Lsb Industries, Inc. · NYSE:LXU
Lsb Industries — Investor Presentation (July 2013)
40 slides from Lsb Industries's investor presentation, Jul 18, 2013
Slide 1: LSB Industries, Inc. Investor Presentation July 2013
LSB Industries, Inc. Investor Presentation July 2013
Slide 2: Safe Harbor Statement
1 Safe Harbor Statement This presentation and the comments being made today contain certain forward-looking statements. All statements other than statements of historical fact are forward-looking statements within the meaning of the Federal securities law. Statements that include the words such as "
Slide 3: Company Overview
2 Company Overview
Slide 4: Business Overview
Business Overview 3 2012 Net Sales by Segment 2012 EBITDA by Business Segment Diversified industrial manufacturer of chemical and HVAC products sold into a wide range of end markets Founded in 1968 and headquartered in Oklahoma City, OK; publicly traded (NYSE: LXU) Chemical business operates 4 produ
Slide 5: Diversified Sources of Revenue
(CHART) Diversified Sources of Revenue 4 13% Mining 21% Industrial Acids & Ammonia 29% Agriculture 29% Commercial & Institutional Buildings 6% Single-family Residential Engineered Products & Other 2% ($15 mil) Climate Control 35% ($266 mil) 2012 Full Year Sales Mix (As Reported)
Slide 6: Key Credit Considerations
Key Credit Considerations 5 Experienced and Invested Management Team Diversified Sources of Revenue Strategically Located Chemical Facilities, Long- Standing Customers, Unique Business Model Advantaged and Improving Raw Material Cost Position Attractive Industry Fundamentals Strong Free Cash Flow an
Slide 7: Strategically Located Chemical Facilities, Long-Standing Customers, Unique Business Model
Strategically Located Chemical Facilities, Long-Standing Customers, Unique Business Model 6 Product offering applicable across a broad range of end markets Nitric acid for industrial uses UAN, AN and NH3 fertilizers AN and AN solutions for mining industry Chemical End Markets Strong Market Positions
Slide 8: Advantaged and Improving Raw Material Cost Position
7 Advantaged and Improving Raw Material Cost Position 2012 Chemical Net Sales (As Reported): $478 million Contracts Provide Cost Advantage Ammonia Production Offers Attractive Economics Strategic focus on management of input cost volatility through pricing agreements 52% of 2012 Chemical net sales w
Slide 9: Attractive Industry Fundamentals: Chemicals
8 Industry dynamics support high margins for U.S. nitrogen fertilizer producers Favorable demand environment Tight stock-to-use ratios for corn and wheat and high expected crop returns U.S. is the largest exporter of coarse grains Low natural gas prices Robust outlook Steady outlook for industrial c
Slide 10: Demonstrated Market Leadership in Core Climate Control Products
Demonstrated Market Leadership in Core Climate Control Products 9 Strategic focus on product specialization, customized products and improved technologies Leading Market Share in Key Products Leading market share in core HVAC products Estimated 40% share in water source and geothermal heat pumps Est
Slide 11: Attractive Industry Fundamentals: Climate Control
10 Attractive Industry Fundamentals: Climate Control Construction markets are poised for a recovery to pre-recession levels Climate Control's product sales should outgrow broader markets Driven by high energy efficiency characteristics Green building market expected to grow ~25%+ CAGR from '12 - '16
Slide 12: Strong Free Cash Flow and Conservative Debt Profile
Strong Free Cash Flow and Conservative Debt Profile 11 Proven Ability to Generate Free Cash Flow Strong Free Cash Flow1 Conversion Conservative Management of Debt History of consistent free cash flow generation, which has been used to invest in operations Efficient operating model has allowed LSB to
Slide 13: Experienced and Invested Management Team
Experienced and Invested Management Team Management Overview Experienced Management Team with over 30 years of average experience with the Company CEO Jack Golsen founded LSB Industries in 1969 and is a major shareholder Management has deep knowledge of the Company's operations and proven track reco
Slide 14: Business Segments Overview
13 Business Segments Overview
Slide 15: Chemical Markets and Products
Chemical Markets and Products Agriculture (46% of 2012 Chemical Net Sales) Nitric Acid Commercial Blends Semi-conductor industry, manufacture of nylon and polyurethane intermediates, ammonium nitrate production Anhydrous Ammonia Air emission abatement in power plants, water treatment, refrigerants,
Slide 16: Key Relationships with Blue-Chip Customer Base
Key Relationships with Blue-Chip Customer Base 15 Major customers consist of large industrial producers, agricultural distributors, farmers and ranchers Top 5 chemical customers accounted for 48% of Chemical Business net sales in 2012 and have been customers for over 15 years on average Majority of
Slide 17: Chemical Facilities
Chemical Facilities 16 Baytown El Dorado Chemical (EDC) Cherokee Nitrogen Co. Pryor Chemical Co.
Slide 18: Typical Facility Process Flow (Pryor)
Typical Facility Process Flow (Pryor) 17 Pryor facility process flow is typical of plants with natural gas feedstock Products are marketable at every intermediate and final stage of production
Slide 19: Recent Events
Recent Events Recent Events Current Status Cherokee (Alabama) Repairs completed in May '13 Facility now running at 100% of pre-incident capacity Facility started up in Q4 2010 after being shuttered for 10+ years Feb. - Jul. '12: no UAN production due to damaged urea reactor Nov. '12 - Apr. '13: no a
Slide 20: Facility Reliability Improvement
Facility Reliability Improvement Facility focused safety and reliability programs and personnel Annual third party Process Safety Management ("PSM") program audits Computerized Maintenance Management ("CMMS") systems at three facilities Critical spares for selected pieces of equipment 19 Key Compone
Slide 21: LTM Q1 2013 Consolidated Adjusted EBITDA Bridge
LTM Q1 2013 Consolidated Adjusted EBITDA Bridge 20 LTM Q1 2013 Consolidated Adjusted EBITDA Bridge *Includes extra expenses of $0.6 MM
Slide 22: Climate Control Market and Products
Climate Control Market and Products Geothermal & Water Source Heat Pumps (61% of 2012 Climate Net Sales) Hydronic Fan Coils Heating and cooling for commercial/institutional markets as well as single family residential new construction renovation and replacements Hydronic Fan Coils (21% of 2012 Clima
Slide 23: Significant Installed Base of Climate Control Products
Significant Installed Base of Climate Control Products Millennium Towers, NYC Bellagio, Las Vegas Statue of Liberty MGM Grand, Las Vegas Trump Tower, NYC World Financial Center, NYC Chicago Hilton and Towers Wynn Resort, Las Vegas Disney's Grand Floridian, Orlando Atlantis, Bahamas Rowes Wharf, Bost
Slide 24: Climate Control Key Customers and Distribution Networks
23 Climate Control business sells its products to mechanical contractors, original equipment manufacturers ("OEMs") and distributors Serves entire construction food chain: owners, architects, mechanical engineers, general contractors and mechanical contractors OEM's purchase from LSB and resell unde
Slide 25: Financial Overview
24 Financial Overview
Slide 26: Chemical Historical Financial Performance
Chemical Historical Financial Performance 25 Net Sales Chemical Business net sales supported by increases in selling prices of ammonia, UAN and other nitrogen-based products driven by robust demand Chemical Business net sales decrease in 2012 into the LTM period was result of unplanned downtime at 3
Slide 27: Climate Control Historical Financial Performance
Climate Control Historical Financial Performance 26 Net Sales Climate Control Business net sales, although lower than pre-recession levels, have remained steady through the construction downturn Product concentration in commercial/ institutional construction has mitigated impact of single family con
Slide 28: Consolidated Historical Financial Performance
Consolidated Historical Financial Performance 27 Net Sales Consolidated EBITDA Gross Profit Capital Expenditures
Slide 29: Second Quarter Performance Update
Second Quarter Performance Update On July 10, 2013, LSB provided an update on operations during the second quarter of 2013 along with selected expected operating results for the period The Company expects Q2 2013 operating income in a range of $9.0 million - $12.0 million Operating income for Q2 201
Slide 30: Capital Investment Will Enhance Performance
Capital Investment Will Enhance Performance 29 Historical and Select Planned Capital Expenditures Currently pursuing select capital investments with a focus on reducing cost, enhancing reliability and increasing capacity / efficiency New converter and other investments at Pryor allowing production a
Slide 31: Appendix
30 Appendix
Slide 32: Consolidated EBITDA Reconciliation
Consolidated EBITDA Reconciliation 31 Consolidated EBITDA and Adjusted EBITDA Reconciliation Consolidated EBITDA Build-up
Slide 33: Business Level EBITDA Reconciliation
Business Level EBITDA Reconciliation 32 Business Level EBITDA and Adjusted EBITDA Reconciliation
Slide 34: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation 33 Free Cash Flow Reconciliation Capital Expenditures
Slide 35: Overview of Recent Indebtedness
Overview of Recent Indebtedness On July 3, 2013 ThermaClime, a wholly owned subsidiary of LSB, entered into the eighth amendment to its existing senior secured revolving credit facility (the "ABL Revolver") Committed amount of the ABL Revolver will increase from $50 million to $100 million (subject
Slide 36: Insurance Coverage and Recovery Proceeds
Insurance Coverage and Recovery Proceeds 35 LSB filed certain claims under its business interruption ("BI") and property damage ("PD") insurance related to the recent events at EDC and Cherokee Company is not pursuing insurance coverage for downtime events at Pryor which related to process upgrade a
Slide 37: Chemical Key Product Sales
Chemical Key Product Sales Agricultural Agricultural Agricultural 36 (CHART) $'s in Millions Tons Sold UAN and Ammonia tons sold decreased in Q1 2013 vs. Q1 2012 as a result of downtime at Cherokee and Pryor. AN sales decreased in Q1 2013 vs. Q1 2012 due to varied seasonality. The 2012 spring planti
Slide 38: Additional Disclosures
Additional Disclosures We have identified several strategic initiatives which we believe will drive increased sales growth and profitability. We also intend to further develop relationships with large industrial customers in our Chemical business, which we believe will create opportunities to drive
Slide 39: Additional Disclosures (continued)
Additional Disclosures (continued) We renewed one of our union agreements in July 2013 for a term of five years, and we expect to negotiate renewals in connection with two additional agreements which expire in October 2013 and November 2013. Each of the named executive officers received a bonus in 2
Slide 40: LSB Industries, Inc.
at Hi. LSB Industries, Inc.