LSB Industries, Inc.: Form 10-Q for the period ended Jun 30, 2026

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 1. Financial Statements.” Notes referenced in this discussion and analysis refer to the notes to consolidated financial statements that are found in “Item 1. Financial Statements—Notes to Condensed 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 in our Annual Report on Form 10-K for the year ended December 31, 2025, 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

General

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 (the “Cherokee Facility”), El Dorado, Arkansas (the “El Dorado Facility”) and Pryor, Oklahoma (the “Pryor Facility”) 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 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 our revised Turnaround standardization, to support consistent execution and long-term asset reliability.
• During the second quarter we successfully completed an extensive and complex Turnaround of our El Dorado ammonia plant on time, within budget and injury free.
• In addition, we began Turnaround work at our Pryor Facility in the second quarter, accelerating the commencement date from its originally scheduled third quarter timeframe. The shift forward in the commencement of the Turnaround moved the majority of the costs and lost production from the Turnaround from the third quarter to the second quarter. The Turnaround at the Pryor Facility was completed during the third quarter.
• 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 2026, we reached an agreement to assume full ownership of our project to capture and sequester CO2 at our El Dorado Facility (the “Project”) from Lapis Carbon Solutions (“Lapis”). The milestone-based structure of the agreement aligns our capital deployment with Project advancement, while limiting upfront capital exposure. The Project is expected to be completed and operational in the first quarter of 2027, subject to United States Environmental Protection Agency (“EPA”) approval of our Class VI permit, at which time CO2 injections are expected to begin.

Once operational, the Project will initially capture and sequester approximately 400,000 to 500,000 metric tons of CO2 per year in underground saline aquifers. The sequestered CO2 is expected to reduce our overall scope 1 GHG emissions by approximately 25% from current levels. In addition, the Project is expected to enable us to produce between 305,000 and 380,000 metric tons per year of low carbon ammonia, a product that could potentially be sold at higher price levels than conventional ammonia.

Key Project milestones include:

• In April 2022, we entered into an agreement with Lapis to develop the Project.
• In February 2023, a pre-construction Class VI permit application was filed with the EPA. The EPA recognized the application as complete in March 2023 and is currently in the review process.
• 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 early 2027, once the Project is operational. Freeport intends to use the low carbon ANS purchased from us for its United States copper mining operations.
• In June 2025, a stratigraphic injection well was drilled at the El Dorado site and data has been gathered to support the EPA in its continuing technical review of our Class VI application. The pre-construction Class VI permit application was resubmitted to the EPA in December 2025. Once the Project receives EPA approval, we intend to use this well for CO2 injections.
• In May 2026, we reached an agreement to take full ownership of the Project. The sequestered CO₂ generated from the facility's ammonia production is expected to qualify for the enhanced federal tax credit, currently $85 per metric ton of CO2, under Internal Revenue Code Section 45Q. Based on expected capture volumes, the Company estimates the Project could generate approximately $25 million to $30 million of annual earnings when fully operational, net of operating costs, over the 12-year credit period, subject to continued qualification. Although the credits are expected to be recognized in earnings as they are earned, the timing of related cash inflows may vary depending on the tax credit monetization method selected. As a result, cash receipts may not coincide with earnings recognition.

Market Outlook

Demand for our industrial products remains strong, including demand for AN, supported by continued mining-sector investment across North America and globally, as well as broader capital spending tied to AI-related infrastructure, data centers, power generation and electrification. Favorable supply / demand fundamentals, further supported by producer outages, continue to underpin both spot and contract pricing, while new mining and aggregate projects are expected to support medium to longer-term demand for explosives used in copper, iron ore, quarrying and infrastructure-related production.

We believe our industrial business provides a meaningful degree of downside protection from risks associated with economic uncertainty, including those related to tariffs, fluctuating oil and commodity prices, concerns about inflation and the ongoing instability in the Middle East, including the U.S.-Iran conflict. A significant portion of our volumes are already contracted, our customer base is diverse and located almost entirely in the United States, and we have the ability to optimize our product mix. In addition, we expect European marginal cost of production to be higher throughout the remainder of 2026, driven by elevated natural gas costs and a tight global market for nitrogen products, particularly as demand for fertilizers in India remains strong and export capacity from China and other sources continues to be limited.

The fertilizer markets remain constructive as conditions continue to evolve following the Strait of Hormuz disruption earlier this year. Ammonia prices remain elevated relative to historical averages, although they have moderated from first-half highs as seasonal demand normalizes and supply conditions improve. Urea Ammonium Nitrate (UAN) pricing remains favorable even as prices normalize from elevated levels, with a constructive demand outlook expected to support increased demand in the second half of 2026. Other developments that could impact product pricing include the continued attacks affecting Russian nitrogen plants, ports, and ships, as well as the ongoing risk related to instability in the Middle East, including the U.S. – Iran conflict.

The outlook for U.S. corn calls for approximately 95 million planted acres of corn for the 2026/2027 marketing season with global ending stocks projected to be at the lowest levels in over a decade supporting improved corn prices. We believe this will support strong fertilizer application rates and we anticipate robust nitrogen demand through the fall fertilizer application season.

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. Demand for our industrial products is robust across all commodities, particularly with copper and gold miners as they maximize production to take advantage of strong supply and demand fundamentals.

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.

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 farmer’s perspective, the demand for fertilizer is affected by the aggregate crop planting decisions including 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 prices, as well as 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 fertilizer prices.

According to the World Agricultural Supply and Demand Estimates Report dated July 10, 2026 (the “July Report”), farmers planted approximately 95.3 million acres of corn in the 2026 planting season, down 3.5% compared to the 2025 planting season. According to the July Report, the U.S. Department of Agriculture (“USDA”) estimates the U.S. ending stocks for the 2026 Harvest will be approximately 45.5 million metric tons, a 11.3% decrease from the 2025 Harvest. The USDA's expected yield per acre for the 2026 Harvest is 183.0 bushels, down approximately 1.9% from a year ago.

The following July 2026 estimates are associated with the corn market:

1. Information obtained from the July Report for the 2026/2027 (“2027 Crop”), 2025/2026 (“2026 Crop”) and 2024/2025 (“2025 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 2027 Crop amounts compared to the 2026 Crop amounts.

3. Represents the percentage change between the 2027 Crop amounts compared to the 2025 Crop amounts.

The current USDA corn outlook compared to the prior report for the U.S. is for smaller supplies, greater exports, and reduced ending stocks. Corn beginning stocks were reduced reflecting an increase in feed and residual use that is partly offset by a reduction in corn used for ethanol. The yield is unchanged at 183.0 bushels per acre from the prior month’s report.

Natural Gas Prices

Natural gas is the primary resource for conversion and manufacturing production of our nitrogen products. 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.

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.

Natural gas costs increased during the February settlement period primarily due to elevated market prices driven by Winter Storm Fern, which caused significant weather-related supply constraints and heightened regional demand, resulting in a higher average cost of natural gas for the period. Since that time, natural gas prices have moderated as market conditions normalized and weather-related constraints eased.

The following table shows the volume of natural gas utilized to produce the goods we sold and the associated 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 a planned major maintenance activity (each such activity, a “Turnaround”), 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 recently completed the scheduled ammonia plant Turnaround at our El Dorado Facility, which commenced during the second quarter of 2026. Additionally, we made the decision to pull forward the commencement of scheduled Turnaround work at our Pryor Facility from the third quarter into the second quarter of 2026. We did not perform any major planned ammonia Turnaround events during 2025.

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.

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 during 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 of the Second Quarter of 2026

Our consolidated net sales for the second quarter of 2026 were $168.1 million compared to $151.3 million for the same period in 2025. Our consolidated operating loss for the second quarter of 2026 was $2.7 million compared to operating income of $10.5 million for the same period in 2025. The items impacting our operating results are discussed in more detail below and under “Results of Operations.”

Items Affecting Comparability of Results of the Second Quarter

Selling Prices

For the second quarter of 2026, average selling prices for all of our major products increased compared to the second quarter of 2025.

Turnaround Activities

As discussed above, during the second quarter of 2026, we performed major Turnaround activities at our El Dorado Facility and started a full plant Turnaround at our Pryor Facility. The Pryor Facility Turnaround was completed during the third quarter of 2026. When such activities are 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. In addition, Turnaround-related costs may be incurred in periods earlier than the actual outage of the plant for activities such as planning and procurement of materials. Turnaround costs for the three months ended June 30, 2026 and 2025, were $28.8 million and $2.6 million, respectively, while Turnaround costs for the six months ended June 30, 2026 and 2025, were $32.7 million and $4.6 million, respectively.

Chief Executive Officer One-Time Retention Award (2026 only)

During the second quarter of 2026,we granted a one-time retention award of 706,880 restricted stock units (“RSUs”) to Mark T. Behrman, our Chief Executive Officer, which award is subject to cliff vesting and will vest on March 31, 2029. This award will increase stock-based compensation expense on a quarterly basis by approximately $0.9 million. See our discussion in “Equity Awards” in Note 1.

Plant, Property and Equipment Impairments (2025 only)

For the second quarter of 2025, we recorded asset write-downs primarily related to assets no longer in use in the amount of $2.5 million. These write-downs are included in “Other expense, net” on our condensed consolidated statements of operations.

Loss on Extinguishment of Senior Secured Notes (2025 only)

During the second quarter of 2025 we repurchased $32.4 million in principal amount of our Senior Secured Notes due 2028 (“Senior Secured Notes”) for approximately $32.1 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.

Shift in Production Mix

In 2025, we transitioned 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.

Results of Operations

The following is a discussion and analysis of our condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025.

Net sales to unaffiliated customers are reported in the condensed consolidated financial statements. 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.

Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025

The following table sets forth certain financial information for the three months ended June 30, 2026 and 2025, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:

(Dollars In Thousands)

N/M-Not meaningful.

1. Represents amount classified as cost of sales.

2. Represents a non-GAAP measure since the amount excludes unallocated depreciation, amortization and Turnaround expenses.

3. As a percentage of the 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:

25

Net Sales

We recorded net sales of $168.1 million during the second quarter of 2026 compared to $151.3 million for the second quarter of 2025, representing an increase of $16.8 million. The increase was primarily due to higher sales prices on all our products partially offset by volume decreases resulting from of Turnarounds at two of our facilities. In addition to the impact of the Turnarounds, UAN volumes were lower as production shifted to AN and Nitric Acid as part of our product mix strategy in response to tight market conditions.

Gross Profit

We recognized a gross profit of $11.5 million for the second quarter of 2026 compared to $23.2 million for the same period in 2025, or an $11.7 million reduction. Overall, our gross profit percentage for the second quarter of 2026 was 6.8% compared to 15.3% for the same period in 2025. Our adjusted gross profit percentage increased to 37.0% for the second quarter of 2026 from 30.7% for the second quarter of 2025. Our gross profit for the second quarter of 2026 was lower compared to the same period of 2025 primarily due to the cost of the two major Turnarounds, partially offset by an increase in sales, as discussed above.

Selling, General and Administrative

Our SG&A expenses were higher for the second quarter of 2026 compared to the same period of 2025, primarily due to an increase in salaries and wages, short term incentive compensation, stock-based compensation from a one-time retention grant (see “Equity Awards” in Note 1) and professional fees.

Other Expense, net

Other expense, net, during the second quarter of 2026 consisted primarily of asset write-offs partially offset by sales and use tax recoveries resulting from our ongoing review whereas other expense, net, during the second quarter of 2025 consisted primarily of asset write-downs.

Interest Expense

Interest expense for the second quarter of 2026 was $7.1 million compared to $7.9 million for the same period in 2025. The decrease was primarily due to a lower outstanding balance on our Senior Secured Notes as a result of repurchases in 2025.

Loss on Extinguishment of Debt

During the second quarter of 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 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. There were no repurchases during the second quarter of 2026.

Non-operating Other Income, net

Non-operating other income, net for the second quarter of 2026 was $1.7 million compared to $1.5 million for the same period of 2025, primarily related to interest income earned during both periods from our short-term investments. Our average short-term investments balance including cash equivalents, was higher during the second quarter of 2026 but interest rates were lower during this period compared to the second quarter of 2025.

(Benefit) Provision for Income Taxes

The benefit for income taxes for the second quarter of 2026 was $1.9 million compared to a provision for income taxes of $1.1 million for the same period of 2025. The resulting effective tax rate for the second quarter of 2026 was a benefit on pre-tax loss of 23.7% compared to a provision for income taxes of 26.5% for the same period of 2025. For the second quarter of 2026, the effective tax rate was higher than the statutory rate primarily due to state taxes and deferred benefits from state tax law changes, partially offset by nondeductible compensation expense. For the second quarter of 2025, the effective tax rate was higher than the statutory rate primarily due to nondeductible compensation expense and state taxes. See discussion in Note 7.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

The following table contains certain financial information for the six months ended June 30, 2026 and 2025, the increase or decrease between those periods, and the percentage increase or decrease between those periods with respect to each line item:

(Dollars In Thousands)

N/M-Not meaningful.

1. Represents amount classified as cost of sales.

2. Represents a non-GAAP measure since the amount excludes unallocated depreciation, amortization and Turnaround expenses.

3. As a percentage of the 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:

27

Net Sales

Net sales of our primary products increased during the first half of 2026 compared to the prior year period primarily due to higher sales prices on all our products partially offset by volume decreases resulting from Turnarounds at two of our facilities. In addition to the impact of the Turnarounds, UAN volumes were lower as production shifted to AN and Nitric Acid as part of our product mix strategy in response to current market conditions, while ammonia volumes were lower as more was utilized downstream on upgraded product.

Gross Profit

As noted in the table above, we recognized a gross profit of $47.3 million for the first half of 2026 compared to $37.6 million for the same period in 2025, a $9.7 million increase. Overall, our gross profit percentage was 14.0% compared to a gross profit percentage of 12.7% for the same period in 2025. Our adjusted gross profit percentage was 36.3% for the first half of 2026 compared to 28.1% for the same period in 2025. Our gross profit for the first half of 2026 was higher compared to the same period of 2025 primarily due to the increase in sales discussed above, partially offset by Turnaround costs, higher natural gas and sulfur costs and higher depreciation due to recent investments in our facilities.

Selling, General and Administrative

Our SG&A expenses were higher for the first half of 2026 compared to the same period of 2025, primarily due to an increase in salaries and wages, short-term incentive compensation and stock-based compensation (see discussion of the Side Letter and retention grant within “Equity Awards” in Note 1) and professional fees.

Interest Expense

Interest expense for the first half of 2026 was $14.2 million compared to $16.0 million for the same period in 2025. The decrease primarily related to reduced interest expense as a result of repurchases of Senior Secured Notes made during the second and fourth quarters of 2025.

Loss on Extinguishment of Debt

During the first half of 2025, we repurchased $32.4 million in principal amount of our Senior Secured Notes for approximately $32.1 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. There have been no repurchases so far during 2026.

Other Expense, net

Other expense, net during the first half of 2026 includes write-downs of assets no longer being used in operations, partially offset by gains from the sale of real estate and tangible property of certain former agricultural retail locations that had ceased operations and sales and use tax recoveries resulting from our ongoing review. Other expense, net, during the first half of 2025 consisted of asset write-downs related to assets no longer being used in operations.

Non-operating Other Income, net

Non-operating other income, net for the first half of 2026 and 2025 was $3.2 million for both periods and primarily related to interest income earned during both periods from our short-term investments. Our average short-term investments balance including cash equivalents, was higher during the first half of 2026 but interest rates were lower during this period compared to the first half of 2025.

(Benefit) Provision for Income Taxes

The benefit for income taxes for the first half of 2026 was $4.0 million compared to a provision for income taxes of $0.8 million for the same period of 2025. The resulting effective tax rate for the first half of 2026 was a benefit of 42.8% compared to a provision for income taxes of 37.0% for the same period of 2025. For the first half of 2026, the effective tax rate was lower than the statutory rate primarily due to the release of state valuation allowances, partially offset by nondeductible compensation expense. For the first half of 2025, the effective tax rate was higher than the statutory rate primarily due to nondeductible compensation expense and state taxes. See discussion in Note 7.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes our cash flow activities for the six months ended June 30:

(In Thousands)

Net Cash Flow from Operating Activities

Net cash provided by operating activities was $111.2 million for the first six months of 2026 compared to $25 million for the same period of 2025, a change of $86.2 million. The increase was primarily a result of improved operating income and changes in working capital.

Net Cash Flow from Investing Activities

Net cash used by investing activities was $101.0 million for the first six months of 2026 compared to net cash provided by investing activities of $4.8 million for the same period of 2025, a change of $105.8 million.

For the first six months of 2026, the net cash used by investing activities primarily related to purchases of short-term investments of $215.8 million, expenditures for property, plant and equipment of $46.2 million and development of our CO2 capture and sequestration project of $10.8 million partially offset by proceeds from short-term investments, a recovery of PP&E costs and proceeds from sales of property, plant and equipment totaling $171.8 million.

For the first six months of 2025, the net cash provided by investing activities primarily related to proceeds from short-term investments of $154.6 million, partially offset by purchases of short-term investments of $110.3 million and expenditures for property, plant and equipment of $39.3 million.

Net Cash Flow from Financing Activities

Net cash used by financing activities was $9.4 million for the first six months of 2026 compared to $44.4 million for the same period of 2025, a change of $35.1 million.

For the first six months of 2026, the net cash used by financing activities primarily consisted of payments on short-term financing and finance leases of $7.4 million and $2.1 million for tax withholding obligations related to the vesting of equity awards.

For the first six months of 2025, the net cash used by financing activities primarily consisted of repurchases of our Senior Secured Notes of $32.1 million, payments on a secured financing due 2025 and short-term financing of $11.3 million and $1.2 million for tax withholding obligations related to the vesting of equity awards.

Capitalization

The following table summarizes our total cash and cash equivalents, short-term investments, long-term debt and stockholders’ equity as of June 30, 2026 and December 31, 2025:

(In Millions)

(1) See discussion contained in Note 4.

(2) Debt issuance costs as of June 30, 2026 and December 31, 2025 of approximately $0.4 million and $0.5 million, respectively, relating to our Revolving Credit Facility are not included in Unamortized debt issuance costs. These costs are included in our condensed consolidated balance sheets in Intangible and other assets, net.

We currently have a revolving credit facility pursuant to a credit agreement, dated December 21, 2023, between us and the lenders identified on the signature pages thereof and JPMorgan Chase Bank, N.A, as administrative agent (the “Revolving Credit Facility”), with a borrowing base 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 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 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 June 30, 2026, our Revolving Credit Facility was undrawn and had approximately $51 million of availability. See Note 4 for further discussion of the Revolving Credit Facility.

For the full year of 2026, we expect capital expenditures for our core nitrogen-based business to be approximately $80 million, of which $63 million is expected to be spent on sustaining production and the remainder spent on growth initiatives. Additionally, we also expect to expend approximately $95 million on the acquisition and development of our CO2 capture and sequestration project, with a significant majority of that cost incurred in 2026.

As of June 30, 2026, we had approximately $218.0 million of cash and short-term investments. From time to time, we may seek to deploy capital through common stock repurchases or the repurchase 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. The amounts involved may be material.

We believe that the combination of our cash and cash equivalents, short-term investments, the availability under our Revolving Credit Facility and our cash flow from operations will be sufficient to fund our anticipated liquidity needs for the next twelve months. Additionally, we expect our long-term liquidity position will be sufficient to meet our long-term liquidity needs with cash flows from operations and financing arrangements. However, in the event of changes in business conditions or other developments, including a sustained market deterioration, unanticipated regulatory developments, significant acquisitions, competitive pressures, or to the extent our liquidity needs prove to be greater than expected or cash generated from operations is less than anticipated, we may need additional liquidity. To the extent we elect to finance our long-term liquidity needs, we believe that the potential financing capital available to us in the future will be sufficient.

Compliance with Long-Term Debt Covenants

As discussed in Note 4, the Revolving Credit Facility does not include financial covenant requirements unless a defined covenant trigger event has occurred and is continuing. As of June 30, 2026, no trigger event had occurred.

Loan Agreements

Senior Secured Notes due 2028 – We had $438.6 million aggregate principal amount of Senior Secured Notes outstanding as of June 30, 2026. Interest is to be paid semiannually in arrears on May 15th and October 15th. The Senior Secured Notes mature on October 15, 2028.

Revolving Credit Facility – At June 30, 2026, our Revolving Credit Facility was undrawn and had approximately $51 million of availability, based on our eligible collateral, less outstanding letters of credit as of that date. Also see discussion above under “Compliance with Long-Term Debt Covenants.”

Finance Leases – Our finance leases consist primarily of leases on railcars. Most of our railcar leases are classified as operating leases.

Capital Expenditures – First Half of 2026

For the first half of 2026, capital expenditures relating to property, plant and equipment were $46.2 million. Of the expenditures for the first half of 2026, approximately $41.6 million was spent on projects to sustain our production capacity while approximately $4.7 million was spent on growth initiatives. In addition, we expended $10.8 million for the development of our CO2 capture and sequestration project. The capital expenditures were funded primarily from cash and working capital.

See discussion above under “Capitalization” for our total expected capital expenditures for the remainder of 2026.

Expenses Associated with Environmental Regulatory Compliance

We are subject to specific federal and state environmental compliance laws, regulations and guidelines. As a result, our expenses were $2.7 million for the first six months ended June 30, 2026 in connection with environmental projects. For the remainder of 2026, we expect to incur expenses ranging from $2.6 million to $2.9 million in connection with additional environmental projects. However, it is possible that the actual costs could be significantly different than our estimates.

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 fluctuations. The selling seasons for fertilizer 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 fertilizer 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.

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 June 30, 2026, we have agreed to indemnify the sureties for payments, up to $10.2 million, made by them in respect of such bonds.

New Accounting Pronouncements

Refer to Note 1 for recently issued accounting standards.

Critical Accounting Policies and Estimates

See “Critical Accounting Policies and Estimates,” Item 7 of our Form 10-K for the year ended December 31, 2025, filed with the SEC on February 26, 2026 (the “2025 Form 10-K”). In addition, the preparation of financial statements requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosures of contingencies and fair values, including, but not limited to, various environmental and legal matters, including matters discussed under footnote A of Note 5.

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.

It is also reasonably possible that the estimates and assumptions utilized as of June 30, 2026, could change in the near term. Actual results could differ materially from these estimates and judgments, as additional information becomes known.

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 (loss) excluding depreciation and amortization and Turnaround expenses included in 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 Form 10-Q, when viewed in combination with our results prepared in accordance with United States generally accepted accounting principles (“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.

(In Thousands)

(In Thousands)

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, as amended (the “Exchange Act”).

General

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

Forward Sales Commitments Risk

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 June 30, 2026, we had no embedded losses associated with sales commitments with firm sales prices.

Commodity Price Risk

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, and as such, are exempt from derivative accounting requirements. At June 30, 2026, we had no outstanding natural gas contracts which are subject to derivative accounting requirements.

Interest Rate Risk

We may be exposed to variable interest rate risk with respect to our Revolving Credit Facility when there are outstanding borrowings. As of June 30, 2026, we had no outstanding borrowings on this credit facility and no other variable rate borrowings and, as a result, we currently do not hedge our interest rate risk associated with any variable interest rate loan.

The Company maintains disclosure controls and procedures as defined in Rule 13a-15 under the Exchange Act designed to provide reasonable assurance that the information required to be disclosed by the Company in the reports 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. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of June 30, 2026. Based on this evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of June 30, 2026, at the reasonable assurance level. There were no changes to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained within this report may be deemed “Forward-Looking Statements” within the meaning of U.S. federal securities laws. 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, many of which are difficult to predict or outside of the Company’s control, which could cause actual results and performance of the Company to differ materially from those expressed in, or implied or projected by, such statements. Any such Forward-Looking Statements are not guarantees of future performance. The words “believe,” “expect,” “anticipate,” “intend,” “plan,” “may,” “could,” and similar expressions identify Forward-Looking Statements. All Forward-Looking Statements speak only as of the date on which they are made. Forward-Looking Statements contained herein, and the associated risks, uncertainties, assumptions and other important factors include, but are not limited to, the following:

• our ability to invest in projects that will generate the best returns for our stockholders;
• our future liquidity outlook;
• the outlook of our chemical products and related markets;
• our ability to successfully leverage our existing business platform and portfolio of assets to produce low carbon products and execute our strategy to become a leader in the energy transition in the chemical industry;
• the amount, timing and effect on the nitrogen market from current nitrogen expansion projects;
• the effect from the lack of non-seasonal volume;
• our belief that competition is based upon service, price, location of production and distribution sites, and product quality and performance;
• the outlook for the industrial end markets;
• the availability of raw materials;
• our ability to broaden the distribution of our products, including our ability to leverage our nitric acid production capacity at our El Dorado Facility;
• our ongoing initiatives to increase the distribution of our products within our industrial end markets;
• the execution and success of our advanced low carbon ammonia initiatives, including the Project;
• our expectations regarding future ammonia pricing;
• the result of our product and market diversification strategy;
• changes in domestic fertilizer production;
• the increasing output and capacity of our existing production facilities;
• production volumes at our production facilities;
• our ability to moderate risk inherent in agricultural markets;
• the sources to fund our cash needs and how this cash will be used;
• the ability to enter into the additional borrowings;
• the anticipated cost and timing of our capital projects, including the Project;
• certain costs covered under warranty provisions;
• our ability to pass cost increases to our customers in the form of higher prices;
• our belief as to whether we have sufficient sources for materials and components;
• our belief regarding our estimates and contingencies with respect claims and legal actions in the ordinary course of our business and their effect on our business, financial condition, results of operations or cash flows;
• annual natural gas requirements;
• the development of the market and demand for low carbon ammonia;
• compliance by our facilities with the terms of our permits;
• the costs of compliance with environmental laws, health laws, security regulations and transportation regulations;
• our belief as to when Turnarounds will be performed and completed;
• expenses in connection with environmental projects;
• the effect of litigation and other contingencies;
• the increase in interest expense;
• our ability to comply with debt servicing and covenants;
• our ability to meet debt maturities or redemption obligations when due;
• the impact of our repurchase program on our stock price and cash reserves; and
• our belief as to whether we can meet all required covenant tests for the next twelve months.

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:

• changes in general economic conditions, both domestic and foreign;
• material reductions in revenues;
• material changes in interest rates;
• our ability to collect in a timely manner a material amount of receivables;
• increased competitive pressures;
• adverse effects of increases in prices of raw materials;
• changes in federal, state and local laws and regulations, or in the interpretation of such laws and regulations;
• changes in laws, regulations or other issues related to climate change;
• releases of pollutants into the environment exceeding our permitted limits;
• material increases in equipment, maintenance, operating or labor costs not presently anticipated by us;
• the requirement to use internally generated funds for purposes not presently anticipated;
• the inability to secure additional financing for planned capital expenditures or financing obligations due in the near future;
• our substantial existing indebtedness;
• material changes in the cost of natural gas and certain precious metals;
• limitations due to financial covenants;
• our ability to obtain required regulatory approvals and satisfy other requirements for our carbon capture and sequestration project at our El Dorado Facility;
• changes in competition;
• the loss of any significant customer;
• increases in cost to maintain internal control over financial reporting;
• changes in operating strategy or development plans;
• an inability to fund the working capital and expansion of our businesses;
• changes in the production efficiency of our facilities;
• adverse results in our contingencies including pending litigation;
• unplanned downtime at one or more of our chemical facilities;
• changes in production rates at any of our chemical plants;
• an inability to obtain necessary raw materials and purchased components;
• material increases in cost of raw materials;
• material changes in our accounting estimates;
• significant problems within our production equipment;
• fire or natural disasters;
• an inability to obtain or retain our insurance coverage;
• difficulty obtaining necessary permits;
• difficulty obtaining third-party financing;
• risks associated with proxy contests initiated by dissident stockholders;
• changes in fertilizer production;
• reduction in acres planted for crops requiring fertilizer;
• decreases in duties for products we sell resulting in an increase in imported products into the United States;
• adverse effects from regulatory policies, including tariffs;
• geopolitical concerns;
• volatility of natural gas prices;
• price increases resulting from increased inflation;
• weather conditions, including the effects of climate change;
• increases in imported agricultural products;
• global supply chain disruptions;
• other factors described in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report; and
• other factors described in Item 1A. Risk Factors in our 2025 Form 10-K.

Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements. Except to the extent required by law, 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.

PART II

OTHER INFORMATION

Reference is made to Item 1A of our 2025 Form 10-K filed with the SEC on February 26, 2026. Except as set forth below, there were no material changes from the risk factors disclosed in our 2025 Form 10-K.

Geopolitical conditions, including political turmoil and volatility, regional conflicts, terrorism and war have negatively affected and could negatively affect United States and foreign companies, the financial markets, the industries where we operate, our operations and our profitability and could increase the volatility of our stock price.

Geopolitical events, including political turmoil, regional conflicts, instability and terrorist attacks in the United States and elsewhere have in the past, and can in the future negatively affect our operations and could increase the volatility of our stock price. For example, Russia’s invasion of Ukraine and the ongoing conflict in the Middle East, including the military conflict between Iran and the United States, have impacted our financial results. These conflicts have had an effect on commodity prices and fertilizer supply, and there is no guarantee that such conflicts will not draw military intervention from other countries or further retaliation, which, in turn, could lead to a much larger conflict. Furthermore, such military conflicts and the resulting geopolitical instability have caused, and may continue to cause, (i) disruptions to international shipping routes (including through the Strait of Hormuz and other critical transit corridors), (ii) disruptions in global energy markets and significant fluctuations in the prices of oil, natural gas and fertilizer and (iii) substantial disruption to global financial markets, leading to heightened investor uncertainty, reduced risk tolerance and increased market volatility.

It is possible that production volumes, supply chain and trade routes for our products that are traded globally, and the markets we currently serve, could be further adversely affected, which, in turn, could materially, adversely affect our business operations and financial performance. In addition, the market prices of our common stock have recently experienced, and may continue to experience, volatility.

Further, like other companies with major industrial facilities, we may be targets of terrorist activities. Many of our plants and facilities store significant quantities of ammonia and other materials that can be dangerous if mishandled. Any damage to infrastructure facilities, such as electric generation, transmission and distribution facilities, or injury to employees, who could be direct targets or indirect casualties of an act of terrorism, may affect our operations. Any disruption of our ability to produce or distribute our products could result in a significant decrease in revenues and significant additional costs to replace, repair or insure our assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to obtain required regulatory approvals and satisfy other requirements for our carbon capture and sequestration project at our El Dorado Facility, we may not realize the anticipated benefits of the project, and our business, financial condition, results of operations and cash flows could be adversely affected.

In May 2026, we acquired full ownership of the carbon capture and sequestration project at our El Dorado Facility (the “Project”) from Lapis Carbon Solutions. The Project is designed to capture and sequester CO2 generated from our El Dorado Facility ammonia production in underground saline aquifers, and its completion and the commencement of CO2 injections are conditioned upon our receipt of a Class VI permit from the United States Environmental Protection Agency (the “EPA”). A pre-construction Class VI permit application was filed with the EPA in February 2023, which the EPA recognized as complete in March 2023. The application was resubmitted in December 2025 following the EPA’s continuing technical review. Obtaining a Class VI permit is a rigorous, multi-year regulatory process that requires extensive EPA review of the suitability of the proposed storage reservoir.

The EPA may not grant a Class VI permit for the Project, or may not do so on the timeline we currently anticipate. Unless necessary EPA approvals are obtained, we will be unable to complete construction of the Project or commence CO2 injections as planned, and we may be unable to recover some or all of the capital we have invested or expect to invest in the Project. The total purchase price and remaining completion capital associated with the Project is currently estimated at approximately $95 million.

Even if the EPA ultimately approves the Class VI permit application, the approval process may take significantly longer than we currently anticipate. We currently expect the Project to be completed and operational in the first quarter of 2027, subject to EPA approval of our Class VI permit, at which time CO2 injections are expected to begin. Although we drilled a stratigraphic injection well at the El Dorado site in June 2025 to gather data supporting the EPA’s technical review, our application remains subject to further review. The timing of EPA approval is largely outside of our control and could be affected by, among other things, the EPA’s internal review procedures and resource constraints, requests for additional information, legal or administrative challenges to the permit or changes in applicable regulatory policy.

A failure to obtain necessary EPA approvals would prevent us from realizing the anticipated benefits of the Project, including our ability to produce low carbon ammonia and upgraded products, such as the sale of low carbon ammonium nitrate under our existing supply agreement with Freeport Minerals Corporation, and our eligibility for tax credits under Section 45Q of the Internal Revenue Code (the “Code”). In addition, a significant delay in receiving the Class VI permit approval could increase the costs of completing the Project, require us to incur additional capital expenditures and postpone the commencement of CO2 injections and our production of low carbon ammonium nitrate. Any such failure or delay could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Even if the required EPA approvals are obtained, the Project remains subject to construction, commissioning, operational and third-party performance risks. Successful completion of the Project depends on the performance of the construction manager, construction contractors, equipment suppliers and other third parties involved in engineering, design, procurement, construction, installation, drilling, completion, testing and commissioning. Construction delays, cost overruns, contractor disputes, safety incidents, force majeure events, equipment failures, inability to satisfy completion tests, or failure to achieve commercial operation at expected volumes could delay or prevent the Project from becoming operational, increase our capital expenditures or reduce the Project’s expected benefits.

Furthermore, our ability to claim, monetize or retain Section 45Q tax credits depends on our ability to comply with applicable sequestration standards, monitoring and reporting requirements, prevailing wage and apprenticeship requirements, recordkeeping obligations and other guidance or regulations issued by the U.S. Department of the Treasury or the Internal Revenue Service. If we fail to satisfy applicable Section 45Q requirements, or if applicable law or guidance changes, we may be unable to claim tax credits at the anticipated amount or timing, or such credits could be reduced, delayed, disallowed or subject to recapture. If any of these regulatory, construction, operational or tax contingencies are not satisfied, or are satisfied later or on less favorable terms than we expect, we may be unable to complete, place in service or operate the Project as planned. In that event, we may experience delays in the commencement of CO2 injections, fail to realize some or all of the anticipated benefits of the Project, and be unable to recover some or all of the purchase price, completion capital and other costs associated with the Project. Any such developments could adversely affect our business, financial condition, results of operations and cash flows.