Oklahoma City-LSB Industries Inc. said Jan. 22 that 2008 fourth-quarter sales were up in both its climate control and chemical segments. It expects to report a sales increase of approximately 33 percent for the fourth quarter of 2008 versus the fourth quarter of 2007. However, pre-tax income, although positive, will be lower, due in part to write-downs and valuation reserves of approximately $10 million as a result of steep declines in commodity prices and the market value of certain financial hedge positions. In addition, during the fourth quarter 2008, LSB completed planned maintenance at its El Dorado, Ark., and Cherokee, Ala., plants at a combined cost of approximately $4.5 million. The 2008 fourth-quarter write-downs and valuation reserves include estimated $3.7 million lower of cost or market inventory write-downs, $3.3 million mark-to-market losses on natural gas and anhydrous ammonia hedge positions relating to the chemical business, and $3.0 million mark-to-market losses on interest rate hedge positions. Included in the natural gas and anhydrous ammonia mark-to-market losses is $1.7 million in unrealized non-cash losses securing profit margins on certain orders that will be shipped at firm sales prices in 2009. Partially offsetting the $10 million write-downs and valuation reserves is a gain of $5.5 million from the repurchase of a portion of the company’s 5.5 percent subordinated debentures due 2012 at below face value. “The write-downs are caused by the unprecedented volatility in commodity markets that occurred in the fourth quarter of 2008,” said Jack Golsen, LSB chairman and CEO. “We are recently seeing some settling in this situation, and the market is moving forward with lower costs and lower selling prices of our chemical products. Our climate control business results were not significantly affected by the volatility in the commodity markets.” Golsen further stated, “In response to numerous inquiries following the release of the stimulus package proposed by the House of Representatives on Jan. 15, 2009, we believe that several funding initiatives and tax incentives could be favorable to our climate control business, particularly our geothermal heat pump business. The proposed package extends and expands federal tax credits for residential and commercial geothermal systems, and includes almost $33 billion to upgrade federal and state buildings, schools and universities, with emphasis on energy efficiency enhancements. Highly energy efficient products produced by LSB could be used in many of these upgrade and modernization projects.” Actual fourth-quarter results are expected to be released on or about March 12, 2009.
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