LSB Industries, Inc.

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LSB Industries, Inc.

16 S. Pennsylvania Avenue
Oklahoma City, Oklahoma 73107
Telephone: (405) 235-4546
Fax: (405) 235-5067
Web site:

Public Company
Employees: 1,240
Sales: $364.1 million (2004)
Stock Exchanges: American
Ticker Symbol: LXU
NAIC: 325314 Fertilizer (Mixing Only) Manufacturing; 333415 Air Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment Manufacturing

Listed on the American Stock Exchange, LSB Industries, Inc. is a diversified holding company based in Oklahoma City, Oklahoma, whose subsidiaries are divided among three major categories: Chemical, Climate Control, and Industrial. Within the Chemical Group, LSB maintains three business units. The agricultural products unit produces items such as ammonium nitrate, Urea-Ammonium Nitrate solution, specialty fertilizer chemicals blends, and micronutrients. The industrial products business unit produces nitric acid, sulfuric acid, mixed acids, and low-density ammonium nitrate. LSB is the largest supplier of nitric acid in the United States. The third chemical group business unit, explosives, manufactures blasting agents and commercial explosives. LSB's Climate Control Group produces water source heat pumps, fan coils, geothermal heating and cooling products, and air purification and dehumidification equipment. Finally, the Industrial Group manufactures machine tools, milling machines, lathes, drills, and fabrication equipment, as well as providing engineering services to help set up industrial plants in the chemical, metal stamping, metal fabricating, air conditioning, bearing manufacturing, and precision machines parts fields.


LSB Industries grew out of an Oklahoma City company formed in 1946, L&S Bearing Company. It started out rebuilding bearings, which had been commandeered by the military during the recently ended World War II and left a severe shortage of the much needed item. As the economy roared following a brief postwar recession, the demand for bearings remained extremely high, prompting L&S to begin manufacturing its own bearings. In 1961, the founder of LSB, Jack E. Golsen, acquired the company. In that same year, he acquired another Oklahoma City business, International Manufacturing Company, which in the 1950s became involved in the manufacture of heating and air conditioning fan coils. It later changed its name to International Environmental Corporation and remains a key LSB subsidiary. Over the next several years of the 1960s Golsen acquired a dozen more companies, which by 1968 employed about 600 people and generated sales of $17 million. In 1968 he formed LSB Industries, drawing on the L&S Bearing name, to serve as a holding company for his manufacturing interests. He then made an initial public offering of stock a year later.

By the mid-1970s LSB was manufacturing anti-friction bearings, air conditioning and heating equipment, and machine tool products. The workforce had grown to 800 and annual sales totaled some $33 million. Following the construction of a major air conditioning plant, the company maintained 500,000 square feet of manufacturing space in Oklahoma City. Later in the decade LSB, located in oil country, began making oilfield pumping units.

In 1981 LSB topped the $100 million mark for the first time in its history, a 43 percent increase over the prior year's $70.5 million. Net income also improved from $1.6 million in 1980 to more than $2 million in 1981. But business conditions quickly soured and the combination of high interest rates and the cost of keeping higher than normal inventories led to losses in 1982. Of particular concern was a downturn in the oil industry and a softening in demand for pump jacks, which had begun even as LSB became involved in the business. Sales dipped to $63.9 million in 1983 and the company had to contend with a heavy debt load and the discounting of its large inventories.

Forced to cut costs, LSB slashed it workforce from the 1981 peak of 1,400 to 750. Not only was the oil industry suffering, U.S. manufacturers also were enduring difficult times. Many of them had their machine tools repossessed, leading to a surplus of inexpensive used machine tools, putting the products manufactured by LSB at a competitive disadvantage. The company also had to contend with foreign-made bearings, which were subsidized by their governments and sometimes available in the United States at a price less than what LSB paid for raw materials. Moreover, a strong U.S. dollar hurt the company's ability to sell its products overseas. The lone bright spot was the Environmental Control Division, which produced air conditioning equipment for major buildings. In 1984 Golsen told the Oklahoman that it would likely take two years for the company to work through its inventory, restart major production, and regain its health.


Despite its difficulties, however, LSB was able to implement a recapitalization plan with its 12 lender banks and arranged a $40 million line of credit with Philadelphia National Bank. As a result LSB completed a major acquisition in 1984, adding El Dorado, Arkansas-based El Dorado Chemical Company. El Dorado would become the heart of LSB's Chemical Group. A year later, LSB acquired Utica, New York-based Friedrich Climate Master Inc., manufacturer of cooling and heating products, to bolster its Environmental Control Division unit and add about $30 million in annual revenues. Also in 1985, LSB acquired Marshall Supply & Equipment Company, a Tulsa distributor of industrial and electronic products and machine tools, but a deal to buy Hyatt Clark Industries, a New Jersey employee-owned manufacturer of roller bearings, fell through when General Motors refused to continue to underwrite loans to the company if it ceased to be employee-owned.

LSB next tried to acquire financial institutions, at a time when the thrift industry was becoming distressed. In 1986 it failed in its bid to buy Home Savings & Loan Association of Bartlesville, Oklahoma, but succeeded in 1988 in acquiring Northwest Federal Savings & Loan Association of Wood, Oklahoma, for $1.5 million. Northwest had combined with three other troubled S&Ls, was renamed Equity Bank for Savings by LSB, and became a major factor in the attempt to salvage Oklahoma's troubled thrift industry. As an inducement to get involved, the Resolution Trust Corporation (RTC), a government agency formed in 1989 to help bail out or merge insolvent S&Ls, gave Equity financial assistance, essentially making up for losses on nonperforming assets. Equity also would include Arrowhead Federal Savings & Loan, bought in 1988 for $317 million. In 1989 it would pay $10.3 million for United BankCard Inc., the largest bank credit card operator in Oklahoma, issuing both Visa and MasterCard credit cards.


LSB Industries, Inc. is a manufacturing, marketing, and engineering company with activities on a worldwide basis.

LSB enjoyed a strong turnaround in the second half of the 1980s, which ended with the company posting $262.5 million in revenues and net income of $4 million. But the company experienced a downturn with the start of the 1990s, as once again the U.S. economy slipped into recession. Sales fell to $248.2 million in 1990 and LSB lost $9.1 million. The company's industrial products business was particularly hard hit, as was Equity, which by itself lost $8 million in 1990. The financial group returned to profitability in 1991, while the parent company continued to post a net loss.

Business turned around for LSB in 1992, when net income totaled $9.2 million, and LSB was once again looking to expand. In 1992 it acquired Slurry Explosive Corporation, and in 1993 added a number of assets. It bought an Australian explosives manufacturer, Total Energy Systems Limited, for approximately $4.3 million; El Dorado Chemical acquired a concentrated nitric acid plant and other assets from the Joliet, Illinois Army Ammunition Plant; and LSB also added the assets of Memphis, Tennessee-based International Bearings Corporation, a distributor of agricultural and power transmission bearings and roller chains. By this point Equity had sold off much of its original assets and RTC opted to end its assistance agreement, paying the subsidiary $14 million. By the end of 1993, LSB decided to exit the financial services field, selling Equity to Fourth Financial Corp. for $92 million in a deal completed in May 1994.

After realizing net profits of $12.4 million in 1993 and $24.5 million in 1994, LSB lost $3.7 million in 1995 and $3.8 million in 1996, prompting management in 1995 to launch a long-term restructuring effort that would include casting off underperforming businesses. Selling off assets became even more of a priority after 1997, a year that Golsen called in his annual shareholder's letter, "the most disappointing year in the history of LSB Industries." Sales fell to $255 million, compared with $276.4 million in 1996, and the company lost more than $23 million.


With the help of outside advisors, the company came to the conclusion that its core businesses were Chemical and Climate Control. The automotive and industrial units, on the other hand, were expendable and should either be sold or spun off to shareholders. Divesting the automotive bearing business was not easily achieved, however. It had been a core element of LSB from the start and its operations were tied into the entire infrastructure of LSB. Making it a stand-alone operation required the time-consuming task of building a marketing plan, adding customer relations operations, and in general resizing the workforce. Although the company announced its intention of spinning off the automotive unit, it would be some time before it was actually accomplished.

The divestiture of assets began in March 1998 with the sale of the company's Tower office building for $31 million, the proceeds earmarked for the paying down of debt. This sale helped to improve the balance sheet, but in operational terms failed to make any significant contributions. Not only did the noncore business fail to perform any better, LSB's chemical business struggled because of the agricultural market, which was adversely affected by poor weather. Losses continued to mount in 1998 and 1999, although much of the latter were noncash losses connected to the sale or discontinuation of businesses, such as the sale of Total Energy Systems in August 1999. The price of LSB stock also tumbled, resulting in the company failing to meet the price or market capitalization requirements of the New York Stock Exchange. LSB was delisted in June 1999 but eventually landed a spot on the American Stock Exchange.

LSB finally dealt with its unprofitable automotive business by selling it in May 2000 to Drive Line Technologies for $8.7 million. Overall, LSB showed marked improvement in 2000, growing revenues to $296.2 million and posting a $6.2 million profit. It also succeeded in trimming operating expenses from $51.7 million in 1999 to $47.8 million in 2000. Moreover, the company cut its annual interest payments by more than $2 million by buying back nearly $30 million of its public bonds in 2000.

LSB's turnaround continued in 2001, as the emphasis on core businesses began to bear fruit. The agricultural segment of the chemical business, for example, benefited from the acquisition of a plant in Cherokee, Alabama, a move that added customers from a number of new states, including Alabama, Mississippi, Georgia, Kentucky, and Indiana. This expansion helped to offset a decline in demand in the overall market. LSB improved sales to $346.6 million in 2001 and increased earnings to $8.6 million.


L&S Bearing is launched in Oklahoma City.
Jack E. Golsen acquires L&S.
Golsen incorporates a holding company, LSB Industries, Inc.
El Dorado Chemical Co. is acquired.
Slurry Explosive Corporation is acquired.
The Financial Services unit is sold.
The Automotive Products unit is sold.
Slurry is sold.

LSB's momentum was blunted in 2002 by a pair of unforeseen events. In February of that year, the Slurry facility had its license to manufacture high explosives revoked by the Bureau of Alcohol, Tobacco, and Firearms, because of improper storage of finished goods and raw material. LSB lost $3.5 million from the shuttered unit before selling off Slurry in December 2002. The chemical business was dealt a blow in April of that year when the El Dorado plant was severely damaged by high winds, the likely effects of a tornado. As a result, the production of industrial grade ammonium nitrate was shut down. The company's other core business, Climate Control, fared better, producing record earnings. As a whole, however, LSB realized a profit of less than $100,000 for the year.

LSB earned $3.1 million in 2003 and $1.9 million in 2004 on sales of $364.1 million, marking the fifth straight year the company posted a profit. One sore spot was the El Dorado subsidiary, which experienced ongoing losses. In June 2005 LSB announced that it was exploring "numerous alternatives" for the business. Whether that led to another divestiture, and a further refinement of the company's business lines, remained to be seen.


Clime Master International Limited; Summit Machine Tool Manufacturing Corporation; Hercules Energy Mfg. Corporation; El Dorado Chemical Company; International Environmental Corporation.


Agrium Inc.; CF Industries Holdings, Inc.; Mississippi Chemical Corporation.


Bayless, Glen, "LSB's Full Health Called 2 Years Away," Oklahoman, April 8, 1984, p. 34.

"City Firm Plans Offering of Stock," Oklahoman, April 5, 1969, p. 46.

Laval, Kevin, "Equity Savings Agrees to Buy United BankCard," Oklahoman, June 16, 1989, p. 26.

, "LSB Industries Agrees to Buy Insolvent Thrift," Oklahoman, March 28, 1987, p. 20.

Martin, Stacy, "Equity Bank, RTC Deal to End, Officials Say," Oklahoman, September 30, 1992, p. 121.

, "LSB Buys Australian Company," Oklahoman, June 26, 1993, p. 100.

, "LSB Eyes 'Alternatives' for El Dorado As Losses Continue," Chemical Week, June 22, 2005, p. 12.

, "LSB Planning Restructure, Subunit Sales," Oklahoman, September 27, 1995, p. 15.

Sim, Peck Hwee, "LSB's Ammonium Nitrate Production Halted by Tornado," Chemical Week, April 24, 2002, p. 13.