LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today
announced results for the first quarter ended March 31, 2017.
First Quarter Highlights
- Net sales from continuing operations of
$123.3 million for the first quarter of 2017, an increase of $24.4
million from $98.9 million for the first quarter of 2016
- Net loss from continuing operations of
$6.0 million for the first quarter of 2017, an improvement of $9.8
million from a loss of $15.8 million for the first quarter of
2016
- Adjusted EBITDA(1) from continuing
operations of $20.0 million for the first quarter of 2017, an
increase of $11.7 million, from $8.3 million for the first quarter
of 2016
(1) This is a Non-GAAP measure. Refer to the Non-GAAP
Reconciliation section.
“We have made positive improvements that are reflected in our
first quarter 2017 results,” stated Daniel Greenwell, LSB’s
President and CEO. “As anticipated, pricing for our agricultural
products, although slightly improved from the fourth quarter of
2016, remained well below prior year levels. However, our
performance improved compared to the first quarter of 2016 as a
result of stronger operations at our three primary chemical
manufacturing facilities, enhanced by the incremental output from
the new ammonia plant at El Dorado, which entered service in May of
2016.
“Our Cherokee and Pryor ammonia plants operated at on-stream
rates of approximately 99% and 96%, respectively, throughout the
first quarter, and have continued their strong performance thus far
in April. El Dorado’s ammonia on-stream rate continued to improve
with the first quarter of 2017 increasing over the fourth quarter
of 2016. On-stream rates for the first quarter of 2017 rose to
approximately 90% and, for the month of March, achieved 100% while
consistently producing at rates in excess of 1,300 tons per day,
which is significantly higher than the plant’s nameplate capacity
of 1,150 tons per day. We expect this to continue throughout
2017.”
Mr. Greenwell continued, “Demand for our agricultural products
for spring applications has been strong, with the UAN production
capacity at both our Pryor and Cherokee facilities sold out through
the middle of May. Additionally, our previously outlined strategy
to increase sales of high density ammonium nitrate (HDAN) has been
successful. Sales of HDAN were up significantly in the first
quarter versus the same period last year and we are currently
working off a significant HDAN order book. We anticipate that HDAN
sales will continue to grow and we plan to position product in our
storage facilities later this year in anticipation of that increase
in demand in 2018. Finally, demand for the nitric acid and ammonia
for industrial markets is increasing and we expect this trend to
continue.”
Mr. Greenwell concluded, “We are encouraged about our prospects
for continued year-over-year performance improvement for the
balance of 2017. The refinancing actions we completed in the third
quarter of 2016 enhanced our financial position, and will result in
a meaningful reduction in full year interest expense versus last
year. Anticipated sales of non-core assets in the first half of
this year will further strengthen our balance sheet and provide us
with greater financial flexibility.”
Three Months Ended March 31, 2017 2016
(Dollars in millions)
Sector
Sector
%
Sales by Market
Sector
Sales
Mix
Sales
Mix
Change
Agricultural $
63.3
51 % $
49.8
50 % 27 % Industrial, Mining and Other $ 60.0 49 % $ 49.1
50 % 22 % $ 123.3 $ 98.9 25 %
Comparison of 2017 to 2016 periods:
- Net sales of agricultural products
increased driven by increased sales volumes for ammonia, UAN and
HDAN, which were higher by 21%, 67% and 67%, respectively. Stronger
sales volumes for ammonia, UAN and HDAN resulted from healthier
demand environment relative to the first quarter of 2016 when there
was excess inventory in the distribution channel and customers were
reluctant to place orders due to a declining price environment.
Focused marketing and distribution efforts also led to rising HDAN
sales compared to the first quarter of 2016. The significant
increase in industrial ammonia sales reflected the incremental
benefit of the new ammonia plant at the El Dorado facility.
Stronger sales volumes were partially offset by lower selling
prices across our key products, relative to the first quarter of
2016, as indicated in the table below.
- EBITDA from continuing operations
increased compared to the prior year primarily due to the
aforementioned higher sales volumes, coupled with lower plant
costs. These factors were partially offset by the previously
discussed declines in sales prices across our key products.
Additionally, the increase in operating income from continuing
operations relative to the first quarter of 2016 was constrained by
higher depreciation related to the expansion of the El Dorado
Facility.
The following tables provide key sales metrics for our
Agricultural products:
Three Months Ended March 31,
Product (tons
sold)
2017
2016
% Change Urea ammonium nitrate (UAN)
157,784
94,306 67 % High density ammonium nitrate (HDAN) 91,171 54,548 67 %
Ammonia 44,242 36,644 21 % Other 4,912 4,738
4 % 298,109 190,236 57 %
Average Selling
Prices (price per ton) (A)
UAN $ 152 $ 180 (16 ) % HDAN $ 182 $ 247 (26 ) % Ammonia $ 305 $
337 (10 ) %
(A) Average selling prices represent “net back” prices which are
calculated as sales less freight expenses divided by product sales
volume in tons
The following table indicates the volumes sold of our major
Industrial, Mining and Other Chemical products:
Three Months Ended March 31,
Product (tons
sold)
2017
2016
% Change Nitric acid 29,128 16,029 82 % Nitric acid –
Baytown 129,589 124,501 4 % LDAN 20,214 19,562 3 % AN solution
12,304 22,427 (45 ) % Ammonia 43,924 7,673
472 % 235,159 190,192 24 %
Input
Costs
Average purchased ammonia cost/ton N/A $ 328 N/A Average natural
gas cost/MMBtu $ 3.15 $ 2.21 43 %
Financial Position and Capital Additions
As of March 31, 2017, our total cash position was $45.0 million.
Additionally, we had approximately $44.9 million of borrowing
availability under the Working Capital Revolver. There were no
borrowings under the Working Capital Revolver at March 31,
2017.
Total long-term debt, including the current portion was $417.3
million at March 31, 2017 compared to $420.2 million at December
31, 2016. The aggregate liquidation value of the Series E
Redeemable Preferred at March 31, 2017, inclusive of accrued
dividends of $27.6 million, was $167.3 million.
Interest expense, net of capitalized interest, for the first
quarter of 2017 was $9.4 million compared to $1.4 million for the
same period in 2016. The capitalization of interest related to
capital additions made to the El Dorado Facility ceased when the
Facility’s new ammonia plant went into service in May 2016. For the
full year of 2017, we expect interest expense to be approximately
$30 million to $35 million plus approximately $3.0 million of
non-cash amortization of discount and debt issuance costs.
Capital additions were approximately $8.0 million in the first
quarter of 2017. Planned capital additions for the second quarter
of 2017, are estimated to be approximately $12.0 million. For the
full year of 2017, total capital additions which are related to
maintaining and enhancing safety and reliability at our facilities
are expected to be between $30 million and $35 million.
Conference Call
LSB’s management will host a conference call covering the first
quarter results on April 25, 2017 at 10:00 a.m. ET/9:00 a.m. CT to
discuss these results and recent corporate developments.
Participating in the call will be President and CEO Daniel
Greenwell, Executive Vice President and CFO Mark Behrman, and
Executive Vice President, Chemical Manufacturing, John Diesch.
Interested parties may participate in the call by dialing (201)
493-6739. Please call in 10 minutes before the conference is
scheduled to begin and ask for the LSB conference call. To coincide
with the conference call, LSB will post a slide presentation at
www.lsbindustries.com on the webcast section of the Investor tab of
our website.
To listen to a webcast of the call, please go to the Company’s
website at www.lsbindustries.com at least 15 minutes prior to the
conference call to download and install any necessary audio
software. If you are unable to listen live, the conference call
webcast will be archived on the Company’s website. We suggest
listeners use Microsoft Explorer as their web browser.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma,
manufactures and sells chemical products for the agricultural,
mining, and industrial markets. The Company owns and operates
facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor,
Oklahoma, and operates a facility for a global chemical company in
Baytown, Texas. LSB’s products are sold through distributors and
directly to end customers throughout the United States. Additional
information about the Company can be found on its website at
www.lsbindustries.com.
Forward-Looking
Statements
This press release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements generally are
identifiable by use of the words “may,” “believe,” “expect,”
“intend,” “plan to,” “estimate,” “project” or similar expressions,
and include but are not limited to: financial performance
improvement; view on sales to mining customers; estimates of
consolidated depreciation and amortization and future turnaround
expenses; our expectation of production consistency and enhanced
reliability at our Facilities; our projections of trends in the
fertilizer market; improvement of our financial and operational
performance; our planned capital additions for 2017; reduction of
SG&A expenses; and volume outlook.
Investors are cautioned that such forward-looking statements are
not guarantees of future performance and involve risk and
uncertainties. Though we believe that expectations reflected in
such forward-looking statements are reasonable, we can give no
assurance that such expectation will prove to be correct. Actual
results may differ materially from the forward-looking statements
as a result of various factors. These and other risk factors are
discussed in the Company’s filings with the Securities and Exchange
Commission (SEC), including those set forth under “Risk Factors”
and “Special Note Regarding Forward-Looking Statements” in our Form
10-K for the year ended December 31, 2016 and, if applicable, our
Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.
All forward-looking statements included in this press release are
expressly qualified in their entirety by such cautionary
statements. We expressly disclaim any obligation to update, amend
or clarify and forward-looking statement to reflect events, new
information or circumstances occurring after the date of this press
release except as required by applicable law.
LSB Industries, Inc.
Financial Highlights
Three Months Ended March 31,
Three Months 2017 2016 (In Thousands, Except
Per Share Amounts) Net sales $ 123,344 $ 98,972 Cost of
sales 111,729 105,136 Gross profit
(loss) 11,615 (6,164 ) Selling, general and administrative
expense 10,545 10,894 Other expense (income), net (1,251 )
251 Operating income (loss) 2,321 (17,309 )
Interest expense, net 9,358 1,350 Non-operating other expense, net
231 1,956 Loss from continuing
operations before benefit for income taxes (7,268 ) (20,615 )
Benefit for income taxes (1,282 ) (4,850 ) Loss from
continuing operations (5,986 ) (15,765 )
Income from discontinued operations, net
of taxes
— 824 Net loss (5,986 ) (14,941 )
Dividends on convertible preferred stocks 75 75 Dividends on
Series E redeemable preferred stock 5,536 7,350 Accretion of Series
E redeemable preferred stock 1,599 2,243
Net loss attributable to common stockholders $ (13,196 ) $
(24,609 ) Loss per common share: Basic and diluted Loss from
continuing operations $ (0.48 ) $ (1.11 )
Income from discontinued operations, net
of taxes
— 0.03 Net loss $ (0.48 ) $ (1.08 )
LSB Industries, Inc.
Consolidated Balance Sheets
March 31, December 31,
2017
2016
(In Thousands)
Assets Current assets: Cash and cash
equivalents $ 45,037 $ 60,017 Accounts receivable, net 75,284
51,299 Inventories: Finished goods 17,323 19,036 Raw materials
3,698 3,903 Total inventories 21,021 22,939 Supplies,
prepaid items and other: Prepaid insurance 8,191 11,217 Precious
metals 7,463 8,648 Supplies 24,983 24,100 Prepaid and refundable
income taxes 1,078 1,193 Other 2,966 1,733 Total
supplies, prepaid items and other 44,681 46,891 Total
current assets 186,023 181,146 Property, plant and
equipment, net 1,068,892 1,078,958 Intangible and other
assets, net 9,584 10,316 $ 1,264,499 $
1,270,420
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
March 31, December 31,
2017
2016
(In Thousands)
Liabilities and Stockholders' Equity Current
liabilities: Accounts payable $ 53,338 $ 54,246 Short-term
financing 5,428 8,218 Accrued and other liabilities 52,779 44,037
Current portion of long-term debt 11,752
13,745 Total current liabilities 123,297 120,246
Long-term debt, net 405,520 406,475 Noncurrent accrued and
other liabilities 10,431 12,326 Deferred income taxes 91,529
93,831 Commitments and contingencies Redeemable preferred
stocks:
Series E 14% cumulative, redeemable Class
C preferred stock, no par value, 210,000 shares issued; 139,768
outstanding; aggregate liquidation preference of $167,324,000
($161,788,000 at December 31, 2016)Series F redeemable Class C
preferred stock, no par value, 1 share issued and outstanding;
aggregate liquidation preference of $100
152,164
145,029
— — 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 and
outstanding
1,000 1,000
Common stock, $.10 par value; 75,000,000
shares authorized, 31,280,685 shares issued
3,128 3,128 Capital in excess of par value 192,433 192,172 Retained
earnings 302,240 314,301 500,801
512,601 Less treasury stock, at cost:
Common stock, 2,875,582 shares (3,004,855
shares at December 31, 2016)
19,243 20,088 Total stockholders'
equity 481,558 492,513 $ 1,264,499
$ 1,270,420
LSB Industries, Inc.Non-GAAP
Reconciliation
This news release includes certain “non-GAAP financial measures”
under the rules of the Securities and Exchange Commission,
including Regulation G. These non-GAAP measures are calculated
using GAAP amounts in our consolidated financial statements.
EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense,
provision for impairment, depreciation, depletion and amortization
of property plant and equipment (which includes amortization of
other assets and excludes interest included in amortization), less
benefit for income taxes and income from discontinued operations,
net of taxes. We believe that certain investors consider EBITDA a
useful means of measuring our ability to meet our debt service
obligations and evaluating our financial performance. EBITDA has
limitations and should not be considered in isolation or as a
substitute for net income, operating income, cash flow from
operations or other consolidated income or cash flow data prepared
in accordance with GAAP. Because not all companies use identical
calculations, this presentation of EBITDA may not be comparable to
a similarly titled measure of other companies. The following table
provides a reconciliation of net income (loss) to EBITDA for the
periods indicated.
Three Months Ended
March 31,
2017 2016
($ in millions)
Net loss $ (6.0 )
$ (14.9 ) Plus: Interest expense 9.4 1.4
Depreciation and amortization 17.6 11.0 Benefit for income taxes
(1.3 ) (4.8 ) Income from discontinued operations —
(0.8 )
EBITDA $ 19.7 $
(8.1 )
LSB Industries, Inc.Non-GAAP
Reconciliation (continued)
Adjusted EBITDA
Adjusted EBITDA is reported to show the impact of a one-time
consulting fee, start-up/commissioning costs, derecognition of a
death benefit accrual, certain fair market value adjustments,
non-cash stock based compensation, Delaware unclaimed property
liability, and life insurance recovery. We believe that the
inclusion of supplementary adjustments to EBITDA is appropriate to
provide additional information to investors about certain items.
The following tables provide reconciliations of EBITDA excluding
the impact of the supplementary adjustments.
Three Months Ended
March 31,
2017 2016
EBITDA: $ 19.7 $ (8.1 ) Consulting
Fee- Negotiated property tax savings at El Dorado — 12.1 Stock
based compensation 1.2 0.9 Start-up/ Commissioning costs at El
Dorado — 1.3 Derecognition of death benefit accrual (1.4 ) — Loss
on sale or disposal of assets 0.5 — Fair market value adjustment on
preferred stock embedded derivatives — 2.5 Delaware unclaimed
property liability — 0.3 Life insurance recovery —
(0.7 )
Adjusted EBITDA $ 20.0 $ 8.3
Agricultural Sales Price
Reconciliation
The following table provides a reconciliation of total
agricultural sales as reported under GAAP in our consolidated
financial statement reconciled to “net” sales which is calculated
as sales less freight expenses. We believe this provides a relevant
industry comparison among our peer group.
Three Months Ended
March 31,
2017
2016
Agricultural Sales ($ in millions) $ 63.3 $ 49.8 Less
Freight: 5.6 3.2 Net Sales $
57.7 $ 46.6
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version on businesswire.com: http://www.businesswire.com/news/home/20170424006368/en/
Company:LSB Industries, Inc.Mark Behrman,
405-235-4546Chief Financial OfficerorInvestor
Relations:The Equity Group Inc.Fred Buonocore, CFA,
212-836-9607Kevin Towle, 212-836-9620
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