OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (the “Company”) (NYSE: LXU) released an update on progress in certain areas of its El Dorado Chemical Company subsidiary’s facility located in El Dorado, Arkansas (“El Dorado Facility”).
The Company previously announced that on May 15, 2012 the El Dorado Facility suffered significant damage when a reactor in its DSN 98% concentrated nitric acid plant (“DSN”) exploded. No employees or anyone in the El Dorado community were injured as a result of the explosion, and there was no environmental impact. Following is an update to the earlier announcement.
Assessment of Damages and Resumption of Production at the El Dorado Facility
At this time, the Company intends to re-start regular nitric acid and ammonium nitrate (“AN”) production, on a partial basis, in approximately 30 days, and increase that production over the next 90 days, as various plants are brought back on-line. At this time it is not known when the El Dorado Facility will produce 98% concentrated nitric acid.
- DSN concentrated nitric acid plant – It is unlikely that repair of this plant is feasible. At this time the Company, along with its insurance carriers, are evaluating the damages. This evaluation will take several months to complete. The DSN concentrated nitric acid plant produced approximately 20% of the nitric acid manufactured at the El Dorado Facility. The Company intends to replace the nitric acid production capacity lost by this event.
- Other “regular” nitric acid plants – The three other nitric acid plants, which produce approximately 80% of the nitric acid at the El Dorado Facility, in concentrations from 56% to 65%, sustained less damage. We are in the process of undertaking repairs, which should be completed over the next 30 to 90 days. Production from these plants will be phased in over that period as repair of each plant is completed.
- High-density prilled AN plant – This plant was returned to operation last week and is running on a limited basis with feedstock from other sources. High-density AN is used for agricultural and high-purity industrial applications.
- Low-density prilled AN plant – This plant required only minor repairs, which have been completed. When nitric acid is available from one or all of the three “regular” nitric acid plants, the El Dorado Facility will resume production of low-density AN. Low-density AN is used primarily for industrial / mining applications.
- Transportation – The El Dorado Facility has restarted the truck loading facilities for certain products to enable the facility to ship inventory that was on hand prior to the incident.
- Control systems – The El Dorado Facility main nitric acid control room structure was destroyed by the explosion; however, most of the controls remained intact. A temporary control room will be utilized until a new permanent control facility is erected.
- Sulfuric acid plant – The sulfuric acid plant sustained substantial damage and, as a result, as of this date the Company is unable to set a target date for return of this plant to operation.
- General – In addition to the damage sustained by the primary production plants discussed above, the electrical service and various support facilities were damaged. Temporary electrical service is available at this time. Repairs to the permanent electrical service and various support facilities will be made over the next 30 to 90 days.
Customers
The Company is working closely with customers to identify alternatives for supply.
Insurance
The Company believes that it has sufficient insurance to cover the damages to the El Dorado Facility and to cover the Company’s lost revenue, after $1 million deductible as to property damage and a 30-day waiting period as to business interruption, per insurance policy provisions.
CEO’s Remarks
Jack Golsen, LSB’s Board Chairman and CEO stated, “The Company regrets the difficulties this incident has caused its customers, and is committed to restarting production units as quickly as possible.”
Mr. Golsen continued “This interruption of business activities has been unfortunate; however, we are very positive about the future of our El Dorado Facility. We are committed to repairing and rebuilding the El Dorado Facility as soon as possible, as we consider it an important part of our overall Chemical Business. At this time our three other chemical manufacturing facilities are producing product and continuing to conduct business.”
LSB Industries, Inc.
LSB is a manufacturing and marketing company. LSB’s principal business activities consist of the manufacture and sale of commercial and residential climate control products, such as geothermal and water source heat pumps, hydronic fan coils and modular geothermal chillers, and large custom air handlers; and the manufacture and sale of chemical products for the agricultural, mining, and industrial markets.
This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements generally are identifiable by use of the words “believe,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects” or similar expressions, and such forward-looking statements include, but are not limited to the extent of damage, feasibility or timing of repairs to or replacement of various parts of the El Dorado Facility, timing of resumption of production and sufficient insurance coverage. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from the forward-looking statements as a result of various factors, including, but not limited to, if for any reason insurance coverage is denied or the insurance carrier refuses to pay a substantial amount of our claim or claims, ability to finance our investments, general economic conditions, inability to repair or replace damaged equipment in a timely manner, weather conditions, changes in operating strategy in our Chemical Business, inability to fund the necessary repairs or replacements, changes in customer demands, inability to obtain in a timely manner any necessary regulatory approvals as to such repairs or replacements, and other factors set forth under “Risk Factors” in Item 1A of Part 1 and under “A Special Note Regarding Forward-Looking Statements” contained in the Form 10-K for year ended December 31, 2011, and Form 10Q for the period ended March 31, 2012 for discussions of a variety of factors which could cause the future outcome to differ materially from the forward-looking statements contained in this report.