Slide 1: Investor Presentation
Investor Presentation August 2018 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally are identifiable by use of the words “may,” “believe,” “expect,” “intend,” “plan to,” “estimate,”
Slide 3: Key Investment Highlights
Key Investment Highlights 1 Diversified Nitrogen Chemicals Business with differentiated end market positions 2 Business strength supported by stable Industrial and Mining Business with attractive EBITDA margins 3 Favorable long-term dynamics in Agricultural Business creates significant upside in EBI
Slide 4: Diversified Nitrogen Chemicals Business with Differentiated End Market Positions
1 Diversified Nitrogen Chemicals Business with Differentiated End Market Positions Key Regional Mix(1) Products End End Markets(1) Markets Application Applications • Urea ammonium nitrate • Fertilizer for corn and other crops Agricultural solutions (UAN) • Ammonium nitrate (AN) • Primary nitrogen co
Slide 5: Differentiated Business Profile Focuses on Customers / End Markets Where LSB Is Advantaged
1 Differentiated Business Profile Focuses on Customers / End Markets Where LSB Is Advantaged Key Logistical Advantages Centrally located assets with access to… • Truck freight rate advantage on customers west of the El Dorado Mississippi River Northern Plains • Direct routes to western U.S. via ra
Slide 6: Business Supported By Stable Industrial and Mining Products Business
2 Business Supported By Stable Industrial and Mining Products Business Facility Location Product Method of Distribution Regions Sold Ammonia, • Ammonia pipeline; Union Pacific rail • Industrial customers in U.S., El Dorado, Acids, • Purchase and sale agreement with Canada and Mexico AR LDAN Koch thr
Slide 7: Strength and Stability of Adjusted EBITDA Contribution from Industrial and Mining End Markets
2 Strength and Stability of Adjusted EBITDA Contribution from Industrial and Mining End Markets 2017A Revenue 2017A Adjusted EBITDA Adjusted EBITDA Contribution by End Market Contribution by End Market¹ Margin by End Market² 8% Run-Rate 2016A³ 2017A FY Sales: 44% FY Adjusted Agriculture ~8% ~3% EBIT
Slide 8: Sales Mix Provides Stability and Look-Through In Contract Pricing
2 Sales Mix Provides Stability and Look-Through In Contract Pricing Q2-2018 TTM Sales by Pricing Method • Over 40 percent of sales are currently non-seasonal and priced pursuant to contract agreements Cost-Plus • Contributes to margin stability through pass-through of raw materials and other manufac
Slide 9: Stable Industrial Market Demand
2 Stable Industrial Market Demand Key Focus of LSB, Less so of Peers Industrial End Market is Supported By Stable Demand for Sulfuric and Nitric Acid… North American Demand (mm metric tons) Operating Rates (%): 86 88 85 84 87 78 80 80 84 81 81 85 9 9 9 9 10 10 42 42 42 41 41 43 2013 2014 2015 2016 2
Slide 10: Diversified Agriculture Distribution Network and Logistics
3 Diversified Agriculture Distribution Network and Logistics Facility Location Product Method of Distribution Regions Sold • Marketing agreement with CVR Pryor, OK UAN Partners Southern Plains Ammonia • Direct access to distributors / & Corn Belt dealers / end users Cherokee, • Direct to distributor
Slide 11: Long-Term Structural Macro Drivers Expected to Continue Driving Secular Growth
3 Long-Term Structural Macro Drivers Expected to Continue Driving Secular Growth Continued Population Growth Less Arable Land Per Person Drives Ammonia Consumption U.S. Population Growth (mm) U.S. Arable Land per Person (Hectares) North American Ammonia Demand 355 MM Metric tons) 320 0.98 2015 2030E
Slide 12: Global Ammonia Market is Expected to Gain Momentum
3 Global Ammonia Market is Expected to Gain Momentum • The global nitrogen market recovery is projected to gain momentum in 2018, driven by the completion of all expansion projects and lower global operating rates • ~30% of global announced capacity expansions, much of which were in the U.S., have b
Slide 13: North American Projected Capacity Rationalization is Supported by Attractive Demand Trends
3 North American Projected Capacity Rationalization is Supported by Attractive Demand Trends • In the recent past, lower natural gas prices have prompted many North American producers to announce significant capacity additions, which have weighed down ammonia prices • Planned capacity additions in N
Slide 14: Attractive Combination of Low Priced Feedstock in an Increasing Ammonia Price Environment
3 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 S
Slide 15: Illustrative EBITDA Impact Associated with Changes in Product Selling Prices & Feedstock Costs
3 Illustrative EBITDA Impact Associated with Changes in Product Selling Prices & Feedstock Costs (Based on 2018 Volumes) Q3 2017 Actual Current FY EBITDA Average Pricing Average Pricing Change Impact Tampa Ammonia¹ $211 / MT $280 / MT $10.00 +/- $3.8mm UAN¹ $124 / ST $155 / ST $10.00 +/- $4.8mm HDAN
Slide 16: Significant Investment of Capital Will Drive Improved Financial Performance
4 Significant Investment of Capital Will Drive Improved Financial Performance Total 2013-2017 Capex Spend $MM Site 2013 2014 2015 2016 2017 Total El Dorado, AR $102 $204 $449 $144 $15 $914 Cherokee, AL 29 21 7 14 6 77 Pryor, OK 20 9 11 7 16 63 Other - - 3 - - 3 Total $151 $234 $470 $165 $35 $1,054
Slide 17: Operational Improvement Program Across Facilities Mostly Complete
4 Operational Improvement Program Across Facilities Mostly Complete Ammonia On-Stream Rates¹ Key Accomplishments 100% 100% 100% 100% 96% 100% 89% 94% 93% Consistently maintained on-stream rates around 95% 87% 99% 87% 85% and expect to achieve these levels moving forward Cherokee Quarterly Max Annu
Slide 18: Reliability and Operations Improvement
Reliability and Operations Improvement • Implementation of original scope is complete; working on additional improvements • Commonality of platform across all plants • KPI measurements / targeted improvements • Working on downtime risk assessment of critical equipment • Preventive and predictive mai
Slide 19: Financial Overview
Financial Overview Isbindustries.com INDUSTRIES
Slide 20: LSB Consolidated Financial Highlights
LSB Consolidated Financial Highlights Second Quarter 2018 Three Months Ended Six Months Ended June 30, June 30, ($ In Millions, Except EPS) 2018 2017 Change 2018 2017 Change Net sales $ 103.2 $ 122.9 $ (19.7) $ 203.6 $ 246.2 $ (42.6) Adjusted net sales (1) $ 103.2 $ 105.2 (1) $ (2.0) $ 203.6 $ 207.3
Slide 21: Second Quarter – 2018 vs. 2017
Second Quarter – 2018 vs. 2017 ($ In Millions) Quarter Ended 2018 2017 Total Consolidated Adjusted EBITDA $17.8 $21.7 2017 $21.7 Higher selling prices 3.8 Lower natural gas cost 3.3 Lower sales volumes (4.3) Lost absorption and higher costs associated with downtime (4.3) Prior year catalyst recoveri
Slide 22: Capital Structure
Capital Structure $ In Millions 6/30/18 Cash $ 47.2 Senior Secured Notes 400.0 Working Capital Revolver ($34.3 mm of availability at 6/30/18) - Other Debt 33.0 Unamortized Discount and Debt Issuance Costs (16.6) Total Long-Term Debt, Including Current Portion, net $ 416.4 Series E and F Redeemable P
Slide 23: Consolidated Annual EBITDA Illustrative Sensitivity Analysis
Consolidated Annual EBITDA Illustrative Sensitivity Analysis ($ In Millions) Potential for Significant Earnings Power at Optimal Operating Rates Natural Gas Price per MMBtu Tampa Ammonia price per MT $2.50 $3.00 $3.50 $4.00 $4.50 $450 $226 $214 $202 $190 $178 $400 $194 $182 $170 $158 $146 $350 $162
Slide 24: Appendix
Appendix Isbindustries.com INDUSTRIES
Slide 25: EBITDA Reconciliation
EBITDA Reconciliation Three Months Ended Six Months Ended LSB Consolidated ($ In Millions) June 30, June 30, 2018 2017 2018 2017 Net loss: ($27.5) ($7.0) ($33.1) ($13.0) Plus: Interest expense 11.7 9.3 21.0 18.7 Loss on extinguishment of debt 6.0 - 6.0 - Depreciation, depletion and amortization 19.5
Slide 26: Net Sales Reconciliation
Net Sales Reconciliation Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 Net sales ($ in millions) Agricultural $ 58.0 $ 57.2 $ 110.3 $ 120.5 Industrial 32.8 53.2 70.9 102.1 Mining 12.4 10.4 22.4 18.0 Other - 2.1 - 5.6 Total net sales $ 103.2 $ 122.9 $ 203.6 $ 246.2 Impact
Slide 27: LSB Simplified Manufacturing Process Overview
LSB Simplified Manufacturing Process Overview LSB Products Sold to Lower Margin Higher Margin Market Ammonia (NH3) (storage, trucks, rail) Nitric Acid (storage, trucks, rail) Ammonium Nitrate Nitric Acid AN Solution Solution (ANS), HDAN, LDAN (storage, trucks, rail) Natural Urea-Ammonium Ammonia Nit