Enterprising Investor
8 years ago
LSB Industries, Inc. Exploring Strategic Alternatives (11/03/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE: LXU) (“LSB or “the Company”) today announced that its Board of Directors has initiated a process to explore and evaluate potential strategic alternatives for the Company, which may include a sale of the Company, a merger with another party, or another strategic transaction involving some or all of the assets of the Company. LSB has retained Morgan Stanley & Co. LLC as its financial advisor to assist with the strategic review process. The Company stated that there can be no assurance that this strategic review process will result in a transaction. LSB has not set a timetable for completion of the review process, and it does not intend to comment further regarding the strategic review process unless a specific transaction is approved by its Board of Directors and signed, the strategic review process is concluded, or it is otherwise determined that further disclosure is appropriate or required by law.
About 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.
http://www.businesswire.com/news/home/20161103006234/en/LSB-Industries-Exploring-Strategic-Alternatives
Enterprising Investor
8 years ago
LSB Industries, Inc. Provides Update on Its Pryor, Oklahoma Facility (10/19/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that its Pryor, Oklahoma chemical facility (“Pryor Facility” or “Pryor”) resumed production of ammonia on October 8, 2016. The Company announced on October 5, 2016 that Pryor’s scheduled Turnaround had been extended to perform additional work on both the ammonia and urea plants in order to increase their reliability going forward.
LSB expects Pryor’s urea plant to return to service by November 1, 2016, which will enable the facility to resume production of urea ammonium nitrate (UAN). Relative to the timeline disclosed in the Company’s October 5, 2016 announcement, the urea plant’s return to service has been delayed as a result of the inspection process by the welding contractor’s Authorized Inspector (AI), which is responsible for ensuring that work on pressure vessels meets federal and state codes. In addition to addressing the increased scope of work dictated by the AI related to corrosion in the urea plant’s pressure vessel and liner, LSB has elected to implement design changes to the vessel’s liner in order to minimize future corrosion and related downtime. Management expects the additional downtime related to this work on Pryor’s urea plant to have little to no impact on LSB’s fourth quarter 2016 EBITDA above what was disclosed in the Company’s October 5, 2016 announcement.
About 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.
http://www.businesswire.com/news/home/20161019006384/en/LSB-Industries-Update-Pryor-Oklahoma-Facility
Enterprising Investor
8 years ago
LSB Industries, Inc. Provides Operational Update on Its Chemical Manufacturing Facilities (10/05/16)
Revises Product Sales Volume Outlook for 2016
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that Turnaround activities and various operational issues resulted in unplanned downtime at its three primary chemical facilities during the third quarter of 2016. The Company expects the combined impact to third quarter EBITDA as a result of reduced production, lost fixed cost absorption and repair expenses related to unplanned maintenance to be in the range of $25.0 million - $26.5 million.
“Our third quarter 2016 results will reflect the impact of planned and unplanned maintenance activities at our three primary chemical facilities,” stated Dan Greenwell, LSB’s President and CEO. “While the reduced production associated with the various unplanned outages during the quarter will collectively serve to bring our results in below our expectations for the period, importantly, our main focus has been on proactively identifying and completing the repairs and upgrades necessary to position LSB to deliver significantly improved financial performance in 2017. We are confident that the recent work that we have done at Cherokee, Pryor and El Dorado, and over the past year, will yield improving on-stream rates, translating into greater revenue and EBITDA in the coming quarters.”
Facility Level Detail
As previously disclosed, LSB’s Cherokee, Alabama facility (“Cherokee Facility” or “Cherokee”) began its scheduled bi-annual Turnaround on July 23, 2016, which was completed on August 19, 2016. During start-up, a head gasket failure on one of the ammonia plant’s three synthesis gas compressors required the compressor to be taken out of service, which reduced the facility’s ammonia production to approximately 340 tons per day, as compared to its nameplate capacity of approximately 510 tons per day. Repairs required selected major parts replacement, extending the outage of that compressor. Cherokee resumed ammonia production at its nameplate capacity of 510 tons per day on September 22, 2016. The Company estimates that the impact to third quarter 2016 EBITDA as a result of Cherokee’s reduced ammonia production, related lost fixed cost absorption and additional repair expense will be between $4.0 million - $4.5 million.
LSB’s Pryor, Oklahoma chemical facility (“Pryor Facility” or “Pryor”) also had a Turnaround scheduled during the third quarter, as previously disclosed. The scheduled maintenance activity began on August 26, 2016, approximately two weeks earlier than initially planned. While in Turnaround, management made the decision to perform additional work to both the ammonia and urea plants in order to increase their reliability going forward. Pryor’s ammonia and nitric acid plants are expected to resume production on October 10, 2016 and its urea plant is expected to resume production on October 15, 2016. The Company estimates that the impact to third quarter 2016 EBITDA as a result of Pryor’s reduced ammonia and UAN production, related lost fixed cost absorption and additional repair expense will be between $7.0 million - $7.5 million.
After returning to service on July 31, 2016 following two weeks of unplanned downtime related to a lightning strike that was previously announced, the ammonia plant at LSB’s El Dorado facility was taken down for a total of 18 days over the course of the third quarter to address heat exchanger tube leaks and to make modifications to the process vent system design to improve safety and reliability. El Dorado’s ammonia plant has been in continuous operation since September 22, 2016. The Company estimates that the impact to third quarter 2016 EBITDA as a result of El Dorado’s reduced production, related lost fixed cost absorption and additional repair expense will be between $14.0 million - $14.5 million.
Outlook for Fourth Quarter and Full Year 2016
Despite the unplanned downtime, LSB was able to satisfy customer commitments during the third quarter by utilizing product from inventory. This inventory would have otherwise been sold during the fourth quarter of 2016. Management believes the impact to fourth quarter 2016 EBITDA resulting from lower sales from lower beginning inventory, reduced production, related lost fixed cost absorption and repair expense will be in the range of $5.0 million - $5.5 million.
About 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.
http://www.businesswire.com/news/home/20161005006347/en/LSB-Industries-Operational-Update-Chemical-Manufacturing-Facilities
Enterprising Investor
8 years ago
LSB Industries, Inc. Announces Launch of Consent Solicitation (8/23/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that it is soliciting consents (the “Consent Solicitation”) from the holders of its outstanding $425,000,000 in aggregate principal amount of 7.75% Senior Secured Notes due 2019 (CUSIP No. 502160AL8; ISIN No. US502160AL89) (the “Notes”) to effect the Proposed Amendment (as defined below).
As previously disclosed, on July 1, 2016, the Company completed the sale of its climate control business for a total sale price of $364 million, subject to certain post-closing adjustments (the “Sale”).
The primary purpose of the Consent Solicitation is to amend the Indenture (the “Proposed Amendment”) to allow the Company (i) to redeem all $50,000,000 in aggregate principal amount of the Company’s outstanding 12.0% Senior Secured Notes due 2019 (the “12.0% Notes”), at a redemption price of 106% of the principal amount thereof, with the net proceeds of the Sale (the “12.0% Notes Redemption”), (ii) to redeem $50,000,000 in aggregate principal amount of the Notes, at a redemption price of 103.875% of the principal amount thereof, with the net proceeds of the Sale (the “Notes Redemption” and, together with the 12.0% Notes Redemption, the “Redemptions”), (iii) to redeem shares of the Company’s outstanding Series E cumulative redeemable Class C preferred stock (the “Preferred Stock”), at the liquidation preference value thereof, with the net proceeds of the Sale in an aggregate amount not to exceed $45,000,000 (in addition to any such redemption that may be made using the full $35,000,000 of restricted payment capacity that the Company has under the existing “general restricted payments” basket in the Indenture, for an aggregate total of $80,000,000) and (iv) given the intended use of the net proceeds of the Sale as described in the foregoing clause (i), (ii) and (iii), waive the Company’s obligation to make and consummate an asset sale repurchase offer of the Notes with respect to the Sale, and to make certain technical changes to certain financial definitions and collateral release mechanics in connection therewith.
The Company will agree to (a) consummate the Redemptions as promptly as practicable following the date the Proposed Amendment becomes operative and (b) prohibitions on its ability to incur future pari passu indebtedness in excess of $25,000,000 in aggregate principal amount at any time outstanding using the “general debt” basket and the “general liens” basket under the Indenture.
The Company believes that the 12.0% Notes Redemption, the Notes Redemption and the redemption of the Preferred Stock as described above will result in a deleveraging of the Company’s assets and further enhance the Company’s long-term prospects by improving its capital structure given the cost of capital associated with the 12.0% Notes and the Preferred Stock.
The consent of Holders of a majority in principal amount of the outstanding Notes is required pursuant to the terms of the Indenture to approve the Proposed Amendment.
Holders are referred to the Company’s Notice of Consent Solicitation dated August 23, 2016 and the related Consent Form, which are being sent to Holders, for the detailed terms and conditions of the Consent Solicitation.
The Company will pay a consent fee equal to $13.25 per $1,000 principal amount of Notes for which consents have been delivered by such Holder. The consent fee of $13.25 per $1,000 principal amount of Notes was calculated based on an assumed consent fee of $15.00 per $1,000 principal amount of Notes if the Notes Redemption had occurred prior to the payment of the consent fee. In addition, the Company will agree that, if the Proposed Amendment becomes operative, the interest rate applicable to all Notes outstanding after the consummation of the Notes Redemption will, with retroactive effect to August 1, 2016, automatically be increased to 8.50% per annum. The record date for determining the Holders who are entitled to consent is 5:00 p.m., New York City time, on August 22, 2016.
The Consent Solicitation will expire at 5:00 p.m., New York City time, on September 2, 2016, or such later time and date to which the Consent Solicitation may be extended (the “Expiration Time”). Provided the Company receives the requisite consents, the Proposed Amendment will be effected by a supplemental indenture, which the Company and the guarantors party to the Indenture intend to promptly enter into following the receipt of the requisite consents, but the Proposed Amendment will not become operative until the consent fee is paid to each Holder who delivers a valid and unrevoked consent prior to the Expiration Time.
The Company has appointed Ipreo LLC as tabulation agent and as information agent with respect to the Consent Solicitation. Requests for documents should be directed to Ipreo LLC at: (212) 849-3880 (banks and brokers) or (888) 593-9546 (toll free). The Company has also retained Credit Suisse Securities (USA) LLC as the exclusive solicitation agent with respect to the Consent Solicitation. Questions concerning the terms of the Consent Solicitation should be directed to Credit Suisse Securities (USA) LLC at: (212) 325-2476 (collect) or (800) 820-1653 (U.S. toll free).
About 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 Covestro AG 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.
http://www.businesswire.com/news/home/20160823005424/en/LSB-Industries-Announces-Launch-Consent-Solicitation
Enterprising Investor
8 years ago
LSB Industries, Inc. Announces That Its El Dorado, Arkansas Facility Ammonia Plant Resumes Production (8/05/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that the ammonia plant at its El Dorado, Arkansas facility has resumed production after having experienced an unplanned outage resulting from severe weather that caused a loss of power on July 14, 2016. The ammonia plant came back online on July 31, 2016 and is back to nameplate operating capacity of 1,150 tons per day, which it achieved on August 2, 2016.
About 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.
http://www.businesswire.com/news/home/20160805005307/en/LSB-Industries-Announces-El-Dorado-Arkansas-Facility
Enterprising Investor
8 years ago
LSB Industries, Inc. Provides Update on Its El Dorado, Arkansas Facility (7/26/16)
OKLAHOMA CITY, Okla.--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that, due to an intense lightning storm, its El Dorado, Arkansas facility suffered a complete power outage on July 14, 2016, which caused production to be halted. Subsequent restart activities indicated that normal operating parameters had been affected from the outage and repairs were required. Adjustments to El Dorado’s ammonia plant synthesis loop are currently being made and the Company expects to restore ammonia production at nameplate capacity during the first week of August 2016.
In addition, LSB is undertaking necessary warranty repairs and modifications on its nitric acid plant at El Dorado during the seasonally slow period. The modifications and repairs on heat exchangers and NOX abatement systems are being done to increase efficiency and extend service life. The Company expects to complete the activities at the nitric acid plant in late August. Customer shipments are not expected to be interrupted as the facility has a secondary nitric acid plant and the Pryor, Cherokee and Baytown facilities are able to provide required shipments to customers if necessary.
About 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.
http://www.businesswire.com/news/home/20160726005516/en/LSB-Industries-Update-El-Dorado-Arkansas-Facility
Enterprising Investor
8 years ago
LSB Industries, Inc. Announces That Its El Dorado, Arkansas Facility’s Ammonia Plant is Operating at Nameplate Capacity (6/29/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE: LXU) (“LSB or the Company”) announced today that its new 375,000 ton ammonia plant at its El Dorado, Arkansas facility (“El Dorado”) has been producing ammonia at an average rate of 1,150 tons per day, the plant’s nameplate capacity, since June 22, 2016. Since that date, El Dorado has been a net seller of ammonia, with all ammonia that the facility has not upgraded into other products being sold to Koch Fertilizer via pipeline under the previously announced three-year offtake agreement.
Daniel Greenwell, LSB’s Chief Executive Officer, stated, “Attaining nameplate capacity at our new ammonia plant is the culmination of a multi-year expansion project at our El Dorado Facility, and we’d like to thank and congratulate our team there for seeing the project through to completion despite the challenges along the way. The addition of ammonia production capabilities at El Dorado will be transformative to that facility’s economics, which we expect to be reflected in LSB’s overall financial performance in the second half of 2016.”
About LSB Industries, Inc.
LSB is a manufacturing company. LSB’s principal business activities consist of the manufacture and sale of chemical products for the agricultural, mining, and industrial markets, and the manufacture and sale of commercial and residential climate control products, such as water source and geothermal heat pumps, hydronic fan coils, modular chillers, large custom air handlers and make-up air units.
http://www.businesswire.com/news/home/20160629005868/en/LSB-Industries-Announces-El-Dorado-Arkansas-Facility%E2%80%99s
Enterprising Investor
8 years ago
LSB Industries, Inc. Announces the Start of Production at Its El Dorado, Arkansas Facility’s Ammonia Plant; Full Production Level to Be Attained by Third Quarter 2016 (5/17/16)
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB or the Company”) today announced that its new 375,000 ton ammonia plant at its El Dorado, Arkansas facility (“El Dorado”) is operational and ammonia production is now underway. The Company expects to be selling ammonia into the pipeline by the end of May. The plant will gradually ramp production volume over the next two months and is expected to reach full capacity by the beginning of the third quarter of 2016.
As previously stated, LSB expects the total cost of the project to be approximately $830 million, which is at the low end of its previously articulated range of $831 million to $855 million. This includes the ammonia plant and the construction of a new nitric acid plant and concentrator that were completed in 2015.
“We are pleased to have achieved this critical milestone with the start-up of the new ammonia plant at our El Dorado Facility,” stated Daniel Greenwell, LSB’s Chief Executive Officer. “We believe that the ammonia plant will significantly enhance the financial performance of the El Dorado Facility and have a materially positive impact on LSB’s overall performance. We look forward to sharing these results with our shareholders in the upcoming quarters.”
About LSB Industries, Inc.
LSB is a manufacturing company. LSB’s principal business activities consist of the manufacture and sale of chemical products for the agricultural, mining, and industrial markets, and the manufacture and sale of commercial and residential climate control products, such as water source and geothermal heat pumps, hydronic fan coils, modular chillers, large custom air handlers and make-up air units.
http://www.businesswire.com/news/home/20160517005417/en/LSB-Industries-Announces-Start-Production-El-Dorado
Enterprising Investor
8 years ago
LSB Industries, Inc. to Sell Climate Control Business to NIBE Industrier AB (5/12/16)
Provides LSB with Improved Capital Structure and Greater Financial Flexibility to Drive Growth and Enhance Reliability and Profitability of Chemical Business
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (NYSE:LXU) (“LSB” or the “Company”) today announced that it has entered into a definitive agreement to sell the Company’s Climate Control Business (“CCB”) to NIBE Industrier AB (publ) of Sweden (“NIBE”) for a total cash consideration of $364 million. The Climate Control Business generated approximately $274 million in revenue and $25 million in EBITDA in 2015.
Proceeds from the transaction will primarily be used to pay down debt. As a result, LSB will have greater financial flexibility and an improved capital structure to execute its growth strategies for its core Chemical Business, including improving the Company’s chemical plant on-stream rates.
Dan Greenwell, LSB’s President and CEO, stated, “This transaction represents an important milestone for LSB and our shareholders. Our Climate Control Business is a solid operation with innovative products in multiple categories. On behalf of the Board and management team, I would like to thank the CCB employees. Today’s announcement would not have been possible without their hard work and dedication and we commend them for their accomplishments. We are confident that in NIBE, we have found CCB the right home to realize its full potential.”
Mr. Greenwell continued, “As a focused chemicals company, our management team can now concentrate entirely on growing our Chemical Business by leveraging the substantial investments we have made over the last several years to enhance the reliability and profitability of our facilities. We are confident that the investments we made at El Dorado will significantly enhance our performance and look forward to the generation of strong cash flow from those facilities. Importantly, this transaction will enhance our financial flexibility and allow us to continue to invest in improving our plants. We look forward to realizing the benefits of a standalone LSB Chemical Business.”
The companies expect to close the transaction in the third quarter of 2016, subject to regulatory approvals and other customary closing conditions.
Credit Suisse and Vinson & Elkins LLP acted as financial advisor and legal counsel, respectively, to LSB Industries on this divestiture.
About LSB Industries, Inc.
LSB is a manufacturing company. LSB’s principal business activities consist of the manufacture and sale of chemical products for the agricultural, mining, and industrial markets, and the manufacture and sale of commercial and residential climate control products, such as water source and geothermal heat pumps, hydronic fan coils, modular chillers, large custom air handlers and make-up air units.
http://www.businesswire.com/news/home/20160511006681/en/LSB-Industries-Sell-Climate-Control-Business-NIBE
Enterprising Investor
8 years ago
LSB Industries, Inc. Reports Operating Results for the 2016 First Quarter (5/04/16)
El Dorado Ammonia Plant in Final Stages of Start-Up
OKLAHOMA CITY--(BUSINESS WIRE)--LSB Industries, Inc. (“LSB”) (NYSE:LXU) today announced results for the first quarter ended March 31, 2016.
First Quarter Highlights
• Net sales of $165.6 million; $97.0 million Chemical, $66.6 million Climate Control
• EBITDA of $(2.0) million; adjusted EBITDA of $14.6 million
• Operating loss of $12.2 million; adjusted operating income of $1.2 million
• Net loss applicable to common shareholders of $24.6 million, or $1.08 loss per diluted share; adjusted net loss applicable to common shareholders of $10.7 million, or $0.47 loss per diluted share
“Today we are pleased to report that we are nearing a transformative development in LSB Industries’ life as a public company,” stated Dan Greenwell, LSB’s President and CEO. “The new 375,000 ton per year ammonia plant at our El Dorado Facility is in the final stages of start-up and we expect to be producing ammonia in the next several weeks. At that point we expect to see a material improvement in profitability at the El Dorado Facility reflecting significantly lower feedstock costs, along with a greater overall volume of ammonia to upgrade to other products and to sell as part of our previously announced ammonia offtake agreement.”
“Turning to our first quarter 2016 financial performance, our Chemical Business results declined relative to the prior year quarter due largely to lower selling prices for our agricultural products. Pricing for nitrogen fertilizers has firmed up during the spring season but remains relatively low compared to the last several years. However, a reduction in natural gas costs has partially offset decreases in selling prices. Recent industry forecasts point to an increase in acres of corn to be planted by U.S. growers of approximately 6% this year relative to 2015. This increase, coupled with the poor fall 2015 application season, which led to stronger spring 2016 fertilizer application, makes us optimistic that the trend of lowered pricing for our agricultural products has stabilized.
“Our Chemical Business performance as compared to the first quarter of 2015 also continued to reflect the April 2015 expiration of our contract with Orica for low density ammonium nitrate, which resulted in reduced sales, as well as lost fixed cost absorption, exacerbated by the ongoing cost disadvantage resulting from the use of purchased ammonia at our El Dorado Facility. When the new ammonia plant is up and running, and we commence ammonia sales, and with a full year behind us since the end of the Orica contract, we expect year-over-year sales and profit comparisons for El Dorado to improve dramatically.
“Outside of the headwinds presented by weak agricultural product pricing, our facilities performed well during the quarter. Our Pryor Facility achieved an ammonia on-stream rate of 92% during the first quarter while our Cherokee Facility’s ammonia on-stream rate was 96%. We expect continued consistent production for the balance of 2016 as we focus on the implementation of enhanced reliability programs at all of our facilities.
“With respect to our Climate Control Business, we had a solid first quarter 2016. Sales increased compared to the same quarter last year, driven by stronger demand for our large custom air handlers for the healthcare and industrial sectors. These markets continue to show signs of gradual recovery and we expect to see continued improvement through the balance of the year. Notably, our Climate Control Business generated 120 basis points of gross profit improvement relative to the prior year reflecting the operating leverage inherent in the business as volumes rise, coupled with the increasing benefits of our operational excellence initiatives.”
Mr. Greenwell concluded, “Upon the start-up of our new ammonia plant at El Dorado, we believe that LSB will soon be better positioned to deliver profitable growth than at any time in our Company’s history. With our Pryor and Cherokee Facilities running well, and the other operational enhancements we have been implementing throughout our organization, we currently expect to generate improved earnings and free cash flow, while at the same time, strengthening our balance sheet, which we believe will translate into greater value for our shareholders.”
Comparison of 2016 to 2015 periods:
• Net sales of agricultural products decreased significantly, driven by 20-35% declines in selling prices of our key products, as indicated in the table below. Sales volumes were also lower for HDAN and UAN resulting from a slower start to the quarter from residual inventory carry-over from the prior period coupled with reluctance of customers to buy given the declining price environment. We were able to take advantage of a more favorable ammonia market during the period, resulting in lower overall sales of UAN. Industrial acids and other chemical product sales also decreased as a result of lower selling prices. This decrease was partially offset by increased volume from our new nitric acid plant at the El Dorado Facility, which started up in November 2015. The April 2015 expiration of our contract with Orica coupled with continued headwinds in the mining industry also led to decreased volumes as compared to the prior period, coupled with lower sales prices from the pass-through of lower ammonia costs to our contractual customers.
• Operating income and EBITDA declined primarily as a result of the aforementioned items in addition to a one-time cost of $12.1 million relating to consulting services associated with the reduction of assessed property tax values for the El Dorado projects’ real and personal property for the nitric acid plant, nitric acid concentrator plant and the ammonia plant. We expect material savings in future periods through a reduction in property taxes paid. The El Dorado Facility produces agricultural grade AN, nitric acid and industrial grade AN from purchased ammonia, which is currently at a cost disadvantage compared to products produced from natural gas. This cost disadvantage, along with the impact from the loss of our contract with Orica and certain additional expenses related to the El Dorado Expansion projects, resulted in an EBITDA loss for the El Dorado Facility during the first quarter of 2016 period of approximately $16.3 million compared to positive EBITDA of approximately $1.6 million in first quarter 2015. Natural gas and ammonia feedstock costs both decreased approximately 33% during the first quarter of 2016 relative to the prior year period, the benefits of which were partially offset by operating losses incurred relating to our working interests in certain natural gas properties. Please refer to “Non-GAAP Reconciliation” in the financial tables below for a reconciliation of Non-GAAP financial measures to the most directly comparable GAAP financial measures.
Comparison of 2016 to 2015 periods:
• Net sales increased driven primarily by higher sales of custom air handlers reflecting a higher beginning backlog relative to the backlog for these products at the beginning of the prior year period. Net sales of water source and geothermal heat pumps also increased in the first quarter of 2016 as stronger sales to the healthcare sector within our commercial and institutional market more than offset declines in sales of our residential products. Net sales of our hydronic fan coils were impacted by a decline in volume which was partially offset by increased unit selling prices related to favorable product mix.
• Operating income and EBITDA increased as a result of the stronger sales coupled with material and productivity savings generated by the continued implementation of our operational efficiency initiatives.
• New orders for our Climate Control products were $64.6 million in the first quarter of 2016, down slightly from the first quarter of 2015. New orders from the commercial and institutional end-markets were in-line with the first quarter 2015, while residential product new orders declined 16% over the same period. Backlog of $68.0 million as of March 31, 2016 was consistent with March 31, 2015 and December 31, 2015 levels.
Financial Position and Capital Additions
As of March 31, 2016, our total cash and investments were $39.5 million, including short-term investments.
Capital additions were approximately $96.1 million in the first quarter of 2016, including $90.8 relating to the expansion projects at our El Dorado Facility. Planned capital additions for the remainder of 2016, in the aggregate, are estimated to be in the range of $72 million to $114 million, including $29 million to $59 million remaining for the full-year on the El Dorado expansion projects. Some of the 2016 planned capital additions, not related to the El Dorado expansion projects, may be deferred should we need to do so.
Total long-term debt, including the current portion was $528.5 million at March 31, 2016 compared to $520.4 million at December 31, 2015 and our Working Capital Revolver Loan at March 31, 2016 was undrawn (borrowing availability, which is tied in to eligible accounts receivable and inventories, was $69.3 million at March 31, 2016). Interest expense, net of capitalized interest, for the first quarter of 2016 was $1.4 million compared to $3.4 million for the same period in 2015. Additionally, in December 2015 the Company issued $210 million of preferred stock with an aggregate liquidation preference of $219.6 million, inclusive of accrued dividends at March 31, 2016.
In February 2016, we received financing of $10 million related to the cogeneration facility equipment in connection with the El Dorado expansion projects. We are currently in discussions with several parties for further financing as it relates to the cogeneration facilities. Additionally, on April 1, 2016 we successfully refinanced our $12 million promissory note related to our Marcellus Shale assets. Furthermore, we expect to receive the remaining $5 million in financing related to the ammonia storage tank in the second quarter of 2016.
We believe that the combination of our cash, the availability on our Working Capital Revolver Loan, the additional borrowings discussed above and our cash from operations will be sufficient to fund our anticipated liquidity needs for the remainder of 2016. Once we recognize improved operating results, we anticipate that our next significant initiative will be to refinance our Senior Secured Notes and our Series E Redeemable Preferred to obtain a lower cost of capital. We hope this will be accomplished towards the end of 2016 or in 2017.
Full Year 2016 Update
With the continued headwinds in the mining industry we are revising our sales outlook for AN in the Industrial, Mining and Other sector from 110,000 – 135,000 tons to 70,000 – 95,000 tons for the full year of 2016. We do expect increased ammonia sales volumes of approximately 10,000 tons as compared to previously announced guidance.
For 2016, we anticipate consolidated interest expense to be in the range of $31 million - $32 million, net of capitalized interest of approximately $14 million. Additionally, we expect consolidated depreciation and amortization to be $72 million - $75 million in 2016 and $82 million - $85 million, assuming a full year of El Dorado project depreciation.
Conference Call
LSB’s management will host a conference call covering the first quarter results on Thursday, May 5, 2016 at 10:00 am ET/9:00 am CT to discuss these results and recent corporate developments. Participating in the call will be President and CEO, Dan Greenwell and Executive Vice President and CFO, Mark Behrman. Interested parties may participate in the call by dialing (708) 290-0754. Please call in 10 minutes before the conference is scheduled to begin and mention conference ID 94985763. 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 is a manufacturing and marketing company. LSB’s principal business activities consist of the manufacture and sale of chemical products for the agricultural, mining and industrial markets; and, the manufacture and sale of commercial and residential climate control products, such as water source and geothermal heat pumps, hydronic fan coils, modular geothermal and other chillers and large custom air handlers.
http://www.businesswire.com/news/home/20160504006916/en/LSB-Industries-Reports-Operating-Results-2016-Quarter
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