:28)(cid:20)(cid:23)(cid:12)

(cid:11)(cid:21)(cid:28)(cid:15)(cid:28)(cid:20)(cid:23)(cid:12)

(cid:11)(cid:20)(cid:15)(cid:24)(cid:21)(cid:22)(cid:12)

(cid:11)(cid:20)(cid:15)(cid:27)(cid:26)(cid:25)(cid:12)

(cid:21)(cid:15)(cid:27)(cid:27)(cid:20)
(cid:24)(cid:15)(cid:24)(cid:20)(cid:25)

(cid:11)(cid:20)(cid:15)(cid:24)(cid:21)(cid:22)(cid:12)

(cid:11)(cid:20)(cid:15)(cid:27)(cid:26)(cid:25)(cid:12)

(cid:178)
(cid:24)(cid:15)(cid:24)(cid:20)(cid:25)

(cid:28)(cid:27)(cid:23)

(cid:26)(cid:19)(cid:19)

(cid:28)(cid:27)

(cid:11)(cid:26)(cid:15)(cid:19)(cid:19)(cid:25)(cid:12)

(cid:11)(cid:23)(cid:15)(cid:21)(cid:21)(cid:27)(cid:12)
(cid:21)(cid:15)(cid:25)(cid:27)(cid:19)
(cid:11)(cid:22)(cid:20)(cid:15)(cid:21)(cid:24)(cid:24)(cid:12) (cid:7)(cid:11)(cid:20)(cid:19)(cid:15)(cid:24)(cid:22)(cid:22)(cid:12) (cid:7) (cid:23)(cid:25)(cid:19)(cid:15)(cid:23)(cid:28)(cid:19)

Balance at December 31, 2018
NNet loss
Dividend accrued on redeemable

preferred
ff

stock

Accretion of redeemable preferred stock
Stock-based compensation
Issuance of restricted stock, net
Balance at December 31, 2019
NNet loss
Dividend accrued on redeemable

preferred stock

Accretion of redeemable preferred stock
Stock-based compensation
Other
Balance at December 31, 2020
NNet income
Issuance of common stock in exchange

for redeemable preferred stocks
Deemed dividend on redeemable

preferred stocks

Dividend accrued on redeemable

preferred stock prior to exchange
Accretion of redeemable preferred

stock prior to exchange

Dividend paid on non-redeemable
preferred stock upon conversion

Conversion of non-redeemable

Stock-based compensation
Issuance of restricted and
unrestricted stock, net

preferred stock into common stock

(cid:20)(cid:15)(cid:20)(cid:28)(cid:21)

(cid:11)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12)

(cid:20)(cid:20)(cid:28)

Balance at December 31, 2021

(cid:28)(cid:20)(cid:15)(cid:20)(cid:25)(cid:27) (cid:11)(cid:20)(cid:15)(cid:22)(cid:26)(cid:24)(cid:12) (cid:7)

(cid:16) (cid:7) (cid:28)(cid:15)(cid:20)(cid:20)(cid:26) (cid:7) (cid:23)(cid:28)(cid:22)(cid:15)(cid:20)(cid:25)(cid:20) (cid:7)

See accompanying notes.

F-7

LSB Industries, Inc.

Consolidated Statements of Cash Flows

(cid:38)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:86) (cid:73)(cid:85)(cid:82)(cid:80) (cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)
NNet income (loss)
Adjustments to reconcile net income (loss) to net cash provided

(used) by operating activities(cid:29)

Deferred income taxes
Depreciation and amortization of property, plant and

equipment

Amortization of intangible and other assets
Loss associated with assets held for sale
Charge on extinguishments of debt
Amortization of debt issuance costs, including discounts

and premiums

Stock-based compensation
Loss (gain) associated with commodity contracts
Other
Cash provided (used) by changes in assets and liabilities(cid:29)

Accounts receivable
Inventories
Supplies, prepaid items and other
Accounts payable
Other assets and other liabilities
NNet cash provided (used) by operating activities

(cid:38)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:86) (cid:73)(cid:85)(cid:82)(cid:80) (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

Expenditures for property, plant and equipment
Proceeds from vendor settlements associated with

property, plant and equipment

Other investing activities

NNet cash used by investing activities

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:60)(cid:72)(cid:68)(cid:85) (cid:40)(cid:81)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)
(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:7)

(cid:23)(cid:22)(cid:15)(cid:24)(cid:23)(cid:24)

$

(61,911) $

(63,417)

(cid:11)(cid:23)(cid:15)(cid:22)(cid:19)(cid:25)(cid:12)

(4,778)

(20,895)

(cid:25)(cid:27)(cid:15)(cid:25)(cid:27)(cid:28)
(cid:20)(cid:15)(cid:21)(cid:24)(cid:23)
(cid:178)
(cid:20)(cid:19)(cid:15)(cid:21)(cid:24)(cid:28)

(cid:25)(cid:15)(cid:19)(cid:25)(cid:26)
(cid:24)(cid:15)(cid:24)(cid:20)(cid:25)
(cid:11)(cid:21)(cid:15)(cid:26)(cid:19)(cid:25)(cid:12)
(cid:21)(cid:15)(cid:25)(cid:24)(cid:22)

(cid:11)(cid:23)(cid:21)(cid:15)(cid:28)(cid:20)(cid:22)(cid:12)
(cid:22)(cid:15)(cid:21)(cid:25)(cid:20)
(cid:11)(cid:27)(cid:15)(cid:25)(cid:23)(cid:21)(cid:12)
(cid:28)(cid:22)(cid:21)
(cid:23)(cid:15)(cid:19)(cid:20)(cid:27)
(cid:27)(cid:26)(cid:15)(cid:25)(cid:21)(cid:26)

69,581
1,260
(cid:178)
(cid:178)

3,807
1,761
1,613
910

(4,702)
3,550
(6,585)
(6,561)
(458)
(2,513)

68,325
1,249
9,701
(cid:178)

3,620
2,220
(cid:178)
(148)

8,800
6,092
(933)
(7,987)
(4,528)
2,099

(cid:11)(cid:22)(cid:24)(cid:15)(cid:20)(cid:21)(cid:27)(cid:12)

(30,471)

(36,081)

(cid:178)
(cid:23)(cid:22)(cid:23)
(cid:11)(cid:22)(cid:23)(cid:15)(cid:25)(cid:28)(cid:23)(cid:12)

1,647
398
(28,426)

(cid:178)
156
(35,925)

(Continued on following page)

F-8

LSB Industries, Inc.

Consolidated Statements of Cash Flows (continued)

(cid:38)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90)(cid:86) (cid:73)(cid:85)(cid:82)(cid:80) (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74) (cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

Proceeds from revolving debt facility
Payments on revolving debt facility
Proceeds from 6.25% senior secured notes
Net proceeds from 9.625% senior secured notes
Payments on 9.625% senior secured notes
Proceeds from other long-term debt
Payments on other long-term debt
Payments of debt-related costs, including

extinguishment costs

Proceeds from short-term financing
Payments on short-term financing
Payments of costs to exchange redeemable prefeff rred

stocks for common stock
Taxes paid on equity awards
Payments of dividends on non-redeemable

preferred stocks

NNet cash provided by financing activities

NNet increase (decrease) in cash and cash equivalents

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:60)(cid:72)(cid:68)(cid:85) (cid:40)(cid:81)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)
(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:7)

$

(cid:20)(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:11)(cid:20)(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12)
(cid:24)(cid:19)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:178)
(cid:11)(cid:23)(cid:22)(cid:24)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12)
(cid:178)
(cid:11)(cid:20)(cid:19)(cid:15)(cid:23)(cid:26)(cid:21)(cid:12)

(cid:11)(cid:21)(cid:26)(cid:15)(cid:21)(cid:24)(cid:23)(cid:12)
(cid:20)(cid:25)(cid:15)(cid:25)(cid:27)(cid:28)
(cid:11)(cid:20)(cid:26)(cid:15)(cid:24)(cid:23)(cid:28)(cid:12)

(cid:11)(cid:26)(cid:15)(cid:22)(cid:25)(cid:22)(cid:12)
(cid:11)(cid:23)(cid:15)(cid:21)(cid:21)(cid:27)(cid:12)

(cid:11)(cid:20)(cid:15)(cid:27)(cid:26)(cid:25)(cid:12)
(cid:20)(cid:21)(cid:15)(cid:28)(cid:23)(cid:26)

(cid:25)(cid:24)(cid:15)(cid:27)(cid:27)(cid:19)

$

30,000
(30,000)
(cid:178)
(cid:178)
(cid:178)
42,570
(21,356)

(124)
14,589
(10,941)

(cid:178)
(326)

(cid:178)
24,412

5,000
(15,000)
(cid:178)
35,086
(cid:178)
20,219
(14,073)

(1,065)
12,179
(10,828)

(cid:178)
(949)

(cid:178)
30,569

(6,527)

(3,257)

Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(cid:20)(cid:25)(cid:15)(cid:21)(cid:25)(cid:23)
(cid:27)(cid:21)(cid:15)(cid:20)(cid:23)(cid:23)

$

22,791
16,264

$

26,048
22,791

(cid:7)

See accompanying notes.

F-9

LSB Industries, Inc.

Notes to Consolidated Financial Statements

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86)

(cid:37)(cid:68)(cid:86)(cid:76)(cid:86) (cid:82)(cid:73) (cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:177) LSB Industries, Inc. (“LSB”) and its subsidiaries (the “Company”, “we”, “us”, or “our”) are consolidated in
the accompanying consolidated financial statements. LSB is a holding company with no significant operations or assets other than
cash, cash equivalents, and investments in its subsidiaries. All material intercompany accounts and transactions have been eliminated.
Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassifiedff
to conform to
current period presentation.

and sale of chemical products. The chemical products we primarily
(cid:49)(cid:68)(cid:87)(cid:88)(cid:85)(cid:72) (cid:82)(cid:73) (cid:37)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86) (cid:177) We are engaged in the manufacture
manufacture, market and sell are ammonia, fertilizer grade AN (“HDAN”) and UAN for agricultural applications, high purity and
commercial grade 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 (“LDAN”) and solutions for the mining
industry. We manufacture and distribute our products in four facilities(cid:30) three of which we own and are located in El Dorado, Arkansas
(the “El Dorado Facility”)(cid:30) Cherokee, Alabaa ma (the “Cherokee Facility”)(cid:30) and Pryor, Oklahoma (the “Pryor Facility”)(cid:30) and one of which
“Baytown
we operate on behalf of Covestro LLC in Baytown, Texas (thet

Facility”).

aa

rr

ff

Sales to customers include farmers, ranchers, fertilizer dealers and distributors primarily in the ranch land and grain production
markets in the United States (“U.S.”)(cid:30) industrial users of acids throughout the U.S. and parts of Canada(cid:30) and explosive manufacturers
in the U.S. and parts of Mexico and Canada.

(cid:56)(cid:86)(cid:72) (cid:82)(cid:73) (cid:40)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86) (cid:177) The preparation of consolidated financial statements in conformity with 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 differff

from those estimates.

(cid:44)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72) (cid:76)(cid:81) (cid:36)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86) (cid:82)(cid:73) (cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:68)(cid:81)(cid:71) (cid:68) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:39)(cid:76)(cid:89)(cid:76)(cid:71)(cid:72)(cid:81)(cid:71) (cid:177) In September 2021, LSB held a Special Meeting of
Stockholders (the “Special Meeting”). At the Special Meeting, our stockholders approved(cid:29)

•

•

•

the issuance and sale of up to approximately 60.4 million shares of common stock of the Company upon the exchange of all
of the outstanding shares of Series E and Series F Redeemable Preferred (see discussion of the exchange transaction
(“Exchange Transaction” in Note 2)(cid:30)
amending our restated certificate of incorporation to increase the number of authorized shares of our common stock to 150
million shares of common stock(cid:30)
amending the certificate of designations of the Series E Redeemable Preferred to revise the preferential rights of holders of
shares of Series E Redeemable Preferred to eliminate the right to participate in connection with the declaration of the
proposed common stock dividend with respect to our common stock.

In August 2021, our Board of Directors (“Board”) declared a common stock dividend (“Special Dividend”) contingent on the closing
of the Exchange Transaction (as defined below). As a result of the stockholders’ approval and the closing of the Exchange
Transaction, such Special Dividend was effected in the form of a stock dividend of 0.3 shares of our common stock, for each
outstanding share of common stock (exclusive of common stock held in the treasury and the common shares issued as part of the
Exchange Transaction), but the Special Dividend was contingent upon the stockholders’ approval of the proposals noted above. As the
result of the stockholders’ approval, the Special Dividend was paid through the issuance of approximately 9.1 million shares of
common stock on October 8, 2021 to holders of record of common stock, including certain stock-based awards, on September 24,
2021 (the “Record Date”). Our common stock began trading on a stock dividend-adjusted basis on October 13, 2021.

For financial reporting purposes, the Special Dividend is accounted
share and per share information herein has been retroactively adjusted

u
d

to reflff ect the Special Dividend.

for as a stock split in the form of a stock dividend. As a result, all

In addition, pursuant to anti-dilution terms included in cash-based awards that were outstanding on the Record Date, the number of
units of cash-based awards increased due to the Special Dividend. As a result, additional expense was recognized due to the Special
Dividend. See additional discussion relating to these cash-based awards in Note 2.

F-10

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

ff

(cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:86) (cid:177) Our redeemable preferred
stocks, prior to their redemption as discussed in Note 2, were redeemable
outside our control and therefore were historically classified as temporary(cid:18)mezzanine equity. The redeemable preferred stocks were
In addition, certain embedded features (“embedded
recorded at fair value upon issuance, net of issuance costs or discounts.
derivative”) included in the Series E Redeemable Preferred required bifurcation and were classifiedff
as derivative liabilities. The
carrying values of the redeemable preferred stocks were being increased since issuance by periodic accretions (including the amount
for dividends earned but not yet declared or paid) using the interest method so that the carrying amount would equal the redemptionm
value as of the earliest possible redemption date by the holder. The accretion was recorded to retained earnings(cid:18)accumulated deficit.
However, in September 2021, our redeemable preferred stocks were exchanged into our common stock as discussed in Note 2. As a
result, the change in classification of the redeemable preferred stocks from temporary(cid:18)mezzanine equity to permanent equity was
considered an extinguishment. In conjunction with the extinguishment of the redeemable preferred stocks, the then current fair value
of the bifurcated embedded derivative was applied to the carrying value of the redeemable preferred stocks at the time of the
extinguishment.

(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86) (cid:177) Equity award transactions with employees are measured based on the estimated fair value of the equity awards
issued. For equity awards with 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. Forfeitures are accounted for as they occur. We may issue new shares of
common stock or may use treasury shares associated with the equity awards.

See additional discussion relating to certain equity awards impacted by the Exchange Transaction in Note 11.

(cid:38)(cid:68)(cid:86)(cid:75) (cid:68)(cid:81)(cid:71) (cid:38)(cid:68)(cid:86)(cid:75) (cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86) (cid:177) Investments, which consist of highly liquid investments with original maturities of three months or
less, are considered cash equivalents.

(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86) (cid:53)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72) (cid:177) Our accounts receivable is 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. Any contract assets consist of receivables from contracts with customers. Our accounts receivable primarily relate to
these contract assets and are presented in our consolidated balance sheets.

Sales to our customers are generally unsecured. Credit is extended to customers based on an evaluation of the customer’s financial
condition and other factors. Customer payments are generally due thirty to sixty days after the invoice date. Concentrations of credit
risk with respect to trade receivables are monitored and this risk is reduced due to short-term payment terms relating to most of our
significant customers. Six customers (including their affiliates) account for approximately 50% of our total net receivables at
December 31, 2021.

(cid:44)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:82)(cid:85)(cid:76)(cid:72)(cid:86) (cid:177) Inventories are stated at the lower of cost (determined using the first-in, first-out (“FIFO”) basis) or net realizable value,
which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, transportation
or disposal. Finished goods include material, labor, and manufacturing overhead costs.

a

Inventory reserves associated with cost exceeding net realizable value were not material at December 31, 2021 and 2020.

(cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:15) (cid:51)(cid:79)(cid:68)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87) (cid:177) Property, plant and equipment (“PP(cid:9)E”) are stated at cost, net of accumulated depreciation
amortization (“D(cid:9)A”). Leases meeting finance lease criteria are capitalized in PP(cid:9)E. Major renewals and improvements that
increase the life, value, or productive capacity of assets are capitalized in PP(cid:9)E while maintenance, repairs and minor renewals are
In addition, maintenance, repairs and minor renewal costs relating to planned major maintenance activities
expensed as incurred.
(“Turnarounds”) are expensed as they are incurred. All long-lived assets relate to domestic operations.

Fully depreciated assets are retained in PP(cid:9)E and accumulated D(cid:9)A accounts until disposal. When PP(cid:9)E is retired, sold, or
otherwise disposed, the asset’s carrying amount and related accumulated D(cid:9)A is 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(cid:9)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.

r

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.

F-11

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

(cid:44)(cid:80)(cid:83)(cid:68)(cid:76)(cid:85)(cid:80)(cid:72)(cid:81)(cid:87) (cid:82)(cid:73) (cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:47)(cid:76)(cid:89)(cid:72)(cid:71) (cid:36)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86) (cid:177) Long-lived assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset (asset group) may not be recoverable. An asset’s fair value must be determined when the
carrying amount of an asset (asset group) exceeds the estimated undiscounted future cash flows expected to result from the use of the
asset (asset group) and(cid:18)dd or 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. In general, and depending on the event
or change in circumstances, our asset groups are reviewed for impairment on a facility-by-facility basis (such as the Cherokee, El
Dorado or Pryor Facility).

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

(cid:47)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86) (cid:177) We determine if an arrangement is a lease at inception or modification of a contract and classify each lease as either an
operating or finance lease based on the terms of the contract. We reassess lease classification subsequent to commencement upon a
change to the expected lease term or a modification to the contract.
A contract contains a lease if the contract conveys the right to
control the use of the identified property or equipment, explicitly or implicitly, for a period of time in exchange for consideration.
Control of an underlying asset is conveyed if we obtain the rights to direct the use of and obtain substantially all of the economic
benefit from the use of the underlying asset.

tt

An operating lease asset represents our right to use the underlying asset as a lessee for the lease term and an operating lease liability
represent our obligation to make lease payments arising from the lease. Currently, most of our leases are classified as operating leases
and primarily relate to railcars, other equipment and office space. Our leases that are classified as finance leases and other leases underr
which we are the lessor are not material. (cid:57)ariable payments are excluded from the present value of lease payments and are recognized
in the period in which the payment is made. Our current leases do not contain residual value guarantees. Most of our leases do not
include options to extend or terminate the lease prior to the end of the term. Leases with a term of 12 months or less are not
recognized in the balance sheet.

Since our leases generally do not provide an implicit rate, we use our incremental borrowing rate based on the lease term and oth rer
information available at the commencement date in determining the present value of lease payments. Lease expense is recognized on
a straight-line basis over the appli

cable lease term.

a

(cid:38)(cid:82)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87) (cid:53)(cid:76)(cid:86)(cid:78)(cid:86) (cid:73)(cid:82)(cid:85) (cid:38)(cid:68)(cid:86)(cid:75) (cid:68)(cid:81)(cid:71) (cid:38)(cid:68)(cid:86)(cid:75) (cid:40)(cid:84)(cid:88)(cid:76)(cid:89)(cid:68)(cid:79)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86) (cid:177) Financial instruments relating to cash and cash
equivalents potentially subject us to concentrations of credit risk. These financial instruments were held by financial institutions
within
the U.S. None of the financial instruments held within U.S. were in excess of the federally insured limits.

tt

Net sales to one customer, Koch Fertilizer LLC (“Koch Fertilizer”), represented approximately 15%, 10% and 11% of our total net
sales for 2021, 2020 and 2019, respectively. Net sales to one customer, Coffeyville Resources Nitrogen Fertilizer, LLC (“C(cid:57)R”),
represented approximately 12%, 13% and 9% of our total net sales for 2021, 2020 and 2019, respectively.

(cid:36)(cid:70)(cid:70)(cid:85)(cid:88)(cid:72)(cid:71) (cid:44)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72) (cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86) (cid:177) 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
facilities. Additional pollution liability coverage for our other facilities is provided in our general liability and umbrella policies.

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(cid:18)dd 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 liabia lities 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.

F-12

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:177) We are party to certain benefit agreements with certain key former executives. Costs associated
with these individual benefit agreements are accrued based on the estimated remaining service period when such benefits become
probable, or they will be paid. Total costs accrued equal the present value of specified payments to be made after benefits become
payable.

(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86) (cid:177) Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those 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 the statement of operations in the
period that includes the enactment date. 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. Significant judgment is applied in evaluating the need for and the magnitude of appropriate
valuation allowances against deferred tax assets.

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 relevant taxing authorities 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 amountuu
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.

Income tax benefits associated with amounts that are deductible for income tax purposes are recorded through the statement of
operations. These benefits are principally generated from the vesting of restricted stock. We reduce income tax expense for investment
tax credits in the period the credit arises and is earned.

(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86) (cid:177) 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 when the contingencies have been resolved (generally at the
time a settlement has been reached).

(cid:36)(cid:86)(cid:86)(cid:72)(cid:87) (cid:53)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:50)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:177) 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 availablea
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(cid:9)E, which cost is depreciated
or depleted over the related asset’s respective useful lifeff . We do not have any assets restricted for the purpose of settling our AROs.

(cid:53)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72) (cid:53)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:68)(cid:81)(cid:71) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

Revenue Recognition and Performance Obligations

i

We determine revenue recognition through the following steps(cid:29)

•
•
•
•

Identification of the performance obligations in the contract(cid:30)
Determination of the transaction price(cid:30)
Allocation of the transaction price to the performance obligations in the contract(cid:30) and
Recognition of revenue when, or as, we satisfy a performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account. A
contract’s transaction price is allocated to each distinct performance
obligation and recognized as revenue when, or as, the
performance obligation is satisfied. Generally, satisfaction occurs when control of the promised goods is transferred to the customer or
as services are rendered or completed in exchange for consideration in an amount for which we expect to be entitled. Generally,
control is transferred when the preparation for shipment of the product to a customer has been completed. Most of our contracts
contain a single performance obligation with the promise to transfer a specific product.

ff

Most of our revenue is recognized from performance obligations satisfied at a point in time, however, we have a performance
obligation to perform certain services that are satisfied over a period of time. Revenue is recognized from this type of performance
obligation as services are rendered and are based on the amount for which we have a right to invoice, which reflects the amount of
expected consideration that corresponds directly with the value of the services performed.

F-13

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

Transaction Price Constraints and Variable Consideration

For most of our contracts with customers, the transaction price from the inception of a contract is constrained to a short period of time
(generally one month) as these contracts contain terms with variable consideration related to both price and quantity. These contract
prices are often based on commodity indexes (such as N(cid:60)ME(cid:59) natural gas index) published monthly and the contract quantities are
typically based on estimated ranges. The quantities become fixed and determinable over a period of time as each sale order is received
from the customer.

The nature of our contracts also gives rise to other types of variable consideration, including volume discounts and rebates, make-
whole provisions, other pricing concessions, and short-fall charges. We estimate these amounts based on the expected amount to be
provided to customers, which result in a transaction price adjud stment reducid
ng revenue (net sales) with the offset increasing contract or
refund liabilities. These estimates are based on historical experience, anticipated performance and our best judgment at the time. We
reassess these estimates on a quarterly basis.

The aforementioned constraints over transaction prices in conjunctio
n with the variable consideration included in our material
uu
contracts prevent a practical assignment of a specific dollar amount to performance obligations at the beginning and end of the period.
Therefore, we have applied the variable consideration allocation exception.

Future revenues to be earned from the satisfaction of performance obligations will be recognized when control transfers as goods are
loaded and weighed or services are performed over the remaining duration of our contracts.

Practical Expedients and Other Information
We have applied the foll

owing practical expedients(cid:29)

ff

•

•

•

•

to recognize revenue in the amount we have the right to invoice relating to certain services that are performed for
customers and, not disclosing the value of unsatisfied performance
not disclosing the value of unsatisfied performance obligations for contracts with an original expected duration of one
year or less.
not adjusting the promised amount of consideration for the effects of a significant financing component if we expect the
financing time period to be one year or less.
expense as incurred any incremental costs of obtaining a contract if the associated period of benefit is one year or less.

obligations related to such services.

a

All net sales and long-lived assets relate to domestic operations for the periods presented. In addition, net sales to non-U.S. customers
were not material.

(cid:53)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72) (cid:55)(cid:68)(cid:91) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:86) (cid:11)(cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:55)(cid:75)(cid:68)(cid:81) (cid:38)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:86) (cid:36)(cid:86)(cid:86)(cid:82)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71) (cid:90)(cid:76)(cid:87)(cid:75) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:12) (cid:177) If an incentive tax credit relates to a
recovery of taxes (other than income taxes) incurred, we recognize the incentive tax credit when it is probable and reasonably
estimable. If an incentive tax credit relates to an amount in excess of taxes incurred, the incentive tax credit is a contingent gain, which
we recognize the incentive tax credit when it is realized or when the contingencies have been resolved (generally at the time a
settlement has been reached). Amounts recoverable from the taxing authorities, if any, are included in accounts receivable. The same
financial statement classification is used for an incentive tax credit as the associated tax incurred.

At December 31, 2020, our incentive tax credits receivable totaled $1.4 million (minimal at December 31, 2021).

(cid:53)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81) (cid:82)(cid:73) (cid:44)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72) (cid:53)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:177) 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
when the contingencies have been resolved (generally at the time a settlement has been reached). 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.

(cid:38)(cid:82)(cid:86)(cid:87) (cid:82)(cid:73) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86) (cid:177) Cost of sales includes materials, labor and overhead costs, including depreciation, to manufacture
the products sold
plus inbound freight, purchasing and receiving costs, inspection costs, internal transfer costs, loading and handling costs, warehousing
costs, railcar lease costs and outbound freight. Maintenance, repairs and minor renewal costs relating to Turnarounds are included in
cost of sales as they are incurred. Precious metals used as a catalyst and consumed during the manufacturing process are included in
cost of sales. Recoveries and gains from precious metals and business interruption insurance claims, if any, are reductions to cost of
sales.

ff

(cid:54)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:15) (cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79) (cid:68)(cid:81)(cid:71) (cid:36)(cid:71)(cid:80)(cid:76)(cid:81)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72) (cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:177) Selling, general and administrative expense (“SG(cid:9)A”) includes costs associated
with the sales, marketing and administrative functions. Such costs include personnel costs, including benefits, professional fees, office
and occupancy costs associated with the sales, marketing and administrativ
e functions. Also included in SG(cid:9)A are any distribution
fees paid to third parties to distribute our products.

d

F-14

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

(cid:39)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:15) (cid:43)(cid:72)(cid:71)(cid:74)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:44)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:177) 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. When
applicable, we present the faff ir values of our derivative contracts under master netting agreements using a gross fair value presentation.

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of
inputs to the valuation as of the measurement date(cid:29)

(cid:47)(cid:72)(cid:89)(cid:72)(cid:79) (cid:20) - (cid:57)aluations of contracts classified as Level 1 are based on quoted prices in active markets for identical contracts.

(cid:47)(cid:72)(cid:89)(cid:72)(cid:79) (cid:21) - (cid:57)aluations 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.

(cid:47)(cid:72)(cid:89)(cid:72)(cid:79) (cid:22) - (cid:57)aluations 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, 2021 and 2020, we did not have any financial instruments with fair values materially different from their carrying
ents is not indicative of the overall fair value
amounts (which excludes issuance costs, if applicable). The fair value of financial instrumr
a
of our assets and liabilities since financial instruments do not include all assets, including intangibles, and all liabiliti

es.

rr

(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:11)(cid:47)(cid:82)(cid:86)(cid:86)(cid:12) (cid:83)(cid:72)(cid:85) (cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72) (cid:177) Net income (loss) attributable to common stockholders is computed by adjusting net income
(loss) by the amount of dividends and dividend requirements (including the deemed dividend discussed in Note 2) on preferred stocks
and the accretion of redeemable preferred stocks, if applicable. Basic loss per common share is computed by dividing net loss
attributable to common stockholders by the weighted average numberm of common shares outstanding, excluding contingently issuable
common shares (unvested restricted stock), if applicable. For periods we earn net income, a proportional share of net income is
allocated to participating securities, if applicable, determined by dividing total weighted average participating securities by the sum of
the total weighted average common shares and participating securituu ies (the “two-class method”). Certain securities (Series E
Redeemable Preferred prior to the Exchange Transaction and restricted
stock units) participate in dividends declared on our common
stock and are therefore considered to be participating securities.

tt

Participating securities have the effect of diluting both basic and diluted income per common share during periods of net income. For
periods we incur a net loss, no loss is allocated to participating securities because they have no contractual obligation to share in our
losses. Diluted loss per common share is computed after giving consideration to the dilutive effect of our potential common stock
instruments that are outstanding during the period, except where such non-participating securities would be anti-dilutive.

(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:16) We operate in one principal business segment (cid:177) our chemical business.

(cid:53)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92) (cid:36)(cid:71)(cid:82)(cid:83)(cid:87)(cid:72)(cid:71) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:85)(cid:82)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)

the Accounting for
(cid:36)(cid:54)(cid:56) (cid:21)(cid:19)(cid:20)(cid:28)(cid:16)(cid:20)(cid:21) – In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying
Income Taxes, which affects general principles within Topic 740, Income Taxes. The amendments of ASU 2019-12 are meant to
simplify and reduce the cost of accounting for income taxes. The ASU removes certain exceptions to the general framework and also
seeks to simplify and(cid:18)dd or clarify accounting for income taxes by adding certain requirements that would simplify GAAP for financial
statement preparers. On (cid:45)anuary 1, 2021, we adopted ASU 2019-12, which did not have a material impact on our consolidated
financial statements or related disclosures.

ff

F-15

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:17) (cid:54)(cid:88)(cid:80)(cid:80)(cid:68)(cid:85)(cid:92) (cid:82)(cid:73) (cid:54)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:82)(cid:79)(cid:76)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

(cid:53)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92) (cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71) (cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74) (cid:51)(cid:85)(cid:82)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

(cid:36)(cid:54)(cid:56) (cid:21)(cid:19)(cid:21)(cid:19)(cid:16)(cid:19)(cid:25) - In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and other Options (Subtopic 470-20)
and Derivatives and Hedging – Contracts in Entity’s own Equity (Subtopic 815-40). This ASU addresses the complexity associated
with applying GAAP to certain financial instruments with characteristics of liabilities and equity. The ASU includes amendments to
the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and simplifiesff
the
accounting for convertible instruments which include beneficial conversion features or cash conversion features by removing certain
separation models. Additionally, the ASU requires entities to use the “if-converted” method when calculating diluted earnings per
share for convertible instruments. This ASU will be effective for us on (cid:45)anuary 1, 2024(cid:30) however, early adoption is permitted, which
began (cid:45)anuary 1, 2021. We are evaluating the timing and the effect
of our pending adoption of this ASU on our consolidated financial
statements and related disclosures at this time.

ff

ff

(cid:36)(cid:54)(cid:56) (cid:21)(cid:19)(cid:21)(cid:19)(cid:16)(cid:19)(cid:23) – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference
Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential accounting
burden associated with transitioning away from reference rates such as LIBOR that are expected to be discontinued. This ASU
pprovides exceptions and optional expedients for applying GAAP to contract modifications, hedging relationships, and otherr
transactions that reference LIBOR or other reference rates to be discontinued as a result of reference rate reform. They do not apply to
modifications made or hedges entered into or evaluated after December 31, 2022, unless the hedging relationships existed as of thatt
date and optional expedients for them were elected and retained through the end of the hedging relationship. This ASU became
effective upon issuance. We continue to evaluate the effect of this ASU and plan to utilize this relief for our debt agreements that
include LIBOR rates.

F-16

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:21)(cid:17) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:86)

Series E and Series F Redeemable Preferred Exchanged for Common Stock

In (cid:45)uly 2021, we entered into a Securities Exchange Agreement (the “Exchange Agreement”) with LSB Funding (the “Holder”), an
affiliate of Eldridge Industries, LLC and other affiliates (together “Eldridge”), which Exchange Agreement was voted on and
approved by our stockholders at the Special Meeting as discussed in Note 1. Pursuant to the terms of the Exchange Agreement, the
Holder would exchange all of the shares of the Series E and Series F Redeemable Preferred into our common stock based on the
liquidation preference (“Liquidation Preference”), at the time of the exchange, and an exchange price of $6.16, which is equal to the
30-day volume weighted average price as of the date of the Exchange Agreement. The Liquidation Preference primarily consists of
$1,000 per share of Series E Redeemable Preferred plus accruedr

and unpaid dividends and the participation rights value.

On September 27, 2021, the closing of the Exchange Agreement occurred, and the Exchange Transaction was consummated. Pursuant
red for
to the terms of the Exchange Agreement, the Holder exchanged all of the shares of the Series E and Series F Redeemable Preferff
approximately 49.1 million shares of our common stock.

The total fair value of the approximately 49.1 million shares of common stock issued was approximately $531.1 million (based on the
average per share price on the date of closing). The fair value of the common stock issued was in excess of the Series E and Series F
Redeemable Preferred carrying amount, net of the bifurcated embedded derivative and unamortized issuance costs, by approximately
$231.8 million and is treated as a deemed dividend. Because we were in an accumulated deficit position on the closing date, the
deemed dividend was charged to capital in excess of par value.

Changes in our Series E and Series F Redeemable Preferred are as follows(cid:29)

Balance at December 31, 2020

139,768

$

272,101

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:40) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)
(cid:36)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)

(cid:36)(cid:70)(cid:70)(cid:85)(cid:88)(cid:72)(cid:71) (cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:16)
(cid:40)(cid:80)(cid:69)(cid:72)(cid:71)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)
(cid:36)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)
(Dollars In Thousands)
1,029

$

(cid:54)(cid:72)(cid:85)(cid:76)(cid:72)(cid:86) (cid:41) (cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)
(cid:36)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)

1

$

Accretion relating to liquidation
preference on

preferred stock

Accretion for discount and
issuance costs on
stock

ff
preferred

Accumulated dividends
Change in fair value of
embedded derivative
Costs relating to exchange

transaction

Exchange of preferred stock

for common stock
Balance at December 31, 2021

Change of Control

(cid:178)

(cid:178)
(cid:178)

(cid:178)

(cid:178)

814

709
29,914

(cid:178)

(7,497)

(cid:178)

(cid:178)
(cid:178)

(cid:178)

(cid:178)

2,258

(139,768)

(296,041)

(cid:178) $

(cid:178) $

(3,287)
(cid:178)

(1)
(cid:178) $

(cid:178)

(cid:178)

(cid:178)
(cid:178)

(cid:178)

(cid:178)

(cid:178)
(cid:178)

As the result of the Exchange Transaction discussed above, Eldridge held over 60% of our outstanding shares of common stock on the
closing date. As a result, a change of control (“CoC”) event occurred as defined in certain equity award agreements discussed in Note
11 and in certain cash-based award agreements.

Pursuant to the terms of the cash-based awards outstanding as of the CoC event, all such awards immediately vested and
approximately $5.4 million was paid. As a result of the vesting, we recognized an additional $2.0 million expense, of which $0.7
million is classified as cost of sales and $1.3 million is classified as SG(cid:9)A.

F-17

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:22)(cid:17) (cid:47)(cid:82)(cid:86)(cid:86) (cid:83)(cid:72)(cid:85) (cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)

The following table sets forth the computation of basic and diluted net loss per common share(cid:29)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
( In Thousands, Except Per Share Amounts)

(cid:21)(cid:19)(cid:20)(cid:28)

NNumerator(cid:29)
NNet income (loss)

Adjustments for basic and diluted net loss per common share(cid:29)
Dividend requirements on Series E Redeemable Preferred
Deemed dividend on Series E and Series F

Redeemable Preferred

Dividend and dividend requirements on Series B Preferred
Dividend and dividend requirements on Series D Preferred
Accretion of Series E Redeemable Preferred

(cid:7)

(cid:23)(cid:22)(cid:15)(cid:24)(cid:23)(cid:24)

$

(61,911) $

(63,417)

(cid:11)(cid:21)(cid:28)(cid:15)(cid:28)(cid:20)(cid:23)(cid:12)

(35,182)

(30,729)

(cid:11)(cid:21)(cid:22)(cid:20)(cid:15)(cid:27)(cid:20)(cid:21)(cid:12)
(cid:11)(cid:21)(cid:22)(cid:28)(cid:12)
(cid:11)(cid:24)(cid:28)(cid:12)
(cid:11)(cid:20)(cid:15)(cid:24)(cid:21)(cid:22)(cid:12)

(cid:178)
(240)
(60)
(2,026)

(cid:178)
(240)
(60)
(1,995)

Numerator for basic and diluted net loss per common share

(cid:7)

(cid:11)(cid:21)(cid:21)(cid:19)(cid:15)(cid:19)(cid:19)(cid:21)(cid:12) $

(99,419) $

(96,441)

Denominator(cid:29)

Denominator for basic and diluted net loss per common

share - adjusted weighted-average shares (1)

(cid:23)(cid:28)(cid:15)(cid:28)(cid:25)(cid:22)

36,664

36,455

Basic and diluted net loss per common share

(cid:7)

(cid:11)(cid:23)(cid:17)(cid:23)(cid:19)(cid:12) $

(2.71) $

(2.65)

(1) All periods exclude the weighted-average shares of unvested restricted stock that are contingently issuable.

The following weighted-average shares of securities were not included in the computation of diluted net loss per common share as
their effect would have been antidilutive(cid:29)

Restricted stock and stock units
Stock options
Series E redeemable preferred stock - embedded derivative
Convertible preferred stocks

(cid:23)(cid:17) (cid:51)(cid:85)(cid:82)(cid:83)(cid:72)(cid:85)(cid:87)(cid:92)(cid:15) (cid:51)(cid:79)(cid:68)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:40)(cid:84)(cid:88)(cid:76)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)

Machinery, equipment and automotive
Buildings and improvements
Land improvements
Furniture, fixtures and store equipment
Construction in progress
Capital spare parts
Land

Less accumulated depreciation and amortization

(1) Weighted average useful lives as of December 31, 2021.

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:20)(cid:15)(cid:24)(cid:22)(cid:20)
(cid:20)(cid:22)
(cid:178)
(cid:178)
(cid:20)(cid:15)(cid:24)(cid:23)(cid:23)

1,588
138
304
1,192
3,222

938
138
304
1,192
2,572

(cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)
(cid:88)(cid:86)(cid:72)(cid:73)(cid:88)(cid:79) (cid:79)(cid:76)(cid:89)(cid:72)(cid:86) (cid:11)(cid:20)(cid:12)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)

(cid:21)(cid:24)
(cid:21)(cid:25)
(cid:22)(cid:24)
(cid:24)
(cid:49)(cid:18)(cid:36)
(cid:49)(cid:18)(cid:36)
(cid:49)(cid:18)(cid:36)

(cid:7)

(cid:7)

(cid:20)(cid:15)(cid:21)(cid:23)(cid:23)(cid:15)(cid:25)(cid:20)(cid:26)
(cid:23)(cid:23)(cid:15)(cid:27)(cid:20)(cid:23)
(cid:27)(cid:15)(cid:21)(cid:26)(cid:20)
(cid:20)(cid:15)(cid:20)(cid:24)(cid:25)
(cid:20)(cid:24)(cid:15)(cid:21)(cid:28)(cid:27)
(cid:21)(cid:25)(cid:15)(cid:26)(cid:23)(cid:23)
(cid:23)(cid:15)(cid:24)(cid:25)(cid:26)
(cid:20)(cid:15)(cid:22)(cid:23)(cid:24)(cid:15)(cid:23)(cid:25)(cid:26)
(cid:23)(cid:27)(cid:25)(cid:15)(cid:28)(cid:27)(cid:26)
(cid:27)(cid:24)(cid:27)(cid:15)(cid:23)(cid:27)(cid:19)

$

$

1,213,359
44,123
8,223
1,080
18,389
26,894
4,567
1,316,635
425,437
891,198

Machinery, equipment and automotive primarily includes the categories of property and equipment and estimated useful lives as
follows(cid:29) processing plants and plant infrastructure (15-30 years)(cid:30) certain processing plant components (3-10 years)(cid:30) and trucks,
automobiles, trailers, and other rolling stock (4-7 years).

F-18

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:24)(cid:17) (cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:49)(cid:82)(cid:81)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87) (cid:36)(cid:70)(cid:70)(cid:85)(cid:88)(cid:72)(cid:71) (cid:68)(cid:81)(cid:71) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

interest

Accrued payroll and benefits
Accruedr
Current portion of operating lease liabilities
death and other executive benefits
Accruedr
Accruedr
health and worker compensation insurance claims
Other

Less noncurrent portion
Current portion of accrued and other liabilities

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)
(cid:28)(cid:15)(cid:26)(cid:28)(cid:23)
(cid:27)(cid:15)(cid:22)(cid:28)(cid:26) $
(cid:26)(cid:15)(cid:26)(cid:24)(cid:24)
(cid:21)(cid:15)(cid:24)(cid:20)(cid:23)
(cid:20)(cid:15)(cid:21)(cid:26)(cid:21)
(cid:25)(cid:15)(cid:24)(cid:28)(cid:28)
(cid:22)(cid:25)(cid:15)(cid:22)(cid:22)(cid:20)
(cid:22)(cid:15)(cid:19)(cid:22)(cid:19)
(cid:22)(cid:22)(cid:15)(cid:22)(cid:19)(cid:20) $

5,837
8,669
6,706
2,539
1,179
11,527
36,457
6,090
30,367

(cid:7)

(cid:7)

(cid:25)(cid:17) (cid:36)(cid:86)(cid:86)(cid:72)(cid:87) (cid:53)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:50)(cid:69)(cid:79)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

We own the land on which our owned plants operate, limiting asset retirement obligations at our owned chemical facilities. However,
we have various legal requirements related to operations at our chemical facilities mainly for the disposal of wastewater generated at
certain of these facilities. At December 31, 2021 and 2020, our accrued liability for AROs was $100,000. However, the facilities and
some of the water related assets have an indeterminate life and as a result there is insufficient information to estimate the fair value for
certain of our AROs. We will continue to review these obligations and record a liability when a reasonable estimate of the fair value
can be made.

(cid:26)(cid:17) (cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:55)(cid:72)(cid:85)(cid:80) (cid:39)(cid:72)(cid:69)(cid:87)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)

(cid:7)

(cid:178) $

(cid:24)(cid:19)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:178)

(cid:26)(cid:15)(cid:26)(cid:20)(cid:21)

(cid:24)(cid:15)(cid:22)(cid:21)(cid:27)

(cid:178)
(cid:178)
435,000

10,715

6,834

(cid:21)(cid:22)(cid:15)(cid:28)(cid:27)(cid:26)

28,636

(cid:178)
(cid:178)
(cid:22)(cid:22)(cid:28)
(cid:11)(cid:28)(cid:15)(cid:26)(cid:21)(cid:21)(cid:12)
(cid:24)(cid:21)(cid:26)(cid:15)(cid:25)(cid:23)(cid:23)
(cid:28)(cid:15)(cid:23)(cid:24)(cid:23)
(cid:24)(cid:20)(cid:27)(cid:15)(cid:20)(cid:28)(cid:19)

$

10,000
1,221
432
(8,648)
484,190
16,801
467,389

Working Capital Revolver Loan, with a current interest

rate of 3.75% (A)

Senior Secured Notes due 2028 (B)
Senior Secured Notes due 2023 (B)
Secured Financing due 2023, with an interest

rate of 8.32% (C)

Secured Loan Agreement due 2025, with an interest

rate of 8.75% (D)

Secured Financing Agreement due 2025, with an interest

rate of 8.75% (E)

Unsecured Loan Agreement due 2022, with an interest

rate of 1.00% (F)

Secured Promissory Note due 2021
Other
Unamortized debt issuance costs

Less current portion of long-term debt (G)
one year, net (G)
ff
Long-term debt due after

(cid:7)

F-19

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:26)(cid:17) (cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:55)(cid:72)(cid:85)(cid:80) (cid:39)(cid:72)(cid:69)(cid:87) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

ummm Revolver Amounuu t”)nn , based on specificff percentages of eligible accountsuu

(cid:11)(cid:36)(cid:12) Our revolving credit facility, as amended (the “Working Capital Revolver Loan”), provides for advances up to $65 million (the
“Maximaa
receivable and invenn ntories and up to $10 million of letters
of credit, the outstanding amount of which reduces the available for borrowing under the Working Capital Revolver Loan. At December 31,
2021, our available borrowings under our Working Capital Revolver Loan were approximately $61.3 million, based on our eligible
collateral, less outstanding letters of credit and loan balance. The maturity date of the Working Capital Revolver Loan is on the earlier of (i)
the date that is 90 days prior to the earliest stated maturity date of the Senior Secured Notes (unless refinanced or repaid) and (ii) February
to certain conditions anaa d subject to lender approval, the Maximum Revolver Amount may increase up to an additional $10
26, 2024. Subu ject
million. The Working Capital Revolver Loan also provides for a springing financial covenant (the “Financial Covenant”), which requires
that, if the borrowing availabilitytt
is less than 10.0% of the total revolver commitments, then the borrowers must maintain a minimum
fixed charge coverage ratio of not less than 1.00 to 1.00. The Financial Covenant, if triggered, is tested monthly.

b

Revolver Loan at a rate equal to, at our election, either (a)
a
Interest accrues on outstanding borrowings under the Working Capital
LIBOR for an interest period selected by us plus an applicable margin equal to 1.50% per annum or 1.75% per annum, depending on
borrowing availability under the Working Capital Revolver Loan, or (b) Wells Fargo Capital Finance’s prime rate plus an applicable
margin equal to 0.50% per annum or 0.75% per annum, depending on borrowing availability under the Working Capital Revolver
Loan. Interest is paid quarterly, if applicable.

The Working Capital Revolver Loan contains customary covenants including limitations on asset sales, liens, debt incurrence,
restricted payments, investments, dividends and transactions with affiliates.

The Working Capital Revolver Loan includes customary events of default. Upon the occurrence of any event of default, the
obligations under the Working Capital Revolver Loan may be accelerated and the revolver commitments may be terminated.

Obligations under the Working Capital Revolver Loan are secured by a first priority security interest in substantially all of our current
assets, including accounts receivable and inventory, subject to certain customary exceptions.

Also, the lender provided LSB a consent to close the Exchange Transaction discussed in Note 2 and to allow for the payment of
dividends to the holders of the Series B and Series D Preferred discussed in Note 12.

(cid:11)(cid:37)(cid:12) On October 14, 2021, LSB completed the issuance and sale of $500 million in aggregate principal amount of its 6.25% Senior
Secured Notes due 2028 (the “New Notes”). The New Notes were issued pursuant to an indenture, dated as of October 14, 2021 (the
“Indenture”), by and among the LSB, the subsidiary guarantors named therein, and Wilmington Trust, National Association, a national
banking association, as trustee and collateral agent. The New Notes were issued at a price equal to 100% of their face value. Most of
the proceeds from the New Notes were used to redeem all of our existing Senior Secured Notes due 2023 (the "Old Notes"), to pay
related transaction fees, and the remaining portion to be used for general corporate purposes. The redemption was completed by the
trustee on October 29, 2021.

The Old Notes were redeemed in accordance with the contractual terms and was accounted for as an extinguishment of debt. As a
result, we recognized a loss on extinguishment of debt of approximately $20.3 million in 2021, primarily consisting of the contractual
redemption premium paid and the expensing of unamortized debt issuance costs associated with the Old Notes.

The New Notes mature on October 15, 2028, ranking senior in right of payment to all of our debt that is expressly subordinated in
right of payment to the notes, and will rank pari passu in right of payment with all of our liabilities that are not so subordinated,
including the Working Capital Revolver Loan. LSB’s obligations under the New Notes are jointly and severally guaranteed by the
subsidiary guarantors named in the Indenture on a senior secured basis.

Interest on the New Notes accrues at a rate of 6.25% per annum and is payable semi-annually in arrears on May 15 and October 15 of
each year, beginning on May 15, 2022.

Pursuant to the Indenture, LSB may redeem the New Notes at its option, in whole or in part, at certain redemption prices, including a
“make-whole” premium, as set forth in the Indenture but also includes redemption requirements associated with a change of control
(as defined in the Indenture). The New Notes do not have any conversion features.
In addition, the Indenture contains customary
covenants that limit, among other things, LSB and certain of its subsidiaries’ ability to engage in certain transactions and also provides
for customary events of default (subject in certain cases to customary grace and cure periods). Generally, if an event of default occurs
and is continuing, the trustee or holders of at least 25% in principal amount of the then outstanding New Notes may declare the
principal of and accruedrr

but unpaid interest on all the New Notes to be due and payable.

F-20

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:26)(cid:17) (cid:47)(cid:82)(cid:81)(cid:74)(cid:16)(cid:55)(cid:72)(cid:85)(cid:80) (cid:39)(cid:72)(cid:69)(cid:87) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

LSB may redeem the New Notes at its option, in whole or in part, subject to the payment of a premium of 3.125% of the principal
amount so redeemed, in the case of any optional redemption on or after October 15, 2024. If LSB experiences a change of control, it
must offer to purchase the New Notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to but excluding the
date of purchase.

The Indenture contains covenants that limit, among other things, LSB and certain of its subsidiaries’ ability to (1) incur additional
indebtedness(cid:30) (2) declare or pay dividends, redeem stock or make other distributions to stockholders(cid:30) (3) make other restricted
payments, including investments(cid:30) (4) create dividend and other payment restrictions affecting its subsidiaries(cid:30) (5) create liens or use
assets as security in other transactions(cid:30) (6) merge or consolidate, or sell, transfer, lease or dispose of all or substantially all of our
assets(cid:30) and (7) enter into transactions with affiliates. Further, during any such time when the New Notes are rated investment grade by
each of Moody’s Investors Service, Inc. and Standard (cid:9) Poor’s Investors Ratings Services and no Default (as defined in the Indenture)
has occurred and is continuing, certain of the covenants will be suspended with respect to the New Notes.

Obligations in respect of the New Notes are secured by a first priority security interest in substa
certain customary exceptions.

u

ntially all of our fixed assets, subject to

(cid:11)(cid:38)(cid:12) El Dorado Chemical Company (“EDC”), one of our subsidiaries, is party to a secured financing arrangement with an affiliate of
LSB Funding. Principal and interest are payable in 48 equal monthly installments with a final balloon payment of approximately $3
million due in (cid:45)une 2023.

(cid:11)(cid:39)(cid:12) EDC is party to a secured loan agreement with an affiliate of LSB Funding. Principal and interest will be payable in 60 equal
monthly installments through March 2025.

(cid:11)(cid:40)(cid:12) In August 2020, El Dorado Ammonia L.L.C. (“EDA”), one of our subsidiaries, entered into a $30 million secured financing
arrangement with an affiliate of LSB Funding. Beginning in September 2020, principal and interest are payable in 60 equal monthlyt
installments with a final balloon payment of approximately $5 million due in August 2025. This financing arrangement is secured by
an ammonia storage tank and is guaranteed by LSB.

(cid:11)(cid:41)(cid:12) In April 2020, LSB entered into a federally guaranteed loan agreement (“PPP loan”) for $10 million with a lender pursuant to a
new loan program through the U.S. Small Business Administration (“SBA”) as the result of the Paycheck Protection Program (“PPP”)
established by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and amended by the Paycheck Protection
Program Flexibility Act of 2020. We applied ASC 470, Debt, to account for the PPP loan. We have used all of the proceeds from the
PPP loan for payroll, rent, utilities, and other specified costs that qualify for loan forgiveness. In April 2021, we submitted the PPP
loan forgiveness application to the lender. In (cid:45)une 2021, the PPP loan was fully forgiven by the SBA and lender. As a result, we
recognized a gain on extinguishment of debt of $10 million in 2021.

(cid:11)(cid:42)(cid:12) Maturities of long-term debt for each of the fiff ve years after December 31, 2021 are as follows (in thousands)(cid:29)

2022
2023
2024
2025
2026
Thereafter

Less(cid:29) Debt issuance costs

$

$

9,454
10,900
7,427
9,585
(cid:178)
500,000
9,722
527,644

F-21

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:27)(cid:17) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86)

Benefit for income taxes are as follows(cid:29)

(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:29)

Federal
State

Total Current

(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:29)
Federal
State

Total Deferred

Benefit for income taxes

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:178) $

(cid:11)(cid:21)(cid:24)(cid:19)(cid:12)
(cid:11)(cid:21)(cid:24)(cid:19)(cid:12) $

(4) $
33
29

$

(cid:178)
(29)
(29)

(cid:11)(cid:25)(cid:15)(cid:21)(cid:20)(cid:26)(cid:12) $
(cid:20)(cid:15)(cid:28)(cid:20)(cid:20)
(cid:11)(cid:23)(cid:15)(cid:22)(cid:19)(cid:25)(cid:12) $
(cid:11)(cid:23)(cid:15)(cid:24)(cid:24)(cid:25)(cid:12) $

(4,631) $
(147)
(4,778) $
(4,749) $

(14,739)
(6,156)
(20,895)
(20,924)

(cid:7)

(cid:7)

(cid:7)

(cid:7)
(cid:7)

The current benefit for federal income taxes shown above includes federal income tax after the consideration of permanent and
temporary differences between income for GAAP and tax purposes. The current benefit for state income taxes includes state income
tax and provisions for uncertain income tax positions, and other similar adjustments.

The deferred tax provision (benefit) 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, 2021, our gross amount of tax credits available to offset state income taxes was $4.2 million
($3.4 million net of federal benefit). Most of these tax credits carryforward for 9 years and begin expiring in 2022. The gross amount
of federal tax credits was $8.1 million. These credits carryforward

for 20 years and begin expiring in 2034.

rr

ff

In 2021, we utilized approximately $64 million and $56 million of federal and state NOL carryforwards, respectively, to reduce tax
of $592
liabilities (minimal in 2020 and 2019). At December 31, 2021, we have remaining federal and state tax NOL carryforwards
million and $798 million, respectively. The federal NOL carryforr
began
expiring in 2021.

rwards begin expiring in 2033 and the state NOL carryrr forwards

rr

ff

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 and in conjunction with the IRC Section 382 limitation. Information
evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax
ly available information about future years. (cid:57)aluation allowances are
liabilities and tax carrybacks, as well as an evaluation of current
reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets
and liabilities, the impact of annual utilization limitations of interest expense and net operating losses and our results of operations.
Based on our analysis, we believe that it is more-likely-than-not that a portion of our federal and state deferred tax assets will not be
able to be utilized. Information relating to our valuation allowance are included in the tables below. In 2021, the provision for income
taxes includes the reversal of approximately $13 million of federal valuation allowance and $4 million of state valuation allowance
primarily due to current year income.

rr

F-22

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:27)(cid:17) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

Deferred tax assets and liabilities include temporary differences and carryforwards as follows(cid:29)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

Deferred compensation
Other accrued liabilities
Lease liability
Interest expense carryforward
NNet operating loss
Other

rr

Less valuation allowance on deferred tax assets

(cid:55)(cid:82)(cid:87)(cid:68)(cid:79) (cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:87)(cid:68)(cid:91) (cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)

Property, plant and equipment
Right-of-use-assets
Prepaid and other insurance reserves
(cid:55)(cid:82)(cid:87)(cid:68)(cid:79) (cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:87)(cid:68)(cid:91) (cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

(cid:49)(cid:72)(cid:87) (cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:87)(cid:68)(cid:91) (cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)

(cid:7)

(cid:7)

(cid:7)

(cid:7)

$

(In Thousands)
(cid:21)(cid:15)(cid:22)(cid:28)(cid:19)
(cid:20)(cid:15)(cid:26)(cid:21)(cid:20)
(cid:25)(cid:15)(cid:26)(cid:20)(cid:19)
(cid:21)(cid:26)(cid:15)(cid:28)(cid:21)(cid:27)
(cid:20)(cid:24)(cid:28)(cid:15)(cid:21)(cid:20)(cid:22)
(cid:20)(cid:21)(cid:15)(cid:19)(cid:22)(cid:19)
(cid:11)(cid:23)(cid:25)(cid:15)(cid:28)(cid:25)(cid:27)(cid:12)
(cid:20)(cid:25)(cid:22)(cid:15)(cid:19)(cid:21)(cid:23)

$

2,106
2,142
6,471
36,165
170,362
10,255
(64,655)
162,846

(cid:11)(cid:20)(cid:26)(cid:27)(cid:15)(cid:24)(cid:22)(cid:24)(cid:12)
(cid:11)(cid:25)(cid:15)(cid:26)(cid:19)(cid:28)(cid:12)
(cid:11)(cid:23)(cid:15)(cid:23)(cid:20)(cid:22)(cid:12)
(cid:11)(cid:20)(cid:27)(cid:28)(cid:15)(cid:25)(cid:24)(cid:26)(cid:12) $

(183,335)
(6,508)
(3,942)
(193,785)

(cid:11)(cid:21)(cid:25)(cid:15)(cid:25)(cid:22)(cid:22)(cid:12) $

(30,939)

All of our income (loss) before taxes relates to domestic operations. Detailed below are the differences between the amount of the
provision (benefit) for income taxes and the amount which would result from the application of the federal statutory rate to “Income
(loss) before benefit for income taxes.”

Provision (benefit) for income taxes at federal
statutory rate
State current and deferred income tax provision

(benefit)

(cid:57)aluation allowance - Federal
(cid:57)aluation allowance - State
State tax law changes
Tax credits
PPP loan forgiveness
Other
Benefit for income taxes

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:7)

(cid:27)(cid:15)(cid:20)(cid:27)(cid:26)

$

(13,999) $

(17,712)

(cid:20)(cid:15)(cid:27)(cid:22)(cid:22)
(cid:11)(cid:20)(cid:22)(cid:15)(cid:23)(cid:19)(cid:19)(cid:12)
(cid:11)(cid:23)(cid:15)(cid:21)(cid:27)(cid:25)(cid:12)
(cid:26)(cid:15)(cid:22)(cid:25)(cid:19)
(cid:11)(cid:21)(cid:15)(cid:27)(cid:22)(cid:24)(cid:12)
(cid:11)(cid:21)(cid:15)(cid:23)(cid:24)(cid:25)(cid:12)
(cid:20)(cid:15)(cid:19)(cid:23)(cid:20)
(cid:11)(cid:23)(cid:15)(cid:24)(cid:24)(cid:25)(cid:12) $

(cid:7)

(5,094)
8,758
4,308
(660)
(cid:178)
(cid:178)
1,938
(4,749) $

(5,282)
2,739
2,961
(4,388)
(cid:178)
(cid:178)
758
(20,924)

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows(cid:29)

Balance at beginning of year
Additions based on tax positions related to the current year
Reductions for tax positions of prior years
Balance at end of year

(cid:7)

(cid:7)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:23)(cid:25)(cid:23)
(cid:178)
(cid:11)(cid:23)(cid:25)(cid:23)(cid:12)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)
519
$
(cid:178)
(55)
464

(cid:21)(cid:19)(cid:20)(cid:28)

$

$

577
(cid:178)
(58)
519

(cid:178) $

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 effect on our results of operations or financial
condition. For 2021, 2020, and 2019, if recognized, the effect on the effective tax rate from unrecognized tax benefits would be
insignificant.

F-23

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:27)(cid:17) (cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72) (cid:55)(cid:68)(cid:91)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

We record interest related to unrecognized tax positions in interest expense and penalties in operating other expense. For 2021, 2020
and 2019, the amounts for interest and penalties associated witht unrecognized tax positions were minimal. At December 31, 2021,
there was no accrued interest or penalties (minimal at December 31, 2020).

LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few
exceptions, the 2018-2021 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other
major tax jurisdictions. Additionally, the 2013-2017 years remain subject
to examination for determining the amount of net operating
u
loss and other carryforwards.

(cid:28)(cid:17) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)

(cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72) (cid:68)(cid:81)(cid:71) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:177) We have the following significant purchase and sales commitments.

UAN supply agreement (cid:177) The Pryor Chemical Company (“PCC”) is party to an agreement with C(cid:57)R. C(cid:57)R has the exclusive right
(but not the obligation) to purchase all the tons of UAN that are produced by PCC with certain limitations. If C(cid:57)R fails to take
delivery of certain tons, PCC pursuant to the terms of the agreement may immediately sell such unpurchased product to a third-party
without restriction. The current term of the agreement expires in (cid:45)une 2022, but includes automatic renewals for one or more
additional one-year terms unless terminated by either party. However, C(cid:57)R may unilaterally terminate the agreement upon 180 days’aa
advance written notice of termination to PCC(cid:30) provided, however, that each party’s rights and obligations pertaining to UAN that
C(cid:57)R committed to purchase before such advance notice will survive termination. Additionally, PCC can terminate the agreement
upon 90 days’ advance written notice of termination to C(cid:57)R(cid:30) provided, however, that each party’s rights and obligations pertaining to
UAN that PCC committed to sell prior to such advance notice will survive termination.

Ammonia supply agreement (cid:177) EDC is party to an agreement, as amended, with Koch Fertilizer under which Koch Fertilizer agrees to
purchase, with minimum purchase requirements, the ammonia that (a) will be produced at the El Dorado Facility and (b) a portion that
is in excess of EDC’s needs as defined. As amended, the term of the agreement expires in (cid:45)une 2023 but automatically continues for
one or more additional one-year terms unless terminated by either party by delivering a notice of termination at least nine months prior
to the end of term in effect.

Nitric acid supply agreement (cid:177) EDC is party to an agreement witht a customer to supply nitric acid. Under the agreement, EDC agreed
to supply between 70,000 to 100,000 tons of nitric acid annually. The initial contract term began in 2021 and extends through 2027
but includes automatic one-year renewal terms unless terminated by either party in writing 180 days before the current contract
expiration date.

(cid:54)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15) (cid:50)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74) (cid:49)(cid:68)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:42)(cid:68)(cid:86) (cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:15) (cid:68)(cid:81)(cid:71) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:177) During several days in February 2021, the Pryor
Facility was taken out of service after extreme cold weather caused
a surge in natural gas prices in the region, along with the
a
curtailment of gas distribution by the operator of the pipeline that supplies natural gas to the facility. Also, as a result of unprecedented
cold weather conditions, the primary natural gas supplier to our El Dorado Facility asserted a claim of force majeure and materially
restricted the supply of gas to the facility. In order to mitigate a portion of the commodity price risk associated with natural gas, we
periodically enter into natural gas forward contracts and volume purchase commitments that locked in the cost of certain volumes of
natural gas. Prior to this weather event, we had both types of arrangements. During 2021, as a result of the extreme conditions
previously described, we settled all of our natural gas forward contracts and certain volume purchase commitments at that time and
recognized a realized gain of approximately $6.8 million, which includes the realized gain discussed under “Natural Gas Contracts” in
Note 10 and is classified as a reduction to cost of sales.

During 2020, EDC and certain vendors mediated settlements for EDC to recover certain costs associated with a nitric acid plant at our
El Dorado Facility. The construction of this plant was completed, and the plant began production in 2016. As a result of the
settlements, the vendors paid EDC $4.3 million, provided parts totaling $0.3 million and have agreed to provide services and parts
totaling $2.5 million, which amount, or portion thereof, may be paid in cash at the option of the vendors. At December 31, 2021 and
2020, approximately $2.0 million and $2.5 million, respectively, is included in noncurrent accounts receivable (classified as a
noncurrent other asset) associated with these settlements. As part of the settlements, EDC paid the vendors $2.7 million to settle $3.2
million of invoices that were held in our accounts payable. As a result, the recovery from these settlements recognized during 2020
includes approximately $5.7 million classified as a reduction to cost of sales and approximately $1.9 million classified as a reduction
to PP(cid:9)E.

At December 31, 2021 certain of our natural gas contracts qualifyff as normal purchases under GAAP and thus are not mark-to-market,
which contracts included volume purchase commitments with fixed costs of approximately 5.4 million MMBtus of natural gas. These
contracts extend through March 2022 at a weighted-average cost of $4.53 per MMBtu ($24.6 million) and a weighted-average market
value of $3.87 per MMBtu ($21.0 million).

F-24

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:28)(cid:17) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

In addition, we had standby letters of credit outstanding of approximately $2.6 million at December 31, 2021.

(cid:58)(cid:68)(cid:86)(cid:87)(cid:72)(cid:90)(cid:68)(cid:87)(cid:72)(cid:85) (cid:51)(cid:76)(cid:83)(cid:72)(cid:79)(cid:76)(cid:81)(cid:72) (cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:177) 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, as incurred, which portion is
estimated to be $100,000 to $150,000 annually. The initial term of the operating agreement is through December 2053.

(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72) (cid:68)(cid:81)(cid:71) (cid:51)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87) (cid:37)(cid:82)(cid:81)(cid:71)(cid:86) (cid:177) We are contingently liable to sureties in respect of certain insurance bonds issued by the sureties
s in the normal course of business. These insurance bonds
in connection with certain contracts entered into by certain subsidiarie
primarily represent guarantees of future performance of our subsidiaries. As of December 31, 2021, we have agreed to indemnify the
sureties for payments, up to $9.7 million, made by them in respect of such bonds. All of these insurance bonds are expected to expire
or be renewed in 2022.

u

(cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87) (cid:68)(cid:81)(cid:71) (cid:54)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:16) We have employment 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 $9.9 million at December 31, 2021. Also see Note 14-Related Party Transactions.

(cid:47)(cid:72)(cid:74)(cid:68)(cid:79) (cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86) (cid:16) Following is a summary of certain legal matters involving the Company(cid:29)

(cid:36)(cid:17) (cid:40)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)

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

for costs required to remediate and restore sites where hazardous substances, hydrocarbons

witht all applicable lawsaa

actions were taken.

at the time those

mm

r

t

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

There can be no assurance that we will not incur material costs or liabilities in complying with such laws or in paying fines or
penalties for violation of such laws. Our insurance may not cover all environmental risks and costs or may not provide sufficient
coverage if an environmental claim is made against us. The Environmental and Health Laws and related enforcement policies have in
the past resulted, and could in the future result, in significant compliance expenses, cleanup costs (for our sites or third-party sites
where our wastes were disposed of), penalties or other liabilities relating to the handling, manufacture, use, emission, discharge or
disposal of hazardous or toxic materials at or from our facilities or the use or disposal of certain of its chemical products. Further, a
number of our facilities are dependent on environmental permits to operate, the loss or modification of which could have a material
adverse effect

on their operations and our financial condition.

ff

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

As of December 31, 2021, our accrued liabilities for environmental matters totaled approximately $0.5 million relating primarily to
the matters discussed below. Estimates of the most likely costs for our environmental matters are generally based on preliminary or
completed assessment studies, preliminary results of studies, or our experience with other similar matters. It is reasonably possible that
a change in the estimate of our liability could occur in the near term. Also, see discussion in Note 6 (cid:177) Asset Retirement Obligations.

(cid:20)(cid:17) (cid:39)(cid:76)(cid:86)(cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72) (cid:58)(cid:68)(cid:87)(cid:72)(cid:85) (cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)

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

F-25

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:28)(cid:17) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

In 2017, the Pryor Chemical Company (“PCC”) filed a Permit Renewal Application for its Non-Hazardous Injection Well Permit at
the Pryor Facility. Although the Injection Well Permit expired in 2018, PCC continues to operate the injection well pending the
Oklahoma Department of Environmental Quality (“ODEQ”) action on the Permit Renewal Application. PCC and ODEQ are engaged
in ongoing discussions related to the renewal of the injection

well to address the wastewater stream.

n

Our El Dorado Facility is subject to a National Pollutant Discharge Elimination System (“NPDES”) permit issued by the Arkansas
Department of Environmental Quality (“ADEQ”) in 2004. In 2010, the ADEQ issued a draftff NPDES permit renewal for the El Dorado
Facility, which contained more restrictive discharge limits than the previous 2004 permit. During 2017, ADEQ issued a final NPDES
permit with new dissolved mineral limits(cid:30) however, EDC filed an appeal, and a Permit Appeal Resolution (“PAR”) was signed in
2018. EDC is in compliance with the revised permit limits agreed upon in the PAR.

In 2006, the El Dorado Facility entered into a Consent Administrative
Order (“CAO”) that recognizes the presence of nitrate
contamination in the shallow groundwater. The CAO required EDC to perform semi-annual groundwater monitoring, continue
operation of a groundwater recovery system, submit a human health and ecological risk assessment, and submit a remedial action plan.

t

The risk assessment was submitted in 2007. In 2015, the ADEQ stated that El Dorado Chemical was meeting the requirements of the
CAO and should continue semi-annual monitoring. Subsequent to the PAR mentioned previously, a new CAO was signed in 2018,
which required an Evaluation Report of the data and effectiveness of the groundwater remedy for nitrate contamination. During 2019,
the Evaluation Report was submitted to the ADEQ and the ADEQ approved the report. No liability
has been established at
December 31, 2021, in connection with this ADEQ matter.

a

(cid:21)(cid:17) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:40)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)

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

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

During this process, our subsidiary and Chevron retained an environmental consultant that prepared and performed a corrective action
study work plan as to the appropriate method to remediate the Hallowell Facility. During 2020, the KDHE selected a remedy of
annual monitoring and the implementation of an Environmental Use Control (“EUC”). This remedy primarily relates to long-term
surface and groundwater monitoring to track the natural decline in contamination and is subject to a 5-year re-evaluation with the
KDHE.

The final remedy, including the EUC, the finalization of the cost estimates and any required financial assurances remains under
discussion with the KDHE, but continues to be delayed due to the impact from the CO(cid:57)ID-19 pandemic. Pending the results from our
discussions regarding the final remedy, we continue to accrue our allocable portion of costs primarily for the additional testing,
monitoring and risk assessments that could be reasonably estimated, which amount is included in our accrued liabilities for
environmental matters discussed above. The estimated amount is not discounted to its present value. As more information becomes
available, our estimated accrual will be refined, as necessary.

(cid:37)(cid:17) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:51)(cid:72)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:15) (cid:55)(cid:75)(cid:85)(cid:72)(cid:68)(cid:87)(cid:72)(cid:81)(cid:72)(cid:71) (cid:82)(cid:85) (cid:54)(cid:72)(cid:87)(cid:87)(cid:79)(cid:72)(cid:71) (cid:47)(cid:76)(cid:87)(cid:76)(cid:74)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

at the West Fertilizer Co. (“West Fertilizer”) located in West, Texas, causing death,t bodily injuryrr
In 2013, an explosion and fire occurredrr
and substantial propertytt damage. West Fertilizer is not owned or controlled
by us, but West Fertilizer was a customer of EDC, and
purchased AN from EDC from time to time. LSB and EDC received letters from counsel purporting to represent subrogated insurance
carriers, personal injury claimants and persons who suffered property damages informing LSB and EDC 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. Initial lawsuits filed named West Fertilizer and another

supplier of AN as defendants.

uu

a

tt

t

F-26

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:28)(cid:17) (cid:38)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

In 2014, EDC and LSB were named as defendants, together with other AN manufacturers and brokers that arranged the transport and
delivery of AN to West Fertilizer, in the case styled City of West, Texas vs. CF Industries, Inc., et al., in the District Court of
McLennan County, Texas. The plaintiffs allege, 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 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 placed its liability insurance carrier on notice, and the 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, which retention limit has been met relating to the West Fertilizer matter. In August 2015, the trial court dismissed plaintiff’s
negligence claims against us, and EDC based on a duty to inspect but allowed the plaintiffs to proceed on claims for design defect and
failure to warn.

Subsequently, we and EDC have entered into confidential settlement agreements (with approval of our insurance carriers) with several
plaintiffs that had claimed wrongful death and bodily injury and insurance companies asserting subrogation claims for damages from
the explosion. While these settlements resolve the claims of a number of the claimants in this matter, we continue to be party to
litigation related to the explosion. We continue to defend these lawsuits vigorously and we are unable to estimate a possible range of
loss at this time if there is an adverse outcome in this matter. As of December 31, 2021, no liability reserve has been established in
connection with this matter, except for the unpaid portion of the settlement agreements discussed above.

In 2015, we and EDA received formal written notice from Global Industrial, Inc. (“Global”) of Global’s intention to assert mechanic
liens for labor, service, or materials furnished under certain subcontract agreements for the improvement of the new ammonia plant
(“Ammonia Plant”) at our El Dorado Facility. Global was a subcontractor of Leidos Constructors, LLC (“Leidos”), the general
contractor for EDA for the construction for the Ammonia Plant. Leidos terminated the services of Global with respect to their work
performed at our El Dorado Facility.

LSB and EDA are pursuing the recovery of any damage or loss caused by Global’s work performed through their contract with Leidos
at our El Dorado Facility. In March 2016, EDC and LSB were served a summons in a case styled Global Industrial, Inc. d/b/a Global
Turnaround vs. Leidos Constructors, LLC et al., in the Circuit court of Union County, Arkansas, wherein Global sought damages
under breach of contract and other claims. At the time of the summons, our accounts payable included invoices totaling approximately
$3.5 million related to the claims asserted by Global but such invoices were not approved by Leidos for payment. We have requested
indemnification from Leidos under the terms of our contracts, which they have denied. As a result, we are seeking reimbursement of
legal expenses from Leidos under our contracts. We also seek damages from Leidos for their wrongdoing during the expansion,
including breach of contract, fraud, professional negligence, and gross negligence.

During 2018, the court bifurcated the case into(cid:29) (1) Global’s claims against Leidos and LSB, and (2) the cross-claims between Leidos
and LSB. Part (1) of the case was tried in the court. In March 2020, the court rendered an interim judgment and issued its final
judgment in April 2020. In summary, the judgment awarded Global (i) approximately $7.4 million (including the $3.5 million
discussed above) for labor, service, and materials furnished relating to the Ammonia Plant, (ii) approximately $1.3 million for
prejudgment interest, and (iii) a claim of lien on certain property and the foreclosure of the lien to satisfy these obligations. In
addition, post-judgment interest will accrue at the annual rate of 4.25% until paid. During 2020, this judgment impacted our
consolidated statement of operations as follows(cid:29)

•
•

additional depreciation expense of $0.5 million classified as cost of sales(cid:30) and
prejudgment and post-judgment interest expense totaling $1.6 million.

We have filed a notice of intent to appeal, and the court entered a stay of the judgment pending appeal.

LSB intends to vigorously prosecute its claims against Leidos and vigorously contest the cross-claims in Part (2) of the matter. Due to
the impact from the CO(cid:57)ID-19 pandemic, the trial date for Part (2) of the matter has been delayed and we are awaiting a new trial
date.

No liability was established at December 31, 2021 or 2020, in connection with the cross-claims in Part (2) of the matter, except for
certain invoices held in accounts payable.

We are also involved in various other claims and legal actions (including matters involving gain contingencies). 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.

F-27

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:19)(cid:17) (cid:39)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:86)(cid:15) (cid:43)(cid:72)(cid:71)(cid:74)(cid:72)(cid:86) (cid:68)(cid:81)(cid:71) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79) (cid:44)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

For the periods presented, the following significant instruments are accounted for on a fair value basis(cid:29)

(cid:49)(cid:68)(cid:87)(cid:88)(cid:85)(cid:68)(cid:79) (cid:42)(cid:68)(cid:86) (cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:86)

Periodically, we entered into certain forward natural gas contracts (“natural gas contracts”), which are accounted for on a mark-to-
market basis. We utilize these natural gas contracts as economic hedges for risk management purposes but are not designated as
hedging instruments. At December 31, 2020, our natural gas contracts
included 7.3 million MMBtu of natural gas, that extended
t
through December 2021, but these contracts were settled during the first quarter of 2021, primarily due to the weather event discussed
in Note 9. At December 31, 2021, we had no outstanding natural gas contracts. At December 31, 2020, the fair
value of the natural gas
contracts included approximately $0.1 million (classified as a current asset) and approximately $1.3 million (classified as a current
liability). The valuations of the natural gas contracts are classified as Level 2. The valuation inputs included the contractual weighted-
average cost of $2.65 per MMBtu and the weighted-average market value of $2.49 per MMBtu.

ff

For 2021, we recognized a gain of $2.7 million (including a realized gain of $1.5 million). For 2020, we recognized a $1.6 million loss
(none for 2019), which amount included an unrealized loss of $1.2 million attributed to natural gas contracts still held at the reporting
date. The gain is classified as a reduction of cost of sales and the loss is classified as cost of sales.

(cid:40)(cid:80)(cid:69)(cid:72)(cid:71)(cid:71)(cid:72)(cid:71) (cid:39)(cid:72)(cid:85)(cid:76)(cid:89)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)

As discussed in Note 2, the Series E Redeemable Preferred was exchanged for our common stock during 2021. As a result, certain
bifurcated embedded redemption features and participation rights value (“embedded derivative”) included as a part of the terms of the
Series E Redeemable Preferred were extinguished. Prior to the completion of the Exchange Transaction, the embedded derivative was
classified as a liability.

At December 31, 2020, the fair value of the embedded derivative was approximately $1.0 million (classified as a noncurrent liabila
ity).
We estimated that the contingent redemption features had fair value since we estimate that a portion of the shares of this preferred
stock would be redeemed prior to October 25, 2023, the earliest redemption date by the holder. For certain other embedded features,
we estimated no fair value based on our assessment that there was a remote probability that these features would be exercised.

tt

The fair value of the embedded derivative was valued using discounted cash flow models and primarily based on the difference in the
present value of estimated future cash flows with no redemptions prior to October 25, 2023, compared to certain estimated
redemptions during the same period and applying the effective dividend rate of the Series E Redeemable Preferred. At December 31,
value of the embedded derivative included the valuation of the participation rights, which was based on the equivalent of
2020, the fair
303,646 shares of our common stock at $3.39 per share.

ff

The valuations of the embedded derivative were classified as Level 3. This derivative was valued using market information,
management’s redemption assumptions, the underlying number of shares as defined in the terms of the Series E Redeemable
Preferred, and the market price of our common stock.

For 2021, we recognized a loss of $2.3 million (including a realized loss of $3.3 million) due to the change in faff ir value of the
embedded derivative through the date of the Exchange Transaction.

For 2020 and 2019, we recognized unrealized gains of approximately $0.1 million and $0.5 million, respectively, due to the change
faff ir value of the embedded derivative. These gains and loss are included in non-operating other income and expense.

a

in

There was no Level 3 transfer activity during 2021, 2020 or 2019.

F-28

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:20)(cid:17) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)

(cid:21)(cid:19)(cid:20)(cid:25) (cid:47)(cid:82)(cid:81)(cid:74) (cid:55)(cid:72)(cid:85)(cid:80) (cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72) (cid:51)(cid:79)(cid:68)(cid:81) (cid:177) During 2016, our Board adopted our 2016 Long Term Incentive Plan, which plan was approved
by our shareholders at our annual meeting of shareholders held on (cid:45)une 2, 2016. During 2021, the 2016 Long Term Incentive Plan was
amended as approved by our shareholders at our annual meeting of shareholders held on May 14, 2021 (together, the “2016 Plan”). No
awards may be granted under the 2016 Plan on and after the tentht anniversary of its effective date.

After the effective date of the 2016 Plan, no further awards can be granted under our 2008 Incentive Stock Plan (the “2008 Plan”).
of
Any awards that remain outstanding under the 2008 Plan will continue to be governed by the respective plan’s terms and the termsrr
the specific award agreement, as applicable.

The maximum aggregate number of shares reserved and available for issuance under the 2016 Plan shall not exceed 5,750,000 shares
plus any shares that become available for reissuance under the share counting provisions of the 2008 Plan following the effective date
of the 2016 Plan, subject to adjustment (including additional shares relating to the Special Dividend) as permitted under the 2016 Plan.
Shares subject to any award that is canceled, forfeited, expires unexercised, settled in cash in lieu of common stock or otherwise
terminated without a delivery of shares to a participant will again be available for awards under the 2016 Plan to the extent allowable
by law. Under the 2016 Plan, awards may be made to employees, directors and consultants (for services rendered) of LSB or our
subsidiaries subject to limitations as defined by the 2016 Plan.

rr

The 2016 Plan is administered by the compensation committee (the “Committee”) of our Board. Our Board or the Committee may
amend the 2016 Plan, except that if any applicable statute, rule or regulation requires shareholder approval with respect to any
amendment of the 2016 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 2016 Plan.

All share information has been retroactively adjusted to reflecff

t the Special Dividend as discussed in Note 2.

The following may be granted by the Committee under the 2016 Plan(cid:29)

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86)(cid:15) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:56)(cid:81)(cid:76)(cid:87)(cid:86)(cid:15) (cid:68)(cid:81)(cid:71) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:86) (cid:177) 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).

aa

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:36)(cid:83)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:53)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86) (cid:11)(cid:179)(cid:54)(cid:36)(cid:53)(cid:86)(cid:180)(cid:12) (cid:177) The Committee may grant SARs as a right in tandem with the number of shares underlying
stock options granted under the 2016 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 2016 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.

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:177) 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 2016 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
subject to certain conditions.

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72) (cid:51)(cid:79)(cid:68)(cid:81)(cid:86) - The following information relates to our long-term incentive plans(cid:29)

Maximum number of securities for issuance
NNumber of awards available to be granted (1)
NNumber of unvested restricted stock(cid:18)kk perfor

(cid:18)

mance-based

restricted stock(cid:18)kk restricted stock units outstanding

NNumber of options outstanding
NNumber of options exercisable

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15) (cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:20)(cid:25) (cid:51)(cid:79)(cid:68)(cid:81)
5,750,000
2,800,002

1,900,986
(cid:178)
(cid:178)

(cid:21)(cid:19)(cid:19)(cid:27) (cid:51)(cid:79)(cid:68)(cid:81)

(cid:178)
13,000
13,000

.
(1)

Includes 2008 and 2016 Plan shares canceled, forfeited, expired unexercised, which became available for reissuance under the 2016 Plan.

F-29

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:20)(cid:17) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:68)(cid:81)(cid:71) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:56)(cid:81)(cid:76)(cid:87)(cid:86) (cid:177) During the three years presented below, the Committee approved various grants under
the 2016 Plan of shares of restricted stock to certain executives and employees. These shares have vesting provisions including vesting at
the end of each one-year period at the rate of one-third per year for three years, vesting 100% at the end of three years, and vesting 100%
at the end of one year. The unvested restricted shares carry dividend and voting rights. Sales of these shares are restricted prior to the date
of vesting. Pursuant to the terms of the underlying restricted stock agreements, unvested restricted shares will immediately vest upon the
rr
occurrence

of a change in control (as defined by the agreement), termination without

cause or death.

t

During 2021, the Committee approved the grant of shares of restricted
stock and performance-based restricted stock (“PBRS”) to
t
certain executives and the grant of shares of restricted stock units to certain employees. Pursuant to the terms of the performance-
based awards outstanding as of the CoC event associated with the Exchange Transaction discussed in Note 2, additional shares of
restricted stock were issued including the satisfaction
of certain performance conditions above the target performance level. Upon the
CoC event, such restricted stock is subject only to the time-based vesting conditions set forth in the applicable award agreement and
the 2016 Plan. The shares discussed above are reflected

in the 2021 information below.

r

ff

ff

During 2020, the Committee approved the grant of shares of restricted
reflected in the 2020 information below.

t

stock and PBRS to a certain executive. These shares are

On December 31, 2019, the Committee approved the grant of approximately 358,000 shares of performance-based restricted stock to
certain executives. Key informa
tion to finalize the performance targets and range of vesting shares was approved by the Board during
February 2020, which is the grant date for financial reporting purposes. The terms of this PBRS grant are discussed below and these
PBRS shares are reflected in the 2020 information below.

ff

During the three years presented below, the Committee approved the grant of shares of RSU to our non-employee directors for
payment of a portion of their director fees under the 2016 Plan. Each RSU represents a right to receive one share of our common stock
following the grant date and are non-forfeitable. (cid:57)esting occurs upon the earliest to occur(cid:29) (i) the director’s separation from service,
(ii) the first anniversary of the grant date (for the 2021 and 2020 grants), (iii) the third anniversary of the grant date (for 2019 grant), or
(iv) the occurrence of a change of control, as defined by the agreement. Based on terms of the RSU agreements, the grant date fair
value was recognized as stock-based compensation expense (SG(cid:9)A) on the grant date in each respective year. Pursuant to the terms
of these RSU awards outstanding as of the CoC event associated with the Exchange Transaction discussed in Note 2, all such awards
immediately vested.

A summary of restricted stock activity during 2021 is presented below(cid:29)

Unvested outstanding beginning of year
Granted
(cid:57)ested
Cancelled or forfeited
Unvested outstanding end of year

(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)

(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:16)(cid:37)(cid:68)(cid:86)(cid:72)(cid:71)
(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)

(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:56)(cid:81)(cid:76)(cid:87)(cid:86)

(cid:58)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:16)
(cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)
(cid:42)(cid:85)(cid:68)(cid:81)(cid:87) (cid:39)(cid:68)(cid:87)(cid:72)
(cid:41)(cid:68)(cid:76)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72)

3.48
3.55
3.20
(cid:178)
2.78

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)
445,472
$
$
799,500
(295,993) $
(cid:178) $
$

948,979

(cid:58)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:16)
(cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)
(cid:42)(cid:85)(cid:68)(cid:81)(cid:87) (cid:39)(cid:68)(cid:87)(cid:72)
(cid:41)(cid:68)(cid:76)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72)

3.77
3.09
4.66
4.89
2.67

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)
686,005
$
$
675,532
(598,536) $
(20,737) $
$
742,264

(cid:58)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:16)
(cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)
(cid:42)(cid:85)(cid:68)(cid:81)(cid:87) (cid:39)(cid:68)(cid:87)(cid:72)
(cid:41)(cid:68)(cid:76)(cid:85) (cid:57)(cid:68)(cid:79)(cid:88)(cid:72)

1.62
5.05
2.34
5.04
5.04

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)
388,908
$
$
327,188
(490,866) $
(15,487) $
$
209,743

F-30

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:20)(cid:17) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

Shares of restricted stock granted
Total fair value of restricted stock granted
Weighted-average fair value per restricted stock granted during year
Stock-based compensation expense - Cost of sales
Stock-based compensation expense - SG(cid:9)A
Income tax benefit
Total weighted-average remaining vesting period in years
Total fair value of restricted stock vested during the year

Shares of PBRS granted
Total fair value of PBRS granted
Weighted-average fair value per PBRS granted during year
Stock-based compensation expense - Cost of sales
Stock-based compensation expense - SG(cid:9)A
Income tax benefit
Total weighted-average remaining vesting period in years
Total fair value of PBRS vested during the year

Shares of RSU granted
Total fair value of RSU granted
Weighted-average fair value per RSU granted during year
Stock-based compensation expense - Cost of sales
Stock-based compensation expense - SG(cid:9)A
Income tax benefit
Total weighted-average remaining vesting period in years
Total fair value of RSU vested during the year

(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)

(cid:7)

(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)

(cid:7)

(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)

(cid:7)

(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)
(cid:21)(cid:19)(cid:21)(cid:19)

(cid:21)(cid:19)(cid:21)(cid:20)
(cid:26)(cid:28)(cid:28)(cid:15)(cid:24)(cid:19)(cid:19)
$
(cid:21)(cid:15)(cid:20)(cid:27)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:22)(cid:17)(cid:24)(cid:24)
$
(cid:20)(cid:19)(cid:26)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:20)(cid:15)(cid:25)(cid:23)(cid:24)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:11)(cid:23)(cid:22)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12) $
(cid:20)(cid:17)(cid:27)(cid:23)
(cid:21)(cid:15)(cid:26)(cid:21)(cid:28)(cid:15)(cid:19)(cid:19)(cid:19)

$

40,479
$
87,000
$
2.15
$
62,000
1,078,000
$
(279,000) $
1.61
578,000

$

(cid:21)(cid:19)(cid:20)(cid:28)
371,743
1,223,000
3.29
255,000
1,263,000
(374,000)
2.18
1,917,000

(cid:51)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:81)(cid:70)(cid:72)(cid:16)(cid:37)(cid:68)(cid:86)(cid:72)(cid:71) (cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)

(cid:21)(cid:19)(cid:21)(cid:20) (cid:11)(cid:20)(cid:12)

(cid:21)(cid:19)(cid:21)(cid:19) (cid:11)(cid:20)(cid:12)

(cid:21)(cid:19)(cid:20)(cid:28) (cid:11)(cid:20)(cid:12)

(cid:25)(cid:26)(cid:24)(cid:15)(cid:24)(cid:22)(cid:21)
$
(cid:21)(cid:15)(cid:23)(cid:27)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:22)(cid:17)(cid:19)(cid:28)
$
(cid:20)(cid:19)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:21)(cid:15)(cid:28)(cid:22)(cid:27)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:11)(cid:26)(cid:23)(cid:26)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12) $
(cid:20)(cid:17)(cid:24)(cid:25)
(cid:25)(cid:15)(cid:25)(cid:26)(cid:20)(cid:15)(cid:19)(cid:19)(cid:19)

$

398,134
980,000
2.46

$
$
(cid:178) $
218,000
$
(53,000) $
1.57

(cid:178) $

287,871
1,608,000
5.59
53,000
290,000
(84,000)
1.85
(cid:178)

(cid:21)(cid:19)(cid:21)(cid:20)
(cid:22)(cid:21)(cid:26)(cid:15)(cid:20)(cid:27)(cid:27)
$
(cid:20)(cid:15)(cid:25)(cid:24)(cid:22)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:24)(cid:17)(cid:19)(cid:24)
(cid:7)
(cid:20)(cid:25)(cid:20)(cid:15)(cid:19)(cid:19)(cid:19)
(cid:24)(cid:25)(cid:21)(cid:15)(cid:19)(cid:19)(cid:19)
$
(cid:11)(cid:20)(cid:26)(cid:27)(cid:15)(cid:19)(cid:19)(cid:19)(cid:12) $
(cid:21)(cid:17)(cid:23)(cid:21)
(cid:21)(cid:15)(cid:21)(cid:19)(cid:28)(cid:15)(cid:19)(cid:19)(cid:19)

$

(cid:53)(cid:72)(cid:86)(cid:87)(cid:85)(cid:76)(cid:70)(cid:87)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:56)(cid:81)(cid:76)(cid:87)(cid:86)
(cid:21)(cid:19)(cid:21)(cid:19)
301,361
255,000
0.85

$
$
(cid:178) $
255,000
$
(63,000) $
0.48
16,000

$

(cid:21)(cid:19)(cid:20)(cid:28)

41,383
187,000
4.53
53,000
187,000
(46,000)
1.57
41,000

(1)

Upon the CoC event associated with the Exchange Transaction during 2021, such PBRS is subject only to the time-based vesting conditions set forth in the
applicable award agreement and the 2016 Plan.

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:50)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:177) No stock options have been granted under the 2016 Plan during the three years presented below. As it relates to stock
options granted under the 2008 plan, the exercise price of the outstanding options granted were equal to the market value of our
common stock at the date of grant and vested 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 vested at the end of the sixth year. The fair value for of the stock options granted under the 2008
Plan were estimated, using an option pricing model, as of the date of the grant, which date was also the service inception date.

A summary of stock option activity in 2021 is presented below(cid:29)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)

(cid:58)(cid:72)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:71)(cid:16)(cid:36)(cid:89)(cid:72)(cid:85)(cid:68)(cid:74)(cid:72)
(cid:40)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72) (cid:51)(cid:85)(cid:76)(cid:70)(cid:72)

158,600

$
(cid:178) $
(cid:178) $
(145,600) $
$
13,000
$
13,000

26.04
(cid:178)
(cid:178)
26.07
25.66
25.66

Outstanding at beginning of year
Granted
Exercised
Forfeited or expired
Outstanding at end of year
Exercisable at end of year

F-31

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:20)(cid:17) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) (cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

Stock-based compensation expense - Cost of sales
Stock-based compensation expense - SG(cid:9)A
Income tax benefit
Total intrinsic value of options exercised during the year
Total fair value of options vested during the year
Total intrinsic value of options outstanding at end of year
Total intrinsic value of options exercisable at end of year
Total weighted-average remaining vesting period in years
Total weighted-average remaining contractual life period in years (options outstanding)
Total weighted-average remaining contractual life period in years (options exercisable)

(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)
(cid:7)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:21)(cid:19)(cid:20)(cid:28)
$ 122,000
(cid:178) $ 106,000
50,000
$
42,000
(cid:178) $
(cid:178) $ (36,000) $ (42,000)
(cid:178)
(cid:178) $
(cid:178)
(cid:178) $
(cid:178)
(cid:178) $
(cid:178) $
(cid:178)
0.49
(cid:178)
3.61
(cid:21)(cid:17)(cid:28)(cid:21)
3.47
(cid:21)(cid:17)(cid:28)(cid:21)

(cid:178) $
(cid:178) $
(cid:178) $
(cid:178) $
(cid:178)
2.64
2.64

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:16)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71) (cid:38)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72) (cid:49)(cid:82)(cid:87) (cid:60)(cid:72)(cid:87) (cid:53)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:71) (cid:177) At December 31, 2021, the total stock-based compensation expense not
yet recognized is $4,079,000, relating to all forms of non-vested equity awards, which we will be amortizing (subject to adjustments
for actual forfeitures) through the respective remaining vesting periods through (cid:45)une 2024.

(cid:53)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:71) (cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86) (cid:82)(cid:73) (cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78) (cid:177) As of December 31, 2021, we have reserved 0.2 million shares of common stock issuable
upon vesting of equity awards pursuant to their respective terms.

(cid:49)(cid:50)(cid:47) (cid:53)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87) (cid:16) On (cid:45)uly 6, 2020, we entered into the Section 382 Rights Agreement (the “NOL Rights Agreement”), dated
as of (cid:45)uly 6, 2020, between LSB and Computershare Trust Company, N.A., as rights agent. During 2021, the NOL Rights Agreement
was ratified by our shareholders at our annual meeting of shareholders held on May 14, 2021.

The purpose of the NOL Rights Agreement is to facilitate our ability to preserve our NOLs and other tax attributes in order to be able
to offset
potential future income taxes for federal income tax purposes. Our ability to use these NOLs and other tax attributes would be
ff
substantially limited if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as
amended (the “Code”). A company generally experiences an ownership change if the percentage of the value of its stock owned by
certain 5% shareholders, as defined in Section 382 of the Code, increases by more than 50% points over a rolling three-year period.
The NOL Rights Agreement is intended to reduce the likelihood of an ownership change under Section 382 of the Code by deterring
any person (as defined in the NOL Rights Agreement) or group of affiliated or associated persons (“Group”) from acquiring beneficial
ownership of 4.9% or more of our outstanding common shares.

The rights issued under the NOL Rights Agreement will expire on the earliest to occur of (i) the close of business on the day following
the certification of the voting results of our 2021 annual meeting of stockholders, or other duly held stockholders’ meeting, (ii) the
date on which our Board determines in its sole discretion that (x) the NOL Rights Agreement is no longer necessary for the
preservation of material valuable NOLs or tax attributes or (y) the NOLs and tax attributes have been fully utilized and may no longer
be carried forward and (iii) the close of business on (cid:45)uly 6, 2023.

Our Board may, in its discretion, determine that a person, entity or a certain transaction is exempt from the operation of the NOL
Rights Agreement or amend the terms of the rights.

This summary description of the NOL Rights Agreement does not purport to be complete and is qualified in its entirety by referff ence to
the Rights Agreement filed as an exhibit to our Current Report on Form 8-K filed on (cid:45)uly 6, 2020.

(cid:20)(cid:21)(cid:17) (cid:49)(cid:82)(cid:81)(cid:16)(cid:53)(cid:72)(cid:71)(cid:72)(cid:72)(cid:80)(cid:68)(cid:69)(cid:79)(cid:72) (cid:51)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71) (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)

In 2021, certain of the Golsen Holders who held all of the outstanding shares of Series B 12% Cumulative, Convertible Preferred
Stock, par value $100 (“Series B Preferred”) and Series D 6% Cumulative, Convertible Class C Preferred Stock, no par value (“Series
D Preferred”) provided notice to convert all of their shares of Series B Preferred
and Series D Preferred into approximately 1.2 million
shares of our common stock, pursuant to the terms of these securities. Pursuant to the terms of these securities, our Board declared
and we paid the accumulated dividends totaling approximately $1.9 million on the Series B and Series D Preferred. As a result, no
shares of the Series B Preferred and Series D Preferred remain outstanding. See further discussion concerning the Series B and Series
D Preferred in Note 14.

ff

(cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:177) At December 31, 2021, we are authorized to issue an additional 250,000 shares of $100 par value preferred stock and an
additional 5,000,000 shares of no-par value preferred
stock. Upon issuance, our Board will determine the specific terms and conditions
of such preferred stock.

ff

F-32

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:22)(cid:17) (cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) (cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15) (cid:40)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72) (cid:54)(cid:68)(cid:89)(cid:76)(cid:81)(cid:74)(cid:86) (cid:51)(cid:79)(cid:68)(cid:81)(cid:86) (cid:68)(cid:81)(cid:71) (cid:38)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72) (cid:37)(cid:68)(cid:85)(cid:74)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74) (cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)

We are party to a death benefit agreement (“2005 Agreement”) with (cid:45)ack E. Golsen (“(cid:45). Golsen”), who retired as discussed in Note
14-Related Party Transactions.

The 2005 Agreement provides that, upon (cid:45). Golsen’s death, we will pay to the designated beneficiary, a lump-sum payment of
$2,500,000 to be funded from the net proceeds received by us under certain lifeff
insurance policies on his 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 following table includes informat

ff

ion about this agreement(cid:29)

Total undiscounted death benefit
Total accrued death benefiff t

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)
(cid:21)(cid:15)(cid:24)(cid:19)(cid:19) $
(cid:21)(cid:15)(cid:24)(cid:20)(cid:23) $

2,500
2,539

(cid:7)
(cid:7)

The accrued executive benefit under the 2005 Agreement is included in noncurrent accruedr
liabilities when they become probable and discount the liabilities to their present value.

and other liabilities. We accrue for such

To assist us in funding the 2005 Agreement and for other business reasons, we purchased lifeff
insurance policies on various individuals
in which we are the beneficiary. Some of these life insurance policies have cash surrender values that we have borrowed against. The
net cash surrender values of these policies are included in other assets.

d

The following table summarizes certain information about these life insurance policies.

Total face value of lifeff

insurance policies

Total cash surrender values of lifeff
Loans on cash surrender values
Net cash surrender values

insurance policies

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)(cid:15)

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(In Thousands)
(cid:23)(cid:15)(cid:24)(cid:19)(cid:19)

$

4,500

(cid:20)(cid:15)(cid:27)(cid:25)(cid:22)
(cid:11)(cid:20)(cid:15)(cid:25)(cid:23)(cid:21)(cid:12)
(cid:21)(cid:21)(cid:20)

$

$

1,796
(1,703)
93

(cid:7)

(cid:7)

(cid:7)

Cost of lifeff
insurance premiums
Increase in cash surrender values
NNet cost of life insurance premiums included in SG(cid:9)A

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)
215
$
(69)
146

$

$

$

(cid:21)(cid:20)(cid:24)
(cid:11)(cid:25)(cid:28)(cid:12)
(cid:20)(cid:23)(cid:25)

(cid:7)

(cid:7)

(cid:21)(cid:19)(cid:20)(cid:28)

215
(70)
145

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. Beginning in (cid:45)anuary 2019, we began matching 50% of an employee’s contribution,
up to 6%, for substantially all full-time employees. Prior to 2019, we did not contribute to this plan except for certain employees. For
2021, 2020 and 2019, the amounts contributed to this plan were $986,000, $1,022,000, and $997,000, respectively.

Collective Bargaining Agreements - As of December 31, 2021, we employed 545 persons, 180 of whom are represented by unions
under agreements, including agreements being negotiated, that expire in (cid:45)uly 2022 through (cid:45)uly 2024.

(cid:20)(cid:23)(cid:17) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:51)(cid:68)(cid:85)(cid:87)(cid:92) (cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)

As discussed in Note 2, as the result of the stockholders’ approval, the closing of the Exchange Agreement occurred, and the
Exchange Transaction was consummated on September 27, 2021. Pursuant to the terms of the Exchange Agreement, LSB Funding
exchanged all of the shares of the Series E and Series F Redeemable Preferred for approximately 49.1 million shares of our common
stock.

F-33

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:23)(cid:17) (cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:51)(cid:68)(cid:85)(cid:87)(cid:92) (cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86) (cid:11)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:12)

After considering the Special Dividend, LSB Funding holds approximately 54.4 million shares of our outstanding common stock, or
60% of our outstanding common stock.

As discussed in Note 1, our Board declared the Special Dividend that was paid through the issuance of approximately 9.1 million
shares of common stock in October 2021, which amount
included approximately 1.2 million shares to LSB Funding and
approximately 0.7 million shares to certain of the Golsen Holders. In addition, pursuant to the anti-dilution terms of the Series B and
Series D Preferred, which shares were held by certain of the Golsen Holders, the conversion ratio of the Series B Preferred increased
to 43.3333 to 1 from 33.3333 to 1 and the Series D Preferred increased to 0.325 to 1 from 0.25 to 1. See Note 12 for the discussion
regarding the conversion of the Series B and Series D Preferred into our common stock and the payment of the accumulated dividends
on these securities.

As of December 31, 2021, we have three separate outstanding financing arrangements by an affiliate of LSB Funding as discussed in
footnotes (C), (D) and (E) of Note 7. In addition, an affiliate of LSB Funding held $50 million of our Old Notes, which Old Notes
were redeemed with the proceeds from the New Notes as discussed in footnote (B) of Note 7. An affiliate of LSB Funding holds $30
million of the New Notes.

Pursuant to the terms of the Board Representation and Standstill Agreement, as amended, our Board includes two directors that are
employees of affiliates of LSB Funding. During 2021, 2020 and 2019, we incurred director fees associated with these directors
totaling approximately $0.3 million for each respective year.

During 2021, 2020 and 2019, we incurred director fees associated with Barry H. Golsen totaling approximately $0.1 million for each
respective year.

As the result of (cid:45). Golsen informing the Board of his election to retire as Executive Chairman effective December 31, 2017, we
determined not to extend the employment agreement with (cid:45). Golsen beyond its then current term that expired on December 31, 2017
(the “Retirement Date”) and, in accordance with the terms his employment agreement, delivered a notice of non-renewal to (cid:45). Golsen.
Following the Retirement Date, (cid:45). Golsen serves as Chairman Emeritus of our Board.

During 2017, we entered into a transition agreement (the “Transition Agreement”) with (cid:45). Golsen that commenced on (cid:45)anuary 1, 2018
and ends upon the earlier of his death or a change in control as defined in the agreement. During the term, (cid:45). Golsen will receive an
annual cash retainer of $480,000 and an additional monthly amountu
of $4,400 to cover certain expenses. In accordance with the terms
of the Transition Agreement, we will also reimburse (cid:45). Golsen for his cost of certain medical insurance coverage until his death.
Effective as of the Retirement Date, the severance agreement that was in force with (cid:45). Golsen was terminated. In consideration for his
services, including as Chairman Emeritus, we will pay (cid:45). Golsen a one-time payment equal to $2,320,000 upon the consummation of a
change in control, as defined in the agreement, should one occuruu prior to his death.

(cid:20)(cid:24)(cid:17) (cid:54)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:38)(cid:68)(cid:86)(cid:75) (cid:41)(cid:79)(cid:82)(cid:90) (cid:44)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

The following provides additional information relating to cash floff w activities(cid:29)

Cash payments (refunds) for(cid:29)

Interest on long-term debt and other, net of capitalized

interest

Income taxes, net

NNoncash investing and financing activities(cid:29)

Accounts receivable, supplies, other assets, accounts

payable and accrued liabilities associated with additions
of property, plant and equipment

Extinguishment of PPP loan
Series E and Series F Redeemable Preferred and related

(cid:7)
(cid:7)

(cid:7)
(cid:7)

dividends, accretion, and embedded derivative exchanged
for common stock, net of related costs in accounts payable (cid:7)

Series B and Series D preferred converted into common

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:23)(cid:22)(cid:15)(cid:24)(cid:27)(cid:22) $
(cid:11)(cid:20)(cid:27)(cid:21)(cid:12) $

45,730 $
(312) $

42,184
(65)

(cid:20)(cid:26)(cid:15)(cid:25)(cid:23)(cid:28) $
(cid:20)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19) $

16,286 $
(cid:178) $

18,350
(cid:178)

(cid:22)(cid:19)(cid:25)(cid:15)(cid:25)(cid:28)(cid:19) $

37,208 $

32,724

stock

(cid:7)

(cid:22)(cid:15)(cid:19)(cid:19)(cid:19) $

(cid:178) $

(cid:178)

F-34

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:25)(cid:17) (cid:49)(cid:72)(cid:87) (cid:54)(cid:68)(cid:79)(cid:72)(cid:86)

Disaggregated Net Sales

As discussed in Note 1, we primarily derive our revenues from the sales of various chemical products. The following table presents
our net sales disaggregated by our principal markets, which disaggregation is consistent with other financial information utilized or
provided outside of our consolidated financial statements(cid:29)

NNet sales(cid:29)

Agricultural products
Industrial products
Mining products

Total net sales

Other Information

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)
(In Thousands)

(cid:21)(cid:19)(cid:20)(cid:28)

(cid:7)

(cid:7)

(cid:21)(cid:25)(cid:23)(cid:15)(cid:24)(cid:19)(cid:21)
(cid:21)(cid:22)(cid:23)(cid:15)(cid:23)(cid:28)(cid:25)
(cid:24)(cid:26)(cid:15)(cid:21)(cid:23)(cid:20)
(cid:24)(cid:24)(cid:25)(cid:15)(cid:21)(cid:22)(cid:28)

$

$

180,036
133,024
38,256
351,316

$

$

187,641
139,643
37,786
365,070

Although most of our contracts have an original expected duration of one year or less, for our contracts with a duration greater than
one year at contract inception, the average remaining expected duration was approximately 18 months at December 31, 2021.

Liabilities associated with contracts with customers (contract liabilities) primarily relate to deferred revenue and customer deposits
associated with cash payments received in advance from customers for volume shortfall charges and product shipments. We had
approximately $1.6 million and $2.5 million of contract liabilities as of December 31, 2021 and 2020, respectively. During 2021,
revenues of $2.5 million were recognized and included in the balance at the beginning of the period.

At December 31, 2021, we have remaining performance obligations with certain customer contracts, excluding contracts with original
durations of less than one year and contracts with variable consideration for which we have elected the practical expedient for
consideration recognized in revenue as invoiced. The remaining performance obligations totals approximately $77 million, of which
approximately 39% of this amount relates to 2022 through 2024, approximately 29% relates to 2025 through 2026, with the remainder
thereafter.

F-35

LSB Industries, Inc.

Notes to Consolidated Financial Statements (continued)

(cid:20)(cid:26)(cid:17) (cid:47)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)

Information related to our leases are presented below(cid:29)

(cid:38)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:86) (cid:82)(cid:73) (cid:79)(cid:72)(cid:68)(cid:86)(cid:72) (cid:72)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:29)

Operating lease cost
Short-term lease cost
Other cost (1)

Total lease cost
(cid:54)(cid:88)(cid:83)(cid:83)(cid:79)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:68)(cid:79) (cid:70)(cid:68)(cid:86)(cid:75) (cid:73)(cid:79)(cid:82)(cid:90) (cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81) (cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:87)(cid:82) (cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:29)

Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases

Cash paid for amounts included in the measurement of lease
liabilities

Right-of-use assets obtained in exchange for new operating lease
liabilities
(cid:50)(cid:87)(cid:75)(cid:72)(cid:85) (cid:79)(cid:72)(cid:68)(cid:86)(cid:72)(cid:16)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71) (cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:29)
Weighted-average remaining lease term - operating leases (in
years)
Weighted-average remaining lease term - finance leases (in years)
Weighted-average discount rate - operating leases
Weighted-average discount rate - finance leases

(1) Includes variable and finance lease costs.

(cid:21)(cid:19)(cid:21)(cid:20)

(cid:21)(cid:19)(cid:21)(cid:19)

(cid:21)(cid:19)(cid:20)(cid:28)

(Dollars In Thousands)

$

$

$

9,998
2,243
157
12,398

10,290
33
92

$

$

$

7,611
4,372
75
12,058

7,782
15
45

7,270
2,665
64
9,999

7,677
16
61

10,415

$

7,842

$

7,754

9,549

$

17,064

$

5,967

$

$

$

$

$

4.0
3.2
8.44%
8.69%

4.3
4.1
8.26%
8.65%

4.6
3.8
8.70%
8.94%

At December 31, 2021, future minimum operating lease payments due under ASC 842 are summarized by fiscal year in the table
bbelow(cid:29)

2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less imputed interest
Present value of lease liabilities

(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74) (cid:47)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)
(In thousands)

9,692
7,989
6,298
3,736
2,543
2,000
32,258
(4,935)
27,323

$

$

As of December 31, 2021, we did not have any executed operating leases with lease terms greater than one year that have not yet
commenced.

F-36

LSB Industries, Inc.
Supplementary Information
Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data for 2021 and 2020 are as follows.

(cid:21)(cid:19)(cid:21)(cid:20)
NNet sales
Gross profitff
NNet income (loss) (1) (2)
NNet income (loss) attributable to common stockholders (A)

(1)

Basic income (loss) per common share

Diluted income (loss) per common share

(cid:21)(cid:19)(cid:21)(cid:19)
NNet sales
Gross profit (loss) (1)
NNet loss (1) (2)
NNet loss attributable to common stockholders

and diluted loss per common share

$
$
$
$

$

$

$
$
$
$

$

(cid:55)(cid:75)(cid:85)(cid:72)(cid:72) (cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86) (cid:72)(cid:81)(cid:71)(cid:72)(cid:71)

(cid:48)(cid:68)(cid:85)(cid:70)(cid:75) (cid:22)(cid:20)

(cid:45)(cid:88)(cid:81)(cid:72) (cid:22)(cid:19)

(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:19)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)

(In Thousands, Except Per Share Amounts)

$
98,116
8,060
$
(13,279) $
(23,376) $

140,696
35,008
23,670
12,646

(0.63) $

(0.63) $

0.34

0.32

$
$
$
$

$

$

$
127,199
17,447
$
(8,928) $
(251,504) $

190,228
78,464
42,082
42,009

(6.39) $

(6.39) $

0.49

0.47

$
83,411
2,551
$
(19,452) $
(28,338) $

105,033
19,021

$
$
(365) $
(9,634) $

73,969
$
(1,059) $
(20,402) $
(29,874) $

88,903
(3,465)
(21,692)
(31,573)

(0.77) $

(0.26) $

(0.81) $

(0.86)

(A) See Notes 2 and 3 concerning a deemed dividend associated with the Exchange Transaction, which was consummated during the
third quarter of 2021.

F-37

(1)

The following income (expense) items impacted gross profit (loss) and net income (loss)(cid:29)

LSB Industries, Inc.
Supplementary Financial Data
Quarterly Financial Data (Unaudited)

Turnaround expense(cid:29) (A)

(loss) on natural gas forward contracts

2020

on expense due to CoC event

Recovery from settlements with certain vendors

(cid:48)(cid:68)(cid:85)(cid:70)(cid:75) (cid:22)(cid:20)

(cid:45)(cid:88)(cid:81)(cid:72) (cid:22)(cid:19)

(cid:54)(cid:72)(cid:83)(cid:87)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:19)

(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85) (cid:22)(cid:20)

(cid:55)(cid:75)(cid:85)(cid:72)(cid:72) (cid:80)(cid:82)(cid:81)(cid:87)(cid:75)(cid:86) (cid:72)(cid:81)(cid:71)(cid:72)(cid:71)

(In Thousands)

(140) $

(707) $

(7,976) $

(1,130)

(cid:178) $

(11) $

(34) $

(31)

2,706

$

(cid:178) $

(cid:178) $

(cid:178)

(714) $

31

$

513

$

(1,443)

(cid:178) $

(cid:178) $

(1,221) $

(cid:178) $

5,664

$

(cid:178) $

(cid:178)

(cid:178)

$

$

$

$

$

$

(2)

The following income (expense) items impacted net income (loss)(cid:29)

Legal fees associated with Leidos matter

on expense due to CoC event

Gain (loss) on extinguishments of debt

expense associated with Global judgment

(loss) associated with embedded derivative

2020

(provision) for income taxes

2020

$

$

$

$

$

$

$

$

$

$

(886) $

(441) $

(271) $

(296)

(3,287) $

(955) $

(901) $

(572)

(cid:178) $

(cid:178) $

(3,786) $

(cid:178)

(cid:178) $

10,000

$

(cid:178) $

(20,259)

(78) $

(79) $

(80) $

(1,327) $

(79) $

(80) $

(80)

(80)

(436) $

(716) $

(1,106) $

(cid:178)

637

$

120

$

(141) $

(561)

(42) $

248

339

$

1,299

$

$

(19) $

4,369

1,370

$

1,741

Turnaround expenses do not include the impact on operating results relating to lost absorption or reduced margins due to the associated plants
being shut down.

F-38

LSB Industries, Inc.

Scheduled

II - (cid:57)aluation and Qualifying Accounts

(cid:60)ears ended December 31, 2021, 2020, and 2019

(In Thousands)

Accounts receivable - allowance for doubtful accounts(cid:29)

(cid:39)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81) (cid:11)(cid:20)(cid:12)

2020

2019

Deferred tax assets - valuation allowance(cid:29)

2020

2019

(cid:37)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72) (cid:68)(cid:87)
(cid:37)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74) (cid:82)(cid:73)
(cid:60)(cid:72)(cid:68)(cid:85)

(cid:36)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:16)
(cid:38)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:86) (cid:87)(cid:82)
(cid:11)(cid:53)(cid:72)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:92) (cid:82)(cid:73)(cid:12)(cid:73)(cid:73)
(cid:38)(cid:82)(cid:86)(cid:87)(cid:86) (cid:68)(cid:81)(cid:71)
(cid:40)(cid:91)(cid:83)(cid:72)(cid:81)(cid:86)(cid:72)(cid:86)

(cid:39)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:16)
(cid:58)(cid:85)(cid:76)(cid:87)(cid:72)(cid:16)
(cid:82)(cid:73)(cid:73)(cid:86)(cid:18)(cid:38)(cid:82)(cid:86)(cid:87)(cid:86)
(cid:44)(cid:81)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:71)

(cid:37)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72) (cid:68)(cid:87)
(cid:40)(cid:81)(cid:71) (cid:82)(cid:73) (cid:60)(cid:72)(cid:68)(cid:85)

$

$

$

$

$

$

378

261

351

64,655

51,589

45,626

$

$

$

$

$

$

96

141

175

$

$

$

(cid:178) $

24

265

$

$

474

378

261

(17,687) $

(cid:178) $

46,968

13,471

8,279

$

$

405

2,316

$

$

64,655

51,589

(1) Reduction in the consolidated balance sheet from the related assets to which the reserve applies.

Other valuation and qualifying accounts are detailed in our notes to consolidated financial statements.

F-39

[THIS PAGE INTENTIONALLY LEFT BLANK]

PERFORMANCE GRAPH & PEER GROUP LIST

[THIS PAGE INTENTIONALLY LEFT BLANK]

Stock Performance Graph

Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2021

$200.00

$180.00

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

$40.00

$20.00

$0.00

2016

2017

2018

2019

2020

2021

LSB Industries, Inc.

NYSE Composite Index

New Peer Group

Old Peer Group

LSB Industries, Inc.

NYSE Composite Index

New Peer Group

New Peer Group + LSB Industries, Inc.

Old Peer Group

Old Peer Group + LSB Industries, Inc.

Return %
Cum $

Return %
Cum $

Return %
Cum $

Return %
Cum $

Return %
Cum $

Return %
Cum $

2016

2017

2018

2019

2020

2021

100.00

100.00

100.00

100.00

100.00

100.00

4.04
104.04

18.90
118.90

6.11
106.11

6.06
106.06

13.58
113.58

13.55
113.55

-36.99
65.56

-8.79
108.45

-9.61
95.90

-10.19
95.25

-4.40
108.58

-4.52
108.41

-23.91
49.88

25.74
136.36

15.17
110.45

14.58
109.14

7.18
116.38

7.11
116.13

-19.29
40.26

6.99
145.89

17.24
129.49

16.88
127.56

2.38
119.15

2.35
118.85

323.75
170.61

20.68
176.06

27.04
164.50

29.02
164.59

47.41
175.64

47.76
175.61

AdvanSix Inc. -
American Vanguard Corporation -
Balchem Corporation -
Chase Corporation -
CSW Industrials, Inc. -
CVR Partners, LP -
Flotek Industries, Inc.
Hawkins, Inc. -
Haynes International, Inc. -
Intrepid Potash, Inc. -
Landec Corporation -
Quaker Chemical Corporation -
Synalloy Corporation -
Trecora Resources -
United States Lime & Minerals, Inc. -

ASIX
AVD
BCPC
CCF
CSWI
UAN
FTK
HWKN
HAYN
IPI
LNDC
KWR
SYNL
TREC
USLM

2021 (New) Peer Group

2021 (Old) Peer Group

Flotek Industries, Inc.
H. B. Fuller Company

AdvanSix Inc.
American Vanguard Corporation
Avient Corporation (formerly PolyOne Corp) Hawkins, Inc.
Balchem Corporation
CF Industries Holdings, Inc.
Chase Corporation
CSW Industries, Inc.
CVR Partners, LP
Ferro Corporation

Haynes International, Inc.
Ingevity Corporation
Innospec Inc.
Intrepid Potash, Inc.
Kraton Performance Polymers, Inc.
Landec Corporation

NewMarket Corporation
Nutrien, LTO.
Quaker Chemical Corporation
Stepan Company
Synalloy Corporation
The Mosaic Company
Trecora Resources
United States Lime & Minerals, Inc.

LSB DIRECTORS

Mark T. Behrman
President and Chief Executive Officer

Jonathan S. Bobb
Director, Eldridge Industries

Barry H. Golsen
GOL Capital, LLC
Former President and CEO LSB Industries, Inc.

Kanna Kitamura
Senior Director and Head of Human Resources,
Eldridge Industries

LSB EXECUTIVE OFFICERS

Mark T. Behrman
President and Chief Executive Officer

Cheryl A. Maguire
Executive Vice President and Chief Financial
Officer

Michael J. Foster
Executive Vice President, General Counsel,
and Secretary

John P. Burns
Executive Vice President, Manufacturing

Damien Renwick
Executive Vice President and Chief Commercial
Officer

Kristy D. Carver
Senior Vice President and Treasurer

Steven L. Packebush
Founder and Principal,
Elevar Partners LLC
Former President Koch Ag & Energy Solutions

Diana M. Peninger
CEO, Geneva Lake Partners LLC
Former Vice President,
Celanese Corp.

Richard W. Roedel
Chairman of the Board
Retired Chairman and CEO
BDO Seidman, LLP

Richard S. Sanders, Jr.
President, Circle S Consulting, Inc.
Former Vice President of Manufacturing,
Terra Industries, Inc.

Lynn F. White
Founder and Managing Director,
Twemlow Group, LLC

Jack E. Golsen
Chairman Emeritus of the Board

HEADQUARTERS

LSB Industries, Inc.
3503 NW 63rd Street, Suite 500,
Oklahoma City, OK 73116
Tel: (405) 235-4546
Fax: (405) 235-5067
Email: info@lsbindustries.com

TRANSFER AGENT &
REGISTRAR

Computershare Trust Company, N.A.
462 S. 4th Street, Suite 1600
Louisville, KY 40202
Tel: (800) 884-4225 (US & Canada)
(781) 575-2879 (outside US & Canada)

INVESTOR RELATIONS

WEBSITE

Fred Buonocore, CFA
Vice President of Investor Relations
Tel: (405) 510-3550
Email: fbuonocore@lsbindustries.com

INDEPENDENT AUDITORS

Ernst & Young LLP
Oklahoma City, OK

www.lsbindustries.com

Visit our website for details about our plants,
products, operations and policies.
SECURITY LISTING

Common Stock listed on the New York Stock
Exchange, NYSE Ticker Symbol: LXU

3503 NW 63rd Street, Suite 500,
Oklahoma City, OK 73116
(405) 235-4546
www.lsbindustries.com

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