LXU 10-K & 10-Q changes, risk factors and insider trading

The price of natural gas in North America and worldwide has beenis volatile inand recentimpacted yearsby geopolitical instability, the level of domestic drilling activity and had declined on average due in part to the development of significant natural gas reserves, including shale gas, and the rapid improvement in shale gas extraction techniques, such as hydraulic fracturing and horizontal drilling. However, recent disruptions in the globaltemporary supply chaindisruption mayfrom continuesevere toweather haveevents. anIn impactaddition, in the near term in fiscal year 2025. Futurefuture production of natural gas from shale formations could be reduced by regulatory changes that restrict drilling or hydraulic fracturing or increase its cost or by reduction in oil exploration and development prompted by lower oil prices and resulting in production of less associated natural gas. Additionally,Further, increased demand for natural gas, particularly in the Gulf Coast Region, due to increased industrial demanddemand, increased power generation demand, especially from artificial intelligence data centers, and increased natural gas exports could result in increased natural gas prices.

The equipment required for the manufacture of our products is specialized, and the time for replacement of such equipment can be lengthy, resulting in extended downtime in the affected unit. In addition, the cost for such equipment could be influenced by changes in regulatory policies (including tariffs) of foreign governments, as well as the U.S.United States laws and policies affecting foreign trade and investment. Although we use various reliability and inspection programs and maintain a significant inventory of spare equipment, which are intended to mitigate the extent of production losses, unplanned outages may still occur. As a result, these planned and unplanned downtime events at our chemical facilities have in the past and could in the future adversely affect our liquidity, operating results and financial condition.

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

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

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

As we continue to increase our dependence on information technologies to conduct our operations the risks associated with cybersecurity also increase. Cybersecurity breaches may be the result of, among other things, negligent or unauthorized activity by our employees or by third parties who use cyber-attack techniques involving malware, ransomware, hacking and phishing. Such cyber-attacks continue to increase in frequency and potential harm, and the methods used to gain unauthorized access evolve, making it increasingly difficult to anticipate, prevent, and detect incidents. We rely on our enterprise resource planning software and other information systems, among other things, to manage our manufacturing, supply chain, accounting and financial functions. Additionally, third parties on whose systems we place significant reliance for the conduct of our business are also subject to cybersecurity risks. We are significantly dependent upon internet connectivity and a third-party cloud hosting vendor. We have implemented security procedures and measures in order to protect our information from being vulnerable to theft, loss, damage or interruption from a number of potential sources or events. Although we believe these measures and procedures are appropriate, we may not have the resources or technical sophistication to anticipate, prevent, or recover from rapidly evolving types of cyber-attacks.cyber-attacks, including the risks from emerging technologies like artificial intelligence. Compromises to our information systems could have an adverse effect on our business, results of operations, liquidity and financial condition.

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

In addition, conditions in the international market for nitrogen fertilizer significantly influence our operating results. The international market for fertilizers is influenced by such factors as the global supply and demand balance for each product and changes in the volume of international trade, the relative value of the U.S.United States currency and its impact on the importation of fertilizers, foreign agricultural policies, the existence of, or changes in, import duties (including tariffs, anti-dumping duties and counter-vailing duties) or foreign currency exchange barriers in certain foreign markets and other regulatory policies (including tariffs) of foreign governments, as well as the U.S.United States laws and policies affecting foreign trade and investment.

BothIn recent years, both the U.S.United States and many other countries arehave experiencingexperienced higher than normal inflation, which, in turn, is leadinglead to increased costs in multiple industry segments, including agriculture and related industries. The persistence of inflation hashad led central bankers to increase interest rates within their regions.regions although the Federal Reserve has implemented rate cuts during the past year. While inflation has decreased, there remain various factors that can cause prices to rise again. There is no guarantee that thesecurrent measuresmonetary policy will arrest the inflationary trend.pressures. Further, these factors, taken together with reduced productivity and constraints on the labor supply could lead to recessionary periods in the regions in which the Company does business. While we will take measures within our control to manage the effects of inflation, higher interest rates and other factors, ultimately, they are outside of our control. Further, the persistence and/or severity of one or more of them could adversely affect our financial performance and/or operations.

Natural disasters may also directly affect our physical facilities, especially our chemical facilities, or those of our suppliers or customers and could affect our sales, our production capability and our ability to deliver products to our customers. In the past, extreme weather such as severe storms, frigid cold temperatures, flooding and hurricanes affecting the Gulf Coast of the U.S.United States have negatively affected our operations and those of our customers. Any future natural disasters affecting the areas in which we or our suppliers or customers operation could negatively affect our business operations and financial performance.

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

Geopolitical events, instability and terrorist attacks in the United States and elsewhere, including events like Russia’s occupation of Ukraine and ongoing conflict in the Middle East,elsewhere have in the pastpast, and can in the future negatively affect our operations. For example, Russia’s occupation of Ukraine and the ongoing conflict in the Middle East have impacted our operations. While the occupation of Ukraine has had an effect on commodity prices and fertilizer supply (primarily ammonia and urea from Russia), there is no guarantee that the current conflict will not draw military intervention from other countries or further retaliation from Russia, which, in turn, could lead to a much larger conflict. It is possible that production volumes, supply chain,chain and trade routes for our products that are traded globally, and the markets we currently serveserve, could be further adversely affected, which, in turn, could materially, adversely affect our business operations and financial performance. Instability in the Middle East, especially Iran, and in Venezuela, may impact global energy prices, in particular oil prices. This could impact United States oil and natural gas prices, which, in turn, could materially, adversely affect our business operations and financial performance.

Our business is subject to numerous health, safety, security and environmental laws and regulations. The manufacturemanufacture, storage, handling and distribution of chemical products and our other activities entail health, safety and environmental risks and impose obligations under health, safety and environmental laws and regulations, many of which provide for substantial fines, injunctive relief and potential criminal sanctions for violations. Although we believe we have established processes to monitor, review and manage our businesses to comply with the numerous health, safety and environmental laws and regulations, we previously were, and in the future, may be, subject to fines, penalties, sanctions and injunctive relief for violations and substantial expenditures for cleanup costs and other liabilities relating to the handling, manufacture, use, storage, emission, release, discharge or disposal of wastes, pollutants, effluents, emissionhazardous substances, and other materials at or from our present and former chemical facilities.facilities, or where third-party sites where we disposed our wastes. Further, a number of our facilities are dependent on environmental permits to operate, the loss, or inability to renew or modification of which could have a material adverse effect on theirour operationsability andto operate those facilities and, as a result, a material adverse effect on our results of operationoperations and financial condition. These operating permits are subject to modification, renewal and revocation. In addition, third parties may contest our ability to receive or renew certain permits that we need to operate, which can lengthen the application process or even prevent us from obtaining necessary permits. Delays in obtaining permits or unanticipated permit conditions could delay projects, increase the costs of operations or make operations unfeasible. We regularly monitor and review our operations, procedures and policies for compliance with permits, laws and regulations. Despite these compliance efforts, risk of noncompliance, the risk of loss or modification of permits or changing regulatory or permit interpretation is inherent in the operation of our business.

ExplosionsExplosions, release incidents, and/or losses at other chemical facilities that we do not own or operate (such as the April 2013 explosion in West, Texas) could also result in new or additional legislation or regulatory changes, particularly relating to public health, safety or any of the products manufactured and/or sold by us or the inability on the part of our customers to obtain or maintain insurance as to certain products manufactured and/or sold by us, which could have a negative effect on our revenues, cash flow and liquidity.

Additionally, under CERCLAthe Comprehensive Environmental Response, Compensation, and Liability Act or similar state statutes, we may be required to conduct environmental investigation and remediation (and pay for natural resource damages) at presently or formerly owned or operated sites or at sites at which materials from our operations have been disposed or released. Such liability is often strict and joint and several, meaning that we may be required to pay a disproportionate share of remediation costs if other responsible parties are unable to pay. Additionally, we could be required to conduct additional cleanup at sites where we previously participated in remediation efforts in response to new information or new regulatory requirements. Although we cannot presently provide a precise estimate of the ultimate cost of the exposure with respect to investigation and remediation obligations, we make accruals as warranted and we do not believe that the reasonably possible range of loss in excess of accruals would be material to our operations. However, given the uncertainties inherent to any estimation of remediation costs, potential changing regulations, the uncertainties of litigation and other factors, the ultimate amounts that we pay or expend could vary significantly from the amount we accrue and have a material impact on our business and operations.

The “Secure Handling of Ammonium Nitrate Act of 2007” was enacted by the U.S.United Congress,States Congress and subsequentlydirects the U.S. Department of Homeland Security (“DHS”) to regulate the sale, transfer, and possession of ammonium nitrate. Subsequently, DHS published a notice of proposed rulemaking in 2011.2011 Thisthat regulation proposes towould require sellers, buyers, their agents and transporters of solid AN and certain solid mixtures containing AN to possess a valid registration issued by DHS, keep certain records, report the theft or unexplained loss of regulated materials, and comply with certain other new requirements. We and others affected by this proposal have submitted appropriate comments to DHS regarding the proposed regulation. The regulation was not finalized, and DHS has indicated that its next action, and the timing of such an action, is undetermined. It is possible that DHS could significantlyagain revisepropose thesimilar requirementsor currentlyrevised being proposed.requirements. Depending on the provisions of theany finalpromulgated regulation to be promulgated by DHS and on our ability to pass these costs to our customers, these requirements may have a negative effect on the profitability of our AN business and may result in fewer distributors who are willing to handle the product. DHS has not finalized this rule, and has indicated that its next action, and the timing of such an action, is undetermined.

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

In 2024, the U.S.United States EPA finalized revisions to its Risk Management Program (“RMP”) under Section 112(r) of the Clean Air Act. The revisions are the results of many years of back-and-forth among changing administrations. The current RMP rule includes requirements for certain facilities to perform hazard analyses including a safer technologies and alternatives analysis, an analysis of natural hazards, third-party auditing in certain circumstances, increased transparency (including incident reports and making certain information publicly available), and new emergency response requirements. Although the new rule was effective in 2024, many of the new requirements have a 2027 implementation timeline. The Occupational Safety and Health Administration is likewise considering changes to its Process Safety Management standards. In addition, DHS, the EPA, and the Bureau of Alcohol, Tobacco, Firearms and Explosives updated a joint chemical advisory on the safe storage, handling, and management of AN. While these actions may result in additional regulatory requirements or changes to our operators, it is difficult to predict at this time how these and any other possible regulations, if and when adopted, will affect our business, operations, liquidity or financial results.

Greenhouse gas regulation could: increase the price of the electricity and other energy sources purchased by our chemical facilities; increase costs for natural gas and other raw materials (such as ammonia); potentially restrict access to or the use of certain raw materials necessary to produce our chemical products; and require us to incur substantial expenditures to retrofit our chemical facilities to comply with the proposed new laws and regulations regulating greenhouse gas emissions. Federal, state and local governments may also pass laws mandating the use of alternative energy sources, such as wind power and solar energy, which may increase the cost of energy use in certain of our chemical and other manufacturing operations. For example, over time, the EPA has promulgated rules seeking to limit greenhouse gases from electric power plants. Various of these rules have been either struck down in court or repealed with changes in administration. The EPA’s most recent attempt to limit greenhouse gasses from power plants was finalized in 2024 and was subject to immediate legal challenge. Should the rule be upheld, it could result in increased electricity costs.costs and increased operating restrictions.

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

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.

WeInvest believeto thatimprove Environmental, Health & Safety at our operationalFacilities. progressWe over the past several years represents proof thatprioritize 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. In 2025, weWe remain focused on our efforts to further the progress we have made with our safety programs to move closer to attaining zero injuries. We have been investing and plan to continue to invest additional capital at all three ofacross our facilities during 2025 to build upon the successprogress we have hadmade in implementing enhanced safety programs during the last several years.

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.

EvaluateGrow AcquisitionsOur Platform. We continue to evaluate opportunities across all our facilities to increase production capacity through the implementation of Strategicseveral Assetspotential ordebottlenecking Companies.and Weother maymargin enhancement projects. Additionally, from time to time, we evaluate opportunities to acquire strategic assets or companies where we believe those acquisitions will enhance theour value of the Company and provide attractive returns.returns to our stockholders. We mayalso 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.

AdvancedSummary 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 thelate next year.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 EnergyCarbon Solutions (“Lapis”) to develop a project to capture and sequester CO2 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 inby the end of 2026, subject to the approval of a Class VI permit, at which time CO2 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 CO2 per year in underground saline aquifers. The sequestered CO2 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 CO2 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 CO2 captured and sequestered beginning in 2026. Once in operation, the sequestered CO2 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 CO2 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.

Demand for our industrial products isremains stableconsistent, despite persistent global economic challenges. Nitric acid demand has been steady, reflecting the strength of the United States economy and robust consumer spending levels.concerns. Demand for AN for use in mining applications hasis robust across all commodities, particularly with copper and gold, as miners, have been bolsteredmaximizing byproduction positive exposurevolumes to copper,take goldadvantage andof ironrecord ore,prices. asAN well as continued attractive market fundamentalsdemand for explosives used in quarrying/aggregate production relatingfor 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 infrastructuresupport construction.AN Whiledemand somewell degreeinto 2026. Demand for nitric acid is robust domestically, where it is supported by tariffs and preliminary anti-dumping duties on imports of economicmethylene diphenyl diisocyanate (MDI). Economic uncertainty persists,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.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.

According to the World Agricultural Supply and Demand Estimates Report (“WASDE Report”) dated February 11,10, 20252026 (the “February Report”), farmers planted approximately 90.698.8 million acres of corn in 2024,the down2025 4.2%planting season, up 8.7% compared to the 20232024 planting season. According to the February Report, the USDA estimates the United States ending stocks for the 20242025 Harvest will be approximately 39.154.0 million metric tons, a 12.7%37.1% decreaseincrease from the 20232024 Harvest. The USDA's expected yield per acre for the 20242025 Harvest is 179.3,186.5 bushels, up approximately 1.1%4.0% from a year ago.

According to the February Report, the USDA bumped up domestic corn outlookexports for the United2025 StatesHarvest isby 100 million bushels to 3.3 billion bushels, a record for supplycorn exports, and uselowering toending remainstocks. Domestically there were no other changes. The USDA reduced foreign beginning stocks and production with exports increased slightly, reducing projected foreign ending stocks. Projected season-average farm price remained unchanged from the prior month reportat and projected season-average farm price to increase from the prior month by 10 cents to $4.35$4.10 per bushel, based on lower global supplies. The USDA reduced foreign exports and lowered ending stocks based on reduced production, trimming 1.8 million tons in global corn production citing weather-related yield declines in both Argentina and Brazil.bushel. From a demand perspective, we believe that corn prices will remain at a level that will further support demand for fertilizers during 2025.2026.

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.

Consistent, reliable and safe operations at our chemical plants are critical to our financial performance and results of operations. ThePlanned financialdowntime, effectsincluding Turnarounds, and unplanned downtime can adversely affect results of planned downtime at our plants, including Turnarounds is mitigatedoperations through a diligent planning process that considers the availability of resources to perform the needed maintenance and other factors. Unplanned downtime of our plants typically results in lost contribution margin from lostreduced sales ofvolumes, our products, lostlower fixed cost absorption from lower production of our productsabsorption, and increased costs related to repairs and maintenance. All Turnarounds result in lost contribution margin from lost sales of our products, lost fixed cost absorption from lower production of our products and increased costs related to repairs and maintenance, which repair and maintenance costscosts, which are expensed as incurred.

Total ammonia production in 20242025 was 757,000826,000 tonstons, which was lowerhigher than 2024 production due to improved operating performance and the absence of significant planned turnaroundTurnarounds activityduring at both our Pryor and Cherokee facilities.2025. For 2025,2026, we are targeting total ammonia production of approximately 790,000780,000 tons to 820,000810,000 tonstons, which reflects planned turnaroundTurnaround work at our El Dorado Facilityand Pryor Facilities in the third quarter of 2025.2026.

In AprilMay 2022,2026, we entered intoreached an agreement with Lapis Carbon Solutions (“Lapis”) to developassume afull ownership of our project to capture and sequester CO2 at our El Dorado Facility.Facility Lapis, backed by Cresta Fund Management, a Dallas-based middle-market infrastructure investment firm, will invest (the majority“Project”) from Lapis Carbon Solutions (“Lapis”). The milestone-based structure of the agreement aligns our capital requireddeployment forwith projectProject development.advancement, while limiting upfront capital exposure. The projectProject is expected to be completed and operational late in the fourth quarter of 2026 or the first quarter of 2027, subject to theUnited States Environmental Protection Agency (“EPA”) approval of aour Class VI permit, at which time CO2 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 CO2 per year in underground saline aquifers.

While economic uncertainty remains a risk due to tariffs, the U.S.-Iran conflict, higher oil prices, and concerns about inflation, weWe believe thatour weindustrial havebusiness 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 ourthe industrialMiddle business.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 located in the U.S.,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.

According to the World Agricultural Supply and Demand Estimates Report dated AprilJuly 9,10, 2026 (the “AprilJuly Report”), farmers planted approximately 98.895.3 million acres of corn in the 20252026 planting season, updown 8.7%3.5% compared to the 20242025 planting season. According to the AprilJuly Report, the U.S. Department of Agriculture (“USDA”) estimates the U.S. ending stocks for the 20252026 Harvest will be approximately 54.045.5 million metric tons, a 37.1%11.3% increasedecrease from the 20242025 Harvest. The USDA's expected yield per acre for the 20252026 Harvest is 186.5183.0 bushels, updown approximately 4.0%1.9% from a year ago.

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

Information obtained from the AprilJuly Report for the 2026/2027 (“2027 Crop”), 2025/2026 (“2026 Crop”), and 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.

Consolidated Results of the FirstSecond Quarter of 2026

Our consolidated net sales for the firstsecond quarter of 2026 were $169.5$168.1 million compared to $143.4$151.3 million for the same period in 2025. Our consolidated operating incomeloss for the firstsecond quarter of 2026 was $23.2$2.7 million compared to $4.5operating 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 FirstSecond Quarter

During the firstsecond quarter of 2026,2026,we wegranted modifieda certainone-time equityretention awardsaward heldof by706,880 restricted stock units (“RSUs”) to Mark T. Behrman, our Chief Executive OfficerOfficer, which award is subject to allow for acceleratedcliff vesting inand thewill eventvest ofon March 31, 2029. This award will increase stock-based compensation expense on a qualifyingquarterly retirement.basis Asby aapproximately result,$0.9 we accelerated recognition of the remaining compensation cost associated with those grants in the amount of $3.1 million during the quarter.million. See our discussion in “Equity Awards” in Note 1.

The following is a discussion and analysis of our condensed consolidated results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025.

Net sales to unaffiliated customers are reported in the condensed consolidated financial statementsstatements. and grossGross 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 MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

The following table sets forth certain financial information for the three months ended MarchJune 31,30, 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:

We recorded net sales of $169.5$168.1 million during the firstsecond quarter of 2026 compared to $143.4$151.3 million for the firstsecond quarter of 2025, representing an increase of $26.1$16.8 million. The increase was primarily drivendue byto higher sales prices on all our products.products Decreasespartially inoffset ammoniaby andvolume decreases resulting from of Turnarounds at two of our facilities. In addition to the impact of the Turnarounds, UAN sales volumes were offsetlower byas anproduction increaseshifted into AN and Nitric Acid volumes as part of our product mix strategy,strategy whichin includes upgrading ammoniaresponse to maximizetight highermarket value downstream products.conditions.

We recognized a gross profit of $35.8$11.5 million for the firstsecond quarter of 2026 compared to $14.4$23.2 million for the same period in 2025, or aan $21.4$11.7 million increase.reduction. Overall, our gross profit percentage for the firstsecond quarter of 2026 was 21.1%6.8% compared to 10.0%15.3% for the same period in 2025. Our adjusted gross profit percentage increased to 35.7%37.0% for the firstsecond quarter of 2026 from 25.4%30.7% for the firstsecond quarter of 2025. Our gross profit for the firstsecond quarter of 2026 was higherlower compared to the same period of 2025 primarily due to higherthe sellingcost pricesof andthe improvedtwo productmajor mixTurnarounds, partially offset by increasedan costincrease ofin salessales, stemmingas fromdiscussed higher natural gas and sulfur costs.above.

Our SG&A expenses were higher for the firstsecond quarter of 2026 compared to the same period of 2025, primarily due to an increase in stocksalaries basedand wages, short term incentive compensation, stock-based compensation from thea accelerationone-time ofretention expense recognition for certain executive grantsgrant (see “Equity Awards” in Note 1) and anprofessional increase in short-term incentive compensation, which were partially offset by decreases in insurance and other miscellaneous expenses.fees.

Other income,Expense, net