Lsb Industries, Inc. · NYSE:LXU
Lsb Industries — Debt Investor Presentation (June 2007)
45 slides from Lsb Industries's debt investor presentation, Jun 29, 2007
Slide 1: LSB Industries – June 2007
Exhibit 99.2 AMEX: LXU “Our Climate Control products heat and cool most of the luxury hotel casinos in Las Vegas” 1 JUNE 2007
Slide 2: Company Highlights
Company Highlights Both of LSB’s core businesses are leaders in their respective product lines with dominant market share and technological leadership History of top and bottom line growth – strong EBITDA growth Climate Control Business: strong margins in core products generating exceptional growth
Slide 3: LSB Industries Overview
LSB Industries Overview Two Core Businesses: 2006 Sales Climate Control Business By Business Segment • Technology and market share leader in certain “niches” of the heating ventilation Climate and air conditioning (“HVAC”) industry Control Chemical 45% Chemical Business 53% • Leading merchant market
Slide 4: Company Overview - Background
Company Overview - Background Consistent Revenue Growth History of Major Events Year Event ($ in Millions) 1961 Company Founded by Jack Golsen 1969 IPO 500.0 1970’s Developed high-rise hydronic fan coils 450.0 1980’s Entered water source heat pump (WSHP) market Developed high-rise WSHP’s 400.0 Compl
Slide 5: Climate Control Business
CLIMATE CONTROL BUSINESS 5 Building Blocks for Better Living A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products
Slide 6: Business Overview – Climate Control
Business Overview – Climate Control Strong growth in both revenues and income with operating leverage: Calendar Year Ended 12-31-06 • Sales = $221.2 million, + 41% over 2005 • Operating Income = $25.4 million, + 80% over 2005 • EBITDA = $28.1 million, +69% over 2005 Three Months Ended 3-31-07 • Sale
Slide 7: Climate Control – Huge Installed Base with Hundreds of Premier Developments
Business Overview — Climate Control Huge Installed Base with Hundreds of Premier Developments MGM Grand, | Las Vegas Trump: Tower, NYC ‘Statue of Liberty Disney's Grand Floridian, Orlando Atlantis, Bahamas ‘World Financial Center, NYC Ritz Carlton, Pasadena Maxwell Place Condos, Hoboken NJ Peninsula
Slide 8: Climate Control Industry Trends
Business Overview – Climate Control Industry Trends Construction Market Building Contract Activity (Dollars in Billions) Source: McGraw-Hill Construction Market Forecasting Service (1st Quarter 2007 Edition) $80.0 $70.0 $60.0 Multi-Family $50.0 Education Offices $40.0 Healthcare $30.0 Manufacturing
Slide 9: Broad Product Offering
Business Overview – Climate Control Broad Product Offering Core Products 88% of 2006 Sales ClimateMaster Water Source Heat Pumps and International Environmental Geothermal Heat Pumps Hydronic Fan Coils New Products 12% of 2006 Sales ClimateCraft Large Custom Air Handlers ClimaCool Modular Chillers 9
Slide 10: Typical Installed Units
Business Overview – Climate Control Typical Installed Units High-Efficiency Commercial Geothermal High Rise Fan Coils and Water Source Heat Heat Pump – Above Ceiling Installation Pumps - Integrated Commercial HVAC Systems Custom Air Handler Modular Chillers 10 Building Blocks for Better Living A Lea
Slide 11: ClimateMaster, Inc. Geothermal and Water Source Heat Pumps
Business Overview – Climate Control ClimateMaster, Inc. Geothermal and Water Source Heat Pumps 2006 Sales = $134 million, up 58% over 2005, 61% of CCB Sales What are water source heat pumps? Leading Market Share Highly efficient compressorized cooling and Others heating units which are connected to
Slide 12: What is a Geothermal System and How Does it Work?
Business Overview – Climate Control What is a Geothermal System and How Does it Work? A Geothermal system is an ALTERNATIVE FORM OF RENEWABLE ENERGY. The Earth absorbs approximately 50% of all solar energy and remains at nearly a constant temperature (50°-70°F) year round. A ClimateMaster geothermal
Slide 13: Geothermal Benefits
Business Overview – Climate Control Geothermal Benefits Environmentally responsible Geothermal Heat Pumps transfer energy to or from the earth, minimizing both energy usage and greenhouse gas emissions. Energy Cost Reduction – Geothermal is the most energy efficient HVAC technology available Residen
Slide 14: Geothermal Economics – Geothermal vs. Conventional Systems
Business Overview – Climate Control Geothermal Economics – Geothermal vs. Conventional Systems (3 Ton system – 1800 sq. ft. house) Geothermal as compared to a Basic Conventional AC & Gas Furnace System: • $1,308 annual cost operating (energy) savings with a 4.3 year simple payback • $900 annual posi
Slide 15: The Geothermal Market – A Growth Opportunity
Business Overview – Climate Control The Geothermal Market – A Growth Opportunity Industry Shipments (units) * Market Drivers 70,000 Huge Market Potential - Over 7 million 60,000 units* per year U.S. residential HVAC 50,000 market. 40,000 30,000 High Energy Costs – Long-term high energy costs will co
Slide 16: International Environmental Corp. Hydronic Fan Coils
Business Overview – Climate Control International Environmental Corp. Hydronic Fan Coils 2006 Sales = $61 million, up 11% over 2005, 27% of CCB Sales. What are fan coils? Leading Market Share • Small air handling units including cooling/heating, coils, blowers, valves and Others controls McQuay 9% 1
Slide 17: Worldwide Leader for Hi-Rise Fan Coils and WSHP's
Business Overview – Climate Control Worldwide Leader for Hi-Rise Fan Coils and WSHP’s LSB pioneered Hi-Rise systems Ours have become the standard of the HVAC industry Premier Commercial Fan Coil and Water Source Heat Pump Products e.g. over 70,000 units sold in Las Vegas Integrated System with Easy
Slide 18: Distribution Channels Diversified Customer Base
Business Overview – Climate Control Distribution Channels Diversified Customer Base Other 15% • 210 Commercial Representative Firms Office with 320 locations 6% Multi-Family 27% • 1,200 Commercial Sales Engineers (Approx.) Healthcare • 120 Residential Distributors 11% • 2,000+ Residential Dealer-Con
Slide 19: Key Strategies – Climate Control
Business Strategy – Climate Control Key Strategies: Maintain leadership position in geothermal, water source heat pumps and fan coils as niche product specialist Continued focus on geothermal and water source heat pump growth Grow custom air handler business Continue to introduce new products Contin
Slide 20: Growth Opportunities – Climate Control
Business Strategy – Climate Control Growth Opportunities Geothermal Water Source Heat Pumps • Huge residential market potential • Ultra-high energy efficiency and environmentally responsible technology • Stimulated by long-term high energy prices and environmental concerns Commercial Water Source He
Slide 21: Business Strategy – Climate Control
Business Strategy – Climate Control Key Cost Reduction Initiatives: Tube-in-fin Air Coils for ClimateMaster (heat pumps) Bringing production in-house during first half of 2007 Doubling production capacity Tube-in-fin Air Coils for ClimateCraft (air handlers) Bring production in-house Reduced Motor C
Slide 22: Chemical Business
CHEMICAL BUSINESS 22 Building Blocks for Better Living A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products
Slide 23: Business Overview – Chemical
Business Overview – Chemical Improving financial performance with positive cash flow Calendar Year Ended 12-31-06 • Sales = $260.6 million, +11.6% over 2005 • Operating Income = $10.2 million, +32.4% over 2005 • EBITDA = $19.3 million, +15.9% over 2005 Three Months Ended 3-31-07 • Sales = $73.7 mill
Slide 24: Chemical Products
Business Overview — Chemical Products Industrial Acids e Nitric Acid (56% to 89% concentration) e Terra Industries, Inc., PCS 37% e Mixed Acids e Dyno Nobel America e Concentrated Nitric Acid (98% concentration) « Dyno Nobel America e Sulfuric Acid e Cytec, Chemtrade Logistics Industrial AN e Ammoni
Slide 25: Chemical Industrial Products and Uses
Business Overview – Chemical INDUSTRIAL PRODUCTS: USES: Concentrated Nitric Acid Production of specialty fibers, nitrocellulose, gaskets, crop chemicals, mining Aqueous solution up to 99% concentration products, metal treatment, and nitric acid commercial blends. Nitric Acid Commercial Blends Treatm
Slide 26: Chemical Facilities
Business Overview – Chemical Facilities El Dorado Nitrogen • Located on Bayer MaterialSciencecomplex in Baytown, TX • 465,000 ton/year nitric acid plant • Long term contract with Bayer through mid-2009 with renewal provisions • Primary feedstock is anhydrous ammonia El Dorado Chemical • Located on 1
Slide 27: Major Customers
Business Overview – Chemical Major Customers • Afton Chemical Canada • Air Products & Chemicals • Bayer Material Science LLC • E.I. Dupont De Nemours • Georgia-Pacific Corp. • International Paper Co. • Koch Industries, Inc. • Orica USA, Inc. 27 Building Blocks for Better Living A Leading Manufacture
Slide 28: Industry Trends – Industrial & Agrochemicals
Business Overview - Chemical Industry Trends – Industrial & Agrochemicals Polyurethane Market Demand Coal Production Projections Source: Chemical Marketing Reporter Source: Dept. Of Energy – Energy Information Agency 3000 700 650 2500 600 2000 550 1500 500 450 1000 400 500 350 0 300 2002 2003 2004 2
Slide 29: Key Strategies – Chemical
Business Strategy – Chemical Key Strategies: Continue to develop large multi-year cost-plus supply agreements with customer/partners Increase penetration in industrial markets and reduce seasonal business Maximize plant run rates to increase absorption of fixed costs Increase capacity and sales volu
Slide 30: Convert to Cost-Plus Supply Agreements as opposed to Spot Market Sales
Business Strategy – Chemical Convert to Cost-Plus Supply Agreements as opposed to “Spot Market” Sales Sales by Market and/or Key Customers Cost-Plus Sales vs. Spot Market Sales Baytown -Nitric Low Density AN Acid 20% 12% Spot Market 35% Industrial Acids and Ammonia 25% Agricultural 31% Cost-Plus Agr
Slide 31: Growth Opportunities – Chemical
Business Strategy – Chemical Growth Opportunities Expansion of Baytown capacity Maximize output to support growth and third party sales Additional capacity utilization at El Dorado Convert emissions to marketable products Process optimization – increase yield rate De-bottlenecking Develop proprietar
Slide 32: Profit Improvement Opportunities
Business Strategy - Chemical Profit Improvement Opportunities Cost Reduction Initiatives: Improved Energy Management Systems (installed 2006) Upgraded Preventive / Predictive Maintenance Program (2006 - 2007 implementation) Process Yield Improvements (ongoing) Increased Sales and Capacity Initiative
Slide 33: Financial Overview
FINANCIAL OVERVIEW 33 Building Blocks for Better Living A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products
Slide 34: Improving Financial Performance
Financial Overview Improving Financial Performance ($ in Millions, Years Ended December 31, Three months ended March 31) Sales EBITDA 500.0 45 450.0 40 400.0 35 350.0 30 300.0 492.0 25 41.0 250.0 397.1 364.0 20 200.0 317.0 15 28.8 150.0 283.6 20.9 20.2 23.7 100.0 10 16.9 147.4 50.0 111.9 5 8.7 0.0 0
Slide 35: Statement of Operations
Financial Overview Statement of Operations ($ in millions) Fiscal Year Ended December 31, Three Months Ended March 31, (Note) 2002 2003 2004 2005 2006 2006 2007 Revenue $283.6 $317.0 $364.0 $399.1 $492.0 $111.9 $147.4 Operating Income 9.1 8.0 3.2 15.0 27.6 5.8 13.5 Net Income 0.1 2.9 1.4 5.1 15.9 3.
Slide 36: Condensed Consolidated Balance Sheets
Financial Overview Condensed Consolidated Balance Sheets ($ in thousands) 12/31/2006 3/31/2007 Assets (unaudited) Current assets $132,495 $147,838 Property, plant, equipment, net 76,404 76,781 Other assets 11,028 10,305 Total Assets $219,927 $234,924 Liabilities and Stockholders' Equity Total curren
Slide 37: Capitalization (Long-Term Debt and Stockholders' Equity)
Financial Overview Capitalization (Long-Term Debt and Stockholders’ Equity) March 31, 2007 ($ in millions) (unaudited) Long Term Debt: Working Capital Revolver Loan $34.5 Senior Secured Loan Due 2009 50.0 7% Convertible Senior Subordinated Notes Due 2011 1.0 Other 17.3 Total Long Term Debt (includin
Slide 38: Improved Debt-to-Equity Ratio
Financial Overview Improved Debt-to-Equity Ratio Long Term Debt gi cc0,000's) Stockholders’ Equity (5.0) 2001 2002 2003 2004 2005 2006 2007 2001 2002 2003 2004 2005 2006 2007 3-31 3-34 Note: Balances as of 3-31-07 are unaudited. 38 Building Blocks for Better Living LSH A Leading Manufacturer of Indo
Slide 39: Summary Operating Results by Business Segment
Financial Overview Summary Operating Results by Business Segment ($ in millions) Calendar Year Three Months Ended 12/31 Ended 3/31 2005 2006 2006 2007 Climate Control Business (unaudited) Sales 156.9 221.2 47.4 71.3 Gross Profit 48.1 65.5 14.8 20.7 Gross Profit % 30.7% 29.6% 31.2% 29.0% Segment Oper
Slide 40: EBITDA Reconciliation
Financial Overview EBITDA Reconciliation ($ in millions) Calendar Years Ended December 31, Three Months Ended March 31 2002 2003 2004 2005 2006 2006 2007 (Unaudited) Net income $ 0.1 $ 2.9 $ 1.4 $ 5.1 $ 15.9 $ 3.0 $ 10.8 Interest expense 8.2 6.1 7.4 11.4 11.9 2.9 2.6 Income taxes 0.1 - - 0.1 0.9 - 0
Slide 41: EBITDA Reconciliation – Segment Information
Financial Overview EBITDA Reconciliation – Segment Information ($ in millions) Year ended Three months ended December 31, March 31, 2005 2006 2006 2007 Climate Control Business Operating income $ 14.1 $ 25.4 $ 5.6 $ 8.5 Plus: Non-operating income - - - - Equity in earnings of affiliate 0.7 0.8 0.2 0
Slide 42: Company Highlights
Company Highlights Both of LSB’s core businesses are leaders in their respective industries with dominant market share and technological leadership History of top and bottom line growth – strong EBITDA growth Climate Control Business: strong margins in core products generating exceptional growth and
Slide 43: Forward Looking Statements
Forward Looking Statements Certain statements contained within this presentationmay be deemed “Forward-LookingStatements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements in this presentati
Slide 44: Building Blocks for Better Living
Building Blocks for Better Living Common Stock: Corporate Offices: Investor Relations: AMEX ticker symbol LXU 16 South Pennsylvania Avenue The Equity Group, Inc. Oklahoma City, Oklahoma USA Linda Latman Auditor: Phone: 405.235.4546 Phone: 212-836-6909 Ernst & Young Fax: 405.235.5067 Fax: 212-421-127
Slide 45: Important Notices to Recipients / Contacts
ALL INQUIRIES AND REQUESTS FOR INFORMATION SHOULD BE DIRECTED TO THE CONTACTS BELOW : Mark Behrman Gregg Woodie Justin Figari Managing Director Vice President Analyst Head of Investment Banking Investment Banking Investment Banking Tel: 12.209.7677 Tel: 212.209.7691 Tel: 212.209.7680 mbehrman@jgiord
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