ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Investors should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes included in “ Item 8. Financial Statements and Supplementary Data. ” Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in “ Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements. ” Certain statements contained in this discussion may be deemed to be forward-looking statements. See “ Special Note Regarding Forward-Looking Statements .” Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled “ Risk Factors .” Unless we state otherwise or the context otherwise requires, the terms “LSB,” “we,” “us,” “our” and the “Company” refer to LSB Industries, Inc. and its consolidated subsidiaries.
Overview
LSB is headquartered in Oklahoma City, Oklahoma and we manufacture and sell chemical products for the agricultural 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 LLC in Baytown, Texas. Our products are sold through distributors and directly to end customers, primarily throughout the United States and parts of Canada, and to explosives manufacturers in the United States and other parts of North America.
Key Operating Initiatives for 2026
We expect our future results of operations and financial condition to benefit from the following key initiatives:
Invest to improve Environmental, Health & Safety at our Facilities. We prioritize high safety standards that not only enable us to protect what matters, which is the well-being of our employees, but also translates into improved plant performance. We remain focused on our safety programs to move closer to attaining zero injuries. We continue to invest additional capital across our facilities to build upon the progress we have made in implementing enhanced safety programs during the last several years.
Improve the Reliability at our Facilities while Supplying our Customers with Products of the Highest Quality. Improving the reliability of our facilities while supplying customers with high-quality products remains a key operational focus. We have several initiatives underway aimed at increasing production volumes of ammonia and downstream products through improved operational execution and asset reliability. Progress in these areas is expected to support higher available production and improved unit cost performance over time, while we continue to maintain a strong focus on product quality and customer requirements.
Turnaround Excellence: We will continue to focus on the safe and effective execution of scheduled Turnarounds, with an emphasis on schedule adherence, cost control, and minimizing operational risk. We will continue to apply our standardized Turnaround management practices across all sites, including its revised Turnaround Standard, to support consistent execution and long-term asset reliability.
Mechanical Integrity: We will continue to enhance mechanical integrity through ongoing refinement of our inspection programs, with the objective of reducing fixed equipment failures and unplanned downtime.
Asset Care Strategies: We will continue to advance our machinery and asset care strategies, with a focus on reducing unplanned downtime, optimizing the scope and duration of planned outages, and improving the effectiveness of startup operations.
Culture of Excellence : We will continue to strengthen operational discipline and accountability across the organization, supporting improved productivity and overall operational reliability.
Advance Productivity Improvement. We are accelerating productivity improvements through a comprehensive focus on fixed and variable cost optimization, procurement-driven savings, automation, and process changes with multiple initiatives underway to identify, assess, and pursue cost-reduction opportunities.
Continued Optimization and Increase the Breadth of Distribution of our Product Mix. We have initiatives underway to increase the distribution of our products within our industrial and agricultural end markets, among other product mix optimization strategies. We believe that these initiatives and strategies, combined with continued expansion of our customer relationships, the robust market analysis capabilities we have developed, and the establishment of in-market tank storage and distribution terminals, will make us more effective in identifying and capitalizing on the most profitable distribution opportunities for our products, while making our financial results more stable and predictable. Additionally, we have
completed and are advancing several capital improvement projects with the intention of increasing our sales volumes of higher value downstream products resulting in improvements in our overall profit margins.
Grow Our Platform. We continue to evaluate opportunities across all our facilities to increase production capacity through the implementation of several potential debottlenecking and other margin enhancement projects. Additionally, from time to time, we evaluate opportunities to acquire strategic assets or companies where we believe those acquisitions will enhance our value and provide attractive returns to our stockholders. We also consider assets and companies that can provide us with geographic expansion, extend an existing product line, add one or more new product lines, leverage our existing ammonia production capabilities, or complement our existing business lines, among other accretive opportunities.
Summary of Low Carbon Ammonia Initiatives
In May 2024, we announced an agreement to supply, for a five-year period commencing January 1, 2025, up to 150,000 short tons per year of low carbon ammonium nitrate solution (“ANS”) to Freeport Minerals Corporation (“Freeport”). In early 2025 we began supplying conventional ANS to Freeport from our El Dorado Facility, and expect to phase in the low carbon contracted volume in late 2026. Freeport intends to use the low carbon ANS purchased from us for its United States copper mining operations.
In April 2022, we entered into an agreement with Lapis Carbon Solutions (“Lapis”) to develop a project to capture and sequester CO 2 at our El Dorado Facility. Lapis, backed by Cresta Fund Management, a Dallas-based middle-market infrastructure investment firm, will invest the majority of the capital required for project development. The project is expected to be completed and operational by the end of 2026, subject to the approval of a Class VI permit, at which time CO 2 injections are expected to begin. Once operational, the project at the El Dorado site will initially capture and sequester approximately 400,000 to 500,000 metric tons of CO 2 per year in underground saline aquifers.
The sequestered CO 2 generated from the facility’s ammonia production is expected to qualify for federal tax credits under Internal Revenue Code Section 45Q, which are $85 per metric ton of CO 2 captured and sequestered. Lapis, as the majority owner of the carbon capture and sequestration equipment, will earn the 45Q tax credits and will pay us a fee for each ton of CO 2 captured and sequestered, which we expect to commence at the end of 2026. Once in operation, the sequestered CO 2 is expected to reduce our overall scope 1 GHG emissions by approximately 25% from current levels. In addition, sequestering approximately 400,000 to 500,000 metric tons of CO 2 annually is expected to enable us to produce approximately 305,000 to 380,000 metric tons of low carbon ammonia annually, a product that could potentially be sold at higher price levels than conventional ammonia. In February 2023, a key milestone was achieved in the advancement of our low carbon ammonia project at El Dorado by filing a pre-construction Class VI permit application with the United States Environmental Protection Agency (the “EPA”). The EPA recognized the application as complete in March 2023 and is currently in the review process. In June 2025, Lapis completed the drilling of a stratigraphic injection well at the El Dorado site and has been gathering data to support the EPA in its continuing technical review of our Class VI application. Lapis resubmitted the pre-construction Class VI permit application to the EPA in December 2025. Once the project receives EPA approval, we intend to use this well for CO 2 injections.
Market Outlook
Demand for our industrial products remains consistent, despite global economic concerns. Demand for AN for use in mining applications is robust across all commodities, particularly with copper and gold, as miners, have been maximizing production volumes to take advantage of record prices. AN demand for explosives used in quarrying/aggregate production for infrastructure upgrade and expansion remains steady. Demand for AN in coal is also robust, supporting electricity production and the deferral of coal-fired power plant closures. These factors should continue to support AN demand well into 2026. Demand for nitric acid is robust domestically, where it is supported by tariffs and preliminary anti-dumping duties on imports of methylene diphenyl diisocyanate (MDI). Economic uncertainty continues to be heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs. However, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base, which is almost entirely located in the United States, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
Ammonia prices currently reflect constrained global inventories resulting from reduced supply from the Middle East and Trinidad, higher cost of production in Europe and delays to the start-up of new production capacity. Supply constraints are expected to ease throughout the first half of 2026. New production in the United States is expected to come online mid-2026, which could pressure pricing in the near term.
Pricing for ammonia derivative fertilizer products remains strong. UAN prices have recently improved, reflecting continued low levels of domestic inventory and constrained supply. Channel inventories remain on the tighter end of the range and are expected to remain this way until late in the second quarter. UAN values are also benefiting from a strengthening in Urea prices.
The outlook for United States corn calls for a small increase in stocks to use as a result of strong 2025 plantings and harvest. We expect to see a reduction in planted acres in 2026 closer to recent averages of 91 million to 93 million acres underpinning nitrogen fertilizer demand levels in line with recent years.
See a more detailed discussion below under “Key Industry Factors” below.
Key Industry Factors
Supply and Demand
Industrial Products - Our industrial products’ sales volumes are dependent upon general economic conditions primarily in the housing, automotive, mining, and paper industries. Nitric acid demand has been robust, reflecting strong domestic production driven by preliminary anti-dumping duties on imported MDI, import tariffs and the resilience of the United States economy. Our sales prices generally vary with the market price of ammonia or natural gas, as applicable, in our pricing arrangements with customers.
Our LDAN and AN solutions are primarily used to produce AN fuel oil and specialty emulsions for use in explosives in the quarry and the construction industries, for metals mining and to a lesser extent, for coal. Demand for AN is also benefiting from high copper and gold prices, which is leading United States producers to maximize mine production volumes, robust quarrying/aggregate production for infrastructure upgrade and expansion along with steady coal production to support electricity production and the deferral of coal power plant closures.
Economic uncertainty continues to be heightened by the potential impacts of tariffs on global trade flows, consumer prices and production input costs. However, we believe that we have a meaningful degree of downside protection in our industrial business given our diverse customer base which is almost entirely located in the United States, the nature of our contracts and our ability to shift our production mix to products where demand and pricing are strongest.
Fertilizer - 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 product margins.
From a farmers’ perspective, the demand for fertilizer is affected by the aggregate crop planting decisions and farm economics, weather 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 patterns and the types of crops planted.
Additionally, changes in corn, soybean, cotton and wheat prices can affect the number of acres of corn planted in a given year, and the number of acres planted will drive the level of nitrogen fertilizer consumption, likely affecting prices.
According to the World Agricultural Supply and Demand Estimates Report (“WASDE Report”) dated February 10, 2026 (the “February Report”), farmers planted approximately 98.8 million acres of corn in the 2025 planting season, up 8.7% compared to the 2024 planting season. According to the February Report, the USDA estimates the United States ending stocks for the 2025 Harvest will be approximately 54.0 million metric tons, a 37.1% increase from the 2024 Harvest. The USDA's expected yield per acre for the 2025 Harvest is 186.5 bushels, up approximately 4.0% from a year ago.
The following February 2026 estimates are associated with the corn market:
2026 Crop
2025 Crop
2024 Crop
(2025 Harvest)
(2024 Harvest)
Percentage
(2023 Harvest)
Percentage
February Report (1)
February Report (1)
Change (2)
February Report (1)
Change (3)
U.S. Area Planted (Million acres)
U.S. Yield per Acre (Bushels)
U.S. Production (Million bushels)
U.S. Ending Stocks (Million metric tons)
World Ending Stocks (Million metric tons)
Information obtained from the February Report for the 2025/2026 (“2026 Crop”), 2024/2025 ("2025 Crop") and 2023/2024 (“2024 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.
Represents the percentage change between the 2026 Crop amounts compared to the 2025 Crop amounts.
Represents the percentage change between the 2026 Crop amounts compared to the 2024 Crop amounts.
According to the February Report, the USDA bumped up domestic corn exports for the 2025 Harvest by 100 million bushels to 3.3 billion bushels, a record for corn exports, and lowering ending stocks. Domestically there were no other changes. The USDA reduced foreign beginning stocks and production with exports increased slightly, reducing projected foreign ending stocks. P rojected
season-average farm price remained unchanged from the prior month at $4.10 per bushel. From a demand perspective, we believe that corn prices will remain at a level that will further support demand for fertilizers during 2026.
Natural Gas Prices
Natural gas is the primary resource for conversion and manufacturing production of our nitrogen products. In recent years, United States 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. More recently, higher United States natural gas costs are being driven by rising LNG exports, coupled with increased power-generation and industrial demand.
Historically, we 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. At December 31, 2025, we had natural gas contracts of approximately 0.2 million MMBtus, at an average cost of $4.39 per MMBtu. These contracts extend through March 2026. The following table shows the annual volume of natural gas we purchased and the average cost per MMBtu:
Natural gas volumes (MMBtu in millions)
Natural gas average cost per MMBtu
Transportation Costs
Costs for transporting nitrogen-based products can be significant relative to their selling price. We continue to evaluate the rising costs of freight domestically. As a result of increases in demand for available rail, truck and barge options to transport product, primarily during the spring and fall planting seasons, higher transportation costs have and could continue to impact our margins, where we are unable to fully pass through these costs to our customers. Additionally, truck driver shortages could impact our 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.
Key Operational Factors
Facility Reliability
Consistent, reliable and safe operations at our chemical plants are critical to our financial performance and results of operations. Planned downtime, including Turnarounds, and unplanned downtime can adversely affect results of operations through reduced sales volumes, lower fixed cost absorption, and increased repair and maintenance costs, which are expensed as incurred.
We performed major Turnaround activities at our Pryor Facility during the third quarter of 2024 and at our Cherokee Facility during the fourth quarter of 2024. Minor planned outages were executed at our El Dorado Facility in July 2024 to replace the ammonia primary reformer catalyst. We did not perform any major planned ammonia Turnaround events during 2025 at the El Dorado Facility, although a minor Turnaround was completed on our nitric acid plants at our El Dorado Facility during 2025.
Based on our current maintenance schedule, Turnaround activities in 2026 are expected to include an ammonia plant Turnaround at our El Dorado Facility during the second quarter and a full-site Turnaround at our Pryor Facility during the third quarter. Additionally, a minor turnaround on the urea plant at our Cherokee Facility is planned for the third quarter of 2026.
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 2025 was 826,000 tons, which was higher than 2024 production due to improved operating performance and the absence of significant planned Turnarounds during 2025. For 2026, we are targeting total ammonia production of approximately 780,000 tons to 810,000 tons, which reflects planned Turnaround work at our El Dorado and Pryor Facilities in 2026.
Forward Sales Contracts
In certain instances, we may 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.
Consolidated Results for 2025
Our consolidated net sales for 2025 were $615.2 million compared to $522.4 million for 2024. Our consolidated operating income for 2025 was $57.3 million compared to an operating loss of $5.5 million for 2024. The items affecting our operating results are discussed below and under “Results of Operations.”
Items Affecting Comparability of Results
Shift in Production Mix
In 2025, we commenced the transition of our production from fertilizer grade ammonium nitrate (“HDAN”), an agricultural product, to ANS, a product used in industrial and mining applications. The transition was completed during the third quarter of 2025, at which time we ceased production of HDAN. This shift in production mix is consistent with our strategy to transition a portion of our sales from agricultural sales made at spot market pricing, which can be volatile, to sales under multi-year contracts that provide the pass-through of natural gas feedstock costs.
Selling Prices
Our 2025 average selling prices for our UAN and ammonia increased, while AN & Nitric Acid decreased slightly compared to 2024.
Turnaround Activities
We performed major Turnaround activities at our Pryor Facility during the third quarter of 2024 and at our Cherokee Facility during the fourth quarter of 2024. In addition, we executed a minor planned outage at our El Dorado Facility in July 2024 to replace the catalyst in the ammonia plant in order to maximize production rates. In 2025, we executed a minor planned Turnaround on our nitric acid plants at our El Dorado Facility. There were no planned major ammonia Turnarounds in 2025.
Turnaround activities typically adversely affect results of operations, including through lost contribution margin from reduced sales, lower fixed cost absorption due to decreased production, and increased repair and maintenance costs. Turnaround-related costs may be incurred in periods prior to the actual plant shutdown, including costs associated with planning and procurement activities.
Gain on Extinguishment of Senior Secured Notes
During 2025, we repurchased $39.9 million in principal amount of our Senior Secured Notes through open market transactions for approximately $39.5 million, which was accounted for as an extinguishment of debt. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.
During 2024, we repurchased $96.6 million of our Senior Secured Notes through open market transactions for approximately $92.2 million. As a result, we recognized a gain on extinguishment of debt, net of issuance costs, of approximately $3.0 million. The 2024 and 2025 repurchase transactions also served to reduce our interest expense.
Results of Operations
The following is a discussion and analysis of our consolidated results of operations for the year ended December 31, 2025, compared to the year ended December 31, 2024. For a discussion and analysis of our consolidated results of operations for the year ended December 31, 2024, compared to the year ended December 31, 2023, see “Item 7, Management’s Discussion and Analysis and Results of Operations” in our 2024 Form 10-K filed with the SEC on February 27, 2025.
Net sales to unaffiliated customers are reported in the consolidated financial statements and gross profit represents net sales less cost of sales. Net sales are reported on a gross basis with the cost of freight being recorded in cost of sales.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
The following table sets forth certain financial information, the increase or decrease between those periods, the percentage increase or decrease between those periods with respect to each line item:
Percentage
Change
Change
(Dollars In Thousands)
Net sales:
AN & Nitric Acid
Urea ammonium nitrate (UAN)
Ammonia
Other
Total net sales
Gross profit
Depreciation and amortization (1)
Turnaround expense
Adjusted gross profit (2)
Selling, general and administrative expense
Other expense, net
Operating income (loss)
Interest expense, net
Loss (gain) on extinguishments of debt
Non-operating other income, net
Provision (benefit) for income taxes
Net income (loss)
Other information:
Gross profit percentage (3)
Adjusted gross profit percentage (2)(3)
Property, plant and equipment expenditures
N/M Not meaningful.
Represents amount classified as cost of sales.
Represents a non-GAAP measure. The amounts exclude unallocated depreciation and amortization and Turnaround expenses, which we believe are not reflective of our operating performance in a given period.
As a percentage of total net sales.
The following tables provide key operating metrics for the fertilizer and major industrial products, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:
Percentage
Product (tons sold)
Change
Change
AN & Nitric Acid
Urea ammonium nitrate (UAN)
Ammonia
Total
Percentage
Gross Average Selling Prices (price per ton)
Change
Change
AN & Nitric Acid
Urea ammonium nitrate (UAN)
Ammonia
Percentage
Average Benchmark Prices (price per ton)
Change
Change
Tampa Ammonia Benchmark
NOLA UAN
Net Sales
As noted in the table above, we recorded net sales of $615.2 million in 2025, compared to $522.4 million for 2024, representing an increase of $92.8 million. The increase was primarily driven by higher sales volumes of AN & Nitric Acid and UAN, reflecting improved plant reliability, throughput, and operational efficiency, as well as the absence of major Turnaround activities during 2025. Improved pricing, particularly for UAN, also contributed to the increase in net sales. The price decrease within the AN & Nitric Acid product group was primarily a result of the changing product mix within that group. Ammonia sales declined, in line with our strategy to upgrade ammonia to maximize higher value downstream products like Nitric Acid, AN and UAN.
Gross Profit
As noted in the table above, we recognized a gross profit of $104.3 million for 2025 compared to $47.8 million for 2024, or a $56.5 million increase. Overall, our gross profit percentage was 17.0% for 2025 compared to 9.1% for 2024. Our adjusted gross profit percentage increased to 31.2% for 2025 from 30.6% for 2024.
Our gross profit for 2025 was higher compared to the prior year primarily due to the favorable sales volumes and prices and lower Turnaround expenses. These favorable changes were partially offset by higher natural gas costs.
Selling, General and Administrative ( “ SG&A ” )
Our selling, general and administrative expenses were $41.5 million for 2025, a decrease of $0.3 million compared to 2024. The net decrease was primarily driven by decreases in professional fees, insurance and other miscellaneous expenses items, partially offset by an increase in compensation related expenses.
Other Expense (income), net
Other expense, net, which consists primarily of asset write-downs, was lower in 2025 compared to the prior year. During 2025 and 2024, we recorded asset write-downs of $6.4 million and $11.7 million, respectively. Included in the write-down for 2025 was a $1.5 million impairment on a parcel of land for which we are currently in negotiations to sell. The remaining write-downs for 2025 and for 2024 were primarily related to assets sold or no longer in use.
Interest Expense, net
Interest expense, net for 2025 was $30.7 million compared to $34.5 million for 2024. The decrease was primarily related to a declining balance in the outstanding amount of our Senior Secured Notes as a result of debt repurchases made in recent years. Interest expense was also lower, as we paid off our Secured Financing Agreement due 2025 in August 2025.
Gain on Extinguishment of Debt
In 2025, we repurchased $39.9 million of our Senior Secured Notes through open market transactions for approximately $39.5 million. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million.
In 2024, we repurchased $96.6 million of our Senior Secured Notes through open market transactions for approximately $92.2 million. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a gain on extinguishment of debt of approximately $3.0 million.
Non-operating Other Income, net
Non-operating other income for 2025 was $6.0 million compared to $10.9 million for 2024, primarily relating to interest income earned during both periods from our short-term investments and cash equivalents. Interest income was lower as a result of lower interest rates and a decline in the amount of short-term investments and cash equivalents that we carry.
Provision (benefit) for Income Taxes
The provision for income taxes for 2025 was $7.9 million compared to the benefit for income taxes of $6.7 million for 2024. The resulting effective tax rate for 2025 was 24.4% on pre-tax income compared to 25.7% for 2024 on pre-tax loss. For 2025, the effective tax rate was higher than the statutory rate primarily due to nondeductible compensation expense. For 2024, the effective tax rate was higher than the statutory rate primarily due to changes to valuation allowances and remeasurement of state deferred balances as a result of changes to state apportionment. Also see discussion in Note 6 – Income Taxes.
Liquidity and Capital Resources
The following table summarizes our cash flow activities for 2025 and 2024:
Change
(In Thousands)
Net cash flows - operating activities
Net cash flows - investing activities
Net cash flows - financing activities
Net Cash Flow from Operating Activities
Net cash provided by operating activities was $95.5 million for 2025 compared to $86.6 million for 2024, a change of $8.9 million. The increase was primarily a result of improved gross profit partially offset by changes in working capital.
Net Cash Flow from Investing Activities
Net cash used by investing activities was $42.4 million for 2025 compared to $53.1 million used by investing activities for 2024, a change of $10.7 million.
For 2025, the net cash used by investing activities primarily related to expenditures for property, plant and equipment of $77.5 million, partially offset by proceeds from net redemptions (i.e. amounts maturing exceeded amounts reinvested) of our short-term investments of $34.5 million.
For 2024, the net cash used by investing activities primarily related to expenditures for property, plant and equipment of $92.3 million, partially offset by proceeds from net redemptions of our short-term investments of $39.4 million.
Net Cash Flow from Financing Activities
Net cash used by financing activities was $53.9 million for 2025 compared to $114.3 million used for 2024, a change of $60.4 million.
For 2025, the net cash used by financing activities primarily consisted of repurchases of our Senior Secured Notes of $39.5 million, payments on our Secured Financing due 2025 and short-term financing of $24.9 million, repurchases of $2.4 million of common stock and $1.2 million for tax withholding obligations related to the vesting of equity awards partially offset by proceeds from short-term financing of $14.2 million.
For 2024, the net cash used primarily consists of repurchases of our Senior Secured Notes of $92.2 million, payments on other long-term debt and short-term financing of $23.4 million, repurchases of $11.9 million of common stock, and $2.1 million for tax withholding obligations related to the vesting of equity awards, partially offset by proceeds from short-term financing of $16.1 million.
Capitalization
The following table summarizes our total current cash, cash equivalents and short-term investments, long-term debt and stockholders’ equity:
December 31,
(In Millions)
Cash and cash equivalents
Short-term investments
Total cash and cash equivalents and short-term investments
Revolving credit facility and long-term debt:
Revolving Credit Facility
Senior Secured Notes due 2028 (1)
Secured Financing Agreement due 2025
Finance Leases
Unamortized debt issuance costs (2)
Total long-term debt, including current portion, net
Total stockholders' equity
See discussion below relating to the debt repurchases.
Debt issuance costs as of December 31, 2025 and 2024 of approximately $0.5 million and $0.6 million, respectively, relating to our Revolving Credit Facility are not included in Unamortized debt issuance cost. These costs are included in our consolidated balance sheet in Intangible and other assets, net.
Revolving Credit Facility – In December 2023, we entered into a secured revolving credit facility (the “Revolving Credit Facility”) with the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent. The Revolving Credit Facility provides for borrowings up to an initial maximum of $75 million, with an option to increase the maximum by an additional $25 million (which amount is uncommitted). Availability under the Revolving Credit Facility is subject to a borrowing base and is subject to an availability block of $7.5 million, which is applied against the $75 million initially reducing the maximum (which can be removed by us at our sole discretion, subject to the satisfaction of certain conditions) (the “Availability Block”). The Revolving Credit Facility provides for a sub-facility for the issuance of letters of credit in an aggregate amount not to exceed $10 million, with the outstanding amount of any such letters of credit reducing availability for borrowings. As of December 31, 2025 our Revolving Credit Facility was undrawn and had approximately $44.3 million of availability.
The Revolving Credit Facility contains one financial covenant, which requires that, solely if we elect to remove the Availability Block, then we must maintain a minimum fixed charge coverage ratio of not less than 1.00:1.00. The financial covenant, if triggered, is tested monthly. The financial covenant was not triggered as of December 31, 2025.
Senior Secured Notes due 2028 – As of December 31, 2025, we had $438.6 million outstanding in aggregate principal amount of Senior Secured Notes, which originated from the issuance at par of two tranches of $500 million and $200 million in aggregate principal of such notes in October 2021 and March 2022, respectively. During 2025, we repurchased $39.9 million of Senior Secured Notes through open market transactions for approximately $39.5 million and recognized a loss on extinguishment of debt of approximately $0.1 million. During 2024, we repurchased $96.6 million of Senior Secured Notes through open market transactions for approximately $92.2 million and recognized a gain on extinguishment of debt of approximately $3.0 million. The Senior Secured Notes have an interest rate of 6.25%, to be paid semiannually in arrears on May 15th and October 15th, and mature on October 15, 2028.
Secured Financing Agreement due 2025 – During the third quarter of 2025, we paid off the loan by making the final balloon payment of approximately $5 million on a 60-month, $30 million secured financing arrangement with an affiliate of Eldridge Industries, L.L.C.
Finance Leases – Our finance leases consist primarily of leases on railcars. Most of our railcar leases are classified as operating leases.
Capital Expenditures – Our capital expenditures during 2025 relating to plant, property and equipment were $77.5 million compared to $92.3 million in 2024. Of the expenditures in 2025, approximately $52.7 million was spent on projects to sustain our production capacity while approximately $24.8 million was spent on growth initiatives. Our capital expenditures were funded primarily from cash
and working capital. We expect capital expenditures to be approximately $75 million for 2026 of which $55 million is expected to be spent on sustaining production with the remainder spent on growth initiatives.
Liquidity – We believe that the combination of our cash and cash equivalents, short-term investments, the availability on our Revolving Credit Facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next 12 months.
As of December 31, 2025, we had approximately $148.5 million in cash and cash equivalents and short-term investments. Our capital allocation strategy includes, from time to time, seeking to deploy capital through additional share repurchases or the retirement or purchase of outstanding debt. Such repurchases may be made in open market purchases, privately negotiated transactions or otherwise and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.
Equity and Debt Repurchases – In May 2023, our Board authorized a $150 million stock repurchase program. The program is intended as a means to maximize stockholder value by returning capital to stockholders. Under the repurchase program, we are authorized to purchase shares from time to time through open market or privately negotiated transactions. Such purchases may be made pursuant to Rule 10b5-1 plans or other means as determined by our management and in accordance with the requirements of the SEC. The repurchase program does not obligate us to purchase any particular number or type of securities.
During 2025, we repurchased approximately 0.3 million shares at an average cost of $9.15 per share, all of which occurred during our fiscal quarter ended December 31, 2025. Total repurchase authority remaining under the repurchase program was $106.6 million as of December 31, 2025. The repurchase program does not have a set expiration date, but may be suspended, terminated or modified at any time for any reason.
During 2025, we repurchased $39.9 million in principal amount of our Senior Secured Notes for approximately $39.5 million, which was accounted for as an extinguishment of debt. Including our write-off of the associated remaining portion of unamortized debt issuance costs, we recognized a loss on extinguishment of debt of approximately $0.1 million. The debt repurchase was intended as a means to deleverage our balance sheet and reduce future interest costs while maintaining a balanced capital allocation strategy that provides an appropriate level of liquidity to fund our operations and future growth opportunities.
Expenses Associated with Environmental Regulatory Compliance
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 $4.1 million in 2025 for environmental compliance, compared to $5.2 million in 2024. For 2026, we expect to incur expenses of approximately $5.8 million for environmental compliance. However, it is possible that the actual costs could be significantly different from our estimates.
Dividends
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.
Seasonality
We believe sales of fertilizer products to the agricultural industry are seasonal while sales into the industrial sectors generally are less susceptible to seasonal conditions or cycles. The selling seasons for agricultural products are primarily during the spring and fall planting seasons, which typically extend from March through June and from September through November in the geographical markets where 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 agricultural markets depend upon weather conditions and other circumstances beyond our control. With respect to feedstock cost, we may experience higher cost of natural gas in winter months as a result of increased heating demand combined with the potential of constrained supply during periods of very cold temperatures.
Performance and Payment Bonds
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, 2025, we have agreed to indemnify the sureties for payments, up to $10.2 million, made by them in respect of such bonds. All of these insurance bonds are expected to remain in place in 2026.
Off-Balance Sheet Arrangements
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.
Aggregate Contractual Obligations
As of December 31, 2025 our aggregate contractual obligations are summarized in the following table:
Payments Due in the Year Ending December 31,
Contractual Obligations
Total
Thereafter
(In Thousands)
Long-term debt:
Senior Secured Notes
Finance leases
Total long-term debt
Interest payments on long-term debt (1)
Short-term financing
Operating leases
Natural gas pipeline commitment (2)
Other contractual obligations (3)
Total
The estimated interest payments are all based on fixed interest rates. As of December 31, 2025, we do not have any outstanding borrowings based on variable interest rates.
Our proportionate share of the minimum costs to ensure capacity relating to a gathering and pipeline system.
Includes commitments for utility purchases, natural gas transportation and forward contracts on natural gas.
New Accounting Pronouncements
Refer to Note 1 – Summary of Significant Accounting Policies for recently adopted and issued accounting standards.
Critical Accounting Estimates
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, 2025, could change in the near term. The more critical areas of financial reporting affected by management's judgment, estimates and assumptions include the following:
Contingencies – Certain conditions may exist which may result in a loss, but which will only be resolved when future events occur. We 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 loss when such loss 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 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 7 – Commitments and Contingencies.
It is reasonably possible that the actual costs could be significantly different than our estimates.
Regulatory Compliance – As discussed under “ Item 1. Business–Government Regulation ” 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 developed policies and procedures related to regulatory compliance. We must continually monitor whether we have maintained 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. 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 in “Note 7 – Commitments and Contingencies.” As of December 31, 2025 and 2024, liabilities totaling $0.7 million and $0.6 million, respectively, have been accrued relating to these matters. It is also reasonably possible that the estimates and assumptions utilized as of December 31, 2025 could change in the near term. Actual results could differ materially from these estimates and judgments, as additional information becomes known.
Income Tax – As discussed under “Income Taxes” in Note 1 – Summary of Significant Accounting Policies and in Note 6 – Income Taxes, 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. As of December 31, 2025 and 2024, our valuation allowance on deferred tax assets was $14.3 million and $14.2 million, respectively.
Non-GAAP Financial Measures
Management uses adjusted gross profit as a supplemental measure to review and assess the performance of our core business operations and for planning purposes. We define adjusted gross profit as gross profit excluding depreciation and amortization and Turnaround expenses associated with our cost of sales, which we believe are not reflective of our operating performance in a given period.
Adjusted gross profit is a metric that provides investors with greater transparency to the information used by management in its financial and operational decision-making. We believe this metric is useful to investors because it facilitates comparisons of our core business operations across periods on a consistent basis. Management believes that the non-GAAP measure presented in this Annual Report on Form 10-K, when viewed in combination with our results prepared in accordance with U.S. GAAP, provides a more complete understanding of the factors and trends affecting our business and performance.
Adjusted gross profit is not a measure of financial performance under U.S. GAAP, and should not be considered a substitute for gross profit, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted gross profit has limitations as an analytical tool, and when assessing our operating performance, investors should not consider adjusted gross profit in isolation, or as a substitute for gross profit prepared in accordance with U.S. GAAP. Adjusted gross profit may not be comparable to similarly titled measures of other companies and other companies may not calculate such measure in the same manner as we do.
The following table reconciles gross profit to adjusted gross profit.
Year Ended December 31,
Reconciliation of Gross Profit to Adjusted Gross Profit:
(In Thousands)
Gross profit
Depreciation and amortization
Turnaround expenses
Adjusted gross profit
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK
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.
Forward Sales Commitments
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. As of December 31, 2025, we had no embedded losses associated with sales commitments with firm sales prices.
Commodity Prices
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, such that these contracts are exempt from the accounting and reporting requirements relating to derivatives. As of December 31, 2025 these contracts included volume purchase commitments with fixed prices of approximately 0.2 million MMBtus of natural gas that cover a period from January 2026 through March 2026. The weighted-average price of the natural gas covered by these contracts was $4.39 per MMBtu, for a total of $0.7 million. Based on strip prices, the weighted-average market price of the fixed contracts was $4.39 per MMBtu for a total of $0.7 million.
Interest Rates
We are exposed to variable interest rate risk with respect to our Revolving Credit Facility. As of December 31, 2025, we had no outstanding borrowings on the Revolving Credit Facility and no other variable rate borrowings.
We have a substantial amount of short-term investments in treasury securities. As these securities mature, to the extent that the proceeds are not required to fund operations, we may roll the funds over by purchasing additional securities. When interest rates fluctuate, there is no assurance that future purchases of short-term debt instruments will provide similar yields to the yields of those that have matured.
ITEM 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA
We have included the financial statements and supplementary financial information required by this item immediately following Part IV of this report and hereby incorporate by reference the relevant portions of those statements and information into this Item 8.
