Provides Outlook for
2018 Product Volumes
LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today
announced results for the fourth quarter and full year ended
December 31, 2017.
Fourth Quarter Highlights
- Net sales of $88.9 million for the
fourth quarter of 2017, up from $85.4 million for the fourth
quarter of 2016
- Net loss from continuing operations of
$0.2 million for the fourth quarter of 2017, compared to a loss of
$25.2 million for the fourth quarter of 2016
- Adjusted EBITDA(1) from continuing
operations of $0.3 million for the fourth quarter of 2017, compared
to Adjusted EBITDA of $2.8 million for the fourth quarter of
2016
“Our sales increased while adjusted EBITDA declined modestly
relative to the fourth quarter of last year as increased production
from our El Dorado facility, higher product pricing and improved
demand for mining products was offset by the impact of downtime at
our Pryor facility,” stated Daniel Greenwell, LSB’s President and
CEO.
“With respect to the operating performance of our facilities,
Cherokee’s ammonia plant once again ran at a 99% on-stream rate for
the quarter, which was its fifth consecutive quarter of running at
this level. El Dorado had an ammonia plant on-stream rate of
approximately 77% in the fourth quarter, which was an improvement
over the fourth quarter of the previous year, but lower than the
90% rate it operated at through the first three quarters 2017 as a
result of nineteen days of downtime necessary to address mechanical
issues on a boiler and a heat exchanger as discussed on our third
quarter call. Since returning to service in late October, El
Dorado’s ammonia plant has been producing at a rate in excess of
1,300 tons per day with an on-stream rate from that point to date
of 99%. As previously announced, Pryor resumed production in early
December after being taken out of service towards the end of
September to repair damage to electrical controls, wiring and
piping that resulted from a minor fire at its ammonia plant. In
addition to those repairs, we completed more extensive maintenance
work during the downtime which we expect to allow Pryor to forgo a
full turnaround later in 2018 and consistently operate at
significantly higher on-stream rates, thus enabling us to better
capitalize on the improving pricing environment for ammonia. While
we were disappointed with how Pryor operated for the fourth
quarter, we believe that the significant work that we have done
during the third and fourth quarters of 2017 combined with the
enhanced maintenance programs we are implementing, will allow us to
operate at improved on-stream rates.”
Mr. Greenwell concluded, “So far in the first quarter of 2018,
prices for several of the products we produce and sell,
particularly ammonia, and high density ammonium nitrate (HDAN) have
been strengthening and are currently above their levels from the
first quarter of last year. Pricing in 2017 was negatively impacted
by excess inventory in the distribution channel from new capacity
brought online by several of our competitors. We believe the market
has largely absorbed this excess capacity at this point and do not
anticipate product pricing to return to the trough levels we
experienced in the second half of 2017 that depressed our full year
2017 results. Additionally, we are focused on the significant
technological enhancements we are making to our company wide
maintenance management system, which will improve our ability to
proactively address potential downtime causing issues and improve
the overall reliability of all our plants. We are on track to
complete these enhancements by the end of our 2018 second quarter
and should start to see the benefit in the second half of 2018. We
expect that the improved maintenance system and practices, coupled
with the higher selling prices for our products should result in
materially improved financial results.”
(1) This is a Non-GAAP measure. Refer to the Non-GAAP
Reconciliation section. Three Months
Ended December 31, 2017 2016 (Dollars in millions)
Sales by Market
Sector
Sales
SectorMix
Sales
SectorMix
% Change Agricultural $ 32.4 36 % $ 32.8 38 % (1
) %
Industrial, Mining and Other 56.5 64 % 52.6 62 % 7 %
$ 88.9 $ 85.4 4 %
Comparison of 2017 to 2016 periods:
- Net sales of our agricultural products
were essentially flat during the quarter relative to the prior year
period. Stronger pricing for HDAN was offset by lower ammonia
volumes resulting from downtime at our Pryor facility as well as
weaker market pricing for ammonia. Urea ammonium nitrate (UAN)
sales included approximately 32,955 tons purchased from third
parties to meet customer obligations during the Pryor downtime. UAN
selling prices were negatively impacted by forward orders taken
during the summer months at lower selling prices. Net sales of
industrial ammonia increased as a result of higher volumes from
improved on-stream rates at El Dorado. Low density ammonium nitrate
(LDAN) sales volumes for mining applications also increased as a
result of our sales and marketing efforts and stronger overall
demand from this market. Sales of nitric acid from the Baytown
facility increased as a result of rising levels of industrial
manufacturing throughout the U.S.
- Adjusted EBITDA from continuing
operations was lower compared to the prior year period primarily
due to the aforementioned downtime at the Pryor facility, partially
offset by improved on-stream rates and lower fixed costs at El
Dorado as compared to the fourth quarter of 2016.
The following tables provide key sales metrics for our
Agricultural products:
Three Months Ended December 31,
Product (tons
sold)
2017 2016 % Change UAN 97,852 87,662 12
% HDAN 48,782 49,086 (1 ) % Ammonia 13,821 22,770 (39 ) % Other
4,801 4,264 13 % 165,256 163,782 1 %
Average Selling
Prices (price per ton) (A)
UAN $ 124 $ 135 (8 ) % HDAN $ 203 $ 168 21 % Ammonia $ 215 $ 284
(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 and Other Chemical products:
Three Months Ended December 31,
Product (tons
sold)
2017 2016 % Change Nitric acid – Baytown 115,599
99,055 17 % Nitric acid – All Other 25,375 27,399 (7 ) % AN
solution 4,498 8,272 (46 ) % Ammonia 51,572 43,876 18 % 197,044
178,602 10 %
The following table indicates the volumes sold of our major
Mining products:
Three Months Ended December 31,
Product (tons
sold)
2017 2016 % Change LDAN/HDAN 35,074
31,095 13 % AN solution 3,916 11,267 (65 ) %
38,990 42,362 (8 ) %
Input
Costs
Average natural gas cost/MMBtu $ 3.00 $ 3.01 - %
Financial Position and Capital Expenditures
As of December 31, 2017, our total cash position was $33.6
million. Additionally, we had approximately $41.2 million of
borrowing availability under our Working Capital Revolver. There
were no borrowings under the Working Capital Revolver at December
31, 2017.
Total long-term debt, including the current portion, was $409.4
million at December 31, 2017 compared to $420.2 million at December
31, 2016. The aggregate liquidation value of the Series E
Redeemable Preferred at December 31, 2017, inclusive of accrued
dividends of $45.5 million, was $185.2 million.
Interest expense, net of capitalized interest, for the fourth
quarter of 2017 was $9.3 million compared to $9.8 million for the
same period in 2016. For the full year of 2018, we expect interest
expense to be approximately $35 - $40 million.
Capital expenditures were approximately $10.3 million in the
fourth quarter of 2017. For the full year of 2018, total capital
expenditures, which are related to maintaining and enhancing safety
and reliability at our facilities, are expected to be approximately
$35 million.
Volume Outlook
Our outlook for sales volumes for the full year 2018 (including
lost sales related to El Dorado and Cherokee turnarounds) and our
actual sales volumes for the full year 2017 are as follows:
Products
Full Year 2018
Sales(tons)
Full Year Actual
2017 Sales(tons)
Agriculture: UAN
480,000 – 490,000 489,000 HDAN
290,000 – 310,000 280,000 Ammonia
115,000 – 125,000 94,000
Industrial, Mining and Other:
Ammonia
220,000 – 230,000 229,000 LDAN/HDAN and AN solution
180,000 – 190,000 166,000 Nitric Acid
and Other Mixed Acids 90,000 – 100,000
101,000 Sulfuric Acid 120,000 – 130,000
133,000 DEF 15,000 – 20,000 15,000
Conference Call
LSB’s management will host a conference call covering the fourth
quarter results on February 27, 2018 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 expenditures for 2018; reduction
of SG&A expenses; volume outlook and our ability to complete
plant repairs as anticipated.
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, 2017 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 any
forward-looking statement to reflect events, new information or
circumstances occurring after the date of this press release except
as required by applicable law.
See Accompanying Tables
LSB Industries, Inc.
Financial Highlights Three Months and Twelve Months Ended
December 31, Three Months Ended Twelve Months Ended 2017
2016 2017 2016 (In Thousands, Except Per Share
Amounts) Net sales $ 88,917 $ 85,369 $ 427,504 $ 374,585 Cost of
sales 99,121 94,261 422,038 423,891
Gross profit (loss) (10,204 ) (8,892 ) 5,466 (49,306 )
Selling, general and administrative expense 8,238 8,438 34,990
40,168 Impairment of goodwill — 1,621 — 1,621 Other expense
(income), net 2,309 (852 ) 4,567 (872 )
Operating loss (20,751 ) (18,099 ) (34,091 ) (90,223 )
Interest expense, net 9,326 9,816 37,267 30,945 Loss on
extinguishment of debt — 8,703 — 8,703 Non-operating other expense
(income), net 103 (219 ) (306 ) 218
Loss from continuing operations before benefit
for income taxes
(30,180 ) (36,399 ) (71,052 ) (130,089 ) Benefit for income taxes
(30,018 ) (11,209 ) (40,759 ) (41,956 )
Loss from continuing operations (162) (25,190 ) (30,293 ) (88,133 )
Income from discontinued operations, net of taxes
1,076 3,657 1,076 200,301 Net income (loss)
914 (21,533 ) (29,217 ) 112,168 Dividends on convertible
preferred stocks 75 75 300 300 Dividends on Series E redeemable
preferred stock 6,195 5,410 23,443 27,761 Accretion of Series E
redeemable preferred stock 1,635 1,636 6,487 18,256 Net income
attributable to participating securities — — —
1,091 Net income (loss) attributable to common stockholders
$ (6,991 ) $ (28,654 ) $ (59,447 ) $ 64,760 Income (loss)
per common share: Basic: Loss from continuing operations $ (0.30) $
(1.19 ) $ (2.22) $ (5.28 ) Income from discontinued operations, net
of taxes 0.04 0.13 0.04 7.82 Net income
(loss) $ (0.26) $ (1.06 ) $ (2.18) $ 2.54 Diluted: Loss from
continuing operations $ (0.30) $ (1.19 ) $ (2.22) $ (5.28 ) Income
from discontinued operations, net of taxes 0.04 0.13
0.04 7.82 Net income (loss) $ (0.26) $ (1.06 ) $
(2.18) $ 2.54
LSB Industries,
Inc. Consolidated Balance Sheets December 31,
December 31, 2017 2016 (In Thousands)
Assets Current
assets: Cash and cash equivalents $ 33,619 $ 60,017 Accounts
receivable, net 59,570 51,299 Inventories 21,856 22,939 Supplies,
prepaid items and other: Prepaid insurance 10,535 11,217 Precious
metals 7,411 8,648 Supplies 27,729 24,100 Prepaid and refundable
income taxes 1,736 1,193 Other 1,284 1,733 Total
supplies, prepaid items and other 48,695 46,891 Total
current assets 163,740 181,146 Property, plant and
equipment, net 1,014,038 1,078,958 Intangible and other
assets, net 11,404 10,316 $ 1,189,182 $
1,270,420
LSB
Industries, Inc. Consolidated Balance Sheets (continued)
December 31, December 31, 2017 2016 (In Thousands)
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 55,992 $ 54,246 Short-term financing 8,585 8,218
Accrued and other liabilities 35,573 44,037 Current portion of
long-term debt 9,146 13,745 Total current liabilities
109,296 120,246 Long-term debt, net 400,253 406,475
Noncurrent accrued and other liabilities 11,691 12,326
Deferred income taxes 54,787 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 $185,231,000 ($161,788,000 at December
31, 2016)
174,959 145,029 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 193,956 192,172 Retained
earnings 256,214 314,301 456,298 512,601 Less
treasury stock, at cost: Common stock, 2,662,027 shares (3,004,855
shares at December 31, 2016) 18,102 20,088 Total
stockholders' equity 438,196 492,513 $ 1,189,182 $
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 (DD&A) (which includes
DD&A of property, plant and equipment and amortization of
intangible and other assets), 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 EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016 2017 2016 ($ in millions)
LSB
Consolidated
Net income (loss) $ 0.9 ($21.5
) ($29.2 ) $ 112.2 Plus:
Interest expense 9.3 9.8 37.3 30.9 Loss on extinguishment of debt -
8.7 - 8.7 Provision for impairment - 1.6 - 1.6 Depreciation,
depletion and amortization 17.3 18.4 69.2 61.3 Benefit for income
taxes (30.0 ) (11.2 ) (40.8 ) (41.9 ) Income from discontinued
operations (1.1 ) (3.7 ) (1.1 ) (200.3
)
EBITDA ($3.6 ) $ 2.1
$ 35.4 ($27.5 )
LSB Industries, Inc. Non-GAAP
Reconciliation (continued)
Adjusted EBITDA
Adjusted EBITDA is reported to show the impact of one
time/non-cash items such as, loss on sale of a business and other
property and equipment, one-time income or fees,
start-up/commissioning costs, certain fair market value
adjustments, non-cash stock-based compensation and severance costs.
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. Our 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)
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016 2017 2016
EBITDA: ($3.6 ) $
2.1 $ 35.4 ($27.5 ) Consulting fee - Negotiated property tax
savings at El Dorado - - - 12.1 Stock-based compensation 1.3 0.8
5.2 4.0 Start-up/Commissioning costs at El Dorado - - - 5.1
Severance costs - 0.2 - 0.9 Derecognition of death benefit accrual
- - (1.4 ) - Loss on sale of a business and other property and
equipment 2.6 (0.3 ) 7.0 0.3 Fair market value adjustment on
preferred stock embedded derivatives - - - 1.0 Delaware unclaimed
property liability - - - 0.3 Life insurance recovery -
- - (0.7 )
Adjusted
EBITDA $ 0.3 $ 2.8 $ 46.2 ($4.5 )
Agricultural Sales Price
Reconciliation
The following table provides a reconciliation of total
agricultural sales as reported under GAAP in our consolidated
financial statement reconciled to “net” sales which is calculated
as sales less freight expenses. We believe this provides a relevant
industry comparison among our peer group.
Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2017 2016 2017 2016 Agricultural sales ($ in
millions) $ 32.4 $ 32.8 $ 184.1 $ 166.2 Less freight:
2.7 3.0 15.2 12.2 Net sales $ 29.7
29.8 $ 168.9 $ 154.0
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version on businesswire.com: http://www.businesswire.com/news/home/20180226006524/en/
Company:LSB Industries, Inc.Mark Behrman, (405)
235-4546Chief Financial OfficerorInvestor Relations:The
Equity Group Inc.Fred Buonocore, CFA, (212) 836-9607orKevin
Towle, (212) 836-9620
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