COMPANY CONTACT:

Investor Relations Contact:

Tony M. Shelby, Chief Financial Officer

Linda Latman (212) 836-9609

(405) 235-4546

Lena Cati (212) 836-9611

The Equity Group Inc.

§	Net sales increased 8.8% to $134.7 million from $123.7 million;

§	Operating income rose 89.4% to $11.2 million from $5.9 million;

§	Net income was $4.5 million compared to $2.7 million, an increase of 65.9%;

§	After deducting preferred stock dividend requirements, net income applicable to common stock was $4.5 million for 2007, compared to $1.8 million for 2006; there were no dividend requirements for the fourth quarter 2007;

§	Diluted earnings per share were $.20 or up 100% from last year’s $.10 per share.

§	Net sales increased 19.2% to $586.4 million from $492.0 million;

§	Operating income was $59.0 million, up 117.4% compared to $27.1 million;

§	Net income of $46.9 million was 202.2% ahead of last year’s $15.5 million;

§	After preferred stock dividend requirements, net income applicable to common stock was $41.3 million, up 220.3% from $12.9 million;

§	Diluted earnings per share were $1.84, or 142.1% ahead of last year’s $.76 per share.

 

 

·

Climate Control Business engaged in the manufacturing and selling of a broad range of air conditioning and heating products consisting of water source heat pumps including geothermal heat pumps, hydronic fan coils, large custom air handlers and other products used in commercial and residential new building construction, renovation of existing buildings and replacement of existing systems.

·	Chemical Business engaged in the manufacturing and selling of chemical products produced from plants in Texas, Arkansas and Alabama for the industrial, mining and agricultural markets.

 

 

	Year Ended December 31,								Three Months Ended December 31,
	2007				2006				2007					2006
	(In Thousands, Except Share and Per Share Amounts)
Net sales	$	586,407			$	491,952			$	134,653			$	123,736
Cost of sales		453,814				401,090				103,941				101,911
Gross profit		132,593				90,862				30,712				21,825
Selling, general and administrative expense		75,033				64,134				19,212				17,378
Provision for (recovery of)  losses on accounts receivable		858				426				(16	)			(173	)
Other expense		1,186				722				333				16
Other income		(3,495	)			(1,559	)			(55	)			(1,328	)
Operating income		59,011				27,139				11,238				5,932
Interest expense		12,078				11,915				4,016				2,958
Non-operating other income, net		(1,264	)			(624	)			(659	)			(59	)
Income from continuing operations before provision for income taxes and equity in earnings of affiliate		48,197				15,848				7,881				3,033
Provision for income taxes		2,540				901				3,557				493
Equity in earnings of affiliate		(877	)			(821	)			(223	)			(210	)
Income from continuing operations		46,534				15,768				4,547				2,750
Net loss (income) from discontinued operations		(348	)			253				-				9
Net income		46,882				15,515				4,547				2,741
Preferred stock dividend requirements		5,608				2,630				-				975
Net income applicable to common stock	$	41,274			$	12,885			$	4,547			$	1,766
Weighted average common shares:
Basic		19,579,664				14,331,963				20,868,564				15,810,883
Diluted		23,495,644				20,871,659				22,827,185				17,813,675
Income (loss) per common share:
Basic:
Income from continuing operations	$	2.09			$	.92			$	.22			$	.11
Net income (loss)  from discontinued operations		.02				(.02	)			-				-
Net income	$	2.11			$	.90			$	.22			$	.11
Diluted:
Income from continuing operations	$	1.82			$	.77			$	.20			$	.10
Net income (loss)  from discontinued operations		.02				(.01	)			-				-
Net income	$	1.84			$	.76			$	.20			$	.10

LSB Industries, Inc.

Note 1: Net income applicable to common stock is computed by adjusting net income by the amount of preferred stock dividends, dividend requirements and stock dividends.  Basic income per common share is based upon net income applicable to common stock and the weighted average number of common shares outstanding during each period.  Diluted income per share is based on net income applicable to common stock plus preferred stock dividends and dividend requirements on preferred stock assumed to be converted, if dilutive, and interest expense including amortization of debt issuance cost, net of income taxes, on convertible debt assumed to be converted, if dilutive, and the weighted average number of common shares and dilutive common equivalent shares outstanding, and the assumed conversion of dilutive convertible securities outstanding.

Note 2:  In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. AUG AIR-1 (“FSP”), accounting for planned major maintenance activities.  Effective January 1, 2007, we changed from the accrue-in-advance method to the direct expense  method in accordance with the FSP.  As a result of the change, net income for the year ended December 31, 2006 as presented in the Financial Highlights has been decreased $.4 million and income for the three months ended December 31, 2006 has been decreased $.6 million, as a result of the retrospective application of the FSP.

Note 3: The 2007 provision for income taxes is net of the benefit of deferred taxes primarily resulting from the reversal of deferred tax valuation allowances.  Prior to 2007, we had valuation allowances in place against the net deferred tax assets arising from NOL carryforwards and other temporary differences. However, as the result of improving financial results including some unusual transactions (settlement of pending litigation and insurance recovery of business interruption claim) and our expectation of generating taxable income in the future, we reversed valuation allowances as a benefit for income taxes and recognized deferred tax asset and a deferred tax liability.

Note 4:  Information about the Company’s operations in different industry segments for the year and three months ended December 31, 2007 and 2006 is detailed on the following page.

LSB INDUSTRIES, INC.

Notes to Unaudited Financial Highlights

Years and Three Months Ended December 31, 2007 and 2006

 

 

LSB INDUSTRIES, INC.

Notes to Unaudited Financial Highlights

Years and Three Months Ended December 31, 2007 and 2006

(1)

Gross profit by industry segment represents net sales less cost of sales.  Gross profit classified as “Other” relates to the sales of industrial machinery and related components.

(2)

During the year and three months ended December 31, 2007, we realized insurance recoveries of $3.8 million and $2.3 million, respectively, relating to a business interruption claim associated with the Cherokee, Alabama facility.  During the year ended December 31, 2006, we realized insurance recoveries of $.9 million relating to a business interruption claim associated with the El Dorado, Arkansas facility.  The above transactions contributed to an increase in gross profit.

(3)

Our chief operating decision makers use operating income by industry segment for purposes of making decisions which include resource allocations and performance evaluations.  Operating income by industry segment represents gross profit by industry segment less SG&A incurred by each industry segment plus other income and other expense earned/incurred by each industry segment before general corporate expenses and other business operations, net.  General corporate expenses and other business operations, net, consist of unallocated portions of gross profit, SG&A, other income and other expense.

(4)

During the year ended December 31, 2007, we recognized income of $3.3 million relating to a settlement of a pending litigation.  During the year ended December 31, 2006 an arbitrator awarded a subsidiary of the Company $1.2 million for reimbursement of defense costs which we included in other income.

(5)

General corporate expenses and other business operations, net, amounts are not allocated to our Climate Control and Chemical Businesses since these items are not included in the operating results reviewed by our chief operating decision makers for purposes of making decisions as discussed above.

 

 

	December 31,
	2007				2006
	(In Thousands)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	39,060			$	42,870
Short-term financing and drafts payable		919				2,986
Accrued and other liabilities		38,942				26,816
Current portion of long-term debt		1,043				11,579
Total current liabilities		79,964				84,251
Long-term debt		121,064				86,113
Noncurrent accrued and other liabilities:
Deferred income taxes		5,330				-
Other		6,913				5,929
		12,243				5,929
Commitments and contingencies
Stockholders' equity:
Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding		2,000				2,000
Series 2 $3.25 convertible, exchangeable Class C preferred stock, $50 stated value; 517,402 shares issued at December 31, 2006		-				25,870
Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued		1,000				1,000
Common stock, $.10 par value; 75,000,000 shares authorized, 24,466,506 shares issued (20,215,339 at December 31, 2006)		2,447				2,022
Capital in excess of par value		123,336				79,838
Accumulated other comprehensive loss		(411	)			(701	)
Accumulated deficit		(16,437	)			(47,962	)
		111,935				62,067
Less treasury stock at cost:
Series 2 Preferred, 18,300 shares at December 31, 2006		-				797
Common stock, 3,448,518 shares    (3,447,754 at December 31, 2006)		17,652				17,636
Total stockholders' equity		94,283				43,634
	$	307,554			$	219,927