LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today
announced results for the second quarter ended June 30, 2017.
Second Quarter Highlights
- Net sales of $122.9 million for the
second quarter of 2017, up from $110.0 million for the second
quarter of 2016
- Net loss from continuing operations of
$7.0 million for the second quarter of 2017, compared to a loss of
$7.7 million for the second quarter of 2016
- Adjusted EBITDA(1) from continuing
operations of $22.2 million for the second quarter of 2017, an
increase of $11.1 million, from $11.1 million for the second
quarter of 2016
“Our second quarter adjusted EBITDA nearly doubled from the same
period of 2016 and also increased relative to the 2017 first
quarter, reflecting the enhancements we’ve made across our business
over the past 18 months,” stated Daniel Greenwell, LSB’s President
and CEO. “Our financial performance benefitted from the incremental
output of our El Dorado ammonia plant, which has been ramping up
since entering service in May of 2016, along with strong sales
volume growth for our high-density ammonium nitrate (HDAN)
resulting from our expanded distribution strategy. Partially
offsetting these positive factors were headwinds caused by
significant weakening in agricultural product pricing that began in
June, as well as some downtime at two of our facilities.”
“Our Cherokee facility performed at a 100% on-stream rate during
the period, which represents a best in class operating rate. We
were, however, disappointed to have had unplanned downtime at Pryor
and El Dorado. With that said, these downtime events in no way
change our view about the operating performance potential of the
facilities. Pryor’s second quarter ammonia plant on-stream rate was
approximately 78%, impacted by an unplanned outage. In early July,
the site experienced an electrical outage which shut off power to
the facility and given that Pryor was already down and considering
the low agricultural selling price environment, and other
maintenance that needed to be completed, we elected to pull forward
the turnaround we had previously scheduled for October. We
successfully completed the turnaround on July 21st for a total
downtime of 17 days, in line with previously issued guidance.”
“El Dorado had an on-stream rate of approximately 87% at its
ammonia plant in the second quarter. Although the plant continues
to run at approximately 1,350 tons per day, which is above its
nameplate capacity of 1,150 tons per day, we were down for 12 days
during the quarter primarily to perform proactive adjustments and
heat exchanger cleaning and repairs to enable the plant to operate
closer to the higher end of its operating envelope on a sustained
basis.”
Mr. Greenwell continued, “Demand for our agricultural ammonia
weakened as the second quarter progressed as wet weather in our
primary geographic markets resulted in an early curtailment of the
ammonia pre-plant application season. This caused an inventory
build-up in North America which led to significant deterioration in
prices. Additionally, agricultural ammonia pricing was impacted by
an overabundance of product in the market resulting from recent
facility expansions by two of our competitors. We expect this
excess capacity to be absorbed by early 2018 based on the
distribution and upgrading strategies these competitors have
disclosed. Turning to our non-agricultural products, while demand
for ammonium nitrate solution (ANS) was soft relative to last year,
demand for low density ammonium nitrate prill showed modest
improvement, a trend we expect to continue through the balance of
the year.”
Mr. Greenwell concluded, “The second half of 2017 looks more
challenging than we anticipated earlier this year due to the
current ammonia pricing environment, which is lower than pricing
levels seen at this time in 2016. We do, however, remain highly
confident in our ability to operate all our plants at on-stream
rates of approximately 95% or higher. Additionally, recent sales of
non-core assets have strengthened our balance sheet and provided us
with greater financial flexibility, which we plan to further
enhance in the coming quarters.”
Three Months Ended June 30, 2017 2016 (Dollars in
millions)
Sales by Market
Sector
Sales
SectorMix
Sales
SectorMix
%Change
Agricultural $ 57.2 47 % $ 60.3
55 %
(5) %
Industrial, Mining and Other $ 65.7 53 % $ 49.7
45 %
32 %
$ 122.9 $ 110.0
12 %
Comparison of 2017 to 2016 periods:
- Net sales of industrial products
increased significantly due largely to the incremental benefit of
the new ammonia plant at El Dorado, which was partially offset by
continued weakness in demand for mining products. Net sales of
agricultural products decreased as a result of lower pricing for
UAN, HDAN and agricultural ammonia, as indicated in the table
below. Additionally, sales volumes for agricultural ammonia were
down due to the impact of wet weather in the Company’s primary
agricultural markets and the related premature curtailment of the
ammonia pre-plant application season combined with excess supply of
ammonia due to a temporary overcapacity among ammonia producers.
UAN volumes were impacted by the unplanned downtime at the Pryor
facility which reduced UAN available for sale. HDAN sales, while
impacted by lower pricing, increased materially due to the success
of the Company’s focused marketing and distribution strategy
resulting in increased sales volumes.
- EBITDA from continuing operations
increased compared to the prior year period primarily due to the
aforementioned higher sales volumes of industrial ammonia, HDAN for
agricultural applications along with lower plant costs. These
factors were partially offset by the previously discussed declines
in sales prices across our key products, higher natural gas
feedstock costs and the unplanned downtime at Pryor and El Dorado.
The loss from continuing operations increased slightly relative to
the prior year period due to higher interest expense, the vast
majority of which is related to the debt assumed to finance the El
Dorado expansion and a large portion of which was capitalized up
until the facility’s new ammonia plant went into operation in May
2016. Continuing operations were also impacted by higher
depreciation related to the El Dorado facility expansion and a
non-cash loss primarily related to the sale of certain non-core
assets during the second quarter of 2017.
The following tables provide key sales metrics for our
Agricultural products:
Three Months Ended June 30,
Product (tons
sold)
2017 2016 % Change Urea ammonium nitrate (UAN)
118,488 120,481 (2
)%
High density ammonium nitrate (HDAN) 105,115 87,688 20 % Ammonia
12,248 18,657 (34
)%
Other 12,829 11,237 14 % 248,680
238,063 4 %
Average Selling
Prices (price per ton) (A)
UAN $ 156 $ 182 (14
)%
HDAN $ 224 $ 232 (3
)%
Ammonia $ 288 $ 379 (24
)%
(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 June 30,
Product (tons
sold)
2017 2016 % Change Nitric acid 24,806 21,361 16 %
Nitric acid – Baytown 113,192 93,767 21 % LDAN/HDAN 33,448 19,404
72 % AN solution 10,352 25,251 (59
)%
Ammonia 66,313 18,378 261 % 248,111
178,161 39 %
Input
Costs
Average purchased ammonia cost/ton N/A $ 308 N/A Average natural
gas cost/MMBtu $ 3.09 $ 2.34 32 %
Financial Position and Capital Additions
As of June 30, 2017, our total cash position was $67.2 million.
Additionally, we had approximately $40.8 million of borrowing
availability under the Company’s Working Capital Revolver. There
were no borrowings under the Working Capital Revolver at June 30,
2017.
Total long-term debt, including the current portion, was $411.5
million at June 30, 2017 compared to $420.2 million at December 31,
2016. The aggregate liquidation value of the Series E Redeemable
Preferred at June 30, 2017, inclusive of accrued dividends of $33.3
million, was $173.1 million.
Interest expense, net of capitalized interest, for the second
quarter of 2017 was $9.3 million compared to $6.4 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 $7.5 million in the second
quarter of 2017. Planned capital additions for the third quarter of
2017, are estimated to be approximately $13 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.
Revised Volume Outlook
The Company’s outlook for sales volumes for the second half of
2017 are as follows:
Products
Second Half 2017
Sales(tons)
Agriculture: UAN 225,000 – 235,000 HDAN
75,000 – 85,000 Ammonia 45,000 – 55,000
Industrial, Mining and Other: Ammonia
125,000 – 135,000 LDAN and AN solution 80,000 –
90,000 Nitric acid and Other Mixed Acids 40,000 – 50,000
Nitric Acid – Baytown 240,000 – 260,000
Conference Call
LSB’s management will host a conference call covering the first
quarter results on July 26, 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.
(1) This is a Non-GAAP measure. Refer to the Non-GAAP
Reconciliation section.
LSB Industries, Inc.
Financial Highlights
Three and Six Months Ended June
30,
June 30, June 30, Three Months Ended Six
Months Ended 2017 2016 2017 2016 (In Thousands,
Except Per Share Amounts) Net sales $ 122,853 $ 109,982 $ 246,197 $
208,954 Cost of sales 111,513 107,853 223,242
212,989 Gross profit (loss) 11,340 2,129 22,955 (4,035 )
Selling, general and administrative expense 8,232 10,874
18,777 21,768 Other expense, net 3,406 138
2,155 389 Operating income (loss) (298 ) (8,883 ) 2,023
(26,192 ) Interest expense, net 9,292 6,446 18,650 7,796
Non-operating other expense (income), net 204 (3,970
) 435 (2,014 ) Loss from continuing operations before
benefit
for income taxes
(9,794 ) (11,359 ) (17,062 ) (31,974 ) Benefit for income taxes
(2,761 ) (3,671 ) (4,043 ) (8,521 )
Loss from continuing operations (7,033 ) (7,688 ) (13,019 ) (23,453
) Income from discontinued operations, including taxes
— 22,779 — 23,603 Net income (loss)
(7,033 ) 15,091 (13,019 ) 150 Dividends on convertible
preferred stocks 75 75 150 150 Dividends on Series E redeemable
preferred stock 5,789 7,629 11,325 14,979 Accretion of Series E
redeemable preferred stock 1,618 2,241 3,217 4,484 Net income
attributable to participating securities — 91
— — Net income (loss) attributable to common stockholders $
(14,515 ) $ 5,055 $ (27,711 ) $ (19,463 ) Income (loss) per
common share: Basic: Loss from continuing operations $ (0.53 ) $
(0.70 ) $ (1.02 ) $ (1.81 ) Income from discontinued operations,
including taxes — 0.90 — 0.99 Net
income (loss) $ (0.53 ) $ 0.20 $ (1.02 ) $ (0.82 ) Diluted:
Loss from continuing operations $ (0.53 ) $ (0.70 ) $ (1.02 ) $
(1.81 ) Income from discontinued operations, including taxes
— 0.90 — 0.99 Net income (loss) $ (0.53 ) $
0.20 $ (1.02 ) $ (0.82 )
LSB Industries, Inc.
Consolidated Balance Sheets
June 30, December 31, 2017 2016 (In
Thousands)
Assets Current assets: Cash and cash equivalents
$ 67,213 $ 60,017 Accounts receivable, net 51,013 51,299
Inventories: Finished goods 15,910 19,036 Raw materials
1,377 3,903 Total inventories 17,287 22,939 Supplies,
prepaid items and other: Prepaid insurance 5,057 11,217 Precious
metals 8,806 8,648 Supplies 26,261 24,100 Prepaid and refundable
income taxes 2,233 1,193 Other 1,886 1,733 Total
supplies, prepaid items and other 44,243 46,891 Total
current assets 179,756 181,146 Property, plant and
equipment, net 1,036,758 1,078,958 Intangible and other
assets, net 9,083 10,316 $ 1,225,597 $
1,270,420
LSB Industries, Inc.
Consolidated Balance Sheets
(continued)
June 30, December 31, 2017 2016 (In Thousands)
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 49,200 $ 54,246 Short-term financing 2,622 8,218
Accrued and other liabilities 32,156 44,037 Current portion of
long-term debt 9,622 13,745 Total current liabilities
93,600 120,246 Long-term debt, net 401,889 406,475
Noncurrent accrued and other liabilities 13,075 12,326
Deferred income taxes 88,768 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 $173,113,000 ($161,788,000 at December
31, 2016)
159,571 145,029 Series F redeemable Class C preferred stock, no par
value, 1 share issued and
outstanding; aggregate liquidation
preference of $100
— — 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 194,009 192,172 Retained
earnings 287,800 314,301 487,937 512,601 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 468,694 492,513 $ 1,225,597 $
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,
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, including 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 EndedJune 30,
Six Months EndedJune 30,
2017 2016 2017 2016 ($ in millions)
LSB
Consolidated
Net income (loss) ($7.0 ) $
15.1 ($13.0 ) $ 0.2 Plus:
Interest expense 9.3 6.4 18.7 7.8 Depreciation and amortization
17.5 14.6 35.1 25.6 Benefit for income taxes (2.8 ) (3.7 ) (4.1 )
(8.5 ) Income from discontinued operations -
(22.8 ) - (23.6 )
EBITDA $
17.0 $ 9.6 $ 36.7
$ 1.5
LSB Industries, Inc.Non-GAAP
Reconciliation (continued)
Adjusted EBITDA
Adjusted EBITDA is reported to show the impact of a loss on sale
of a business and other property and equipment, 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. The Company’s policy is to adjust for
non- cash or non-recurring items that are greater than $0.5 million
quarterly or cumulatively.
LSB
Consolidated ($ in millions except per share data)
Three Months EndedJune 30,
Six Months EndedJune 30,
2017 2016 2017 2016
EBITDA: $ 17.0 $
9.6 $ 36.7 $ 1.5 Consulting Fee - Negotiated Property tax savings
at El Dorado - - - 12.1 Stock based compensation 1.6 1.0 2.8 1.9
Start-up/ Commissioning costs at El Dorado - 3.8 - 5.1
Derecognition of death benefit accrual - - (1.4 ) - Loss on sale of
a business and other property and equipment 3.6 0.6 4.1 0.6 Fair
market value adjustment on preferred stock embedded derivatives -
(3.9 ) 0.6 (1.4 ) Delaware unclaimed property liability - - - 0.3
Life insurance recovery - - -
(0.7 )
Adjusted EBITDA $ 22.2 $ 11.1 $ 42.8
$ 19.4
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 EndedJune 30,
Six Months EndedJune 30,
2017 2016 2017 2016 Agricultural Sales ($ in
millions) $ 57.2 $ 60.3 $ 120.5 $ 110.1 Less Freight:
4.3 4.3 9.9 7.5 Net Sales $ 52.9
56.0 $ 110.6 $ 102.6
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170725006289/en/
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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