----

----

| [X]                                                                                                                                                                                                                                                                                                                                      | QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934                                                                                      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                     | For the quarterly period      ended             June      30, 2010                 |
|                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                     | 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       |
|                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                   |
|              LSB      Industries, 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 Pennsylvania      Avenue, Oklahoma City, Oklahoma                     73107                                                                    |
|                       Address of principal executive offices                  (Zip      Code)                                                                  |
|                                                                                                                                                                                                                                                                                                                                     |
|                (405)      235-4546                                                                                                                                       |
|        Registrant's      telephone number, including area code                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                     |
|           __             None            _        ___           |
| Former      name, former address and former fiscal year, if  changed since last      report.                                                                                                                                                                                                                                        |

----

----

|                    |                                                                                                 |   |
|-------------------------|------------------------------------------------------------------------------------------------------|--------|
|                    |                                                                                                 |   |
|                    | PART      I – Financial Information                                                            | Page   |
|                    |                                                                                                 |   |
| Item      1.            | Financial Statements                                                                                 | 4      |
|                    |                                                                                                 |   |
| Item      2.            | Management's      Discussion and Analysis of Financial Condition and Results      of      Operations | 37     |
|                    |                                                                                                 |   |
| Item      3.            | Quantitative and Qualitative Disclosures About      Market Risk                                      | 63     |
|                    |                                                                                                 |   |
| Item      4.            | Controls and Procedures                                                                              | 64     |
|                    |                                                                                                 |   |
| Special      Note  | Regarding      Forward-Looking Statements                                                            | 65     |
|                    |                                                                                                 |   |
|                    | PART      II – Other Information                                                               |   |
|                    |                                                                                                 |   |
| Item      1.            | Legal Proceedings                                                                                    | 68     |
|                    |                                                                                                 |   |
| Item      1A.           | Risk      Factors                                                                                    | 68     |
|                    |                                                                                                 |   |
| Item      2.            | Unregistered Sales of Equity Securities and Use of      Proceeds                                     | 68     |
|                    |                                                                                                 |   |
| Item      3.            | Defaults Upon Senior      Securities                                                                 | 70     |
|                    |                                                                                                 |   |
| Item      4.            | (Reserved)                                                                                           | 70     |
|                    |                                                                                                 |   |
| Item      5.            | Other Information                                                                                    | 70     |
|                    |                                                                                                 |   |
| Item      6.            | Exhibits                                                                                             | 71     |

----

Table of Contents

|   | June      30,2010 |   | December      31,2009 |
|--------|-------------------|--------|-----------------------|

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

| Assets                                       |   |    |   |   |    |   |
|----------------------------------------------|--------|---------|--------|--------|---------|--------|
| Current      assets:                         |   |    |   |   |    |   |
| Cash      and cash equivalents               | $      | 65,285  |   | $      | 61,739  |   |
| Restricted      cash                         |   | 276     |   |   | 30      |   |
| Short-term      investments                  |   | -       |   |   | 10,051  |   |
| Accounts      receivable, net                |   | 73,759  |   |   | 57,762  |   |
| Inventories:                                 |   |    |   |   |    |   |
| Finished      goods                          |   | 23,084  |   |   | 25,753  |   |
| Work      in process                         |   | 2,778   |   |   | 2,466   |   |
| Raw      materials                           |   | 21,347  |   |   | 22,794  |   |
| Total      inventories                       |   | 47,209  |   |   | 51,013  |   |
| Supplies,      prepaid items and other:      |   |    |   |   |    |   |
| Prepaid      income taxes                    |   | -       |   |   | 1,642   |   |
| Prepaid      insurance                       |   | 2,086   |   |   | 4,136   |   |
| Precious      metals                         |   | 11,422  |   |   | 13,083  |   |
| Supplies                                     |   | 5,976   |   |   | 4,886   |   |
| Other                                        |   | 2,299   |   |   | 1,626   |   |
| Total      supplies, prepaid items and other |   | 21,783  |   |   | 25,373  |   |
| Deferred      income taxes                   |   | 5,680   |   |   | 5,527   |   |
| Total      current assets                    |   | 213,992 |   |   | 211,495 |   |
|                                         |   |    |   |   |    |   |
| Property,      plant and equipment, net      |   | 121,317 |   |   | 117,962 |   |
|                                         |   |    |   |   |    |   |
| Other      assets:                           |   |    |   |   |    |   |
| Debt      issuance costs, net                |   | 1,342   |   |   | 1,652   |   |
| Investment      in affiliate                 |   | 4,126   |   |   | 3,838   |   |
| Goodwill                                     |   | 1,724   |   |   | 1,724   |   |
| Other,      net                              |   | 2,274   |   |   | 1,962   |   |
| Total      other assets                      |   | 9,466   |   |   | 9,176   |   |
|                                         | $      | 344,775 |   | $      | 338,633 |   |

----

Table of Contents

|   | June      30,2010 |   | December      31,2009 |
|--------|-------------------|--------|-----------------------|

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

| Liabilities      and Stockholders’ Equity                                                                                  |   |    |   |   |    |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| Current      liabilities:                                                                                                        |   |    |   |   |    |   |
| Accounts      payable                                                                                                            | $      | 38,297  |   | $      | 37,553  |   |
| Short-term      financing                                                                                                        |   | 955     |   |   | 3,017   |   |
| Accrued      and other liabilities                                                                                               |   | 23,390  |   |   | 23,054  |   |
| Current      portion of long-term debt                                                                                           |   | 3,456   |   |   | 3,205   |   |
| Total      current liabilities                                                                                                   |   | 66,098  |   |   | 66,829  |   |
|                                                                                                                             |   |    |   |   |    |   |
| Long-term      debt                                                                                                              |   | 98,459  |   |   | 98,596  |   |
|                                                                                                                             |   |    |   |   |    |   |
| Noncurrent      accrued and other liabilities                                                                                    |   | 11,252  |   |   | 10,626  |   |
|                                                                                                                             |   |    |   |   |    |   |
| Deferred      income taxes                                                                                                       |   | 12,467  |   |   | 11,975  |   |
|                                                                                                                             |   |    |   |   |    |   |
| Commitments      and contingencies (Note 11)                                                                                     |   |    |   |   |    |   |
|                                                                                                                             |   |    |   |   |    |   |
| Stockholders'      equity:                                                                                                       |   |    |   |   |    |   |
| Series      B 12% cumulative, convertible preferred stock, $100 par value;      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, 25,413,145      shares issued (25,369,095 at December 31, 2009) |   | 2,541   |   |   | 2,537   |   |
| Capital      in excess of par value                                                                                              |   | 130,828 |   |   | 129,941 |   |
| Retained      earnings                                                                                                           |   | 48,504  |   |   | 41,082  |   |
|                                                                                                                             |   | 184,873 |   |   | 176,560 |   |
| Less      treasury stock at cost:                                                                                                |   |    |   |   |    |   |
| Common      stock, 4,320,462 shares (4,143,362 at December 31, 2009)                                                             |   | 28,374  |   |   | 25,953  |   |
| Total      stockholders' equity                                                                                                  |   | 156,499 |   |   | 150,607 |   |
|                                                                                                                             | $      | 344,775 |   | $      | 338,633 |   |

----

Table of Contents

|   | Six      Months |   | Three      Months |
|--------|-----------------|--------|-------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

|   | (In      Thousands, Except Per ShareAmounts) |
|--------|----------------------------------------------|

| Net      sales                                                                                                     | $      | 298,802 |   |   | $      | 288,760 |   |   | $      | 168,392 |   |   | $      | 138,563 |   |
|--------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Cost      of sales                                                                                                 |   | 235,388 |   |   |   | 210,205 |   |   |   | 133,244 |   |   |   | 100,736 |   |
| Gross      profit                                                                                                  |   | 63,414  |   |   |   | 78,555  |   |   |   | 35,148  |   |   |   | 37,827  |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Selling,      general and administrative expense                                                                   |   | 46,827  |   |   |   | 44,421  |   |   |   | 22,238  |   |   |   | 23,046  |   |
| Provision      for (recoveries of) losses on accounts receivable                                                   |   | (35     | )      |   |   | 28      |   |   |   | (44     | )      |   |   | (24     | )      |
| Other      expense                                                                                                 |   | 302     |   |   |   | 334     |   |   |   | 244     |   |   |   | 291     |   |
| Other      income                                                                                                  |   | (906    | )      |   |   | (190    | )      |   |   | (100    | )      |   |   | (28     | )      |
| Operating      income                                                                                              |   | 17,226  |   |   |   | 33,962  |   |   |   | 12,810  |   |   |   | 14,542  |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Interest      expense                                                                                              |   | 4,079   |   |   |   | 2,939   |   |   |   | 1,999   |   |   |   | 1,028   |   |
| Losses      (gains) on extinguishment of debt                                                                      |   | 52      |   |   |   | (1,743  | )      |   |   | 52      |   |   |   | (421    | )      |
| Non-operating      other income, net                                                                               |   | (38     | )      |   |   | (34     | )      |   |   | -       |   |   |   | (11     | )      |
| Income      from continuing operations before provisions for      income taxes and equity in earnings of affiliate |   | 13,133  |   |   |   | 32,800  |   |   |   | 10,759  |   |   |   | 13,946  |   |
| Provisions      for income taxes                                                                                   |   | 5,891   |   |   |   | 12,800  |   |   |   | 4,979   |   |   |   | 5,451   |   |
| Equity      in earnings of affiliate                                                                               |   | (528    | )      |   |   | (488    | )      |   |   | (267    | )      |   |   | (248    | )      |
| Income      from continuing operations                                                                             |   | 7,770   |   |   |   | 20,488  |   |   |   | 6,047   |   |   |   | 8,743   |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Net      loss from discontinued operations                                                                         |   | 43      |   |   |   | 15      |   |   |   | 38      |   |   |   | 13      |   |
| Net      income                                                                                                    |   | 7,727   |   |   |   | 20,473  |   |   |   | 6,009   |   |   |   | 8,730   |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Dividends      on preferred stocks                                                                                 |   | 305     |   |   |   | 306     |   |   |   | -       |   |   |   | -       |   |
| Net      income applicable to common stock                                                                         | $      | 7,422   |   |   | $      | 20,167  |   |   | $      | 6,009   |   |   | $      | 8,730   |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Weighted-average      common shares:                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Basic                                                                                                              |   | 21,227  |   |   |   | 21,174  |   |   |   | 21,229  |   |   |   | 21,238  |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Diluted                                                                                                            |   | 21,692  |   |   |   | 23,587  |   |   |   | 22,377  |   |   |   | 23,674  |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Income      per common share:                                                                                      |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Basic                                                                                                              | $      | .35     |   |   | $      | .95     |   |   | $      | .28     |   |   | $      | .41     |   |
|                                                                                                               |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Diluted                                                                                                            | $      | .35     |   |   | $      | .89     |   |   | $      | .27     |   |   | $      | .38     |   |

----

Table of Contents

|   |  Common      Stock      Shares |   | Non-Redeemable      Preferred      Stock |   |  CommonStock      Par      Value |   |  Capital      in Excess      of Par      Value |   |   Retained      Earnings |   |  Treasury      Stock-Common |   |    Total |
|--------|-------------------------------------|--------|------------------------------------------|--------|---------------------------------------|--------|-----------------------------------------------------|--------|------------------------------------|--------|----------------------------------|--------|-------------------------|

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

| Balance      at December 31, 2009                                          | 25,369 | $      | 3,000  | $      | 2,537  | $      | 129,941 |   | $      | 41,082 |   | $      | (25,953 | )      | $      | 150,607 |   |
|----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|---------|--------|--------|---------|--------|
| Net      income                                                            |   |   |   |   |   |   |    |   |   | 7,727  |   |   |    |   |   | 7,727   |   |
| Dividends      paid on preferred stocks                                    |   |   |   |   |   |   |    |   |   | (305   | )      |   |    |   |   | (305    | )      |
| Stock-based      compensation                                              |   |   |   |   |   |   | 500     |   |   |   |   |   |    |   |   | 500     |   |
| Exercise      of stock options                                             | 43     |   |   |   | 4      |   | 292     |   |   |   |   |   |    |   |   | 296     |   |
| Excess      income tax benefit associated with stock-basedcompensation     |   |   |   |   |   |   | 94      |   |   |   |   |   |    |   |   | 94      |   |
| Acquisition      of 177,100 shares of common stock                         |   |   |   |   |   |   |    |   |   |   |   |   | (2,421  | )      |   | (2,421  | )      |
| Conversion      of 14 shares of redeemable preferred stock to common stock | 1      |   |   |   |   |   | 1       |   |   |   |   |   |    |   |   | 1       |   |
| Balance      at June 30, 2010                                              | 25,413 | $      | 3,000  | $      | 2,541  | $      | 130,828 |   | $      | 48,504 |   | $      | (28,374 | )      | $      | 156,499 |   |

----

Table of Contents

|   | 2010 |   | 2009 |
|--------|------|--------|------|

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

| Cash      flows from continuing operating activities:                                                  |   |    |   |   |   |    |   |
|--------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|
| Net      income                                                                                        | $      | 7,727   |   |   | $      | 20,473  |   |
| Adjustments      to reconcile net income to net cash provided by continuing operating      activities: |   |    |   |   |   |    |   |
| Net      loss from discontinued operations                                                             |   | 43      |   |   |   | 15      |   |
| Deferred      income taxes                                                                             |   | 244     |   |   |   | 5,538   |   |
| Loss      (gain) on extinguishment of debt                                                             |   | 52      |   |   |   | (1,743  | )      |
| Losses      on sales and disposals of property and equipment                                           |   | 259     |   |   |   | 220     |   |
| Gain      on property insurance recoveries associated with property, plant and      equipment          |   | (495    | )      |   |   | -       |   |
| Depreciation      of property, plant and equipment                                                     |   | 8,626   |   |   |   | 7,684   |   |
| Amortization                                                                                           |   | 311     |   |   |   | 451     |   |
| Stock-based      compensation                                                                          |   | 500     |   |   |   | 514     |   |
| Provision      for (recovery of) losses on accounts receivable                                         |   | (35     | )      |   |   | 28      |   |
| Realization      of losses on inventory                                                                |   | (324    | )      |   |   | (3,024  | )      |
| Provision      for (realization of) losses on firm sales commitments                                   |   | (371    | )      |   |   | 514     |   |
| Equity      in earnings of affiliate                                                                   |   | (528    | )      |   |   | (488    | )      |
| Distributions      received from affiliate                                                             |   | 240     |   |   |   | 350     |   |
| Changes      in fair value of commodities contracts                                                    |   | 246     |   |   |   | 969     |   |
| Changes      in fair value of interest rate contracts                                                  |   | 348     |   |   |   | (649    | )      |
| Other                                                                                                  |   | (10     | )      |   |   | -       |   |
| Cash      provided (used) by changes in assets and liabilities:                                        |   |    |   |   |   |    |   |
| Accounts      receivable                                                                               |   | (16,585 | )      |   |   | 15,790  |   |
| Inventories                                                                                            |   | 4,128   |   |   |   | 12,153  |   |
| Prepaid      and accrued income taxes                                                                  |   | 2,392   |   |   |   | 146     |   |
| Other      supplies and prepaid items                                                                  |   | 1,798   |   |   |   | 1,315   |   |
| Accounts      payable                                                                                  |   | 2,700   |   |   |   | (11,703 | )      |
| Customer      deposits                                                                                 |   | (77     | )      |   |   | (2,121  | )      |
| Accrued      payroll and benefits                                                                      |   | (1,054  | )      |   |   | (1,983  | )      |
| Commodities      contracts                                                                             |   | 150     |   |   |   | (4,112  | )      |
| Deferred      rent expense                                                                             |   | -       |   |   |   | (1,424  | )      |
| Other      current and noncurrent liabilities                                                          |   | 2,243   |   |   |   | (3,781  | )      |
| Net      cash provided by continuing operating activities                                              |   | 12,528  |   |   |   | 35,132  |   |
|                                                                                                   |   |    |   |   |   |    |   |
| Capital      expenditures                                                                              |   | (10,861 | )      |   |   | (12,406 | )      |
| Proceeds      from property insurance recoveries associated with property, plant and      equipment    |   | 1,670   |   |   |   | -       |   |
| Proceeds      from sales of property and equipment                                                     |   | 11      |   |   |   | 3       |   |
| Proceeds      from short-term investments                                                              |   | 20,053  |   |   |   | -       |   |
| Purchase      of short-term investments                                                                |   | (10,002 | )      |   |   | -       |   |
| Proceeds      from (deposits of) restricted cash                                                       |   | (246    | )      |   |   | 518     |   |
| Other      assets                                                                                      |   | (326    | )      |   |   | (209    | )      |
| Net      cash provided (used) by continuing investing activities                                       |   | 299     |   |   |   | (12,094 | )      |

----

Table of Contents

|   | 2010 |   | 2009 |
|--------|------|--------|------|

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

| Cash      flows from continuing financing activities:                                                             |   |     |   |   |   |     |   |
|-------------------------------------------------------------------------------------------------------------------|--------|----------|--------|--------|--------|----------|--------|
| Proceeds      from revolving debt facilities                                                                      | $      | 263,064  |   |   | $      | 281,103  |   |
| Payments      on revolving debt facilities                                                                        |   | (263,064 | )      |   |   | (281,103 | )      |
| Acquisition      of 5.5% convertible debentures                                                                   |   | (2,494   | )      |   |   | (7,134   | )      |
| Proceeds      from other long-term debt, net of fees                                                              |   | 47       |   |   |   | 2,565    |   |
| Payments      on other long-term debt                                                                             |   | (2,386   | )      |   |   | (687     | )      |
| Payments      on short-term financing                                                                             |   | (2,062   | )      |   |   | (1,776   | )      |
| Proceeds      from exercise of stock options                                                                      |   | 296      |   |   |   | 500      |   |
| Purchase      of treasury stock                                                                                   |   | (2,421   | )      |   |   | -        |   |
| Excess      income tax benefit associated with stock-basedcompensation                                            |   | 189      |   |   |   | 657      |   |
| Dividends      paid on preferred stocks                                                                           |   | (305     | )      |   |   | (306     | )      |
| Net      cash used by continuing financing activities                                                             |   | (9,136   | )      |   |   | (6,181   | )      |
|                                                                                                              |   |     |   |   |   |     |   |
| Cash      flows of discontinued operations:                                                                       |   |     |   |   |   |     |   |
| Operating      cash flows                                                                                         |   | (145     | )      |   |   | (53      | )      |
| Net      increase in cash and cash equivalents                                                                    |   | 3,546    |   |   |   | 16,804   |   |
|                                                                                                              |   |     |   |   |   |     |   |
| Cash      and cash equivalents at beginning of period                                                        |   | 61,739   |   |   |   | 46,204   |   |
| Cash      and cash equivalents at end of period                                                                   | $      | 65,285   |   |   | $      | 63,008   |   |
|                                                                                                              |   |     |   |   |   |     |   |
| Supplemental      cash flow information:                                                                          |   |     |   |   |   |     |   |
|                                                                                                              |   |     |   |   |   |     |   |
| Cash      payments for income taxes, net of refunds                                                               | $      | 3,093    |   |   | $      | 6,459    |   |
|                                                                                                              |   |     |   |   |   |     |   |
| Noncash      investing and financing activities:                                                                  |   |     |   |   |   |     |   |
|                                                                                                              |   |     |   |   |   |     |   |
| Receivable      associated with a property insurance claim                                                        | $      | 560      |   |   | $      | 1,135    |   |
| Current      other assets, accounts payable and long-term debt associated with      property, plant and equipment | $      | 5,548    |   |   | $      | 4,164    |   |
| Debt      issuance costs associated with the acquisition of the 5.5% convertible      debentures                  | $      | 58       |   |   | $      | 323      |   |
|                                                                                                              |   |     |   |   |   |     |   |

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Table of Contents

----

Table of Contents

|   |   | June      30,2010 |   | December      31,2009 |
|--------|--------|-------------------|--------|-----------------------|

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

| Trade      receivables               | $      | 72,467 |   |   | $      | 55,318 |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|
| Insurance      claims                |   | 880    |   |   |   | 1,517  |   |
| Other                                |   | 948    |   |   |   | 1,603  |   |
|                                 |   | 74,295 |   |   |   | 58,438 |   |
| Allowance      for doubtful accounts |   | (536   | )      |   |   | (676   | )      |
|                                 | $      | 73,759 |   |   | $      | 57,762 |   |

|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Balance      at beginning of period        | $      | 1,676 |   |   | $      | 4,141  |   |   | $      | 1,744 |   |   | $      | 1,109 |   |
|--------------------------------------------|--------|-------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|
| Provision      for (realization of) losses |   | (324  | )      |   |   | (3,024 | )      |   |   | (442  | )      |   |   | 8     |   |
| Write-offs/disposals                       |   | (50   | )      |   |   | (53    | )      |   |   | -     |   |   |   | (53   | )      |
| Balance      at end of period              | $      | 1,302 |   |   | $      | 1,064  |   |   | $      | 1,302 |   |   | $      | 1,064 |   |

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|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Precious      metals expense           | $      | 3,461 |   |   | $      | 3,279  |   |   | $      | 2,082 |   |   | $      | 1,552 |   |
|----------------------------------------|--------|-------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|-------|--------|
| Recoveries      of precious metals     |   | -     |   |   |   | (2,222 | )      |   |   | -     |   |   |   | (9    | )      |
| Gains      on sales of precious metals |   | (112  | )      |   |   | -      |   |   |   | -     |   |   |   | -     |   |
| Precious      metals expense, net      | $      | 3,349 |   |   | $      | 1,057  |   |   | $      | 2,082 |   |   | $      | 1,543 |   |

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|   | June      30,2010 |   | December      31,2009 |
|--------|-------------------|--------|-----------------------|

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

| Deferred      revenue on extended warranty contracts  |   | $      | 5,284  |   |   | $      | 4,884  |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Accrued      payroll and benefits                     |   |   | 4,846  |   |   |   | 5,900  |   |
| Accrued      insurance                                |   |   | 4,146  |   |   |   | 3,667  |   |
| Accrued      death benefits                           |   |   | 3,703  |   |   |   | 3,356  |   |
| Accrued      warranty costs                           |   |   | 3,129  |   |   |   | 3,138  |   |
| Fair      value of derivatives                        |   |   | 2,523  |   |   |   | 1,929  |   |
| Accrued      contractual manufacturing obligations    |   |   | 1,687  |   |   |   | 732    |   |
| Accrued      income taxes                             |   |   | 1,358  |   |   |   | 608    |   |
| Accrued      executive benefits                       |   |   | 1,213  |   |   |   | 1,102  |   |
| Accrued      interest                                 |   |   | 809    |   |   |   | 1,593  |   |
| Accrued      commissions                              |   |   | 723    |   |   |   | 1,035  |   |
| Other                                                 |   |   | 5,221  |   |   |   | 5,736  |   |
|                                                  |   |   | 34,642 |   |   |   | 33,680 |   |
| Less      noncurrent portion                          |   |   | 11,252 |   |   |   | 10,626 |   |
| Current      portion of accrued and other liabilities |   | $      | 23,390 |   |   | $      | 23,054 |   |

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|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Balance      at beginning of period | $      | 3,138  |   |   | $      | 2,820  |   |   | $      | 2,991 |   |   | $      | 2,864  |   |
|-------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-------|--------|--------|--------|--------|--------|
| Charged      to costs and expenses  |   | 1,643  |   |   |   | 3,146  |   |   |   | 645   |   |   |   | 1,288  |   |
| Costs      and expenses incurred    |   | (1,652 | )      |   |   | (2,928 | )      |   |   | (507  | )      |   |   | (1,114 | )      |
| Balance      at end of period       | $      | 3,129  |   |   | $      | 3,038  |   |   | $      | 3,129 |   |   | $      | 3,038  |   |

|   | June      30, |   | December      31, |
|--------|---------------|--------|-------------------|
|   | 2010          |   | 2009              |

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

| Working      Capital Revolver Loan due 2012 (A)                                                                                           | $      | -       |   | $      | -       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| 5.5%      Convertible Senior Subordinated Notes due 2012 (B)                                                                              |   | 26,900  |   |   | 29,400  |   |
| Secured      Term Loan due 2012 (C)                                                                                                       |   | 49,151  |   |   | 50,000  |   |
| Other,      with a current weighted-average interest rate of 6.42%, most of which is      secured by machinery, equipment and real estate |   | 25,864  |   |   | 22,401  |   |
|                                                                                                                                      |   | 101,915 |   |   | 101,801 |   |
| Less      current portion of long-term debt                                                                                               |   | 3,456   |   |   | 3,205   |   |
| Long-term      debt due after one year                                                                                                    | $      | 98,459  |   | $      | 98,596  |   |

----

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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 Rule10b-5, |
|--------------------|------------------------------------------------------------|

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

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

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|   | Fair      Value Measurements atJune      30, 2010 Using |
|--------|---------------------------------------------------------|

|     Description |   |  Total      FairValue      atJune      30,2010 |   | Quoted      Prices in      ActiveMarkets      for Identical      Assets (Level      1) |   | SignificantOtherObservableInputs(Level      2) |   |  Significant      Unobservable      Inputs(Level      3) |   |  Total      FairValue      atDecember      31,2009 |
|-------------------------------------|--------|-----------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|---------------------------------------------------------------|--------|---------------------------------------------------------|

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

| Assets      - Supplies, prepaid items      and other:                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Commodities      contracts                                                         | $      | -      |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |   | $      | 150    |   |
| Total                                                                              | $      | -      |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |   | $      | 150    |   |
|                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities      - Current and noncurrent      accrued and other      liabilities: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Commodities      contracts                                                         | $      | 246    |   | $      | 246    |   |   | $      | -      |   |   | $      | -      |   |   | $      | -      |   |
| Interest      rate contracts                                                       |   | 2,277  |   |   | -      |   |   |   | 2,277  |   |   |   | -      |   |   |   | 1,929  |   |
| Total                                                                              | $      | 2,523  |   | $      | 246    |   |   | $      | 2,277  |   |   | $      | -      |   |   | $      | 1,929  |   |

|   | 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                                          |   | $      | -      |   |

----

|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Total      net gains (losses) included in earnings:   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost      of sales – Commodities contracts      | $      | (904   | )      |   | $      | (1,148 | )      |   | $      | (216   | )      |   | $      | 8      |   |
| Cost      of sales – Foreign exchange contracts |   | (24    | )      |   |   | (31    | )      |   |   | -      |   |   |   | (1     | )      |
| Interest      expense – Interest rate contracts |   | (1,137 | )      |   |   | 158    |   |   |   | (523   | )      |   |   | 427    |   |
|                                                  | $      | (2,065 | )      |   | $      | (1,021 | )      |   | $      | (739   | )      |   | $      | 434    |   |

|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Change      in unrealized gains and losses relating to contracts still held at period      end: |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Cost      of sales – Commodities contracts                                                | $      | (246   | )      |   | $      | (969   | )      |   | $      | (313   | )      |   | $      | 30     |   |
| Interest      expense – Interest rate contracts                                           |   | (348   | )      |   |   | 649    |   |   |   | (128   | )      |   |   | 719    |   |
|                                                                                            | $      | (594   | )      |   | $      | (320   | )      |   | $      | (441   | )      |   | $      | 749    |   |

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|   | June      30, 2010 |   | December      31, 2009 |
|--------|--------------------|--------|------------------------|

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

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

| Variable      Rate:                             |   |   |   |   |   |   |    |   |   |   |   |   |
|-------------------------------------------------|--------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
| Secured      Term Loan                          |   | $      | 24,518 |   |   | $      | 49,151  |   |   | $      | 27,640 |   |   | $ | 50,000 |   |
| Working      Capital Revolver Loan              |   |   | -      |   |   |   | -       |   |   |   | -      |   |   |   | - |   |
| Other      debt                                 |   |   | 2,495  |   |   |   | 2,495   |   |   |   | 2,553  |   |   |   | 2,553 |   |
|                                            |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| Fixed      Rate:                                |   |   |   |   |   |   |    |   |   |   |   |   |   |   |   |   |
| 5.5%      Convertible Senior Subordinated Notes |   |   | 26,833 |   |   |   | 26,900  |   |   |   | 29,106 |   |   |   | 29,400 |   |
| Other      bank debt and equipment financing    |   |   | 24,015 |   |   |   | 23,369  |   |   |   | 20,231 |   |   |   | 19,848 |   |
|                                            |   | $      | 77,861 |   |   | $      | 101,915 |   |   | $      | 79,530 |   |   | $ | 101,801 |   |

| ·   | we      purchased 177,100 shares of treasurystock; |
|--------------------|----------------------------------------------------|

| ·   | we      issued 43,510 shares of our common stock as the result of the exercise of      stock options; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | we      acquired $2,500,000 aggregate principle amount of the 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 $5,000,respectively. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | we      issued 389,000 shares of our common stock as the result of the exercise of      stock options; |
|--------------------|--------------------------------------------------------------------------------------------------------|

| ·   | we      acquired $9,200,000 aggregate principle amount of the 2007 Debentures;      and |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | 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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|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

| Numerator:                                                                                                                                                        |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------|--------|--------|------------------|--------|--------|--------|------------------|--------|--------|--------|------------------|--------|
| Net      income                                                                                                                                                   | $      | 7,727      |   |   | $      | 20,473           |   |   | $      | 6,009            |   |   | $      | 8,730            |   |
| Dividends      on Series B Preferred                                                                                                                              |   | (240       | )      |   |   | (240             | )      |   |   | -                |   |   |   | -                |   |
| Dividends      on Series D Preferred                                                                                                                              |   | (60        | )      |   |   | (60              | )      |   |   | -                |   |   |   | -                |   |
| Dividends      on Noncumulative Preferred                                                                                                                         |   | (5         | )      |   |   | (6               | )      |   |   | -                |   |   |   | -                |   |
| Total      dividends on preferred stock                                                                                                                           |   | (305       | )      |   |   | (306             | )      |   |   | -                |   |   |   | -                |   |
| Numerator      for basic net income per common share - net income applicable to common      stock                                                                 |   | 7,422      |   |   |   | 20,167           |   |   |   | 6,009            |   |   |   | 8,730            |   |
| Dividends      on preferred stock assumed to be converted, if dilutive                                                                                            |   | 65         |   |   |   | 306              |   |   |   | -                |   |   |   | -                |   |
| Interest      expense including amortization of debt      issuance costs, net of income taxes, on convertible debt assumed to be      converted, if      dilutive |   | -          |   |   |   |  627        |   |   |   |  -          |   |   |   |  314        |   |
| Numerator      for diluted net income per common share                                                                                                            | $      | 7,487      |   |   | $      | 21,100           |   |   | $      | 6,009            |   |   | $      | 9,044            |   |
|                                                                                                                                                              |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Denominator:                                                                                                                                                      |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Denominator      for basic net income per common share - weighted-average      shares                                                                             |   | 21,227,411 |   |   |   | 21,174,210       |   |   |   | 21,228,918       |   |   |   | 21,237,904       |   |
| Effect      of dilutive securities:                                                                                                                               |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Convertible      preferred stock                                                                                                                                  |   | 270,425    |   |   |   | 938,006          |   |   |   | 936,566          |   |   |   | 937,825          |   |
| Stock      options                                                                                                                                                |   | 190,332    |   |   |   | 331,607          |   |   |   | 207,849          |   |   |   | 354,899          |   |
| Convertible      notes payable                                                                                                                                    |   | 4,000      |   |   |   | 1,143,320        |   |   |   | 4,000            |   |   |   | 1,143,320        |   |
| Dilutive      potential common shares                                                                                                                             |   | 464,757    |   |   |   | 2,412,933        |   |   |   | 1,148,415        |   |   |   | 2,436,044        |   |
| Denominator      for diluted net income per common share - adjusted weighted-average shares      and assumed conversions                                          |   | 21,692,168 |   |   |   |  23,587,143 |   |   |   |  22,377,333 |   |   |   |  23,673,948 |   |
|                                                                                                                                                              |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Basic      net income per common share                                                                                                                            | $      | .35        |   |   | $      | .95              |   |   | $      | .28              |   |   | $      | .41              |   |
|                                                                                                                                                              |   |       |   |   |   |             |   |   |   |             |   |   |   |             |   |
| Diluted      net income per common share                                                                                                                          | $      | .35        |   |   | $      | .89              |   |   | $      | .27              |   |   | $      | .38              |   |

----

|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

|                             |   |   |      |   |   |   |    |   |   |   |      |   |
|----------------------------------|--------|--------|-----------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
| Convertible      notes payable   |   |   | 979,160   |   |   |   | -       |   |   |   | 979,160   |   |   |   | - |   |
| Convertible      preferred stock |   |   | 666,666   |   |   |   | -       |   |   |   | -         |   |   |   | - |   |
| Stock      options               |   |   | 373,619   |   |   |   | 766,646 |   |   |   | 372,253   |   |   |   | 412,363 |   |
|                             |   |   | 2,019,445 |   |   |   | 766,646 |   |   |   | 1,351,413 |   |   |   | 412,363 |   |

|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Current:                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Federal                       | $      | 4,473  |   | $      | 6,490  |   |   | $      | 3,957  |   |   | $      | 1,682  |   |
| State                         |   | 1,174  |   |   | 772    |   |   |   | 967    |   |   |   | 182    |   |
| Total      current provisions | $      | 5,647  |   | $      | 7,262  |   |   | $      | 4,924  |   |   | $      | 1,864  |   |

| Deferred:                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Federal                          | $      | 226    |   | $      | 4,970  |   |   | $      | 49     |   |   | $      | 3,219  |   |
| State                            |   | 18     |   |   | 568    |   |   |   | 6      |   |   |   | 368    |   |
| Total      deferred provisions   |   | 244    |   |   | 5,538  |   |   |   | 55     |   |   |   | 3,587  |   |
| Provisions      for income taxes | $      | 5,891  |   | $      | 12,800 |   |   | $      | 4,979  |   |   | $      | 5,451  |   |

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|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Other      expense:                                                 |    |      |   |   |    |    |   |   |    |    |   |   |    |    |   |
|---------------------------------------------------------------------|---------|-----------|--------|--------|---------|---------|--------|--------|---------|---------|--------|--------|---------|---------|--------|
| Losses      on sales and disposals of property and equipment        | $       | 259       |   |   | $       | 220     |   |   | $       | 256     |   |   | $       | 207     |   |
| Other      miscellaneous expense (1)                                |    | 43        |   |   |    | 114     |   |   |    | (12     | )      |   |    | 84      |   |
| Total      other expense (1)                                        | $       | 302       |   |   | $       | 334     |   |   | $       | 244     |   |   | $       | 291     |   |
|                                                                |    |      |   |   |    |    |   |   |    |    |   |   |    |    |   |
| Other      income:                                                  |    |      |   |   |    |    |   |   |    |    |   |   |    |    |   |
| Property      insurance recoveries in excess oflosses      incurred |  $ |  739 |   |   |  $ |  - |   |   |  $ |  - |   |   |  $ |  - |   |
| Miscellaneous      income (1)                                       |    | 167       |   |   |    | 190     |   |   |    | 100     |   |   |    | 28      |   |
| Total      other income                                             | $       | 906       |   |   | $       | 190     |   |   | $       | 100     |   |   | $       | 28      |   |
|                                                                |    |      |   |   |    |    |   |   |    |    |   |   |    |    |   |
| Non-operating      other income, net:                               |    |      |   |   |    |    |   |   |    |    |   |   |    |    |   |
| Interest      income                                                | $       | 77        |   |   | $       | 78      |   |   | $       | 21      |   |   | $       | 33      |   |
| Miscellaneous      expense (1)                                      |    | (39       | )      |   |    | (44     | )      |   |    | (21     | )      |   |    | (22     | )      |
| Total      non-operating other income, net                          | $       | 38        |   |   | $       | 34      |   |   | $       | -       |   |   | $       | 11      |   |

| (1)   | Amounts      represent numerous unrelated transactions, none of which are individually      significant requiring separatedisclosure. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------|

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|   | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Net      sales:                                                             |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
|-----------------------------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|
| Climate      Control                                                        | $      | 113,499 |   |   | $      | 139,030 |   |   | $      | 59,828  |   |   | $      | 66,982  |   |
| Chemical                                                                    |   | 181,250 |   |   |   | 144,371 |   |   |   | 106,378 |   |   |   | 69,893  |   |
| Other                                                                       |   | 4,053   |   |   |   | 5,359   |   |   |   | 2,186   |   |   |   | 1,688   |   |
|                                                                        | $      | 298,802 |   |   | $      | 288,760 |   |   | $      | 168,392 |   |   | $      | 138,563 |   |
|                                                                        |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Gross      profit: (1)                                                      |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Climate      Control (2)                                                    | $      | 37,231  |   |   | $      | 47,426  |   |   | $      | 18,832  |   |   | $      | 24,998  |   |
| Chemical      (3)                                                           |   | 24,760  |   |   |   | 29,429  |   |   |   | 15,602  |   |   |   | 12,281  |   |
| Other                                                                       |   | 1,423   |   |   |   | 1,700   |   |   |   | 714     |   |   |   | 548     |   |
|                                                                        | $      | 63,414  |   |   | $      | 78,555  |   |   | $      | 35,148  |   |   | $      | 37,827  |   |
|                                                                        |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Operating      income: (4)                                                  |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Climate      Control (2)                                                    | $      | 12,520  |   |   | $      | 21,204  |   |   | $      | 6,993   |   |   | $      | 12,226  |   |
| Chemical      (3) (5)                                                       |   | 11,063  |   |   |   | 18,835  |   |   |   | 9,178   |   |   |   | 6,197   |   |
| General      corporate expenses and other      business operations, net (6) |   | (6,357  | )      |   |   | (6,077  | )      |   |   | (3,361  | )      |   |   | (3,881  | )      |
|                                                                        |   | 17,226  |   |   |   | 33,962  |   |   |   | 12,810  |   |   |   | 14,542  |   |
| Interest      expense                                                       |   | (4,079  | )      |   |   | (2,939  | )      |   |   | (1,999  | )      |   |   | (1,028  | )      |
| Gains      (losses) on extinguishment of debt                               |   | (52     | )      |   |   | 1,743   |   |   |   | (52     | )      |   |   | 421     |   |
| Non-operating      other income, net:                                       |   |    |   |   |   |    |   |   |   |    |   |   |   |    |   |
| Climate      Control                                                        |   | 1       |   |   |   | -       |   |   |   | -       |   |   |   | -       |   |
| Chemical                                                                    |   | 5       |   |   |   | 6       |   |   |   | 3       |   |   |   | 3       |   |
| Corporate      and other business operations                                |   | 32      |   |   |   | 28      |   |   |   | (3      | )      |   |   | 8       |   |
| Provisions      for income taxes                                            |   | (5,891  | )      |   |   | (12,800 | )      |   |   | (4,979  | )      |   |   | (5,451  | )      |
| Equity      in earnings of affiliate-Climate Control                        |   | 528     |   |   |   | 488     |   |   |   | 267     |   |   |   | 248     |   |
| Income      from continuing operations                                      | $      | 7,770   |   |   | $      | 20,488  |   |   | $      | 6,047   |   |   | $      | 8,743   |   |

| (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 six and three months ended June 30, 2010, we recognized losses      totaling $315,000 and $465,000, respectively, on our futures contracts for      copper compared to gains totaling $789,000 and $326,000 during the six and      three months ended June 30, 2009, respectively.  The impact of      these losses decreased (gains increased) gross profit and operating income      for each respective period. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | As      the result of entering into sales commitments with higher firm sales      prices during 2008, we recognized sales with a gross profit of $761,000      higher than our comparable product sales made at lower market prices      available during the six months ended June 30, 2010, (not applicable for      the second quarter of 2010) compared to sales with a gross profit of      $3,558,000 and $1,058,000 higher than our comparable product sales made at      lower market prices available during the six and three months ended June      30, 2009, respectively. In addition, during the six months ended June 30,      2010, we recognized gains on salesand |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | recoveries      of precious metals totaling $112,000 (not applicable for the second      quarter of 2010) compared to gains totaling $2,222,000 and $9,000 during      the six and three months ended June 30, 2009, respectively. The impact of      these transactions increased gross profit and operating income for each      respective period. During the six and three months ended June 30, 2010, we      incurred expenses of $2,696,000 and $1,264,000, respectively, relating to      planned major maintenance activities compared to expenses totaling      $604,000 and $484,000 during the six and three months ended June 30, 2009,      respectively. During the six and three months ended June 30, 2010, we      recognized losses totaling $589,000 and gains totaling $249,000,      respectively, on our futures/forward contracts for natural gas and ammonia      compared to losses totaling $1,937,000 and $318,000 during the six and      three months ended June 30, 2009, respectively. The impact of these      expenses and losses decreased (gains increased) gross profit and operating      income for each respective period. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | 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 by each industry segment before general      corporate expenses and other business operations, net. General corporate      expenses and other business operations, net, consist of unallocated      portions of gross profit, SG&A, other income and other      expense. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | During      the first six months of 2010, we began limited production and sales of      anhydrous ammonia and urea ammonium nitrate (“UAN”) at our previously      idled chemical facility located in Pryor, Oklahoma (the “Pryor      Facility”).  However the production was at rates lower than our      targeted production rates. As a result, we incurred operating losses of      $8,030,000 and $1,993,000 for the six and three months ended June 30,      2010, respectively. During the six and three months ended June 30, 2009,      we incurred start up expenses of $5,213,000 and $3,217,000, respectively,      relating to the Pryor Facility. Excluding the impact of gross profit      recognized during the first half of 2010, these expenses are primarily      included in SG&A for each respective period. Also see Note 16 –      Business Interruption and Property Insurance Claims concerning a fire      within the Pryor Facility. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | The      amounts included 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: |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|    | Six      Months EndedJune      30, |   | Three      Months EndedJune      30, |
|--------------|------------------------------------|--------|--------------------------------------|

|   | 2010 |   | 2009 |   | 2010 |   | 2009 |
|--------|------|--------|------|--------|------|--------|------|

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

| Gross      profit-Other                                                       | $      | 1,423  |   |   | $      | 1,700  |   |   | $      | 714    |   |   | $      | 548    |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Selling,      general and administrative:                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Personnel      costs                                                          |   | (4,267 | )      |   |   | (4,326 | )      |   |   | (2,520 | )      |   |   | (2,601 | )      |
| Professional      fees                                                        |   | (1,925 | )      |   |   | (1,818 | )      |   |   | (755   | )      |   |   | (834   | )      |
| Office      overhead                                                          |   | (323   | )      |   |   | (345   | )      |   |   | (160   | )      |   |   | (157   | )      |
| Maintenance      and repairs                                                  |   | (38    | )      |   |   | (174   | )      |   |   | (26    | )      |   |   | (152   | )      |
| Property,      franchise and other taxes                                      |   | (170   | )      |   |   | (160   | )      |   |   | (84    | )      |   |   | (77    | )      |
| Advertising                                                                   |   | (121   | )      |   |   | (132   | )      |   |   | (55    | )      |   |   | (62    | )      |
| All      other                                                                |   | (999   | )      |   |   | (733   | )      |   |   | (508   | )      |   |   | (370   | )      |
| Total      selling, general and administrative                                |   | (7,843 | )      |   |   | (7,688 | )      |   |   | (4,108 | )      |   |   | (4,253 | )      |
|                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income                                                             |   | 70     |   |   |   | 133    |   |   |   | 30     |   |   |   | 23     |   |
| Other      expense                                                            |   | (7     | )      |   |   | (222   | )      |   |   | 3      |   |   |   | (199   | )      |
| Total      general corporate expenses and other      business operations, net | $      | (6,357 | )      |   | $      | (6,077 | )      |   | $      | (3,361 | )      |   | $      | (3,881 | )      |

|   | June      30,2010 |   | December      31,2009 |
|--------|-------------------|--------|-----------------------|

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

| Climate      Control            | $      | 109,606 |   | $      | 102,029 |   |
|---------------------------------|--------|---------|--------|--------|---------|--------|
| Chemical                        |   | 151,624 |   |   | 143,800 |   |
| Corporate      assets and other |   | 83,330  |   |   | 92,804  |   |
| Total      assets               | $      | 344,560 |   | $      | 338,633 |   |

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Table of Contents

Item 2. Management’sDiscussion and Analysis of Financial Condition and Results ofOperations

| ·   | 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, renovation of      existing buildings and replacement of existing systems. For the first six      months of 2010, approximately 38% 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. In addition, we are      continuing with the development of our previously idled Pryor Facility      located in Pryor, Oklahoma. Our products include industrial and fertilizer      grade AN, UAN, anhydrous ammonia, sulfuric acids, nitric acids in various      concentrations, nitrogen solutions and various other products. For the      first six months of 2010, approximately 61% of our consolidated net sales      relates to the Chemical Business. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Multi-Family      Residential (apartments andcondominiums) |
|--------------------|------------------------------------------------------------|

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

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

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

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

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

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

----

----

|   | 2010 |   | 2009 |
|--------|------|--------|------|

| Natural      gas average price per MMBtu based upon    Tennessee      500 pipeline pricing point | $ | 4.46 |   | $      | 3.91         |   |
|----------------------------------------------------------------------------------------------------------------------|---|------|--------|--------|--------------|--------|
| Ammonia      average price based upon low Tampa    metric      price per ton                     | $ | 390  |   | $      | 261          |   |
| Sulfur      price based upon Tampa average quarterly price per      long ton                                         | $ | 145  |   |   | See      (1) |   |

| (1)   |  The      average quarterly price was negligible for the second quarter of      2009. |
|-----------------|--------------------------------------------------------------------------------------------|

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

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

|                    | Increase |
|-------------------------|----------|
| Chemical      products: |     |

| Agricultural                       |   |   | 45 | %       |   |   | 48 | %       |
|------------------------------------|--------|--------|----|---------|--------|--------|----|---------|
| Industrial      acids and other    |   |   | 44 |  % |   |   | 53 |  % |
| Mining                             |   |   | 33 | %       |   |   | 61 |  % |
| Total      weighted-average change |   |   | 45 |  % |   |   | 52 |  % |

----

|   | June      30,2010  |   | December      31,2009 |
|--------|--------------------|--------|-----------------------|
|   | (In      Millions) |

| Cash      and cash equivalents                       | $      | 65.3   |   | $      | 61.7   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Short-term      investments                          |   | -      |   |   | 10.1   |   |
|                                                 | $      | 65.3   |   | $      | 71.8   |   |
|                                                 |   |   |   |   |   |   |
| Long-term      debt:                                 |   |   |   |   |   |   |
| 2007      Debentures due 2012                        | $      | 26.9   |   | $      | 29.4   |   |
| Secured      Term Loan due 2012                      |   | 49.2   |   |   | 50.0   |   |
| Other                                                |   | 25.8   |   |   | 22.4   |   |
| Total      long-term debt, including current portion | $      | 101.9  |   | $      | 101.8  |   |
|                                                 |   |   |   |   |   |   |
| Total      stockholders’ equity                | $      | 156.5  |   | $      | 150.6  |   |

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----

----

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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 at the rate of $.06 a share, which dividend is      cumulative; |
|--------------------|-----------------------------------------------------------------------------------------|

| ·   | Series      B Preferred at the rate of $12.00 a share, which dividend is cumulative;      and |
|--------------------|-----------------------------------------------------------------------------------------------|

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

----

----

----

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales:                                          |   |    |   |   |   |    |   |   |   |    |   |   |   |                |
|----------------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|---------------------|
| Geothermal      and water source heat pumps              | $      | 78,961  |   |   | $      | 95,069  |   |   | $      | (16,108 | )      |   | (16.9  | )  %      |
| Hydronic      fan coils                                  |   | 16,205  |   |   |   | 26,157  |   |   |   | (9,952  | )      |   | (38.0  | )  %      |
| Other      HVAC products                                 |   | 18,333  |   |   |   | 17,804  |   |   |   | 529     |   |   | 3.0    |    % |
| Total      Climate Control                               | $      | 113,499 |   |   | $      | 139,030 |   |   | $      | (25,531 | )      |   | (18.4  | )  %      |
|                                                     |   |    |   |   |   |    |   |   |   |    |   |   |   |                |
| Gross      profit – Climate Control                | $      | 37,231  |   |   | $      | 47,426  |   |   | $      | (10,195 | )      |   | (21.5  | )  %      |
|                                                     |   |    |   |   |   |    |   |   |   |    |   |   |   |                |
| Gross      profit percentage – Climate Control (1) |   | 32.8    |   | %      |   | 34.1    |   | %      |   | (1.3    | )      | %      |   |                |
|                                                     |   |    |   |   |   |    |   |   |   |    |   |   |   |                |
| Operating      income – Climate Control            | $      | 12,520  |   |   | $      | 21,204  |   |   | $      | (8,684  | )      |   | (41.0  | )      %            |

| · | Net sales of      our geothermal and water source heat pump products decreased primarily as      a result of a 22% decline in sales of our commercial products due to the      slowdown in the construction and renovation activities in the markets we      serve and a 5% decline in sales of our residential products. Shipments of      residential products during the first half of 2009 were particularly      strong due to a larger backlog of customer orders carried forward from      2008. During the first half of 2010, we continued to maintain a market      share leadership position of approximately 38%, based on market data      supplied by the Air-Conditioning, Heating and Refrigeration Institute      (“AHRI”); |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net      sales of our hydronic fan coils decreased primarily due to a 25% decline      in the number of units sold due to the slowdown in the construction and      renovation activities in the markets we serve and a 20% decrease in the      average unit sales price due to change in product mix. During the first      half of 2010, we continue to have a market share leadership position of      approximately 28% based on market data supplied by the    AHRI; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net      sales of our other HVAC products increased primarily as the result of an      increase in the sales of our large custom air handlers and modular      chillers partially offset by a decrease in engineering and construction      services. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales:                                   |   |    |   |   |   |    |   |   |   |   |   |   |   |          |
|---------------------------------------------------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|---------------|
| Agricultural      products                        | $      | 75,496  |   |   | $      | 67,171  |   |   | $      | 8,325  |   |   | 12.4   |  %       |
| Industrial      acids and other chemical products |   | 63,834  |   |   |   | 46,697  |   |   |   | 17,137 |   |   | 36.7   |   % |
| Mining      products                              |   | 41,920  |   |   |   | 30,503  |   |   |   | 11,417 |   |   | 37.4   |  %       |
| Total      Chemical                               | $      | 181,250 |   |   | $      | 144,371 |   |   | $      | 36,879 |   |   | 25.5   |   % |
|                                              |   |    |   |   |   |    |   |   |   |   |   |   |   |          |
| Gross      profit – Chemical                | $      | 24,760  |   |   | $      | 29,429  |   |   | $      | (4,669 | )      |   | (15.9  | )      %      |
|                                              |   |    |   |   |   |    |   |   |   |   |   |   |   |          |
| Gross      profit percentage – Chemical (1) |   | 13.7    |   | %      |   | 20.4    |   | %      |   | (6.7   | )      | %      |   |          |
|                                              |   |    |   |   |   |    |   |   |   |   |   |   |   |          |
| Operating      income – Chemical            | $      | 11,063  |   |   | $      | 18,835  |   |   | $      | (7,772 | )      |   | (41.3  | )      %      |

| ·   | Sales      prices for products produced at the El Dorado Facility increased 10 %      related, in part, to the higher cost of anhydrous ammonia, part of which      is passed through to certain of our customers pursuant to contracts and/or      pricing arrangements that include raw material feedstock as a pass-through      component in the sales price. Pricing for agricultural grade AN was 9%      higher than the prior year period. However, fertilizer grade AN volume of      tons shipped at the El Dorado Facility decreased 15,000 tons primarily due      to unfavorable weather conditions in the first quarter of 2010. Industrial      acid volumes increased 17,000 tons due to improved economic conditions and      spot sales opportunities.  Our industrial grade AN is sold to      one customer pursuant to a multi-year take or pay supply contract in which      the customer |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | has agreed to purchase, and our El Dorado Facility has agreed to      reserve certain minimum volumes of industrial grade AN during the      year.  Pursuant to the terms of the contract, the customer has been      invoiced for the fixed costs and profit associated with the reserved      capacity despite not taking the minimum volume requirement. Overall volume      of all products sold from the El Dorado Facility increased 7,000 tons, or      2%. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      prices at the Cherokee Facility increased 5% compared to the prior year      period.  Volumes also increased 18% primarily related to higher      UAN fertilizer demand.  In the first half of 2009, UAN      fertilizer sales were affected by high inventory levels in the      distribution chain left over from 2008, as well as poor weather      conditions.  While weather conditions were not optimal in 2010,      volumes were not impacted by the supply chain as noted above for the prior      year. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Sales      prices decreased approximately 9% for products produced at the Baytown      Facility due to decreased fixed expenses under the new agreement compared      to the prior agreement. These expenses are a pass-through component to      Bayer.  Overall volumes increased 70% as the result of improved      demand from the Baytown site’s customers.  The decreased sales      prices and increased volumes had only a minimum impact to gross profit and      operating income due to certain provisions of the Bayer      Agreement. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During      the first half of 2010, our Pryor Facility recognized net sales of      $6.0 million for sales of 14,000 tons of anhydrous      ammonia and 16,000 tons of UAN. In addition, the Pryor      Facility provided 14,000 tons of anhydrous ammonia to our El Dorado      and Cherokee Facilities. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales – Other                                      | $      | 4,053  |   |   | $      | 5,359  |   |   | $      | (1,306 | )      |   | (24.4  | )%     |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit – Other                                   | $      | 1,423  |   |   | $      | 1,700  |   |   | $      | (277   | )      |   | (16.3  | )%     |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit percentage – Other (1)                    |   | 35.1   |   | %      |   | 31.7   |   | %      |   | 3.4    |   | %      |   |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General      corporate expense and other business operations, net | $      | (6,357 | )      |   | $      | (6,077 | )      |   | $      | (280   | )      |   | 4.6    | %      |

----

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales:                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |           |
|----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|----------------|
| Geothermal      and water source heat pumps              | $      | 42,003 |   |   | $      | 44,587 |   |   | $      | (2,584 | )      |   | (5.8   | )  % |
| Hydronic      fan coils                                  |   | 8,931  |   |   |   | 12,591 |   |   |   | (3,660 | )      |   | (29.1  | )  % |
| Other      HVAC products                                 |   | 8,894  |   |   |   | 9,804  |   |   |   | (910   | )      |   | (9.3   | )       % |
| Total      Climate Control                               | $      | 59,828 |   |   | $      | 66,982 |   |   | $      | (7,154 | )      |   | (10.7  | )  % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |           |
| Gross      profit – Climate Control                | $      | 18,832 |   |   | $      | 24,998 |   |   | $      | (6,166 | )      |   | (24.7  | )  % |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |           |
| Gross      profit percentage – Climate Control (1) |   | 31.5   |   | %      |   | 37.3   |   | %      |   | (5.8   | )      | %      |   |           |
|                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |           |
| Operating      income – Climate Control            | $      | 6,993  |   |   | $      | 12,226 |   |   | $      | (5,233 | )      |   | (42.8  | )      %       |

| · | Net sales of      our geothermal and water source heat pump products decreased primarily as      a result of a 15% decline in sales of our commercial products due to the      slowdown in the construction and renovation activities in the markets we      serve partially offset by a 7% increase in sales of our residential      products; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| · | Net      sales of our hydronic fan coils decreased primarily due to a 21% decline      in the number of units sold due to the slowdown in the construction and      renovation activities in the markets we serve and an 11% decrease in the      average unit sales price primarily due to change in product      mix; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net      sales of our other HVAC products decreased primarily as the result of a      decrease in engineering and construction  services. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales:                                   |   |    |   |   |   |   |   |   |   |   |   |   |   |          |
|---------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|---------------|
| Agricultural      products                        | $      | 50,960  |   |   | $      | 34,333 |   |   | $      | 16,627 |   |   | 48.4   |  %       |
| Industrial      acids and other chemical products |   | 32,773  |   |   |   | 21,466 |   |   |   | 11,307 |   |   | 52.7   |   % |
| Mining      products                              |   | 22,645  |   |   |   | 14,094 |   |   |   | 8,551  |   |   | 60.7   |  %       |
| Total      Chemical                               | $      | 106,378 |   |   | $      | 69,893 |   |   | $      | 36,485 |   |   | 52.2   |   % |
|                                              |   |    |   |   |   |   |   |   |   |   |   |   |   |          |
| Gross      profit – Chemical                | $      | 15,602  |   |   | $      | 12,281 |   |   | $      | 3,321  |   |   | 27.0   |  %       |
|                                              |   |    |   |   |   |   |   |   |   |   |   |   |   |          |
| Gross      profit percentage – Chemical (1) |   | 14.7    |   | %      |   | 17.6   |   | %      |   | (2.9   | )      | %      |   |          |
|                                              |   |    |   |   |   |   |   |   |   |   |   |   |   |          |
| Operating      income – Chemical            | $      | 9,178   |   |   | $      | 6,197  |   |   | $      | 2,981  |   |   | 48.1   |  %       |

----

| · | Sales      prices for products produced at the El Dorado Facility increased 12%      related, in part, to the higher cost of anhydrous ammonia, part of which      is passed through to certain of our customers pursuant to contracts and/or      pricing arrangements that include raw material feedstock as a pass-through      component in the sales price. Pricing for agricultural grade AN was also      higher than the prior year quarter. Fertilizer grade AN volume of tons      shipped at the El Dorado Facility increased 16,000 tons primarily due to      favorable weather conditions.  Industrial grade AN volumes were      also up 18,000 tons primarily due to increased demand for coal and other      mining services.  Our industrial grade AN is sold to one      customer pursuant to a multi-year take or pay supply contract in which the      customer has agreed to purchase, and our El Dorado Facility has agreed to      reserve, certain minimum volumes of industrial grade AN during the      year.  Pursuant to the terms of the contract, the customer has      been invoiced for the fixed costs and profit associated with the reserved      capacity despite not taking the minimum volume requirement. Industrial      acid volumes increased 10,000 tons due to improved economic conditions and      spot sales opportunities. Overall volume of all products sold from the El      Dorado Facility increased 43,000 tons, or 25% over the prior year second      quarter. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Sales      prices at the Cherokee Facility increased 14% over the prior year      quarter.  Volumes for all Cherokee Facility products increased      24% primarily related to higher UAN fertilizer demand.  In the      second quarter 2009, UAN fertilizer sales were affected by high inventory      levels in the distribution chain left over from 2008, as well as poor      weather conditions.  Volumes in the second quarter 2010 were      also somewhat impacted by less than favorable weather      conditions. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Sales      prices for products produced at the Baytown Facility were approximately      the same as the prior year quarter.  Overall volumes increased      64% as the result of improved demand from the Baytown site’s      customers.  The increased volumes had only a minimum impact to      gross profit and operating income due to certain provisions of the Bayer      Agreement. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | During      the second quarter of 2010, our Pryor Facility recognized net sales      of $5.7 million for sales of 12,000 tons of anhydrous ammonia      and 14,000 tons of UAN. In addition, the Pryor      Facility provided 11,000 tons of anhydrous ammonia to our El Dorado      and Cherokee Facilities. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   |  2010 |   |  2009 |   |  Change |   | Percentage      Change |
|--------|------------|--------|------------|--------|--------------|--------|------------------------|

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

| Net      sales – Other                                      | $      | 2,186  |   |   | $      | 1,688  |   |   | $      | 498    |   |   | 29.5   | %      |
|-------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit – Other                                   | $      | 714    |   |   | $      | 548    |   |   | $      | 166    |   |   | 30.3   | %      |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit percentage – Other (1)                    |   | 32.7   |   | %      |   | 32.5   |   | %      |   | 0.2    |   | %      |   |   |
|                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General      corporate expense and other business operations, net | $      | (3,361 | )      |   | $      | (3,881 | )      |   | $      | 520    |   |   | (13.4  | )%     |

----

----

|   | · | an      increase of $12.9 million relating to the Chemical Business as the result      of the spring fertilizer seasonality and increased demand at our Baytown      Facility and |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an      increase of $3.8 million relating to the Climate Control Business due      primarily to higher in sales in June 2010 compared to December      2009. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      decrease of $2.1 million of prepaid insurance as the result of recognizing      the related insurance expense for the first half of 2010    and |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      decrease of $1.7 million relating to lower costs and volume on hand of      precious metals used in the manufacturing process of our Chemical      Business, partially offset by |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an      increase of $1.1 million of supplies relating to the Chemical Business due      primarily to an increase in the volume on hand as the result of increased      production at our Pryor Facility. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | an      increase of $3.8 million in the Chemical Business primarily as the result      of increased production at our El Dorado and Baytown Facilities which      resulted in increased raw material purchases at increased costs, partially      offset by |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | a      decrease of $1.0 million in the Climate Control Business due primarily to      a reduction in raw materialpurchases. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

----

----

| · | 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 $3.1      million as of June 30, 2010 and |
|--------|-----------------------------------------------------------------------------------------------------------------------|

| · | our      committed capital expenditures were approximately $8.4  million      for the remainder of 2010. |
|--------|--------------------------------------------------------------------------------------------------------------------|

Item 3. Quantitative andQualitative Disclosures about Market Risk

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Item 4. Controls andProcedures

----

SPECIAL NOTEREGARDING

| · | all      production at the Pryor Facility has ceased until repairs can be      completed, which is expected toward the end of September    2010;                                                                                                                                                                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | another      factor that may affect product order rates going forward is the potential      for growth in our highly energy-efficient geothermal water-source heat      pumps, which could benefit significantly from government stimulus      programs, including various tax incentives;                                                       |
| · | we      anticipate modest increased demand from certain of our      large industrial customers and from our mining customers      for the remainder of 2010;                                                                                                                                                                      |
| · | it      is possible that the fertilizer outlook could be adversely affected by      lower grain production, unanticipated changes in commodity prices, or      unfavorable weather conditions;                                                                                                                                                   |
| · | we      expect to ship substantially all of these orders within the next twelve      months; however, due to the current economic conditions in the markets we      serve, it is possible that some of our customers could cancel a portion of      our backlog or extend the shipment terms beyond twelve    months;                            |
| · | our      GHPs use a form of renewable energy and, under certain conditions, can      reduce energy costs up to 80% compared to conventional all-electric and      gas HVAC systems;                                                                                                                                                              |
| · | we      expect to see continued slowness in our Climate Control Business’ results      in the short-term; we believe that the recently enacted federal tax      credits for GHPs should have a positive impact on sales of those highly      energy efficient and green products;                                                          |
| · | based      upon current assessment, we anticipate, due to lead times for replacement      parts, the repairs will be completed toward the end of September      2010;                                                                                                                                                                            |
| · | for      the remainder of 2010, we expect our primary cash needs will be for      working capital and capital expenditures;                                                                                                                                                                                                                      |
| · | we      and our subsidiaries plan to rely upon internally generated cash flows,      cash, secured property and equipment financing, and the borrowing      availability under the Working Capital Revolver Loan to fund operations      and pay obligations;                                                                                    |
| · | based      upon our current projections, we believe that cash and borrowing      availability under our Working Capital Revolver Loan is adequate to fund      operations during the remainder of 2010;                                                                                                                                          |
| · | based      on our current assessment, the repairs should be completed toward the end      of September 2010;                                                                                                                                                                                                                                     |
| · | we      plan to fund the committed expenditures from working capital, which may      include utilizing our Working Capital Revolver Loan, and financing      arrangements;                                                                                                                                                                       |
| · | our      Chemical Business management believes, subject to further review,      investigation and discussion with the EPA, that certain facilities within      our Chemical Business may be required to make certain capital improvements      to certain emission equipment in order to comply with the requirements of      the Clean Air Act; |

----

| · | if      changes to the production equipment at our chemical facilities are      required in order to bring this equipment into compliance with the Clean      Air Act, the amount of capital expenditures necessary in order to bring      the equipment into compliance is unknown at this time but could be      substantial; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | we      believe that certain facilities within our Chemical Business may be      required to pay certainpenalties;                                                                                                                                                                                                              |

| · | the      amount we will incur for capital expenditures, turnarounds and expenses      associated with environmental regulatory compliance for the remainder of      2010;                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | greenhouse      gas regulation could increase the price of the electricity purchased by      these chemical facilities and increase costs for our use of natural gas,      other raw materials (such as anhydrous ammonia), and other energy sources,      potentially restrict access to or the use of natural gas and certain other      raw materials necessary to produce certain of our chemical products and      require us to incur substantial expenditures to retrofit these chemical      facilities to comply with the proposed new laws and regulations regulating      greenhouse gas emissions, if adopted; |
| · | we      believe that some of this additional UAN production from the Caribbean      could be marketed in the United States;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| · | we      do not currently anticipate paying cash dividends on our outstanding      common stock in the near future;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| · | meeting      all required covenant tests for all the remaining quarters of 2010 and the      year ending in 2010;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| · | environmental      and health laws and enforcement policies thereunder could result, in      compliance expenses, cleanup costs, penalties or other liabilities      relating to the handling, manufacture, use, emission, discharge or      disposal of pollutants or other substances at or from our facilities or      the use or disposal of certain of its chemical  products;                                                                                                                                                                                                                                        |

| · | material      costs for liabilities could be incurred by us in complying with      Environmental Laws and the Healthcare Laws or in paying fines or penalties      for violations of such laws;                                                                                                                                                          |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | we      currently have no plans to discontinue the use of our Chemical Business      facilities;                                                                                                                                                                                                                                                         |
| · | we      plan to maintain or replace, as needed, certain facilities in our Chemical      Business that contain asbestos insulation around piping or heating      surfaces, with non-asbestos insulation through our standard repair and      maintenance activities;                                                                                      |
| · | the      El Dorado facility believes that if it were required to meet more      restrictive dissolved minerals permit levels, it should be able to do      so;                                                                                                                                                                                           |
| · | our      internally-generated cash flows and our liquidity could be effected by      possible declines in sales volumes resulting from the uncertainty relative      to the current economic conditions; and                                                                                                                                             |
| · | most      of the Chemical Business’s expenditures for the remainder of 2010 will      likely be funded from internal cash flows and the Climate Control’s      expenditures will likely be financed and most of the Pryor Facility's      expenditures will primarily be funded from proceeds received from our      insurance carrier. |

----

| · | changes      in general economic conditions, both domestic and  foreign,                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
| · | material      reduction in revenues,                                                                                                    |
| · | material      changes in interest rates,                                                                                                |
| · | ability      to collect in a timely manner a material amount of      receivables,                                                       |
| · | increased      competitive pressures,                                                                                                   |
| · | changes      in federal, state and local laws and regulations, especially environmental      regulations, or in interpretation of such, |
| · | additional      releases (particularly air emissions) into the  environment,                                                            |
| · | material      increases in equipment, maintenance, operating or labor costs not      presently anticipated by us,                       |
| · | the      requirement to use internally generated funds for purposes not presently      anticipated,                                     |
| · | the      inability to pay or secure additional financing for planned capital      expenditures,                                         |
| · | material      changes in the cost of certain precious metals, anhydrous ammonia, natural      gas, copper and steel,                    |
| · | changes      in competition,                                                                                                            |
| · | the      loss of any significant customer,                                                                                              |
| · | changes      in operating strategy or development plans,                                                                                |
| · | inability      to fund the working capital and expansion of our    businesses,                                                          |
| · | changes      in the production efficiency of our facilities,                                                                            |
| · | adverse      results in any of our pending litigation,                                                                                  |
| · | activating      operations at full production rates at the Pryor  Facility,                                                             |
| · | inability      to obtain necessary raw materials,                                                                                       |

|  · | other      factors described in the MD&A contained in this report,      and                                                                                                                 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  · | other      factors described in “Risk Factors” of our 2009 Form 10-K and “Special      Note Regarding Forward-Looking Statements” contained in our 2009 Form      10-K. |

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Item 1. LegalProceedings

Item 1A. RiskFactors

Item 2.Unregistered Sales of Equity Securities and Use ofProceeds

----

|       Period |  (a)      Total number      of shares      of common      stock      acquired      (1) |   (b)      Average price      paid   per      shareof      commonstock      (1) |  (c)      Total number of shares      of common stock      purchased aspart      of publiclyannounced      plansor      programs (2) | (d)      Maximum number(or      approximatedollar      value) of sharesof      common stock that      may yetbe      purchased underthe      plans or programs |
|--------------------------------------------|---------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| April      1, 2010 -  April      30, 2010                                                  |  -       |   |  $ |  -     |          |         |
|------------------------------------------------------------------------------------------------------|---------------|--------|---------|-------------|---------------|--------------|
|                                                                                                 |          |   |    |        |          |         |
| May      1, 2010      -          May      31, 2010 |  -       |   |  $ |  -     |          |         |
|                                                                                                 |          |   |    |        |          |         |
| June      1, 2010 -June      30, 2010                                                                |  177,100 |   |  $ |  13.67 |  177,100 |         |
| Total                                                                                                | 177,100       |   | $       | 13.67       | 177,100       | See      (2) |

|      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 |
|--------------------------------------|------------------------------------------------------------------|---------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------|

| April      1, 2010 - April      30, 2010              |  -     |   |  $ |  -      |                        |   |
|-------------------------------------------------------|-------------|--------|---------|--------------|-----------------------------|--------|
|                                                  |        |   |    |         |                        |   |
| May      1, 2010 -   May      31, 2010 |  2,000 |   |  $ |  999.50 |  2,000                 |   |
|                                                  |        |   |    |         |                        |   |
| June      1, 2010 -June      30, 2010                 |  500   |   |  $ |  990.00 |     500 |   |
| Total                                                 | 2,500       |   | $       | 997.60       | 2,500                       | 26,900 |

----

Item 3. Defaults upon SeniorSecurities

Item4.  (Reserved)

Item 5. OtherInformation

----

Item 6.Exhibits

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

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.1a   | Amended      and Restated Loan and Security Agreement by and among LSB Industries,      Inc., ThermaClime, Inc. and each of its subsidiaries that are Signatories,      the lenders and Wells Fargo Foothill, Inc., which the Company hereby      incorporates by reference from Exhibit 4.2 to the Company’s Form 10-Q for      the fiscal quarter ended September 30, 2007.                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.1b   | Exhibits      and Schedules to the Amended and Restated Loan and Security Agreement by      and among LSB Industries, Inc., ThermaClime, Inc. and each of its      subsidiaries that are Signatories, the lenders and Wells Fargo Foothill,      Inc.                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.2a   | Term      Loan Agreement, dated as of November 2, 2007, among LSB Industries, Inc.,      ThermaClime, Inc. and certain subsidiaries of ThermaClime, Inc., Cherokee      Nitrogen Holdings, Inc., the Lenders, the Administrative and Collateral      Agent and the Payment Agent, which the Company hereby incorporates by      reference from Exhibit 4.1 to the Company’s Form 10-Q for the fiscal      quarter ended September 30, 2007. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 4.2b   | Exhibits      and Schedules to the Term Loan Agreement, dated as of November 2, 2007,      among LSB Industries, Inc., ThermaClime, Inc. and certain subsidiaries of      ThermaClime, Inc., Cherokee Nitrogen Holdings, Inc., the Lenders, the      Administrative and Collateral Agent and the Payment  Agent.                                                                                                                                  |

| 10.1a  | Asset      Purchase Agreement, dated as of December 6, 2002 by and among Energetic      Systems Inc. LLC, UTeC Corporation, LLC, SEC Investment Corp. LLC,      DetaCorp Inc. LLC, Energetic Properties, LLC, Slurry Explosive      Corporation, Universal Tech Corporation, El Dorado Chemical Company, LSB      Chemical Corp., LSB Industries, Inc. and Slurry Explosive Manufacturing      Corporation, LLC, which the Company hereby incorporates by reference from      Exhibit 2.1 to the Company's Form 8-K, dated December 12,      2002.                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.1b  | Exhibits      and Disclosure Letters to the Asset Purchase Agreement, dated as of      December 6, 2002 by and among Energetic Systems Inc. LLC, UTeC      Corporation, LLC, SEC Investment Corp. LLC, DetaCorp Inc. LLC, Energetic      Properties, LLC, Slurry Explosive Corporation, Universal Tech Corporation,      El Dorado Chemical Company, LSB Chemical Corp., LSB Industries, Inc. and      Slurry Explosive Manufacturing Corporation, LLC.                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| 10.2   | Second      Amendment to the Nitric Acid Supply, Operating and Maintenance Agreement,      dated June 16, 2010, between El Dorado Nitrogen, L.P., El Dorado Chemical      Company and Bayer MaterialScience, LLC.  CERTAIN      INFORMATION 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 THIS      REQUEST. |

----

| 10.3   | Consent,      Joinder and Second Amendment, dated as of April 1, 2010, by and among LSB      Industries, Inc., ThermaClime, Inc., each of the Subsidiaries of      ThermaClime identified on the signature pages thereof, the lenders      identified on the signature pages thereof, Wells Fargo Capital finance,      Inc., as the arranger and administrative agent, and Consolidated      Industries Corp., which the Company hereby incorporates by reference from      Exhibit 99.3 to the Company’s Form 8-K, filed April 7,    2010.                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.4   | Amendment      and Waiver to the Term Loan, dated April 1, 2010, by and among      ThermaClime, Inc., Cherokee Nitrogen Holdings, Inc., Northwest Financial      Corporation, Chemex I Corp., Chemex II Corp., Cherokee Nitrogen      Company,  ClimaCool Corp., ClimateCraft, Inc., Climate Master,      Inc., DSN Corporation, El Dorado Chemical Company, International      Environmental Corporation, Koax Corp., LSB Chemical Corp., The Climate      Control Group, Inc., Trison Construction, Inc.,  ThermaClime      Technologies, Inc., XpediAir, Inc., LSB Industries, Inc., each lender      party thereto, Banc of America Leasing & Capital, LLC, as      Administrative Agent and as Collateral Agent, Bank of Utah, as Payment      Agent, and Consolidated Industries Corp., which the Company hereby      incorporates by reference from Exhibit 99.4 to the Company’s Form 8-K,      filed April 7, 2010. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 21.1   | Subsidiaries      of the Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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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 AccountingOfficer |

----