Lsb Industries Inc. (LXU)

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LSB Industries, Inc. (LXU)

Q3 2008 Earnings Call Transcript

November 6, 2008, 5:15 pm ET

Executives

Carol Oden - IR

Jack Golsen – Chairman and CEO

Tony Shelby – CFO

Barry Golsen – President and COO

Analysts

Eric Prouty – Canaccord Adams

Rick Hult – Roth Capital Partners

Dan Mannes – Avondale Partners

Steve Denault – Northland Securities

Ali Motamed – Boston Partners

Bruce Geller – DGHM

Presentation

Operator

Good day everyone and welcome to the LSB Industries, Incorporated Third Quarter 2008 Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode.

I will now turn the conference over to Ms. Carol Oden. Please go ahead, ma'am.

Carol Oden

Thank you. Welcome to the LSB Industries, Inc. third quarter 2008 conference call. Today, LSB’s management participants are Jack Golsen, Chairman and Chief Executive Officer; Barry Golsen, President, and Tony Shelby, Chief Financial Officer.

This conference call is being broadcast live over the Internet and is also being recorded. An archive of the webcast will be available shortly after the call on our website at www.lsb-okc.com and will be accessible for one month. After comments by management, a question-and-answer session will be held. Instructions for asking questions will be provided at that time.

Information reported on this call speaks only as of today, November 6, 2008, and therefore you are advised that time-sensitive information may no longer be accurate as at the time of any replay. We do not intend to and undertake no duties to update the information contained in this conference call.

Comments today may contain certain forward-looking statements. All statements other than statements of historical facts are forward-looking statements. Statements that include the words expect, intend, plan, believe, project, anticipate, estimate and similar statements of a future or forward-looking nature identify forward-looking statements, including but not limited to, starting up our Pryor, Oklahoma chemical plant, obtaining our long-term offtake agreement for the production at the Pryor plant, cost to activate the Pryor plant, production plans at the Pryor plant at approximately 120 million annual sales, we are in a strong position to finance operations, as well as growth opportunities, capital expenditures for expansion, optimistic about the long range potential for our geothermal products, demand for our acids and ammonium nitrate, emphasize cost reduction while developing products and customer mix that will allow us to operate our chemical plants at full rate, the outlook for commercial construction for this years and future years, prospects for growing the Climate Control business, outlook for a strong ag market, the general level of future activities positions LSB to improve and grow its economy, allow liquidity as a company, impact of gas hedged contracts in the fourth quarter and future quarters, effect of economic slowdown in our Climate Control business and construction industry, sections under the Economic Stability Act of 2008 and effects on our Climate Control business, long range growth of geothermal products, cost reductions, outlook for our chemical business is good, and prospects regarding our Climate Control business is good.

The term EBITDA as used in this presentation is net income plus interest expense, depreciation, amortization, income taxes, and certain non-cash charges unless otherwise described. You should not rely on forward-looking statements because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors.

These factors include but are not limited to decline in general economic conditions, interest rate changes, competitive pressures, changes in working capital and the risk and uncertainties discussed under the heading Special Note Regarding Forward-Looking Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. The Form 10-Q for the quarter ended September 30, 2008, and the reports we filed from time to time with the Securities and Exchange Commission. We do not intend to and anticipate no duty to update the information contained in this conference call.

The term EBITDA as used in this presentation is net income plus interest expense, depreciation, amortization, income taxes, and certain non-cash charges unless otherwise described. EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative for GAAP measurement. We will post on our website a reconciliation to GAAP of any EBITDA numbers discussed during this conference call.

Now, I'll turn the conference call over to Mr. Jack Golsen, the company's Board Chairman.

Jack Golsen

Thank you, Carol. Good afternoon, everybody, and welcome to LSB's third quarter 2008 conference call.

Today, Tony Shelby, our Chief Financial Officer and Executive Vice President will review our overall financial results. Then Barry Golsen, our President and Chief Operating Officer will discuss both the Climate Control and the chemical businesses. Following these presentations, Tony, Barry and I will be available to answer your questions.

With everything that's taking place in our economy, any indications we give you about the markets we serve are subject to the return of stability in the credit and capital markets. Our businesses have continued to have good order levels and our backlogs are strong at this time. We do see indications that the general level of future activity will be less than has been in certain areas.

We are convinced that even if the short or medium term general economy turns out to be negative, we are doing the right thing to position LSB to improve and grow as the economy and our markets allow. We did not anticipate the current financial crisis that our country is experiencing, but fortunately the steps that we have previously taken have resulted in us having liquidity, the need to continue with the investments required for our planned long-term growth. Our general approach is to conserve cash to use to fuel our growth plans.

When you analyze the numbers behind our third quarter results as we have reported them in our new release this afternoon, they were better than they appear. In last year's third quarter, there were tax benefits. This year, our earnings are fully taxed. During last year's third quarter, we recognized income of 4.8 million from a litigation settlement and insurance recoveries. This did not recur this year.

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