Rob McGuire: Mark, when contemplating the preferred exchange, how did management and the Board of Directors
weight dilution to existing common shareholders against the benefits of the transaction?
Mark Behrman: So, ultimately, the preferred holder has several
appointees to the Board, and they are our largest common stock, even pre this transaction common shareholder pre this transaction. Its considered a related party transaction, so, as I mentioned, the Board set up a special committee made
up of four independent members. They hired their own legal counsel. They hired their own financial advisor. Dilution is certainly one consideration, but ultimately, what you really need to look at in any of these, and what I know they looked at, is,
are you better off as is, or are you better off today, tomorrow, three years down the road executing this transaction with more dilution. And so ultimately, they came to the conclusion, with their financial advisors, that despite the dilution,
shareholders would be better off with this transaction in the short-term, medium-term, and even the long-term.
JP Geygan: Can you explain the special
dividend that will be payable to existing shareholders if the transaction is approved?
Mark Behrman: Sure. So as part of the transaction, Eldridge
Industries, who are the holders of the preferred, has agreed to convert their preferred into common stock at a conversion price of $6.16 per share. As part of that transaction, to maybe offset some of that dilution, existing shareholders of record
as a certain date will receive 0.3 shares of stock for each share of stock that they own.
Rob McGuire: Ok, so Mark, if the transaction is approved, what
will LSBs balance sheet look like following the exchange of Series E-1 Preferred and how should investors be thinking about the companys financial leverage?
Mark Behrman: Great question. So today, we have approximately $450 million of net debt. Weve got about $300 million of preferred and then
weve got common stock outstanding and a market cap of about $270 million, at current prices. Post the transaction, with the preferred converting to equity, well have the same debt outstanding, and then well have about
90 million shares outstanding post approval of this transaction. So at a $8.00 price, thats $720 million of market cap. $8.50 is going to be about $760 million of market cap. So well have a very clean capital structure, a
larger market cap, and leverage based on having a better second half this year than we certainly did last year. By the end of this year, leverage should be trending around four times, which is a lot different place than weve been, certainly
the last four or five years. Ultimately, when we think about leverage, were in a commodity business, so its really important for us to keep leverage less than four times so that when prices changeand they willand they tend to
change pretty quicklyif weve got five times levered, we could certainly handle that. But you certainly dont want to be five times levered, and then the pricing environment changes, and all of a sudden youre seven times
levered, and that creates a lot more uncertainly and a lot more risk. So, well look- once we clean up the balance sheet, were assuming that we have the positive shareholder vote to allow us to do that, well look to really keep
leverage at four times or less so we can really run the business, have enough cash flow to do that, to grow organically, but also look to grow inorganically through some M&A activities.