Slide 1: Fourth Quarter 2017 Update
Fourth Quarter 2017 Update February 27, 2018 1
Slide 2: Agenda and Forward-Looking Statements
Agenda Overview Dan Greenwell, President and Chief Executive Officer Operations Review John Diesch, Executive Vice President, Chemical Manufacturing Financial Review Mark Behrman, Executive Vice President and Chief Financial Officer Q&A Forward-Looking Statements • This presentation contains c
Slide 3: Fourth Quarter 2017 Highlights
Fourth Quarter 2017 Highlights Net sales of $88.9 million for the fourth quarter of 2017, an increase of $3.5 million, or approximately 4% from $85.4 million for the fourth quarter of 2016 Adjusted EBITDA from continuing operations of $0.3 million for the fourth quarter of 2017, a decrease of $2
Slide 4: Chemical Commodities: Feedstock and End Products Price Trend
Chemical Commodities Feedstock & End Products 5-year Price Trend Net Back Prices Natural Gas 4
Slide 5: Market Outlook
Market Outlook Agricultural Industrial and Mining Nitrogen prices showing signs of recovery despite continued pressure Industrial market – Trending slightly up in 2018. The auto and housing on farmers from continued low crop prices markets continue to look good for the coming year Global outages a
Slide 6: Attractive Combination of Low Priced Feedstock in an increasing Ammonia Price Environment
Attractive Combination of Low Priced Feedstock in an increasing Ammonia Price Environment • Due to large shale gas deposits and technological advancements, U.S. Ammonia Producers have a Commanding Position as the domestic natural gas prices are expected to remain low World’s Lowest Cost Producer Ser
Slide 7: Supportive U.S. Grower Economics
Supportive U.S. Grower Economics Source: USDA, Green Markets, CME Group, Nutrient 1. 2017/18 margins are based on spot cash crop prices and estimated average fertilizer costs; 2018/19 margins are based on new crop 2018 futures prices less estimated basis and estimated spot retail fertilizer prices 7
Slide 8: Operational Review
Operational Review Isbindustries.com INDUSTRIES
Slide 9: Operational Review
Operational Review El Dorado Cherokee • Auxiliary boiler / heat exchanger repairs in • Ammonia on-stream rate above 99% for Q4 2017; 5th Ammonia caused 21 days down time in October consecutive quarter at 99%+ • November, December and January had 99%+ on- • Planning for turnaround July/August 2018 st
Slide 10: Maintenance Management System Enhancement
Maintenance Management System Enhancement • Commonality of platform across all plants • Risk and critical ranking of all equipment and instrumentation • Mechanical integrity program improvements • Preventive and predictive maintenance • Precision maintenance implementation and training • Focus on ro
Slide 11: Focus on Pryor
Focus on Pryor BD Energy Ammonia Plant Assessment • Firm is expert in design of steam methane reformers • Process Evaluation for the Ammonia plant • Heat and material balance • Improve performance, reliability and efficiency • Study to deliver a full evaluation of the operation and performance of th
Slide 12: Financial Review
Financial Review Isbindustries.com INDUSTRIES
Slide 13: LSB Consolidated Financial Highlights
LSB Consolidated Financial Highlights Fourth Quarter 2017 Three Months Ended Twelve Months Ended December 31, December 31, ($ In Millions, Except EPS) 2017 2016 Change 2017 2016 Change Net sales $88.9 $85.4 $3.5 $427.5 $374.6 $52.9 Gross profit (loss) ($10.2) ($8.9) ($1.3) $5.5 ($49.3) $54.8 % of ne
Slide 14: Fourth Quarter – 2017 vs. 2016
Fourth Quarter – 2017 vs. 2016 ($ In Millions) Q4 2017 2016 Total Consolidated Adjusted EBITDA $0.3 $2.8 2016 $2.8 Net Sales Price Impact 1.1 Net Sales Volume Impact 0.1 Costs related to Pryor unplanned downtime (8.8) Higher fixed cost in 2016 related to unplanned downtime at El Dorado / "shake down
Slide 15: Capital Structure
Capital Structure $ In Millions 12/31/17 Cash $ 33.6 Senior Secured Notes 375.0 Working Capital Revolver ($41.2 mm of availability at 12/31/17) - Other Debt 39.1 Unamortized Discount and Debt Issuance Costs (4.7) Total Long-Term Debt, Including Current Portion, net $ 409.4 Series E and F Redeemable
Slide 16: Free Cash Flow
Free Cash Flow Twelve Months Ended December 31, $ In Millions 2017 2016 Change Net income (loss) $ (29.2) $ 112.2 $ (141.4) Income from discontinued operations, net of taxes (1.1) (200.3) 199.2 Depreciation, depletion and amortization 72.1 64.3 7.8 Deferred income taxes (40.4) (42.0) 1.6 Loss on ext
Slide 17: 2018 Outlook
2018 Outlook Sales Volume: Full Year 2018 Sales (tons) Full Year 2017 Actual Sales (tons) Agriculture: (includes lost sales related to EDC and Cherokee turnarounds) 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
Slide 18: 2018 Outlook (continued)
2018 Outlook (continued) Financial (Full Year): Variable Plant Expenses: Natural gas feedstock costs 30 – 32 MMBtu/ton of ammonia Electricity 5.0% – 7.0% of sales Catalyst expense (burnoff) 1.0% – 2.0% of sales Freight 7.0% – 9.0% of sales Other purchased products (primarily Ag Centers) 2.0% – 4.0%
Slide 19: Areas of Focus
Areas of Focus • Improving the on-stream rates of our chemical plants • Focus on the continued improvement of our safety performance • Continue broadening of the distribution of our AN and Nitric Acid products • Improving the margins on sales of our products • Reducing and controlling our cost struc
Slide 20: Appendix
Appendix Isbindustries.com INDUSTRIES
Slide 21: EBITDA Reconciliation
EBITDA Reconciliation Three Months Ended Twelve Months Ended December 31, December 31, LSB Consolidated ($ In Millions) 2017 2016 2017 2016 Net income (loss): $0.9 ($21.5) ($29.2) $112.2 Plus: Interest expense 9.3 9.8 37.3 30.9 Loss on extinguishment of debt - 8.7 - 8.7 Provision for impairment - 1.
Slide 22: Consolidated EBITDA Sensitivity Analysis
Consolidated EBITDA Sensitivity Analysis ($ In Millions) Significant Earnings Power at Optimal Operating Rates Natural Gas Price per mmbtu $2.50 $3.00 $3.50 $4.00 $4.50 Tampa Ammonia price per MT $450 $226 $214 $202 $190 $178 $400 $194 $182 $170 $158 $146 $350 $162 $150 $138 $126 $114 $300 $130 $118