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| [X]                                                                                                                                                                                                                                                                                                                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                      |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                           | For the quarterly period ended             September30, 2009             |
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                           | OR                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
| [  ]                                                                                                                                                                                                                                                                                                                      | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                     |
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                           | For the transition period from   _____________to______________                                                                                                     |
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                           | Commission file number                  1-7677       |
|                                                                                                                                                                                                                                                                                                                           |                                                                                                                                                                         |
|              LSBIndustries, Inc.                                                                                                                                                                       |
| Exact name of Registrant as specified in its charter                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                           |
|           Delaware                                                                                                                                                                                               |     73-1015226                                                                                                                  |
| State or other jurisdiction of incorporation or organization                                                                                                                                                                                                                                                                   | I.R.S. Employer Identification No.                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                           |
|        16 South PennsylvaniaAvenue, Oklahoma City, Oklahoma                     73107                                                                |
|              Address of principal executive offices                        (ZipCode)                                                            |
|                                                                                                                                                                                                                                                                                                                           |
|                (405)235-4546                                                                                                                                   |
|   Registrant's telephone number, including area code                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                           |
|                          None                              |
| Former name, former address and former fiscal year, if  changed since last report.                                                                                                                                                                                                                                        |

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Table of Contents

TABLE OF CONTENTS

|               |                                                                                        |   |
|--------------------|---------------------------------------------------------------------------------------------|--------|
|               |                                                                                        |   |
|               | PART I – Financial Information                                                        | Page   |
|               |                                                                                        |   |
| Item 1.            | Financial Statements                                                                        | 4      |
|               |                                                                                        |   |
| Item 2.            | Management's Discussion and Analysis of Financial Condition and Results of Operations  | 38     |
|               |                                                                                        |   |
| Item 3.            | Quantitative and Qualitative Disclosures About Market Risk                                  | 67     |
|               |                                                                                        |   |
| Item 4.            | Controls and Procedures                                                                     | 69     |
|               |                                                                                        |   |
| Special Note  | Regarding Forward-Looking Statements                                                        | 70     |
|               |                                                                                        |   |
|               | PART II – Other Information                                                           |   |
|               |                                                                                        |   |
| Item 1.            | Legal Proceedings                                                                           | 72     |
|               |                                                                                        |   |
| Item 1A.           | Risk Factors                                                                                | 73     |
|               |                                                                                        |   |
| Item 2.            | Unregistered Sales of Equity Securities and Use of Proceeds                                 | 74     |
|               |                                                                                        |   |
| Item 3.            | Defaults Upon Senior Securities                                                             | 74     |
|               |                                                                                        |   |
| Item 4.            | Submission of Matters to a Vote of Security Holders                                         | 74     |
|               |                                                                                        |   |
| Item 5.            | Other Information                                                                           | 74     |
|               |                                                                                        |   |
| Item 6.            | Exhibits                                                                                    | 75     |

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Table of Contents

|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|

|   | (In Thousands) |
|--------|----------------|

| Assets                                  |   |    |   |   |    |   |
|-----------------------------------------|--------|---------|--------|--------|---------|--------|
| Current assets:                         |   |    |   |   |    |   |
| Cash and cash equivalents               | $      | 60,187  |   | $      | 46,204  |   |
| Restricted cash                         |   | 31      |   |   | 893     |   |
| Short-term investments                  |   | 10,000  |   |   | -       |   |
| Accounts receivable, net                |   | 68,254  |   |   | 78,846  |   |
| Inventories:                            |   |    |   |   |    |   |
| Finished goods                          |   | 23,773  |   |   | 30,679  |   |
| Work in process                         |   | 2,784   |   |   | 2,954   |   |
| Raw materials                           |   | 20,700  |   |   | 27,177  |   |
| Total inventories                       |   | 47,257  |   |   | 60,810  |   |
| Supplies, prepaid items and other:      |   |    |   |   |    |   |
| Prepaid insurance                       |   | 849     |   |   | 3,373   |   |
| Prepaid advertising                     |   | 1,369   |   |   | -       |   |
| Prepaid current income taxes            |   | 1,375   |   |   | -       |   |
| Precious metals                         |   | 14,118  |   |   | 14,691  |   |
| Supplies                                |   | 4,949   |   |   | 4,301   |   |
| Other                                   |   | 2,166   |   |   | 1,378   |   |
| Total supplies, prepaid items and other |   | 24,826  |   |   | 23,743  |   |
| Deferred income taxes                   |   | 7,015   |   |   | 11,417  |   |
| Total current assets                    |   | 217,570 |   |   | 221,913 |   |
|                                    |   |    |   |   |    |   |
| Property, plant and equipment, net      |   | 114,202 |   |   | 104,292 |   |
|                                    |   |    |   |   |    |   |
| Other assets:                           |   |    |   |   |    |   |
| Debt issuance costs, net                |   | 1,831   |   |   | 2,607   |   |
| Investment in affiliate                 |   | 3,808   |   |   | 3,628   |   |
| Goodwill                                |   | 1,724   |   |   | 1,724   |   |
| Other, net                              |   | 1,892   |   |   | 1,603   |   |
| Total other assets                      |   | 9,255   |   |   | 9,562   |   |
|                                    | $      | 341,027 |   | $      | 335,767 |   |

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Table of Contents

|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|

|   | (In Thousands) |
|--------|----------------|

| Liabilities and Stockholders’ Equity                                                                             |   |    |   |   |    |   |
|------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| Current liabilities:                                                                                                   |   |    |   |   |    |   |
| Accounts payable                                                                                                       | $      | 33,594  |   | $      | 43,014  |   |
| Short-term financing                                                                                                   |   | -       |   |   | 2,228   |   |
| Accrued and other liabilities                                                                                          |   | 28,523  |   |   | 39,236  |   |
| Current portion of long-term debt                                                                                      |   | 3,161   |   |   | 1,560   |   |
| Total current liabilities                                                                                              |   | 65,278  |   |   | 86,038  |   |
|                                                                                                                   |   |    |   |   |    |   |
| Long-term debt                                                                                                         |   | 100,367 |   |   | 103,600 |   |
|                                                                                                                   |   |    |   |   |    |   |
| Noncurrent accrued and other liabilities                                                                               |   | 10,549  |   |   | 9,631   |   |
|                                                                                                                   |   |    |   |   |    |   |
| Deferred income taxes                                                                                                  |   | 11,598  |   |   | 6,454   |   |
|                                                                                                                   |   |    |   |   |    |   |
| Contingencies (Note 12)                                                                                                |   |    |   |   |    |   |
|                                                                                                                   |   |    |   |   |    |   |
| Stockholders' equity:                                                                                                  |   |    |   |   |    |   |
| Series B 12% cumulative, convertible preferred stock, $100 parvalue; 20,000 shares issued and outstanding              |   | 2,000   |   |   | 2,000   |   |
| 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, 25,368,270 shares issued (24,958,330 at December 31, 2008) |   | 2,537   |   |   | 2,496   |   |
| Capital in excess of par value                                                                                         |   | 129,406 |   |   | 127,337 |   |
| Accumulated other comprehensive loss                                                                                   |   | -       |   |   | (120    | )      |
| Retained earnings                                                                                                      |   | 41,044  |   |   | 19,804  |   |
|                                                                                                                   |   | 175,987 |   |   | 152,517 |   |
| Less treasury stock at cost:                                                                                           |   |    |   |   |    |   |
| Common stock, 3,867,462 shares (3,848,518 at December 31, 2008)                                                        |   | 22,752  |   |   | 22,473  |   |
| Total stockholders' equity                                                                                             |   | 153,235 |   |   | 130,044 |   |
|                                                                                                                   | $      | 341,027 |   | $      | 335,767 |   |

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Table of Contents

|   | Nine Months |   | Three Months |
|--------|-------------|--------|--------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands, Except Per Share Amounts) |
|--------|------------------------------------------|

| Net sales                                                                                                | $      | 416,538      |   |   | $      | 569,427      |   |   | $      | 127,778     |   |   | $      | 210,920     |   |
|----------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------|--------------|--------|--------|--------|-------------|--------|--------|--------|-------------|--------|
| Cost of sales                                                                                            |   | 307,330      |   |   |   | 456,760      |   |   |   | 97,125      |   |   |   | 179,751     |   |
| Gross profit                                                                                             |   | 109,208      |   |   |   | 112,667      |   |   |   | 30,653      |   |   |   | 31,169      |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Selling, general and administrative expense                                                              |   | 70,548       |   |   |   | 62,633       |   |   |   | 26,127      |   |   |   | 22,411      |   |
| Provisions for (recovery of) losses on accounts receivable                                               |   | 189          |   |   |   | 159          |   |   |   | 161         |   |   |   | (133        | )      |
| Other expense                                                                                            |   | 461          |   |   |   | 946          |   |   |   | 127         |   |   |   | 289         |   |
| Other income                                                                                             |   | (222         | )      |   |   | (8,417       | )      |   |   | (32         | )      |   |   | (88         | )      |
| Operating income                                                                                         |   | 38,232       |   |   |   | 57,346       |   |   |   | 4,270       |   |   |   | 8,690       |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Interest expense                                                                                         |   | 5,139        |   |   |   | 6,363        |   |   |   | 2,200       |   |   |   | 2,643       |   |
| Gains on extinguishment of debt                                                                          |   | (1,796       | )      |   |   | -            |   |   |   | (53         | )      |   |   | -           |   |
| Non-operating other income, net                                                                          |   | (72          | )      |   |   | (1,125       | )      |   |   | (38         | )      |   |   | (263        | )      |
| Income from continuing operations before provisions for income taxes and equity in earnings of affiliate |   |  34,961 |   |   |   |  52,108 |   |   |   |  2,161 |   |   |   |  6,310 |   |
| Provisions for income taxes                                                                              |   | 14,110       |   |   |   | 19,817       |   |   |   | 1,310       |   |   |   | 2,388       |   |
| Equity in earnings of affiliate                                                                          |   | (740         | )      |   |   | (697         | )      |   |   | (252        | )      |   |   | (235        | )      |
| Income from continuing operations                                                                        |   | 21,591       |   |   |   | 32,988       |   |   |   | 1,103       |   |   |   | 4,157       |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Net loss (income) from discontinued operations                                                           |   | 45           |   |   |   | 13           |   |   |   | 30          |   |   |   | (4          | )      |
| Net income                                                                                               |   | 21,546       |   |   |   | 32,975       |   |   |   | 1,073       |   |   |   | 4,161       |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Dividends and dividend requirements on preferred stocks                                                  |   | 306          |   |   |   | 306          |   |   |   | -           |   |   |   | -           |   |
| Net income applicable to common stock                                                                    | $      | 21,240       |   |   | $      | 32,669       |   |   | $      | 1,073       |   |   | $      | 4,161       |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Weighted-average common shares:                                                                          |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Basic                                                                                                    |   | 21,279       |   |   |   | 21,156       |   |   |   | 21,487      |   |   |   | 21,237      |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Diluted                                                                                                  |   | 23,623       |   |   |   | 24,884       |   |   |   | 22,633      |   |   |   | 22,654      |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Income per common share:                                                                                 |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Basic                                                                                                    | $      | 1.00         |   |   | $      | 1.54         |   |   | $      | .05         |   |   | $      | .20         |   |
|                                                                                                     |   |         |   |   |   |         |   |   |   |        |   |   |   |        |   |
| Diluted                                                                                                  | $      | .95          |   |   | $      | 1.40         |   |   | $      | .05         |   |   | $      | .18         |   |

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Table of Contents

|   |  Common Stock Shares |   | Non-Redeemable Preferred Stocks |   |  CommonStock Par Value |   |  Capital in Excess of Par Value |   | Accumulated Other Comprehensive Loss |   |   Retained Earnings |   |  Treasury Stock-Common |   |    Total |
|--------|---------------------------|--------|---------------------------------|--------|-----------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|-------------------------------|--------|-----------------------------|--------|-------------------------|

|   | (In Thousands) |
|--------|----------------|

| Balance at December 31, 2008                                       | 24,958  | $      | 3,000  | $      | 2,496  | $      | 127,337   |   | $      | (120   | )      | $      | 19,804 |   |   | $      | (22,473 | )      | $      | 130,044   |   |
|--------------------------------------------------------------------|---------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|-----------|--------|
|                                                               |    |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |    |   |   |      |   |
| Net income                                                         |    |   |   |   |   |   |      |   |   |   |   |   | 21,546 |   |   |   |    |   |   | 21,546    |   |
| Amortization of cash flow hedge                                    |    |   |   |   |   |   |      |   |   | 120    |   |   |   |   |   |   |    |   |   | 120       |   |
| Total comprehensive income                                         |    |   |   |   |   |   |      |   |   |   |   |   |   |   |   |   |    |   |   | 21,666    |   |
| Dividends paid on preferred stocks                                 |    |   |   |   |   |   |      |   |   |   |   |   | (306   | )      |   |   |    |   |   | (306      | )      |
| Stock-based compensation                                           |    |   |   |   |   |   | 768       |   |   |   |   |   |   |   |   |   |    |   |   | 768       |   |
| Exercise of stock options                                          | 408     |   |   |   | 41     |   | 839       |   |   |   |   |   |   |   |   |   | (279    | )      |   | 601       |   |
| Excess income tax benefit associated with stock-based compensation |    |   |   |   |   |   |  458 |   |   |   |   |   |   |   |   |   |    |   |   |  458 |   |
| Conversion of shares of redeemable preferred stock to common stock |  2 |   |   |   |   |   |  4   |   |   |   |   |   |   |   |   |   |    |   |   |  4   |   |
| Balance at September 30, 2009                                      | 25,368  | $      | 3,000  | $      | 2,537  | $      | 129,406   |   | $      | -      |   | $      | 41,044 |   |   | $      | (22,752 | )      | $      | 153,235   |   |

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Table of Contents

|   | 2009 |   | 2008 |
|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Cash flows from continuing operating activities:                                                     |   |    |   |   |   |    |   |
|------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|
| Net income                                                                                           | $      | 21,546  |   |   | $      | 32,975  |   |
| Adjustments to reconcile net income to net cash provided by continuing operating activities:         |   |    |   |   |   |    |   |
| Net loss from discontinued operations                                                                |   | 45      |   |   |   | 13      |   |
| Deferred income taxes                                                                                |   | 9,373   |   |   |   | 4,424   |   |
| Gain on extinguishment of debt                                                                       |   | (1,796  | )      |   |   | -       |   |
| Gain on litigation judgment associated with property, plant and equipment                            |   | -       |   |   |   | (3,943  | )      |
| Losses on sales and disposals of property and equipment                                              |   | 340     |   |   |   | 130     |   |
| Depreciation of property, plant and equipment                                                        |   | 11,573  |   |   |   | 9,784   |   |
| Amortization                                                                                         |   | 605     |   |   |   | 914     |   |
| Stock-based compensation                                                                             |   | 768     |   |   |   | 577     |   |
| Provisions for losses on accounts receivable                                                         |   | 189     |   |   |   | 159     |   |
| Provision for (realization of) losses on inventory                                                   |   | (3,186  | )      |   |   | 400     |   |
| Provision for losses on firm sales commitments                                                       |   | 1,310   |   |   |   | -       |   |
| Provision for impairment of long-lived assets                                                        |   | -       |   |   |   | 192     |   |
| Equity in earnings of affiliate                                                                      |   | (740    | )      |   |   | (697    | )      |
| Distributions received from affiliate                                                                |   | 560     |   |   |   | 555     |   |
| Changes in fair value of commodities contracts                                                       |   | (236    | )      |   |   | 4,931   |   |
| Changes in fair value of interest rate contracts                                                     |   | (314    | )      |   |   | (237    | )      |
| Cash provided (used) by changes in assets and liabilities:                                           |   |    |   |   |   |    |   |
| Accounts receivable                                                                                  |   | 11,889  |   |   |   | (36,043 | )      |
| Inventories                                                                                          |   | 16,418  |   |   |   | (17,969 | )      |
| Other supplies and prepaid items                                                                     |   | (238    | )      |   |   | (3,254  | )      |
| Accounts payable                                                                                     |   | (8,957  | )      |   |   | 14,410  |   |
| Customer deposits                                                                                    |   | (2,279  | )      |   |   | (269    | )      |
| Deferred rent expense                                                                                |   | (1,424  | )      |   |   | (2,909  | )      |
| Other current and noncurrent liabilities                                                             |   | (7,420  | )      |   |   | 5,178   |   |
| Net cash provided by continuing operating activities                                                 |   | 48,026  |   |   |   | 9,321   |   |
|                                                                                                 |   |    |   |   |   |    |   |
| Cash flows from continuing investing activities:                                                     |   |    |   |   |   |    |   |
| Capital expenditures                                                                                 |   | (22,221 | )      |   |   | (22,348 | )      |
| Proceeds from litigation judgment associated with property, plant and equipment                      |   | -       |   |   |   | 5,948   |   |
| Payment of legal costs relating to litigation judgment associated with property, plant and equipment |   | -       |   |   |   | (1,884  | )      |
| Proceeds from sales of property and equipment                                                        |   | 14      |   |   |   | 63      |   |
| Purchase of short-term investments                                                                   |   | (10,000 | )      |   |   | -       |   |
| Proceeds from (deposit of) restricted cash                                                           |   | 862     |   |   |   | (73     | )      |
| Other assets                                                                                         |   | (289    | )      |   |   | (305    | )      |
| Net cash used by continuing investing activities                                                     |   | (31,634 | )      |   |   | (18,599 | )      |

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Table of Contents

|   | 2009 |   | 2008 |
|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Cash flows from continuing financing activities:                                                        |   |     |   |   |   |     |   |
|---------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|--------|----------|--------|
| Proceeds from revolving debt facilities                                                                 | $      | 396,794  |   |   | $      | 475,372  |   |
| Payments on revolving debt facilities                                                                   |   | (396,794 | )      |   |   | (475,372 | )      |
| Proceeds from other long-term debt, net of fees                                                         |   | 8,566    |   |   |   | -        |   |
| Acquisition of 5.5% convertible debentures                                                              |   | (7,953   | )      |   |   | -        |   |
| Payments on other long-term debt                                                                        |   | (1,600   | )      |   |   | (869     | )      |
| Payments of debt issuance costs                                                                         |   | (26      | )      |   |   | -        |   |
| Payments on short-term financing                                                                        |   | (2,228   | )      |   |   | (919     | )      |
| Proceeds from exercise of stock options                                                                 |   | 601      |   |   |   | 771      |   |
| Purchase of treasury stock                                                                              |   | -        |   |   |   | (3,421   | )      |
| Excess income tax benefit associated with stock-based compensation                                      |   | 631      |   |   |   | 3,412    |   |
| Dividends paid on preferred stocks                                                                      |   | (306     | )      |   |   | (306     | )      |
| Net cash used by continuing financing activities                                                        |   | (2,315   | )      |   |   | (1,332   | )      |
|                                                                                                    |   |     |   |   |   |     |   |
| Cash flows of discontinued operations:                                                                  |   |     |   |   |   |     |   |
| Operating cash flows                                                                                    |   | (94      | )      |   |   | (136     | )      |
| Net increase (decrease) in cash and cash equivalents                                                    |   | 13,983   |   |   |   | (10,746  | )      |
|                                                                                                    |   |     |   |   |   |     |   |
| Cash and cash equivalents at beginning of period                                                   |   | 46,204   |   |   |   | 58,224   |   |
| Cash and cash equivalents at end of period                                                              | $      | 60,187   |   |   | $      | 47,478   |   |
|                                                                                                    |   |     |   |   |   |     |   |
| Supplemental cash flow information:                                                                     |   |     |   |   |   |     |   |
|                                                                                                    |   |     |   |   |   |     |   |
| Cash payments for income taxes, net of refunds                                                          | $      | 6,521    |   |   | $      | 16,814   |   |
|                                                                                                    |   |     |   |   |   |     |   |
| Noncash investing and financing activities:                                                             |   |     |   |   |   |     |   |
|                                                                                                    |   |     |   |   |   |     |   |
| Receivables associated with a property insurance claims                                                 | $      | 1,210    |   |   | $      | -        |   |
| Current other assets, accounts payable and long-term debt associated with property, plant and equipment | $      | 3,866    |   |   | $      | 5,309    |   |
| Debt issuance costs associated with the acquisition of the 5.5% convertible debentures                  | $      | 351      |   |   | $      | -        |   |

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| ·   | a decrease in our estimated costs to complete a construction contract of $575,000, which contract was substantially completed during the third quarter, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in our inventory shrink reserves of $238,000, and |
|--------------------|--------------------------------------------------------------|

| ·   | an increase in our accrued vacation of $205,000. |
|--------------------|--------------------------------------------------|

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Table of Contents

|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|

|   | (In Thousands) |
|--------|----------------|

| Trade receivables               | $      | 66,262 |   |   | $      | 78,092 |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Insurance claims                |   | 1,866  |   |   |   | 252    |   |
| Other                           |   | 952    |   |   |   | 1,231  |   |
|                            |   | 69,080 |   |   |   | 79,575 |   |
| Allowance for doubtful accounts |   | (826   | )      |   |   | (729   | )      |
|                            | $      | 68,254 |   |   | $      | 78,846 |   |

|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Balance at beginning of period         | $      | 4,141  |   |   | $      | 473  |   |   | $      | 1,064 |   |   | $      | 583 |   |
|----------------------------------------|--------|--------|--------|--------|--------|------|--------|--------|--------|-------|--------|--------|--------|-----|--------|
| Provisions for (realization of) losses |   | (3,186 | )      |   |   | 400  |   |   |   | (162  | )      |   |   | 216 |   |
| Write-offs/disposals                   |   | (57    | )      |   |   | (138 | )      |   |   | (4    | )      |   |   | (64 | )      |
| Balance at end of period               | $      | 898    |   |   | $      | 735  |   |   | $      | 898   |   |   | $      | 735 |   |

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Precious metals expense       | $      | 4,354  |   |   | $      | 6,209  |   |   | $      | 1,075 |   |   | $      | 1,855 |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|
| Recoveries of precious metals |   | (2,456 | )      |   |   | (1,343 | )      |   |   | (234  | )      |   |   | (551  | )      |
| Precious metals expense, net  | $      | 1,898  |   |   | $      | 4,866  |   |   | $      | 841   |   |   | $      | 1,304 |   |

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Balance at beginning of period      | $      | 2,820  |   |   | $      | 1,944  |   |   | $      | 3,038  |   |   | $      | 2,278  |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Add: Charged to costs and expenses  |   | 5,050  |   |   |   | 3,406  |   |   |   | 1,904  |   |   |   | 1,119  |   |
| Deduct: Costs and expenses incurred |   | (4,115 | )      |   |   | (3,032 | )      |   |   | (1,187 | )      |   |   | (1,079 | )      |
| Balance at end of period            | $      | 3,755  |   |   | $      | 2,318  |   |   | $      | 3,755  |   |   | $      | 2,318  |   |

|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|

|   | (In Thousands) |
|--------|----------------|

| Accrued payroll and benefits                                                |   | $      | 7,128  |   |   | $      | 6,422  |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Deferred revenue on extended warranty contracts                             |   |   | 4,730  |   |   |   | 4,028  |   |
| Accrued warranty costs                                                      |   |   | 3,755  |   |   |   | 2,820  |   |
| Fair value of derivatives                                                   |   |   | 3,391  |   |   |   | 8,347  |   |
| Accrued death benefits                                                      |   |   | 3,186  |   |   |   | 2,687  |   |
| Accrued insurance                                                           |   |   | 2,608  |   |   |   | 2,971  |   |
| Accrued contractual manufacturing obligations                               |   |   | 2,072  |   |   |   | 2,230  |   |
| Accrued property and franchise taxes                                        |   |   | 1,900  |   |   |   | 693    |   |
| Accrued losses on firm sales commitments                                    |   |   | 1,310  |   |   |   | -      |   |
| Accrued interest                                                            |   |   | 1,227  |   |   |   | 2,003  |   |
| Accrued executive benefits                                                  |   |   | 1,103  |   |   |   | 1,111  |   |
| Customer deposits                                                           |   |   | 963    |   |   |   | 3,242  |   |
| Accrued commissions                                                         |   |   | 936    |   |   |   | 2,433  |   |
| Accrued income taxes                                                        |   |   | 664    |   |   |   | 1,704  |   |
| Accrued precious metals costs                                               |   |   | 587    |   |   |   | 1,298  |   |
| Billings in excess of costs and estimated earnings on uncompleted contracts |   |   | -      |   |   |   | 1,882  |   |
| Deferred rent expense                                                       |   |   | -      |   |   |   | 1,424  |   |
| Other                                                                       |   |   | 3,512  |   |   |   | 3,572  |   |
|                                                                        |   |   | 39,072 |   |   |   | 48,867 |   |
| Less noncurrent portion                                                     |   |   | 10,549 |   |   |   | 9,631  |   |
| Current portion of accrued and other liabilities                            |   | $      | 28,523 |   |   | $      | 39,236 |   |

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|   | September 30, |   | December 31, |
|--------|---------------|--------|--------------|
|   | 2009          |   | 2008         |

|   | (In Thousands) |
|--------|----------------|

| Working Capital Revolver Loan due 2012 (A)                                                                                      | $      | -       |   | $      | -       |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| 5.5% Convertible Senior Subordinated Notes due 2012 (B)                                                                         |   | 30,400  |   |   | 40,500  |   |
| Secured Term Loan due 2012 (C)                                                                                                  |   | 50,000  |   |   | 50,000  |   |
| Other, with a current weighted-average interest rate of 6.30%, most of which is secured by machinery, equipment and real estate |   | 23,128  |   |   | 14,660  |   |
|                                                                                                                            |   | 103,528 |   |   | 105,160 |   |
| Less current portion of long-term debt                                                                                          |   | 3,161   |   |   | 1,560   |   |
| Long-term debt due after one year                                                                                               | $      | 100,367 |   | $      | 103,600 |   |

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| ·   | incur additional indebtedness, |
|--------------------|--------------------------------|

| ·   | incur liens, |
|--------------------|--------------|

| ·   | make restricted payments or loans to affiliates who are not Borrowers, |
|--------------------|------------------------------------------------------------------------|

| ·   | engage in mergers, consolidations or other forms of recapitalization, or |
|--------------------|--------------------------------------------------------------------------|

| ·   | dispose assets. |
|--------------------|-----------------|

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| A. | Environmental Matters |
|----|-----------------------|

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| ·   | for a period of five years from the completion of an exchange or tender to repurchase, redeem or otherwise acquire shares of our common stock, without approval of the outstanding Series 2 Preferred irrespective that dividends are accrued and unpaid with respect to the Series 2 Preferred; or |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | to provide that holders of Series 2 Preferred may not elect two directors to our board of directors when dividends are unpaid on the Series 2 Preferred if less than 140,000 shares of Series 2 Preferred remain outstanding. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | fraudulent inducement and fraud, |
|--------------------|----------------------------------|

| ·   | violation of 10(b) of the Exchange Act and Rule 10b-5, |
|--------------------|--------------------------------------------------------|

| ·   | violation of 17-12A501 of the Kansas Uniform Securities Act, and |
|--------------------|------------------------------------------------------------------|

| ·   | breach of contract. |
|--------------------|---------------------|

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|   | Fair Value Measurements at September 30, 2009 Using |
|--------|----------------------------------------------------------|

|     Description |   |  Total FairValue atSeptember 30,2009 |   | Quoted Prices in ActiveMarkets for Identical Assets (Level 1) |   | SignificantOtherObservableInputs(Level 2) |   |  Significant Unobservable Inputs(Level 3) |   |  Total FairValue atDecember 31,2008 |
|-------------------------------------|--------|-------------------------------------------|--------|--------------------------------------------------------------------|--------|-------------------------------------------|--------|------------------------------------------------|--------|------------------------------------------|

|   | (In Thousands) |
|--------|----------------|

| Assets – Supplies, prepaid items and other:                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Commodities contracts                                                     | $      | 666    |   | $      | 666    |   | $      | -      |   | $      | -      |   | $      | -      |   |
| Foreign exchange contracts                                                |   | -      |   |   | -      |   |   | -      |   |   | -      |   |   | 35     |   |
| Total                                                                     | $      | 666    |   | $      | 666    |   | $      | -      |   | $      | -      |   | $      | 35     |   |
|                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities – Current and noncurrent accrued and other liabilities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commodities contracts                                                     | $      | 1,268  |   | $      | 137    |   | $      | 1,131  |   | $      | -      |   | $      | 5,910  |   |
| Interest rate contracts                                                   |   | 2,123  |   |   | -      |   |   | 2,123  |   |   | -      |   |   | 2,437  |   |
| Total                                                                     | $      | 3,391  |   | $      | 137    |   | $      | 3,254  |   | $      | -      |   | $      | 8,347  |   |

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|   | Commodities Contracts |
|--------|-----------------------|

|   | (In Thousands) |
|--------|----------------|

| Beginning balance                                       |   | $      | (1,388 | )      |
|---------------------------------------------------------|--------|--------|--------|--------|
| Total realized and unrealized gain included in earnings |   |   | 493    |   |
| Purchases, issuances, and settlements                   |   |   | 895    |   |
| Transfers in and/or out of Level 3                      |   |   | -      |   |
| Ending balance                                          |   | $      | -      |   |

|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Total gains (losses) included in earnings:       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost of sales – Commodities contracts      | $      | (1,598 | )      |   | $      | (3,766 | )      |   | $      | (450   | )      |   | $      | (8,254 | )      |
| Cost of sales – Foreign exchange contracts |   | (31    | )      |   |   | (172   | )      |   |   | -      |   |   |   | (137   | )      |
| Interest expense – Interest rate contracts |   | (530   | )      |   |   | 209    |   |   |   | (688   | )      |   |   | (499   | )      |
|                                             | $      | (2,159 | )      |   | $      | (3,729 | )      |   | $      | (1,138 | )      |   | $      | (8,890 | )      |

| Change in unrealized gains and losses relating to contracts still held at period end: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost of sales – Commodities contracts                                           | $      | 236    |   | $      | (4,931 | )      |   | $      | 385    |   |   | $      | (5,391 | )      |
| Cost of sales – Foreign exchange contracts                                      |   | -      |   |   | (129   | )      |   |   | -      |   |   |   | (123   | )      |
| Interest expense – Interest rate contracts                                      |   | 314    |   |   | 275    |   |   |   | (335   | )      |   |   | (361   | )      |
|                                                                                  | $      | 550    |   | $      | (4,785 | )      |   | $      | 50     |   |   | $      | (5,875 | )      |

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|   | September 30, 2009 |   | December 31, 2008 |
|--------|--------------------|--------|-------------------|

|   | Estimated Fair Value |   | Carrying Value |   | Estimated Fair Value |   | Carrying Value |
|--------|----------------------|--------|----------------|--------|----------------------|--------|----------------|

|   | (In Thousands) |
|--------|----------------|

| Variable Rate:                             |   |   |   |   |   |    |   |   |   |   |   |
|--------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| Secured Term Loan                          | $      | 23,076 |   |   | $      | 50,000  |   |   | $      | 20,939 |   |   | $ | 50,000 |   |
| Working Capital Revolver Loan              |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | - |   |
| Other bank debt and financing              |   | 2,581  |   |   |   | 2,581   |   |   |   | 8      |   |   |   | 8 |   |
|                                       |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Fixed Rate:                                |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| 5.5% Convertible Senior Subordinated Notes |   | 28,880 |   |   |   | 30,400  |   |   |   | 27,338 |   |   |   | 40,500 |   |
| Other bank debt and equipment financing    |   | 20,949 |   |   |   | 20,547  |   |   |   | 14,949 |   |   |   | 14,652 |   |
|                                       | $      | 75,486 |   |   | $      | 103,528 |   |   | $      | 63,234 |   |   | $ | 105,160 |   |

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| ·   | we issued 408,500 shares of our common stock as the result of the exercise of stock options, |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | we acquired $10,100,000 aggregate principal amount of our 2007 Debentures; and |
|--------------------|--------------------------------------------------------------------------------|

| ·   | we paid cash dividends on our Series B 12% cumulative, convertible preferred stock (“Series B Preferred”), Series D 6% cumulative, convertible Class C preferred stock (“Series D Preferred”) and noncumulative redeemable preferred stock (“Noncumulative Preferred”) totaling approximately $240,000, $60,000 and $6,000, respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we acquired 200,000 shares of our common stock; |
|--------------------|-------------------------------------------------|

| ·   | we issued 430,304 shares of our common stock as the result of the exercise of stock options; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | we paid cash dividends on our Series B Preferred, Series D Preferred and Noncumulative Preferred totaling approximately $240,000, $60,000 and $6,000, respectively. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

| Numerator:                                                                                                                                    |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|--------|--------|--------|------------------|--------|--------|--------|------------------|--------|--------|--------|------------------|--------|
| Net income                                                                                                                                    | $      | 21,546           |   |   | $      | 32,975           |   |   | $      | 1,073            |   |   | $      | 4,161            |   |
| Dividends on Series B Preferred                                                                                                               |   | (240             | )      |   |   | (240             | )      |   |   | -                |   |   |   | -                |   |
| Dividends on Series D Preferred                                                                                                               |   | (60              | )      |   |   | (60              | )      |   |   | -                |   |   |   | -                |   |
| Dividends on Noncumulative Preferred                                                                                                          |   | (6               | )      |   |   | (6               | )      |   |   | -                |   |   |   | -                |   |
| Total dividends on preferred stocks                                                                                                           |   | (306             | )      |   |   | (306             | )      |   |   | -                |   |   |   | -                |   |
| Numerator for basic net income per common share - net income applicable to common stock                                                       |   | 21,240           |   |   |   | 32,669           |   |   |   | 1,073            |   |   |   | 4,161            |   |
| Dividends on preferred stocks assumed to be converted, if dilutive                                                                            |   | 306              |   |   |   | 306              |   |   |   | -                |   |   |   | -                |   |
| Interest expense including amortization of debt issuance costs, net of income taxes, on convertible debt assumed to be converted, if dilutive |   |  914        |   |   |   |  1,805      |   |   |   |  -          |   |   |   |  -          |   |
| Numerator for diluted net income per common share                                                                                             | $      | 22,460           |   |   | $      | 34,780           |   |   | $      | 1,073            |   |   | $      | 4,161            |   |
|                                                                                                                                          |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Denominator:                                                                                                                                  |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Denominator for basic net income per common share - weighted-average shares                                                                   |   | 21,279,030       |   |   |   | 21,155,724       |   |   |   | 21,486,688       |   |   |   | 21,237,268       |   |
| Effect of dilutive securities:                                                                                                                |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Convertible notes payable                                                                                                                     |   | 1,110,560        |   |   |   | 2,188,000        |   |   |   | 4,000            |   |   |   | 4,000            |   |
| Convertible preferred stocks                                                                                                                  |   | 938,006          |   |   |   | 938,999          |   |   |   | 937,106          |   |   |   | 939,286          |   |
| Stock options                                                                                                                                 |   | 295,539          |   |   |   | 600,917          |   |   |   | 205,149          |   |   |   | 473,882          |   |
| Dilutive potential common shares                                                                                                              |   | 2,344,105        |   |   |   | 3,727,916        |   |   |   | 1,146,255        |   |   |   | 1,417,168        |   |
| Denominator for diluted net income per common share - adjusted weighted-average shares and assumed conversions                                |   |  23,623,135 |   |   |   |  24,883,640 |   |   |   |  22,632,943 |   |   |   |  22,654,436 |   |
|                                                                                                                                          |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Basic net income per common share                                                                                                             | $      | 1.00             |   |   | $      | 1.54             |   |   | $      | .05              |   |   | $      | .20              |   |
|                                                                                                                                          |   |             |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Diluted net income per common share                                                                                                           | $      | .95              |   |   | $      | 1.40             |   |   | $      | .05              |   |   | $      | .18              |   |

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

| Stock options             |   | 406,685 |   |   |   | 425,000 |   |   |   | 383,152   |   |   |   | 425,000   |   |
|---------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|
| Convertible notes payable |   | -       |   |   |   | -       |   |   |   | 1,106,560 |   |   |   | 2,184,000 |   |
|                      |   | 406,685 |   |   |   | 425,000 |   |   |   | 1,489,712 |   |   |   | 2,609,000 |   |

|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Federal                  | $      | 4,245 |   | $      | 13,641 |   |   | $      | (2,245 | ) |   | $      | 2,121 |   |
|--------------------------|--------|-------|--------|--------|--------|--------|--------|--------|--------|---|--------|--------|-------|--------|
| State                    |   | 492   |   |   | 1,752  |   |   |   | (280   | ) |   |   | 28    |   |
| Total current provisions | $      | 4,737 |   | $      | 15,393 |   |   | $      | (2,525 | ) |   | $      | 2,149 |   |

| Federal                     | $      | 8,680  |   | $      | 3,927  |   |   | $      | 3,710 |   |   | $      | 388   |   |
|-----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|
| State                       |   | 693    |   |   | 497    |   |   |   | 125   |   |   |   | (149  | )      |
| Total deferred provisions   |   | 9,373  |   |   | 4,424  |   |   |   | 3,835 |   |   |   | 239   |   |
| Provisions for income taxes | $      | 14,110 |   | $      | 19,817 |   |   | $      | 1,310 |   |   | $      | 2,388 |   |

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Other expense:                                                 |    |     |   |   |    |        |   |   |    |    |   |   |    |    |   |
|----------------------------------------------------------------|---------|----------|--------|--------|---------|-------------|--------|--------|---------|---------|--------|--------|---------|---------|--------|
| Losses on sales and disposals of property and equipment        | $       | 340      |   |   | $       | 130         |   |   | $       | 120     |   |   | $       | 48      |   |
| Litigation settlements and potential  settlements    |    | 75       |   |   |    | 367         |   |   |    | -       |   |   |    | -       |   |
| Income tax related penalties                                   |    | 31       |   |   |    | 176         |   |   |    | 4       |   |   |    | 175     |   |
| Impairment of long-lived assets (1)                            |    | -        |   |   |    | 192         |   |   |    | -       |   |   |    | -       |   |
| Other miscellaneous expense (2)                                |    | 15       |   |   |    | 81          |   |   |    | 3       |   |   |    | 66      |   |
| Total other expense                                            | $       | 461      |   |   | $       | 946         |   |   | $       | 127     |   |   | $       | 289     |   |
|                                                           |    |     |   |   |    |        |   |   |    |    |   |   |    |    |   |
| Other income:                                                  |    |     |   |   |    |        |   |   |    |    |   |   |    |    |   |
| Litigation judgment, settlements and potential settlements (3) |  $ |  50 |   |   |  $ |  8,235 |   |   |  $ |  - |   |   |  $ |  - |   |
| Other miscellaneous income (2)                                 |    | 172      |   |   |    | 182         |   |   |    | 32      |   |   |    | 88      |   |
| Total other income                                             | $       | 222      |   |   | $       | 8,417       |   |   | $       | 32      |   |   | $       | 88      |   |
|                                                           |    |     |   |   |    |        |   |   |    |    |   |   |    |    |   |
| Non-operating other income, net:                               |    |     |   |   |    |        |   |   |    |    |   |   |    |    |   |
| Interest income                                                | $       | 138      |   |   | $       | 1,188       |   |   | $       | 60      |   |   | $       | 289     |   |
| Miscellaneous income (2)                                       |    | 1        |   |   |    | 10          |   |   |    | 1       |   |   |    | (1      | )      |
| Miscellaneous expense (2)                                      |    | (67      | )      |   |    | (73         | )      |   |    | (23     | )      |   |    | (25     | )      |
| Total non-operating other income, net                          | $       | 72       |   |   | $       | 1,125       |   |   | $       | 38      |   |   | $       | 263     |   |

| (1)   | Based on an unsuccessful effort to sell certain corporate assets in an auction, we recognized an impairment of long-lived assets. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Amounts represent numerous unrelated transactions, none of which are individually significant requiring separate disclosure. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------|

| (3)   | For the nine months ended September 30, 2008, income from litigation judgment and settlements included approximately $7.6 million, net of attorneys’ fees, relating to a litigation judgment involving a subsidiary within our Chemical Business. On June 6, 2008, we received proceeds of approximately $11.2 million for this litigation judgment, which includesinterest of approximately $1.4 million and from which we paid attorneys’ fees of approximately $3.6 million. The payment of attorneys’ fees of 31.67% of our recovery was contingent upon the cash receipt of the litigation judgment. Cash flows relating to this litigation judgment are included in cash flows from continuing operating activities, except for the portion of the judgment associated with the recovery of damages relating to property, plant and equipment and its pro-rata portion of the attorneys’ |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Net sales:                                                        |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
|-------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Climate Control                                                   | $      | 206,443 |   |   | $      | 230,303 |   |   | $      | 67,413  |   |   | $      | 83,354  |   |
| Chemical                                                          |   | 204,089 |   |   |   | 329,271 |   |   |   | 59,718  |   |   |   | 124,483 |   |
| Other                                                             |   | 6,006   |   |   |   | 9,853   |   |   |   | 647     |   |   |   | 3,083   |   |
|                                                              | $      | 416,538 |   |   | $      | 569,427 |   |   | $      | 127,778 |   |   | $      | 210,920 |   |
|                                                              |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Gross profit: (1)                                                 |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Climate Control (2)                                               | $      | 72,172  |   |   | $      | 72,346  |   |   | $      | 24,746  |   |   | $      | 24,892  |   |
| Chemical (3) (4)                                                  |   | 35,091  |   |   |   | 37,181  |   |   |   | 5,662   |   |   |   | 5,329   |   |
| Other                                                             |   | 1,945   |   |   |   | 3,140   |   |   |   | 245     |   |   |   | 948     |   |
|                                                              | $      | 109,208 |   |   | $      | 112,667 |   |   | $      | 30,653  |   |   | $      | 31,169  |   |
|                                                              |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Operating income (loss): (5)                                      |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Climate Control (2)                                               | $      | 32,146  |   |   | $      | 31,017  |   |   | $      | 10,942  |   |   | $      | 9,835   |   |
| Chemical (3) (4) (6) (7)                                          |   | 15,491  |   |   |   | 34,487  |   |   |   | (3,344  | )      |   |   | 1,860   |   |
| General corporate expenses and other business operations, net (8) |   | (9,405  | )      |   |   | (8,158  | )      |   |   | (3,328  | )      |   |   | (3,005  | )      |
|                                                              |   | 38,232  |   |   |   | 57,346  |   |   |   | 4,270   |   |   |   | 8,690   |   |
|                                                              |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Interest expense                                                  |   | (5,139  | )      |   |   | (6,363  | )      |   |   | (2,200  | )      |   |   | (2,643  | )      |
| Gains on extinguishment of debt                                   |   | 1,796   |   |   |   | -       |   |   |   | 53      |   |   |   | -       |   |
| Non-operating other income (expense), net:                        |   |    |   |   |   |    |   |   |   |    |   |   |   |
| Climate Control                                                   |   | -       |   |   |   | 1       |   |   |   | -       |   |   |   | -       |   |
| Chemical                                                          |   | 26      |   |   |   | 64      |   |   |   | 20      |   |   |   | -       |   |
| Corporate and other business operations                           |   | 46      |   |   |   | 1,060   |   |   |   | 18      |   |   |   | 263     |   |
| Provisions for income taxes                                       |   | (14,110 | )      |   |   | (19,817 | )      |   |   | (1,310  | )      |   |   | (2,388  | )      |
| Equity in earnings of affiliate-Climate Control                   |   | 740     |   |   |   | 697     |   |   |   | 252     |   |   |   | 235     |   |
| Income from continuing operations                                 | $      | 21,591  |   |   | $      | 32,988  |   |   | $      | 1,103   |   |   | $      | 4,157   |   |

| (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 nine and three months ended September 30, 2009, we recognized gains totaling $1,193,000 and $404,000, respectively, on our futures contracts for copper. During the nine and three months ended September 30, 2008, we recognized gains (losses) on our copper futures contracts totaling $2,202,000 and $(483,000), respectively. During the three months ended September 30, 2009, our engineering and constructionbusiness recognized |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | additional gross profit of $552,000 relating to customer change orders. The impact of these transactions is included in gross profit and operating income. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | During the nine and three months ended September 30, 2009, we recognized losses totaling $2,791,000 and $854,000, respectively, on our futures/forward contracts for natural gas and ammonia compared to $5,968,000 and $7,771,000 for each of the same periods in 2008, respectively. In addition, during the three months ended September 30, 2008, our Chemical Business recognized unrealized gains of $447,000 associated withnatural gas forward contracts, which were deferred at June 30, 2008 due to uncertainties involving a sales contract with a customer. During the nine and three months ended September 30, 2009, we recognized losses on outstanding firm sales commitments of $1,310,000 and $1,229,000, respectively, which amounts include $992,000 relating to the Pryor Facility discussed below in footnote 7. The impact of these transactions is included in gross profit and operating income (loss) for each respective period. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | As the result of entering into sales commitments with higher firm sales prices during 2008, we recognized sales with a gross profit of $5,143,000 and $1,585,000 higher than our comparable product sales made at lower market prices available during the nine and three months ended September 30, 2009, respectively. In addition, during the nine months ended September 30, 2009, we recognized recoveries of precious metalstotaling $2,456,000 compared to $1,343,000 for the same period in 2008. During the nine and three months ended September 30, 2009, we incurred expenses of $2,682,000 and $2,079,000, respectively, relating to planned major maintenance activities compared to $1,494,000 and $881,000 for each of the same periods in 2008, respectively. Also during the nine and three months ended September 30, 2008, the Cherokee Facility incurred costs of approximately $5,100,000 as the result of unplanned downtime during the thirdquarter of 2008. These costs include estimates of lost fixed overhead absorption, repair cost, and losses incurred to purchase anhydrous ammonia to replace lost production in order to meet firm sales commitments. The impact of these transactions is included in gross profit and operating income (loss) for each respective period. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | 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 selling, general and administration expense (“SG&A”) incurred by each industry segment plus other income and other expense earned/incurred byeach 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. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | For the nine month periods ended September 30, 2008, we recognized other income of $7,560,000, net of attorneys’ fees, relating to a litigation judgment. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| (7) | During the nine and three months ended September 30, 2009, we incurred expenses of $12,271,000 and $7,058,000, respectively, (including the $992,000 loss on firm sales commitments discussed above in footnote 3) associated with the start up of our previously idled chemical facility located in Pryor, Oklahoma (the “Pryor Facility”) that we are in the process of activating. For the nine and three monthsended September 30, 2008, we incurred expenses of $1,344,000 and $425,000, respectively, associated with maintaining the Pryor Facility. These expenses are primarily included in SG&A for each respective period. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | The amounts included in general corporate expenses and other business operations, net 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. A detail of these amounts are as follows: |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Nine Months EndedSeptember 30, |   | Three Months EndedSeptember 30, |
|--------|--------------------------------|--------|---------------------------------|

|   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In Thousands) |
|--------|----------------|

| Gross profit-Other                                                  | $      | 1,945   |   |   | $      | 3,140   |   |   | $      | 245    |   |   | $      | 948    |   |
|---------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Selling, general and administrative:                                |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Personnel                                                           |   | (6,202  | )      |   |   | (5,810  | )      |   |   | (1,876 | )      |   |   | (1,740 | )      |
| Professional fees                                                   |   | (2,775  | )      |   |   | (3,349  | )      |   |   | (957   | )      |   |   | (1,362 | )      |
| Office overhead                                                     |   | (490    | )      |   |   | (499    | )      |   |   | (145   | )      |   |   | (122   | )      |
| Maintenance and repairs                                             |   | (182    | )      |   |   | (115    | )      |   |   | (8     | )      |   |   | (30    | )      |
| Property, franchise and other taxes                                 |   | (245    | )      |   |   | (299    | )      |   |   | (85    | )      |   |   | (83    | )      |
| Advertising                                                         |   | (199    | )      |   |   | (204    | )      |   |   | (67    | )      |   |   | (67    | )      |
| All other                                                           |   | (1,186  | )      |   |   | (1,082  | )      |   |   | (453   | )      |   |   | (405   | )      |
| Total selling, general and administrative                           |   | (11,279 | )      |   |   | (11,358 | )      |   |   | (3,591 | )      |   |   | (3,809 | )      |
|                                                                |   |    |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Other income                                                        |   | 156     |   |   |   | 736     |   |   |   | 23     |   |   |   | 32     |   |
| Other expense                                                       |   | (227    | )      |   |   | (676    | )      |   |   | (5     | )      |   |   | (176   | )      |
| Total general corporate expenses and other business operations, net | $      | (9,405  | )      |   | $      | (8,158  | )      |   | $      | (3,328 | )      |   | $      | (3,005 | )      |

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|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|

|   | (In Thousands) |
|--------|----------------|

| Climate Control            |   | $      | 108,770 |   |   | $      | 117,260 |   |
|----------------------------|--------|--------|---------|--------|--------|--------|---------|--------|
| Chemical                   |   |   | 141,507 |   |   |   | 145,518 |   |
| Corporate assets and other |   |   | 90,750  |   |   |   | 72,989  |   |
| Total assets               |   | $      | 341,027 |   |   | $      | 335,767 |   |

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

| ·   | Climate Control Business manufactures and sells a broad range of air conditioning and heating products in the niche markets we serve consisting of geothermal and water source heat pumps, hydronic fan coils, large custom air handlers and other related products used to control the environment in commercial and residential new building construction, renovationof existing buildings and replacement of existing systems. For the first nine months of 2009, approximately 50% of our consolidated net sales relates to the Climate Control Business. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Chemical Business manufactures and sells nitrogen based chemical products produced from three plants located in Arkansas, Alabama and Texas for the industrial, mining and agricultural markets. Our products include industrial and fertilizer grade ammonium nitrate (“AN”), urea ammonium nitrate (“UAN”),nitric acid in various concentrations, nitrogen solutions and various other products. For the first nine months of 2009, approximately 49% of our consolidated net sales relates to the Chemical Business. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Increase(Decrease) |   |
|--------|--------------------|--------|

|   | (In Millions) |
|--------|---------------|

| Expenses – Pryor Facility                           | $      | (6.6 | )      |
|-----------------------------------------------------------|--------|------|--------|
| Gross profit margins – Agricultural products        |   | (6.5 | )      |
| Timing of planned major maintenance                       |   | (1.2 | )      |
| Reduced Losses – Natural gas contracts              |   | 6.5  |   |
| Improvement in production efficiencies                    |   | 2.7  |   |
| Other                                                     |   | (0.1 | )      |
| Effect of variances on Chemical’s operating results | $      | (5.2 | )      |

| ·   | Multi-Family (apartments and condominiums) |
|--------------------|--------------------------------------------|

| ·   | Single-Family Residential |
|--------------------|---------------------------|

| ·   | Lodging |
|--------------------|---------|

| ·   | Education |
|--------------------|-----------|

| ·   | Healthcare |
|--------------------|------------|

| ·   | Offices |
|--------------------|---------|

| ·   | Manufacturing |
|--------------------|---------------|

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|   | Third Quarter |
|--------|---------------|

|   | 2009 |   | 2008 |
|--------|------|--------|------|

| Natural gas average price per MMBtu based upon Tennessee 500 pipeline pricing point | $ | 3.50 |   |   | $ | 10.80 |   |
|------------------------------------------------------------------------------------------|---|------|--------|--------|---|-------|--------|
| Ammonia average price based upon low Tampa metric price per ton                     | $ | 267  |   |   | $ | 773   |   |
| Sulfur price based upon Tampa average quarterly price per long ton                       | $ | 10   |   |   | $ | 617   |   |

| ·   | nitric acid, sulfuric acid and anhydrous ammonia sold to industrial customers; and |
|--------------------|------------------------------------------------------------------------------------|

| ·   | industrial grade AN and nitrogen solutions sold to mining customers. |
|--------------------|----------------------------------------------------------------------|

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| ·   | AN produced at our El Dorado Facility from purchased anhydrous ammonia, |
|--------------------|-------------------------------------------------------------------------|

| ·   | UAN produced at our Cherokee Facility from natural gas, and |
|--------------------|-------------------------------------------------------------|

| ·   | Other fertilizer products sold through our agricultural distribution centers. |
|--------------------|-------------------------------------------------------------------------------|

|   |   | Percentage Change of |
|--------|--------|----------------------|

|   | Tons |   | Dollars |
|--------|------|--------|---------|

|               | Increase  (Decrease) |
|--------------------|--------------------------------|
| Chemical products: |                           |

| Agricultural                  | 8   |  % |   | (28 | )% |
|-------------------------------|-----|---------|--------|-----|----|
| Mining                        | (16 | )%      |   | (47 | )% |
| Industrial acids and other    | (17 | )%      |   | (42 | )% |
| Total weighted-average change | (9  | )%      |   | (38 | )% |

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|   | September 30,2009 |   | December 31,2008 |
|--------|-------------------|--------|------------------|
|   | (In Millions)     |

| Cash and cash equivalents        | $      | 60.2   |   | $      | 46.2   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|
| Short-term investments (1)       |   | 10.0   |   |   | -      |   |
|                             | $      | 70.2   |   | $      | 46.2   |   |
|                             |   |   |   |   |   |   |
| Long-term debt:                  |   |   |   |   |   |   |
| 2007 Debentures due 2012         | $      | 30.4   |   | $      | 40.5   |   |
| Secured Term Loan due 2012       |   | 50.0   |   |   | 50.0   |   |
| Other                            |   | 23.1   |   |   | 14.7   |   |
| Total long-term debt             | $      | 103.5  |   | $      | 105.2  |   |
|                             |   |   |   |   |   |   |
| Total stockholders’ equity | $      | 153.2  |   | $      | 130.0  |   |

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| ·   | the amount of income taxes that ThermaClime would be required to pay if they were not consolidated with us; |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | an amount not to exceed fifty percent (50%) of ThermaClime's consolidated net income during each fiscal year determined in accordance with generally accepted accounting principles plus amounts paid to us within the first bullet above, provided that certain other conditions are met; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the amount of direct and indirect costs and expenses incurred by us on behalf of ThermaClime pursuant to a certain services agreement; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the amount under a certain management agreement between us and ThermaClime, provided certain conditions are met, and |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | outstanding loans entered into subsequent to November 2, 2007 not to exceed $2.0 million at any time. |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Series D Preferred, all of which is owned by the Golsen Group, at the rate of $.06 a share payable on October 9, which dividend is cumulative; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Series B Preferred, all of which is owned by the Golsen Group, at the rate of $12.00 a share payable January 1, which dividend is cumulative; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Noncumulative Preferred at the rate of $10.00 a share payable April 1, which is noncumulative. |
|--------------------|------------------------------------------------------------------------------------------------|

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| ·   | a decrease in our estimated costs to complete a construction contract of $575,000, which contract was substantially completed during the third quarter, |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in our inventory shrink reserves of $238,000, and |
|--------------------|--------------------------------------------------------------|

| ·   | an increase in our accrued vacation of $205,000. |
|--------------------|--------------------------------------------------|

|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |   |
|--------|------------------------|--------|

| Net sales:                                          |   |    |   |   |   |    |   |   |   |    |   |   |   |          |
|-----------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------------|
| Geothermal and water source heat pumps              | $      | 136,681 |   |   | $      | 136,161 |   |   | $      | 520     |   |   | 0.4    |   % |
| Hydronic fan coils                                  |   | 38,503  |   |   |   | 65,701  |   |   |   | (27,198 | )      |   | (41.4  | ) %           |
| Other HVAC products                                 |   | 31,259  |   |   |   | 28,441  |   |   |   | 2,818   |   |   | 9.9    |   % |
| Total Climate Control                               | $      | 206,443 |   |   | $      | 230,303 |   |   | $      | (23,860 | )      |   | (10.4  | ) %           |
|                                                |   |    |   |   |   |    |   |   |   |    |   |   |   |          |
| Gross profit – Climate Control                | $      | 72,172  |   |   | $      | 72,346  |   |   | $      | (174    | )      |   | (0.2   | ) %           |
|                                                |   |    |   |   |   |    |   |   |   |    |   |   |   |          |
| Gross profit percentage – Climate Control (1) |   | 35.0    |   | %      |   | 31.4    |   | %      |   | 3.6     |   | %      |   |          |
|                                                |   |    |   |   |   |    |   |   |   |    |   |   |   |          |
| Operating income – Climate Control            | $      | 32,146  |   |   | $      | 31,017  |   |   | $      | 1,129   |   |   |   |          |

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| · | Net sales of our geothermal and water source heat pump products increased slightly primarily as a result of a 16% increase in sales of our residential products offset by a decline in sales in our commercial products. During the first nine months of 2009, we continued to maintain a market share leadership position of approximately 40%, based on datasupplied by the Air-Conditioning, Heating and Refrigeration Institute (“AHRI”); |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net sales of our hydronic fan coils decreased primarily due to a 41% decrease in the number of units sold and a slight decline in the average unit sales price due to change in product mix. During the first nine months of 2009, we continue to have a market share leadership position based on data supplied by the AHRI; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net sales of our other HVAC products increased primarily as the result of an increase in engineering and construction services completed on construction contracts. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |   |
|--------|------------------------|--------|

| Net sales:                                   |   |    |   |   |   |    |   |   |   |     |   |   |   |   |
|----------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|----------|--------|--------|--------|--------|
| Agricultural products                        | $      | 87,460  |   |   | $      | 120,661 |   |   | $      | (33,201  | )      |   | (27.5  | ) %    |
| Industrial acids and other chemical products |   | 73,165  |   |   |   | 126,690 |   |   |   | (53,525  | )      |   | (42.2  | ) %    |
| Mining products                              |   | 43,464  |   |   |   | 81,920  |   |   |   | (38,456  | )      |   | (46.9  | ) %    |
| Total Chemical                               | $      | 204,089 |   |   | $      | 329,271 |   |   | $      | (125,182 | )      |   | (38.0  | ) %    |
|                                         |   |    |   |   |   |    |   |   |   |     |   |   |   |   |
| Gross profit – Chemical                | $      | 35,091  |   |   | $      | 37,181  |   |   | $      | (2,090   | )      |   | (5.6   | ) %    |
|                                         |   |    |   |   |   |    |   |   |   |     |   |   |   |   |
| Gross profit percentage – Chemical (1) |   | 17.2    |   | %      |   | 11.3    |   | %      |   | 5.9      |   | %      |   |   |
|                                         |   |    |   |   |   |    |   |   |   |     |   |   |   |   |
| Operating income – Chemical            | $      | 15,491  |   |   | $      | 34,487  |   |   | $      | (18,996  | )      |   |   |   |

| · | Sales prices for products produced at the El Dorado Facility decreased 34% related, in part, to the lower cost of raw material, anhydrous ammonia, part of which is passed through to our customers pursuant to contracts and/or pricing arrangements that include raw material feedstock as a pass-through component in the sales price. Our industrial grade AN is sold to one of our customers pursuant to a multi-year takeor pay supply contract in which the customer has agreed to purchase from our El Dorado Facility a certain minimum volume of industrial grade AN during the year. This customer ordered less than the contractual minimum quantity of industrial grade AN product that it was required to purchase during the nine months of 2009 contributing to the decline in sales. Pursuant to the terms of the contract, the customer has been invoiced for certain unrecovered fixed costs and profit on the minimum volume not taken throughSeptember 30, 2009. The customer has disputed and we are in negotiations with the customer related to a component of the invoiced amount on the minimum volume not taken. The disputed amount totaling $0.8 million has been deferred until such time that an agreement is reached. Additionally, pricing for agricultural nitrogen-based products has decreased due to lower demand that resulted, in part, because of unfavorable weather conditions in certain parts of the United States coupled with falling commodity markets.However, volume at the El Dorado Facility increased 9% or 40,000 tons compared to the same period in 2008 primarily attributable to agricultural AN. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | Sales prices and volumes for products produced at the Cherokee Facility decreased 39% and 10%, respectively, primarily related to the lower market-driven demand for UAN in the first nine months of 2009. This situation has been compounded by unfavorable weather conditions in Cherokee’s primary market resulting in lower fertilizer application.  Sales prices also decreased with the pass through of ourlower natural gas costs in the first nine months of 2009 compared to 2008, under pricing arrangements with certain of our industrial customers. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Sales prices decreased approximately 34% for products produced at the Baytown Facility due to lower ammonia costs which is a pass-through component to Bayer. Overall volumes decreased 30% as the result of a decline in customer demand primarily due to the economic downturn. Sales are also lower due to the elimination of a pass-through cost component for lease expense as discussed in ”Liquidity and Capital Resources-BayerAgreement”. The lower sales prices and lower volumes had only a minimum impact to gross profit and operating income due to the provisions of the Bayer Agreement. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |   |
|--------|------------------------|--------|

| Net sales – Other                                      | $      | 6,006  |   |   | $      | 9,853  |   |   | $      | (3,847 | )      |   | (39.0  | ) %    |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit – Other                                   | $      | 1,945  |   |   | $      | 3,140  |   |   | $      | (1,195 | )      |   | (38.1  | ) %    |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit percentage – Other (1)                    |   | 32.4   |   | %      |   | 31.9   |   | %      |   | 0.5    |   | %      |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General corporate expense and other business operations, net | $      | (9,405 | )      |   | $      | (8,158 | )      |   | $      | (1,247 | )      |   |   |   |

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|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |   |
|--------|------------------------|--------|

| Net sales:                                          |   |   |   |   |   |   |   |   |   |    |   |   |   |          |
|-----------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------------|
| Geothermal and water source heat pumps              | $      | 41,612 |   |   | $      | 53,692 |   |   | $      | (12,080 | )      |   | (22.5  | ) %           |
| Hydronic fan coils                                  |   | 12,346 |   |   |   | 21,475 |   |   |   | (9,129  | )      |   | (42.5  | ) %           |
| Other HVAC products                                 |   | 13,455 |   |   |   | 8,187  |   |   |   | 5,268   |   |   | 64.3   |   % |
| Total Climate Control                               | $      | 67,413 |   |   | $      | 83,354 |   |   | $      | (15,941 | )      |   | (19.1  | ) %           |
|                                                |   |   |   |   |   |   |   |   |   |    |   |   |   |          |
| Gross profit – Climate Control                | $      | 24,746 |   |   | $      | 24,892 |   |   | $      | (146    | )      |   | (0.6   | ) %           |
|                                                |   |   |   |   |   |   |   |   |   |    |   |   |   |          |
| Gross profit percentage – Climate Control (1) |   | 36.7   |   | %      |   | 29.9   |   | %      |   | 6.8     |   | %      |   |          |
|                                                |   |   |   |   |   |   |   |   |   |    |   |   |   |          |
| Operating income – Climate Control            | $      | 10,942 |   |   | $      | 9,835  |   |   | $      | 1,107   |   |   |   |          |

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| · | Net sales of our geothermal and water source heat pump products decreased primarily as a result of lower shipments in both commercial and residential products due to the decline in customer orders received during 2009; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net sales of our hydronic fan coils decreased primarily due to a decrease in the number of units sold and lower average unit selling prices due to change in product mix; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net sales of our other HVAC products increased primarily as the result of an increase in engineering and construction services completed on construction contracts and sales of large custom air handlers. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The gross profit percentage improved for our geothermal and water source heat pump products, primarily due to lower raw material costs ($0.8 million) and higher selling prices ($0.3 million) partially offset by lower overhead absorption due to the sales volume decline; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Operational improvements and efficiency gains in our engineering and construction business (including approximately $1.1 million relating to customer change orders and project performance improvements) and in our coil manufacturing operations ($0.5 million), and; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A $0.4 million gain in copper hedges in the third quarter of 2009 compared to a $0.5 million copper hedge loss in the third quarter of 2008. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

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|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |
|--------|------------------------|

| Net sales:                                   |   |   |   |   |   |    |   |   |   |    |   |   |   |          |
|----------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------------|
| Industrial acids and other chemical products | $      | 26,468 |   |   | $      | 47,686  |   |   | $      | (21,218 | )      |   | (44.5  | ) %           |
| Agricultural products                        |   | 20,289 |   |   |   | 42,918  |   |   |   | (22,629 | )      |   | (52.7  | ) %           |
| Mining products                              |   | 12,961 |   |   |   | 33,879  |   |   |   | (20,918 | )      |   | (61.7  | ) %           |
| Total Chemical                               | $      | 59,718 |   |   | $      | 124,483 |   |   | $      | (64,765 | )      |   | (52.0  | ) %           |
|                                         |   |   |   |   |   |    |   |   |   |    |   |   |   |          |
| Gross profit – Chemical                | $      | 5,662  |   |   | $      | 5,329   |   |   | $      | 333     |   |   | 6.2    |   % |
|                                         |   |   |   |   |   |    |   |   |   |    |   |   |   |          |
| Gross profit percentage – Chemical (1) |   | 9.5    |   | %      |   | 4.3     |   | %      |   | 5.2     |   | %      |   |          |
|                                         |   |   |   |   |   |    |   |   |   |    |   |   |   |          |
| Operating income (loss) – Chemical     | $      | (3,344 | )      |   | $      | 1,860   |   |   | $      | (5,204  | )      |   |   |          |

| · | Sales prices for products produced at the El Dorado Facility decreased 46% related, in part, to the lower cost of raw materials, anhydrous ammonia and sulfur, part of which is passed through to our customers pursuant to contacts and/or pricing arrangements that include raw material feedstock as a pass-through component in the sales price. Additionally, pricing for agricultural nitrogen based products has decreaseddue to lower demand that resulted, in part, because of unfavorable weather conditions in certain parts of the United States coupled with falling commodity markets. Volume at the El Dorado Facility decreased 14% or 21,000 tons. The decrease in tons sold was primarily attributable to 31,000 fewer tons of industrial grade AN. Our industrial grade AN is sold to one of our customers pursuant to a multi-year take or pay supply contract in which the customer has agreed to purchase from our El Dorado Facility a certainminimum volume of industrial grade AN during the year. This customer ordered less than the contractual minimum quantity of industrial grade AN product that it was required to purchase during the third quarter of 2009 contributing to the decline in sales. Pursuant to the terms of the contract, the customer has been invoiced for certain unrecovered fixed costs and profit on the minimum volume not taken through September 30, 2009. The customer has disputed and we are in negotiations with the customer relatedto a component of the invoiced amount on the minimum volume not taken. The disputed amount totaling |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | $0.8 million (which includes approximately $0.5 million for the third quarter of 2009) has been deferred until such time that an agreement is reached. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Sales prices for products produced at the Cherokee Facility decreased 50% primarily related to the lower selling prices in the market due to the steep declines in commodities in 2009. Sales prices under pricing arrangements with certain of our industrial and mining customers decreased with the pass through of our lower natural gas costs in the third quarter of 2009 compared to 2008. Sales volumes at the CherokeeFacility increased nominally compared to the third quarter of 2008. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Sales prices decreased approximately 51% for products produced at the Baytown Facility due to lower ammonia costs which is a pass through to the customer. Overall volumes decreased 7% as the result of a decline in customer demand primarily due to the economic downturn. Sales are also lower due to the elimination of a pass-through cost component for lease expense as discussed above in ”Liquidity and CapitalResources-Bayer Agreement”. The lower sales prices and lower volumes had only a minimum impact to gross profit and operating income due to the cost provisions of the Bayer Agreement. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |  2009 |   |  2008 |   |  Change |   | Percentage Change |
|--------|------------|--------|------------|--------|--------------|--------|-------------------|

|   | (Dollars In Thousands) |   |
|--------|------------------------|--------|

| Net sales – Other                                      | $      | 647    |   |   | $      | 3,083  |   |   | $      | (2,436 | )      |   | (79.0  | ) %    |
|--------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit – Other                                   | $      | 245    |   |   | $      | 948    |   |   | $      | (703   | )      |   | (74.2  | ) %    |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit percentage – Other (1)                    |   | 37.9   |   | %      |   | 30.7   |   | %      |   | 7.2    |   | %      |   |   |
|                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General corporate expense and other business operations, net | $      | (3,328 | )      |   | $      | (3,005 | )      |   | $      | (323   | )      |   |   |   |

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| ·   | a decrease of $8.8 million in the Climate Control Business due, in part, to the decrease in sales relating to our geothermal and water source heat pumps and hydronic fan coil  products and an improvement in the timing of collections, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a net decrease of $1.7 million in the Chemical Business primarily as the result of lower sales prices and tons sold from our Cherokee Facility partially offset by an increase in sales volume in September 2009 compared to December 2008 at the Baytown Facility, and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease of $1.3 million in the industrial machinery business due primarily to a decrease in sales of large machinery. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

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| ·   | a decrease of $14.2 million in the Chemical Business primarily relating to the El Dorado Facility due to the decline in costs of our raw material feedstocks and an increase in sales volume of AN and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease of $2.3 million in the Climate Control Business due primarily to the decrease in certain raw material purchases associated with our fan coil and custom large air handler products. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase of $1.4 million relating to estimated income tax payments in excess of our estimated current income tax obligations and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase of $1.4 million of prepaid advertising costs associated with a marketing program launched by our Climate Control Business, partially offset by |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease of $2.5 million of prepaid insurance as the result of recognizing the related insurance expense for the first nine months of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·    | a decrease of $6.1 million in the Climate Control Business primarily as the result of a reduction in raw material purchases and a decrease in certain raw material costs and |
|---------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a net decrease of $2.5 million in the Chemical Business due, in part, to the decrease in costs of our raw material feedstocks and the timing of maintenance projects performed at the El Dorado Facility partially offset by increased start-up costs at the Pryor Facility. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease of $1.1 million in the Chemical Business, |
|--------------------|------------------------------------------------------|

| ·   | a decrease of $0.7 million in the Climate Control Business, and |
|--------------------|-----------------------------------------------------------------|

| ·    | a decrease of $0.5 million in our industrial machinery business. |
|---------------------|------------------------------------------------------------------|

| ·   | a decrease in the fair value of commodities contracts of $5.1 million associated with contracts settled during the first nine months of 2009, |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in billings in excess of costs and estimated earnings on uncompleted contracts of $1.9 million primarily due to costs incurred during the first nine months of 2009 associated with these construction contracts, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | a decrease in accrued commissions of $1.5 million due primarily to lower sales volume in related distribution channels, and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| ·   | a decrease in accrued income taxes of $1.0 million due primarily to payments made to the taxing authorities partially offset by the recognition of income taxes for the first nine months of 2009, partially offset by |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in accrued property and franchise taxes of $1.2 million primarily as the result of the recognition of property and franchise taxes for the first nine months of 2009 and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | an increase in accrued warranty costs of $0.9 million due primarily to specific project installations and the expansion of our residential geothermal heat pump warranty coverage relating to our Climate Control Business. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | long-term debt, |
|--------|-----------------|

| · | interest payments on long-term debt, |
|--------|--------------------------------------|

| · | interest rate contracts, |
|--------|--------------------------|

| · | capital expenditures, |
|--------|-----------------------|

| · | operating leases, |
|--------|-------------------|

| · | futures/forward contracts, |
|--------|----------------------------|

| · | contractual manufacturing obligations, |
|--------|----------------------------------------|

| · | purchase obligations and |
|--------|--------------------------|

| · | other contractual obligations. |
|--------|--------------------------------|

| · | our contractual obligations relating to futures/forward contracts were $3.8 million as of September 30, 2009 and |
|--------|------------------------------------------------------------------------------------------------------------------|

| · | our committed capital expenditures were approximately $7.2 million for the remainder of 2009. |
|--------|-----------------------------------------------------------------------------------------------|

Quantitative and Qualitative Disclosures about Market Risk

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Controls and Procedures

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FORWARD-LOOKING STATEMENTS 

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Legal Proceedings

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Risk Factors

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Unregistered Sales of Equity Securities and Use of Proceeds

|      Period |     (a) Total numberof units acquired (A) |     (b) Average price paidper unit (A) |  (c) Total number of units purchased aspart of publiclyannounced plansor programs | (d) Maximum number(or approximatedollar value) ofunits that may yetbe purchased underthe plans or programs |
|--------------------------------------|---------------------------------------------------------------|------------------------------------------------------------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|

| July 1, 2009 - July 31, 2009          |  -   |   |  $ |  -      |  -   |   |
|---------------------------------------|-----------|--------|---------|--------------|-----------|--------|
|                                  |      |   |    |         |      |   |
| August 1, 2009 -August 31, 2009       |  900 |   |  $ |  910.00 |  900 |   |
|                                  |      |   |    |         |      |   |
| September 1, 2009 -September 30, 2009 |  -   |   |  $ |  -      |  -   |   |
| Total                                 | 900       |   | $       | 910.00       | 900       | 30,400 |

Defaults upon Senior Securities

Submission of Matters to a Vote of Security Holders

Other Information

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Exhibits

| (a) | Exhibits The Company has included the following exhibits in this report: |
|-----|--------------------------------------------------------------------------|

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3(ii)  | Amended and Restated Bylaws of LSB Industries, Inc. dated August 20, 2009, which the Company hereby incorporates by reference from Exhibit 3(ii) to the Company’s Form    8-K, filed August 26, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 10.1   | Amendment No. 1 to Urea Ammonium Nitrate Purchase and Sale Agreement, dated October 29, 2009, between Pryor Chemical Company and Koch Nitrogen Company, LLC, which the Company hereby incorporates by reference from Exhibit 99.1 to the Company’s Form 8-K, filed November 4, 2009.  CERTAININFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AS IT IS THE SUBJECT OF A REQUEST FOR CONFIDENTIAL TREATMENT UNDER THE FREEDOM OF INFORMATION ACT AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION FOR THE PURPOSES OF SUCH REQUEST. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 31.1   | Certification of Jack E. Golsen, Chief Executive Officer, pursuant to Sarbanes-Oxley Act of 2002, Section 302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 31.2   | Certification of Tony M. Shelby, Chief Financial Officer, pursuant to Sarbanes-Oxley Act of 2002, Section 302.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 32.1   | Certification of Jack E. Golsen, Chief Executive Officer, furnished pursuant to Sarbanes-Oxley Act of 2002, Section 906.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 32.2   | Certification of Tony M. Shelby, Chief Financial Officer, furnished pursuant to Sarbanes-Oxley Act of 2002, Section 906.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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|   | LSB INDUSTRIES, INC. |
|--------|----------------------|

|   | By: /s/ Tony M. Shelby                                                                                     |   |
|--------|------------------------------------------------------------------------------------------------------------|--------|
|   | Tony M. ShelbyExecutive Vice President of Finance and Chief Financial Officer(Principal Financial Officer) |

|   | By: /s/ Harold L. Rieker, Jr.                                        |   |
|--------|----------------------------------------------------------------------|--------|
|   | Harold L. Rieker, Jr.Vice President and Principal Accounting Officer |

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