Q3 2021 LSB Industries Inc Earnings Call

November 2, 2021

[music].

Greetings and welcome to the LSP industries third quarter, 2020 One conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Binder This conference is being recorded.

It is now my pleasure to introduce your host Fred Bon a court Vice President of Investor Relations. Thank.

Thank you Sir.

May begin.

Yeah.

Good morning, everyone. Joining me today on the call are Mark Behrman, our Chief Executive Officer, and Cheryl Maguire, our Chief Financial Officer.

Please note that today's call will include forward looking statements and because these statements are based on the company's current intent expectations and projections. They are not guarantees of future performance and a variety of factors could cause the actual results to differ materially.

As this call will include references to non-GAAP results.

Please see the press release in the investors section of our website L. S. B industry Dot com for further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP results.

Time I'd like to go ahead, and turn the call over to Mark.

Thank you Fred and welcome to the L. S B team.

We're happy to have the opportunity to speak with you today about our 2021 third quarter, which combined with the first half of October have included some of the most significant positive developments in our company's history.

We posted record quarterly results for the second consecutive quarter as we continued to run our plants reliably which enabled us to capitalize on the strong market environment for our products on both sides of our business.

We also closed on the preferred stock exchange transaction that we discussed with you on our last call.

As anticipated the elimination of the preferred stock from our balance sheet, but the credit upgrades on our debt by our major rating agencies.

This enabled us to refinance our senior secured notes at a significant reduction in interest rate with Cheryl will discuss later in the call.

Collectively these factors make us very optimistic about our prospects for the final quarter of 2021 and for the coming year.

As it relates to our end markets pricing strength on the agricultural side of our business and healthy demand on the industrial side combined to produce strong third quarter results as compared to those of our third quarter last year on.

On slide three we summarize the key drivers for our agricultural end markets.

Commodity prices continue to ship well above year ago levels.

Most relevant to our business the price of corn, while down from the highs of this past may are up nearly 70% from 2020 lows and up more than 30% from this point last year and continued to trade at near eight year high levels.

As we've discussed on previous calls the strong pricing is the result of multiple factors, including a surge in exports led by increased demand from China. Additionally.

Additionally, ethanol consumption and production currently sit at near Prim pre pandemic levels as U S miles driven continues to recover from the pandemic shutdowns as a result of the benefits of Covid vaccines.

Drought conditions in Brazil, which are resulting in significant yield losses have also served to constrict global corn supply in the face of rising demand translating into further support for healthy price levels farmers are currently enjoying.

Prices of other agricultural commodities have also seen steep increases, including beans, wheat, and cotton all creating a competitive environment for a finite number of acres, we have available for planting in the U S.

The USDA continues to estimate that nearly 93 million acres were planted in 2021.

This represents a 2 million acre increase from the previous year and with the exception of 2016 was the highest level of planting since 2013, resulting in strong demand for fertilizers.

Along with strong corn market fundamentals that have driven a robust demand for fertilizers as farmers seek to maximize their yields.

Nitrogen prices have been driven to multi year highs.

Elevated prices reflect global constraints on ammonia production, resulting from a variety of factors.

From the U S perspective, the production issue started early in the year with winter storm Uri and the February deep freeze throughout a large swath of the middle of the country, where much of the nation's ammonia production capacity is located.

On top of that nitrogen production was reduced over the course of the year due to a combination of both planned and unplanned downtime.

At a number of producers facilities through the spring and summer.

Then in late August Hurricane either close shutdowns at a number of facilities along the Gulf Coast.

More recently, the rising price of natural gas the primary feedstock in the production of ammonia and derivative nitrogen products has played a role in further reducing production levels, while gas prices in the U S have increased significantly over the course of 2021, our domestic price inflation pales in comparison to the significant.

Kris that Europe has experienced.

Over the last several months natural gas prices in Europe rose to over $30 <unk> equivalent.

While those prices have receded recently to approximately $24 an M M Btu equivalent.

It still represents a price that is more than four times, what we're paying in the U S.

As a result, some producers have been forced to take the a Europe based facilities offline as the economics of continuing to operate with such high feedstock costs are far from breakeven.

While we expect the situation to somewhat normalize at some point in the next six months the impact on global nitrogen supply isn't something that can be quickly made up given the strong demand that I discussed.

We believe this translates into very solid support for fertilizer prices at their current levels through the remainder of 2021 and throughout 2022.

On slide four we highlight some end market trends contributing to the robust year over year improvement in our industrial and mining end markets.

As many of you are aware, our industrial business tends to be contract base, which gives us good visibility into our sales for upcoming quarters and insulates us from input cost inflation, particularly for natural gas and they've been enabling us to maintain our favorable margins with Cheryl will discuss shortly.

During the third quarter, we continued to ramp up our nitric acid volumes related to the long term supply agreement that we commenced at the beginning of this year.

As you can see on the slide the demand dynamics for our key industrial and mining end markets remain solid. Despite recent disruptions on the industrial side from the widespread supply chain issues in the U S or.

Overall, the demand and pricing trends were currently seeing on both sides of our business make us optimistic for continued year over year improvement in financial performance for the 2021 fourth quarter and for 2022 now.

Now I will turn over the call to Cheryl who will discuss our third quarter results and our fourth quarter outlook Cheryl.

Thanks, Mark and good morning, turning to page five you'll see a summary of our results for the quarter, our strong top and bottom line performance relative to the third quarter of 2020 reflects the increased pricing for our products across all our businesses.

Our adjusted EBITDA of approximately 38 million is a company record for a third quarter, our seasonally weakest period.

EBITDA for the first nine months of 2020 with more than 45% higher than our full year adjusted EBITDA for 2020.

And with the month of October in the books, we are very optimistic about our fourth quarter.

Page six bridges, our adjusted EBITDA for the second quarter 2021 of $37 7 million.

Adjusted EBITDA for the third quarter 2020 of $10 2 million.

Green bar illustrates the substantial impact selling price had on our results.

Modest decline in sales volume largely in effect reflects the successful turnaround we conducted at our Cherokee facility.

As a reminder, last year, we did not have turnarounds at any of our facilities.

Partially offsetting the benefit of higher product selling prices was the continued increase in raw material costs, which are shown net of 39 $36 9 million price impact you see on page six.

And represented a nearly $13 million headwind in the quarter energy costs, including natural gas have risen substantially over the course of 2021, and we are actively managing our exposure through forward gas purchases.

Currently have approximately 75% of our gas needs locked in through the end of the year, but to put the gas cost inflation in perspective. It takes approximately 32, and then be to use of gas to make one kind of ammonia as you can see in the tables in our earnings release in the third quarter of 2021.

Cost of gas increased year over year by a $1 73 or around $50 per ton of ammonia produced.

At the same time, our average selling prices for agricultural ammonia increased by more than $360 per ton over the same period far exceeding the impact of higher gas prices.

As Mark mentioned earlier, our industrial and mining business is fairly insulated from gas price inflation as a significant portion of our contracts enable us to pass through the cost of raw material inputs.

While we are acutely focused on the dramatic change in natural gas cost between having the effect of causing some global ammonia production capacity to be temporarily taken off line.

Primarily in Europe, along with the strong overall pricing environment environment, we've been experiencing rising gas costs have not been significantly detrimental to our results thus far.

Before I pass the call back to Mark I'll review, a few important considerations as to how to think about the fourth quarter of 2021.

Pricing for our agricultural products remains strong and we expect this favorable dynamic to persist over the last 90 days NOLA benchmark pricing increased from approximately $300 a ton to over $500 a ton. Additionally, agricultural ammonia has increased from approximately.

<unk> $600, a time to over $1000 a tonne over that same period.

Partially offsetting some of the improved pricing as the impact from higher natural gas costs, which we expect will average around $5 per <unk> for the quarter up from approximately $2 45 per M btu versus the fourth quarter of last year as I just mentioned, we expect the higher selling price.

As ever our agricultural products to far exceed our increased feedstock costs.

Putting it all together, we expect significant year over year improvement in our fourth quarter results.

Currently expect adjusted EBITDA for the period to be north of $70 million or roughly seven times that of the fourth quarter of 2020, and almost 10% higher when compared to the entire full year of 2020.

Looking further out into 2022 as Mark discussed the market fundamentals. We're currently seeing across our agricultural industrial and mining end markets lead us to believe that we have the opportunity to deliver another year of strong bottom line results.

This is the case, even with the turnarounds, we have scheduled at our El Dorado and Pryor facilities.

Turning to slide seven with respect to our balance sheet as many of you are aware we were ultimately successful in achieving our goals of recapitalizing and simplifying our balance sheet, reducing our cost of capital and creating greater financial flexibility for LSP at.

At the end of September we closed on the transaction to exchange to $310 million of preferred stock held by al dredge that carried a 14, 5% dividend for shares of our common stock with this substantial liability removed from our balance sheet, we received credit ratings upgrades from both S&P and <unk>.

<unk>.

And subsequent to the end of the third quarter, we proceeded and issuing $500 million of new senior notes with an interest rate of six 5%, which we used to redeem our outstanding $435 million of $9, 65% senior notes and added cash to our balance sheet for future use.

As you can see from the chart on the right removing the preferred stock from our balance sheet substantially reduced our leverage ratio to very close to our target of four times and.

And we expect further reduction in the fourth quarter, given our strong outlook for EBITDA.

With respect to liquidity, while we ended the third quarter with approximately $81 million between our cash balance and the available availability on our revolver today, our liquidity stands at over 100 million positioning us well to pursue our growth initiatives as we close out 2021 and enter 2022 a year.

We expect to bring further positive transformation, where L. S b and increased value to our shareholders and now I'll turn it back over to Mark.

Thank you Cheryl.

There is no question that the recent actions we've taken with respect to our balance sheet have dramatically changed the future potential of what <unk> can become as a company and the potential value, we can deliver to our shareholders.

That combined with the journey, we began several years ago to improve the reliability and efficiency of our assets and to focus on optimizing the sales of our products made the kind of results. We delivered in the 2021 third quarter possible.

Looking ahead on slide eight we summarized our priorities for the next 12 months.

The continued improvement of our facilities operating rates has been and remains at the top of our list of opportunities to organically make a significant incremental contribution to EBITDA.

Since introducing the performance improvement initiatives, we began implementing in 2016, along with the investments in maintenance and upgrades we've made over the past several years our.

Our plants have collected collectively made tremendous progress with respect to the volumes they produce.

Thus, increasing our sales and enhancing our margins aided by the strong pricing environment.

With that said, we still have meaningful room to improve and similar to football where the red zone yards can be the most difficult yards to achieve we have a good amount of work to do to capture the remaining operational performance opportunity that we've identified at our facilities.

But we know it's possible it will take a lot of hard work and the continued additions to our team of talented experienced professionals.

But we will roll up our sleeves and get it done give.

Given current market pricing, we believe that this opportunity potentially represents $25 million to $30 million of incremental EBITDA that we believe we could recognize over the next 24 months.

Another important priority is our focus on maintaining a conservative balance sheet.

We are in an inherently cyclical industry and we believe that we can best enhanced returns and minimize risk to our stakeholders, while maintaining a net debt to adjusted EBITDA leverage ratio of below four times.

As Cheryl pointed out we expect that to occur at the end of this year. Thanks to our recent balance sheet recapitalization and our strong financial results. This year.

With this major goal accomplished we plan to manage our capital structure prudently. So that we are in the best position to take advantage of opportunities to maximize returns regardless of where we are in the cycle.

As we've discussed on past calls we identified a number of what we call margin enhancement projects that involve maximizing our production footprint storage capabilities and logistics infrastructure that we expect to help us capture the most attractive pricing opportunities available to us. Additionally over.

Last year and a half our commercial team has worked hard to put us in a sold out position.

And we are now in a position to seek ways to maximize our margins by optimizing our product balance and customer mix.

We will aggressively pursue all of these organic opportunities in the coming quarters with an eye towards increasing our financial performance.

Beyond our very meaningful organic opportunities, while recently recapitalized balance sheet provides us with the flexibility to profitably profitably increase our scale through accretive M&A activity and we have been evaluating a number of prospects recently, we strongly believe that we have the leadership team in place to effectively manage a meaningfully larger business.

Finally.

As I have discussed on our last few calls.

We are of the strong belief that our industry is on the threshold of becoming a major contributor to the global effort to reduce carbon emissions.

Both through the capture and storage of Sidoti <unk> emissions from the ammonia manufacturing process, which is referred to as blue ammonia.

And by emerging as one of the most feasible sources of hydrogen for use as a zero cotwo emissions energy source referred to as green ammonia, particularly as a fuel source for marine and for the marine industry, which is a major emitter of carbon relating to a large cargo and other ships using diesel of bunker fuel.

Our existing knowledge and ammonia manufacturing handling storage and logistics.

Position us extremely well to become a significant player in this arena and to help create a more sustainable environmentally friendly world in a way that we believe can create long term value both socially and financially.

The economic opportunity for Blue and Green ammonia relates primarily to blue ammonia in the immediate term as the U S. Federal government is currently providing 45 Q tax credits of $35 to $50 $50 per ton of Sidoti captured and stored or sequestered.

MSP has been engaged with several groups where organizations in D. C attempting to persuade lawmakers to increase the geologically sequestered cotwo credits from its current $50 per ton beginning in 2026 to a suggested $80 per ton.

We believe that this is necessary to justify the capex required for smaller facilities.

In addition, changing the section 45, Q credit from a tax credit to a direct cash payment would open this opportunity to many more companies as it were removed their tax liability burden and provide immediate cash incentives, making carbon capture projects more economically feasible.

These changes will ultimately lead to greater C. O two emissions reductions in the U S. In a shorter period of time.

Over the longer term, we believe that green ammonia will be one of the leading solutions to carbon reduction globally, given its carbon free and it represents a source of significant incremental demand for ammonia not only for OSB, but for the industry as a whole, which would further consume global production capacity and serve to create a higher pricing range for <unk>.

Ammonia.

Currently legislation that would create a tax credit for the production of Green and Blue hydrogen is being considered.

The clean hydrogen production and investment tax credit Act of 2021 would provide a tax credit to companies that reduce carbon emissions by the production of hydrogen.

The credit would be worth up to $3 per kilogram of qualified clean hydrogen produced.

We support this legislation as it will be needed to make clean hydrogen and green ammonia cost competitive to current products produced and therefore spur significant investment.

Our current focus is on choosing a technology partner that will perform a feasibility study for each of our sites to determine the infrastructure needed to produce green or blue ammonia and its derivatives that will support lsp's medium to long term commercial sustainability objectives.

We would anticipate one or more of the feasibility studies to be completed.

Early in 2022 and to be presenting a plan to our board of directors to approve during the second quarter.

In addition to opportunities to reduce our carbon emissions through the production of Blue and Green ammonia.

As I pointed out on the last call while less frequently discussed as a greenhouse gas gas relative to carbon dioxide nitrous oxide is actually 300 times more impactful in terms of warming of the atmosphere than cotwo.

We have been able to reduce our natural nitrous oxide emissions in recent years, we continue to seek further ways to reduce nitrous oxide emissions at our facilities.

Before I hand, the call back to the operator for the Q&A session.

Like to mention that we'll be participating in the Morgan Stanley Global chemicals, Agriculture, and packaging virtual conference on Wednesday November 10th.

The Bank of America Securities Virtual leveraged Finance conference on Tuesday November 30th.

Doty Winter virtual Microcap conference on Thursday December 9th as.

As well as the UBS Chicago Aragon Industrials Chemical conference also on December nine we.

We hope to speak with many of you. During these events that concludes our prepared remarks, and we will now be happy to take any questions. Thank you.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

Participants using speaker equipment and may be necessary to pick up your handset before pressing the star of Q1.

One moment, please while we poll for questions.

Thank you. Our first question is from Rob Mcguire with Granite Research. Please proceed with your question.

Good morning, Mark Cheryl and Frank Congratulations on your quarter.

Hey, Rob how are you.

Good thank you.

But can you help us understand your parameters around potential M&A.

Okay.

Parameters, you mean financial parameters are kind of things that we're looking we might be looking for.

Actually both would be great if you'd be willing to comment.

[laughter].

Well.

So from a from a.

Focus standpoint.

I think we have a number of different <unk>.

Opportunities directions that we can go in clearly acquiring facilities that are similar to the ones that we operate today would be right down the fairway for us.

And it's something that we would really.

Be able to easily understand and operate.

So that would be good if we could find those kinds of facilities, maybe give us some geographic differentiation, maybe broaden the product portfolio.

So that we've got more.

Variable variance of products when talking to our customers.

We also own a small sulfuric acid plant down at El.

Dorado than we've operated there for over 30 years. So we know the sulphuric acid market and if we could really.

Make that a more meaningful business through the acquisition of other assets, we would look to do that as well.

And then lastly, we do have a big focus as I said in Blue and Green ammonia. So I think looking at some assets that would.

Really move.

Move us forward in those areas could.

Could be something that.

We would really take a look at and be attractive.

From a financing standpoint.

Yeah.

As I mentioned in my comments and Cheryl reiterated.

We've been Levered for a number of years and we've worked really hard to Delever. The company. So we're not looking to go back and leverage up for an M&A activity.

We would consider going above the four times leverage.

If we can see a clear line of sight that we can utilize free cash flow within 18 to 24 months after closing on the transaction to get below four times and then of course the balance would be.

Financed with equity.

But it would have to be accretive would have to make a lot of sense for us.

So we're not looking to get bigger just for bigger stake and there's no value to that.

So I hope that gave you some some color.

Thank you.

UAS.

Can you put some color around your uhm production in the quarter and how we should think about uhm volumes going forward.

Sure, Rob So and volumes were down this quarter versus the same quarter last year from a sales perspective that was of course, the turnaround at Cherokee probably accounted for 30 to 35000 tons of lower UAS production.

Sales were also impacted this quarter.

Compared to last quarter simply from timing, we sold more in the second quarter. This year.

Whereas last year, we kind of carried on an additional 2000 25000 tons into the third quarter and we were able to move that volume last year.

We're just running lower on inventory.

Overall, a lot of that is still from that winter freeze we had it in we're carrying less inventory in the chain. So some of that caught up with us in the third quarter.

Looking forward to the fourth quarter really thinking you Ann sales volumes are probably going to be in line with last year.

Thank you that's all my questions.

Thanks, Rob.

Thank you. Our next question is from Steve <unk> with Sidoti and company. Please proceed with your question.

Good morning, Mark Good morning, Cheryl.

Wanted to ask about a little bit about the guidance in terms of you have a pretty good I'm sure you have a pretty good handle on natural gas prices given.

Given your hedging but in terms of pre selling.

Hmm millennium and fertilizer volume, how much you're doing that and how tricky. It is right now given the fact that prices are going up some dramatically.

Different from past years wouldn't expect prices moving as much as Connie.

Yes, it's a great question.

And sort of the great.

Struggle everyday for us right, how far to sell ahead versus.

Hold back with prices moving so quickly.

So and.

I would tell you that we're not selling as far ahead.

As we might have in the past, but particularly at this time of the year.

So forward happens.

But we still have to run facilities right and we still produced product and want to make sure that we can sell it. So I think it's a happy balance.

Having said that I think we're trying to be prudent about.

Moving prices up as the industry is moving prices up so we'll hold back on.

There are some quantities of sale that we might have historically sold at this point in the year.

Take advantage of maybe higher spot prices.

Okay.

The flip side would be how far ahead are customers trying to buy.

Well.

I think there was a.

You go back two or three months I think there was a little bit of a standoff where prices were moving up and customers.

We are holding off on buying expecting that prices will come back down to more normalized levels.

With prices continuing to move up we are seeing.

A lot of customers now.

Now bye.

Buying forward.

For the spring to try and lock in prices.

Because I think they're a little nervous that we could see continued price appreciation.

Throughout the rest of this year and the early part of next year. The other thing I would say is when you look at nitrogen prices.

In nitrogen equivalent.

Pricing.

As a comparison to whether UA in urea and ammonia.

Ammonia is trading at.

24, 36% discount UA and in urea.

And so I think what we're seeing and starting to see is some pretty significant demand for fall ammonia application.

Because if I'm a farmer.

Probably from a cost perspective, we'll put them more ammonia in the fall and get more nitrogen in the ground given its lower competitive pricing in the hopes that maybe I can put a little less nitrogen in the spring.

So.

The harvest.

On average.

More than 50% done.

With the corn harvest more than 50% done at this point.

We're starting to see some real demand for fall ammonia application.

Oh.

The industrial contracts.

As you have seen the slowdown on the automotive front, but certainly as we get through this earnings season, we're seeing a lot of industries getting hit by the supply chain issues, we might see some production coming down.

How much do your contracts product protect you on the volume front and does that mean the mix shifts over the next couple of quarters, knowing that we're going to not have excess supply.

The strong AG demand.

Yeah.

While the products.

The industrial contracts.

Generally.

Our requirements contracts do not take or pay although we do have some significant take or pay contracts.

So.

Volume could shift.

Having said all of that and despite auto pulling back a little bit.

Some of the other uses of let's say nitric acid.

Have some really strong demand.

So I can tell you that we don't have enough product to meet all the demand that we have so we're not going to see a drop off in that market.

Great.

Last one for me just on Blue and Green.

Pretty.

Quick timeline in terms of moving forward.

We have already done a ton of work.

In terms of.

Moving forward how much of that is a mix of what you're hearing from potential partners versus customers versus the DC climate.

Well look I in my opinion, and I think our position as a company is unlike a lot of.

Previous green waves that have come and gone.

This is really here to stay.

There's a lot of momentum globally. There is a lot of government intervention and support a lot of <unk>.

Private capital that.

We're involved.

In de Carbonization.

And of course, the consumer most consumers understand.

The need to really.

Reduce our carbon emissions around the globe so.

This is we don't believe this is going away and so we're very committed to it.

We are.

<unk> been working on this for a while.

We tend to.

Not announce.

We'll put out announcements of who we're talking to.

So I think we'll put out an announcement when we have some meaningful movement on our position.

But we're looking as I mentioned at both carbon capture and the production of Green ammonia, because we think both are important and the efforts to decarbonize.

Great. Thanks, a lot mark.

Sure.

Thank you. Our next question is from Richard <unk> with Jefferies. Please proceed with your question.

Hey, guys. Thanks for taking my questions. So.

Just curious do you have a sense of what percent of the industry is offline right now as a result of some of the higher cost that they're experiencing.

Okay.

Well most of it most of the.

Production offline that we're talking about is throughout Europe.

So there've been a number of announcements I mean, I don't have a <unk>.

<unk> I've heard as much as 4 million.

Tons of ammonia production.

Is offline.

Okay. Okay.

And then.

There's obviously a lot of noise about some of the environmental policies that are.

Taking place over in China how.

How do you think that ends up impacting nitrogen supply here over the medium term.

Well I think China is really try to control their exports of product and use the product domestically.

I think I think a lot of that has to do with the <unk>.

In fact that they've shut down some.

Very costly and pollute of nitrogen.

Manufacturing facilities.

So I think the impact will be less product exported from China, and therefore less supply in the marketplace.

Right Okay.

And then just on some of this green blue ammonia.

Just have a sense of I know you are very very early in this process here, but like how do you think about the amount of capital that you would look to invest in that type of an opportunity over the medium term can you kind of maybe frame that up for us give us some goalpost to think about.

Yeah, So I'll talk about Blue first.

Since I think it's more immediate term.

So as I mentioned there are there is currently a tax program called 45 Q.

You can get a tax credit of <unk> 30.

<unk> $35 a ton for.

Taking that cotwo and using it for enhanced oil recovery.

Which is done every day.

Or you can earn as much as $50 a ton.

<unk> permanently sequestering it in the ground.

So when you look at economics of investing capital so for us will be carbon capture equipment and of course, it needs to be a pipeline too.

To either a pipeline or direct to a to a well if we're sequestering it.

So.

The investment of capital can go a number of different ways. We can invest we potentially could invest no capital and just bringing a partner that wants to own the carbon capture the pipeline and the well and would pay us for the <unk> and leave us with blue ammonia to sellers blue ammonia or or an upgraded product a derivative of that.

Or we can invest some dollars in the carbon capture and own it with a partner or own the whole carbon capture.

Ourselves it's really.

Just an economic model and a return.

So we're not far enough along to determine which.

Which scenario, we'd like to go down I think we will have a number of different options.

That will be able to evaluate and then make a decision when it comes to green.

Ammonia.

There will be an investment of capital.

We will have to.

Retrofit the front end of our ammonia plant whichever when we decide to.

Green ammonia and <unk>.

We'll have to buy Electrolyze theirs.

And then there is obviously engineering designed to do that.

But I think.

In order for us to invest those dollars.

Not only obviously, we want to sign a long term power purchase agreement for renewable energy at cost effective rates, but.

But we'd also like to underwrite the project by having.

At least 60 or 70% of the production.

<unk>.

Spoken for with an off take agreement. So I think we'll look to do that.

And there's been a lot of conversations with some really.

An exciting partners that.

Well really willing to partner with us so that we can all point to.

When opportunity.

In our life situation, where.

Green Green ammonia is being produced.

So we're really excited about a lot of the conversations that we're having this is really a lot of interest in partnering with us to really execute on either blue or green ammonia.

That's great.

And then lastly for me Big picture on Cherokee, how much expense negatively impacted EBITDA in the quarter I saw the $8 million add back to the adjusted EBITDA number I'm curious how much was not added back as and in terms of lost production.

Yeah, I would say probably close to $15 million got.

Got it.

Alright, thanks, very much guys.

Great. Thanks rich.

Thank you. Our next question comes from Brian <unk> with Baird. Please proceed with your question.

Good morning, do you have any sense.

How much lower imports were especially for <unk> this year versus last year.

Brian if I could give you that in a follow up call I don't have that in front of me now.

Okay.

Safe to say, it's probably material for this year correct.

Yes.

Okay.

And just turnarounds in for next year are we looking at two or just one.

No we're looking at too.

We have one at Pryor will actually we have one at El Dorado that will start.

Mid to late summer.

And then followed by prior that will be late summer.

Kind of early fall.

And just remind me are we still on is at Pryor, that's still on the two year schedule.

Sure.

Are you trying to move that to three.

I forget there was one of the three so it was on it.

Two year schedule.

So it had been on a two year schedule, having said that.

We bypass last year.

Turnaround at Pryor during the pandemic during the height of the pandemic.

And pushed it off to this year. So this will be three years.

We will have to make a determination.

As we're doing the planning for this upcoming turnaround and we go into the plant and look at.

The condition of the plant because you always find some things whether we think we can stay on a three year. We'll go back to a two year. The key at Pryor is I want to make sure that we're doing.

The right upgrades and the right maintenance and replacement of equipment or rebuild.

So that we can really run reliably.

Okay.

Got it.

And then just the Cheryl the almost $8 million add back on turnarounds to your adjusted EBITDA was that the actual cash cost and lost EBITDA.

Just trying to get a slight much of that was cash.

No I mean, the lost EBITDA is the production that I, just alluded to which was 15 million the 8 million is.

Basically the maintenance cost contractors that sort of thing so yes, all in cash.

On just those two items, you're looking at over $20 million.

Okay, Great and then just finally.

Lighthouse lawsuit just any updates there in terms of timing.

I wish I really had.

Good news on that front I mean, we still feel.

I feel strongly that we've got a great case.

I think we've got some loose.

Dates on the docket.

To get in front of the judge.

<unk>.

So for late a couple of dates or blocks of time in 2022, and then early 2023.

But the judge has instructed all the parties to get really focused on finishing up all the depositions in our work. So that's a positive.

Development, they're so focused on finishing it up and then when.

When we can.

Having the trial.

Alright, great I appreciate the thoughts thank you.

Okay.

Thank you there are no further questions at this time I would now like to turn the floor back over to Mark Behrman for any closing comments.

Well. Thank you everyone for your interest in LSP industries, and hopefully you see that we continue to make good progress. If there is any follow up questions feel free to call shareholder myself, thanks and have a great day.

Okay.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

[music].

Greetings and welcome to the LSP industries third quarter 2021 conference call.

This time, all participants are in a listen only mode.

A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

A reminder, this conference is being recorded.

It is now my pleasure to introduce your host Fred Buonocore, Vice President of Investor Relations. Thank you you may begin.

Good morning, everyone. Joining me today on the call are Mark Behrman, our Chief Executive Officer, and Cheryl Maguire, our Chief Financial Officer.

As this call will include references to non-GAAP results. Please see the press release in the investors section of our website LSP industries Dot com for further information regarding forward looking statements and reconciliations of non-GAAP results to GAAP yourself.

At this time I'd like to go ahead and turn the call over to Mark.

Thank you Fred and welcome to the LSP team.

We also closed on the preferred stock exchange transaction that we discussed with you on our last call.

As anticipated the elimination of the preferred stock from our balance sheet, but the credit upgrades on our debt by our major rating agencies.

This enabled us to refinance our senior secured notes at a significant reduction in interest rate with Cheryl will discuss later in the call.

Collectively these factors make us very optimistic about our prospects for the final quarter of 2021 and for the coming year.

On slide three we summarize the key drivers for our agricultural end markets.

Commodity prices continue to sit well above year ago levels.

As we've discussed on previous calls the strong pricing is the result of multiple factors, including a surge in exports led by increased demand from China. Additionally.

Additionally, ethanol consumption and production currently sit at near Prim pre pandemic levels as U S miles driven continue to recover from the pandemic shutdowns as a result of the benefits of Covid vaccines.

The USDA continues to estimate that nearly 93 million acres were planted in 2021.

This represents a 2 million acre increase from the previous year and with the exception of 2016 was the highest level of planting since 2013, resulting in strong demand for fertilizers.

Along with strong corn market fundamentals that have driven robust demand for fertilizers as farmers seek to maximize their yields.

Nitrogen prices have been driven to multi year highs.

Elevated prices reflect global constraints on ammonia production, resulting from a variety of factors.

From the U S perspective, the production issue started early in the year with winter storm here in the February deep freeze throughout a large swath of the middle of the country, where much of the nation's ammonia production capacity is located.

On top of that nitrogen production was reduced over the course of the year due to a combination of both planned and unplanned downtime.

At a number of producers facilities through the spring and summer.

Then in late August hurricane either cost shutdowns at a number of facilities along the Gulf Coast.

Increase that Europe has experienced.

Over the last several months natural gas prices in Europe rose to over $30 per <unk> equivalent.

While those prices have receded recently to approximately $24 <unk> equivalent.

That still represents a price that is more than four times, what we're paying in the U S.

As a result, some producers have been forced to take the a Europe based facilities offline as the economics of continuing to operate with such high feedstock costs are far from breakeven.

We believe this translates into very solid support for fertilizer prices at their current levels through the remainder of 2021 and throughout 2022.

On slide four we highlight some end market trends contributing to the robust year over year improvement in our industrial and mining end markets.

As many of you are aware, our industrial business tends to be contract base, which gives us good visibility into our sales for upcoming quarters and insulates us from input cost inflation, particularly for natural gas enabled enabling us to maintain our favorable margins with Cheryl will discuss shortly.

During the third quarter, we continued to ramp up our nitric acid volumes related to the long term supply agreement that we commenced at the beginning of this year.

As you can see on the slide the demand dynamics for our key industrial and mining end markets remains solid despite recent disruptions on the industrial side from the widespread supply chain issues in the U S.

Now I will turn over the call to Cheryl who will discuss our third quarter results and our fourth quarter outlook Cheryl.

Thanks, Mark and good morning, turning to page five you'll see a summary of our results for the quarter.

Strong top and bottom line performance relative to the third quarter of 2020 reflects the increased pricing for our products across all our businesses.

Our adjusted EBITDA of approximately $38 million is a company record for a third quarter, our seasonally weakest period.

<unk> EBITDA for the first nine months of 2020 with more than 45% higher than our full year adjusted EBITDA for 2020.

And with the month of October in the books, we are very optimistic about our fourth quarter.

Page six bridges, our adjusted EBITDA for the second quarter 2021 of $37 7 million to adjusted EBITDA for the third quarter 2020 of $10 2 million.

The Green bar illustrates the substantial impact selling price trends had on our results.

This decline in sales volume largely reflects reflects the successful turnaround we conducted at our Cherokee facility.

As a reminder, last year, we did not have turnarounds at any of our facilities.

Partially offsetting the benefit of higher product selling prices was the continued increase in raw material costs, which are shown net in the 39 $36 9 million price impact you see on page six.

Represented a nearly $13 million headwind in the quarter energy costs, including natural gas have risen substantially over the course of 2021, and we are actively managing our exposure through forward gas purchases.

We have approximately 75% of our gas needs locked in through the end of the year, but to put the gas cost inflation in perspective.

Next approximately 32 <unk> of gas to make one kind of ammonia as you can see in the tables in our earnings release in the third quarter of 2021, our cost of gas increased year over year by a $1 73 or around $50 per ton of ammonia produced.

At the same time, our average selling prices for agricultural ammonia increased by more than $360 per ton over the same period far exceeding the impact of higher gas prices as Mark mentioned earlier, our industrial and mining business is fairly insulated from gas price inflation as a significant portion of our call.

Contracts enable us to pass through the cost of raw material inputs.

While we are acutely focused on the dramatic change in natural gas costs between having the effect of causing some global ammonia production capacity to be temporarily taken off line.

Primarily in Europe, along with the strong overall pricing environment environment, we've been experiencing rising gas costs have not been significantly detrimental to our results thus far.

Before I pass the call back to Mark I'll review, a few important considerations as to how to think about the fourth quarter of 2021.

<unk> $600, a time to over $1000 a tonne over that same period.

Partially offsetting some of the improved pricing as the impact from higher natural gas costs, which we expect will average around $5 per <unk> for the quarter up from approximately $2 45 per annum btu versus the fourth quarter of last year as I just mentioned, we expect the higher selling price.

As ever our agricultural products to far exceed our increased feedstock costs.

Putting it all together, we expect significant year over year improvement in our fourth quarter results.

This is the case, even with the turnarounds, we have scheduled at our El Dorado and Pryor facilities.

<unk>.

And subsequent to the end of the third quarter, we proceeded and issuing $500 million of new senior notes with an interest rate of six 5%, which we used to redeem our outstanding $435 million of 965% senior notes and added cash to our balance sheet for future use.

As you can see from the chart on the right removing the preferred stock from our balance sheet substantially reduced our leverage ratio to very close to our target of four times and.

And we expect further reduction in the fourth quarter, given our strong outlook for EBITDA.

We expect to bring further positive transformation for LSP and increased value to our shareholders and now I'll turn it back over to Mark.

Thank you Cheryl.

Looking ahead on slide eight we've summarized our priorities for the next 12 months.

The continued improvement of our facilities operating rates has been and remains at the top of our list of opportunities to organically make a significant incremental contribution to EBITDA.

Since introducing the performance improvement initiatives, we began implementing in 2016, along with the investments in maintenance and upgrades we've made over the past several years our.

Our plants have collected collectively made tremendous progress with respect to the volumes they produce.

Thus, increasing our sales and enhancing our margins aided by the strong pricing environment.

But we know it's possible it will take a lot of hard work and the continued additions to our team of talented experienced professionals.

But we will roll up our sleeves and get it done give.

Given current market pricing, we believe that this opportunity potentially represents 25% to $30 million of incremental EBITDA that we believe we could recognize over the next 24 months.

Another important priority is our focus on maintaining a conservative balance sheet.

We are in an inherently cyclical industry and we believe that we can best enhance returns and minimize risk to our stakeholders, while maintaining a net debt to adjusted EBITDA leverage ratio of below four times.

As Cheryl pointed out we expect that to occur at the end of this year. Thanks to our recent balance sheet recapitalization and our strong financial results. This year.

The last year and a half our commercial team has worked hard to put us in a sold out position and.

And we are now in a position to seek ways to maximize our margins by optimizing our product balancing customer mix.

We will aggressively pursue all of these organic opportunities in the coming quarters with an eye towards increasing our financial performance.

Beyond our very meaningful organic opportunities are recently recapitalized balance sheet provides us with the flexibility to profitably profitably increase our scale through accretive M&A activity and we have been evaluating a number of prospects recently, we strongly believe that we have the leadership team in place to effectively manage a meaningfully larger business.

Finally.

As I have discussed on our last few calls.

We are of the strong belief that our industry is on the threshold of becoming a major contributor to the global effort to reduce carbon emissions.

Both through the capture and storage of Sidoti <unk> emissions from the ammonia manufacturing process, which is referred to as blue ammonia.

Our existing knowledge and ammonia manufacturing handling storage and logistics.

The economic opportunity for Blue and Green ammonia relates primarily to blue ammonia in the immediate term as the U S. Federal government is currently providing 45% <unk> tax credits of $35 to $50 $50 per ton of Sidoti captured and stored or sequestered.

<unk> has been engaged with several groups or organizations in D. C attempting to persuade lawmakers to increase the geologically sequestered cotwo credit from its current $50 per ton beginning in 2026 to a suggested $80 per ton would.

We believe that this is necessary to justify the capex required for smaller facilities.

In addition, changing the section 45, Q credit from a tax credit to a direct cash payment would open this opportunity to many more companies as it will remove that their tax liability burden and provide immediate cash incentives, making carbon capture projects more economically feasible.

These changes will ultimately lead to greater <unk> emissions reductions in the U S. In a shorter period of time.

Over the longer term, we believe that green ammonia will be one of the leading solutions to carbon reduction globally, given its carbon free and it represents a source of significant incremental demand for ammonia not only for OSB, but for the industry as a whole, which would further consumed global production capacity and serve to create a higher pricing range for.

Ammonia.

Currently legislation that would create a tax credit for the production of Green and Blue hydrogen is being considered.

A clean hydrogen production and investment tax credits Act of 2021 will provide a tax credit to companies that reduce carbon emissions by the production of hydrogen.

The credit would be worth up to $3 per kilogram of qualified clean hydrogen produced.

We support this legislation as it will be needed to make clean hydrogen and green ammonia cost competitive to current products produced and therefore spur significant investment.

We would anticipate one or more of the feasibility studies to be completed.

Early in 2022 and to be presenting a plan to our board of directors to approve during the second quarter.

In addition to opportunities to reduce our carbon emissions through the production of Blue and Green ammonia.

But we have been able to reduce our nurtured nitrous oxide emissions in recent years, we continue to seek further ways to reduce nitrous oxide emissions at our facilities.

Before I hand, the call back to the operator for the Q&A session.

I'd like to mention that we'll be participating in the Morgan Stanley Global chemicals, Agriculture, and packaging virtual conference on Wednesday November 10th.

The Bank of America Securities Virtual leveraged Finance conference on Tuesday November 30th.

Adobe Winter virtual Microcap conference on Thursday December 9th as.

As well as the UBS Chicago AG Industrials Chemical conference also on December nine we.

We hope to speak with many of you. During these events that concludes our prepared remarks, and we will now be happy to take any questions. Thank you.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.

You May press Star two if you would like to remove your question from the queue.

Participants using speaker equipment and may be necessary to pick up your handset before pressing the star of Q1.

One moment, please while we poll for questions.

Thank you. Our first question is from Rob Mcguire with Granite Research. Please proceed with your question.

Good morning, Mark Cheryl and Frank Congratulations on your quarter.

Hey, Rob how are you.

Good thank you.

And can you help us understand your parameters around potential M&A.

Okay.

Parameters, you mean financial parameters are kind of things that we're looking we might be looking for.

Actually both would be great if you'd be willing to comment.

[laughter].

Well.

So from a from a.

Focus standpoint.

I think we have a number of different opportunities directions that we can go and clearly acquiring facilities that are similar to the ones that we operate today would be right down the fairway for us.

That we would really.

Be able to easily understand and operate.

So that would be good if we could find those kinds of facilities, maybe give us some geographic differentiation, maybe broaden the product portfolio.

So that we've got more.

Variable variance of products when talking to our customers.

We also own a small sulfuric acid plant down at El.

Dorado than we've operated there for over 30 years. So we know the sulphuric acid market and we could really.

Make that a more meaningful business through the acquisition of other assets, we would look to do that as well.

And then lastly, we do have a big focus as I said in Blue and Green ammonia. So I think looking at some assets that would.

Really move.

<unk> move us forward in those areas could.

Could be something that.

We would really take a look at and be attractive.

From a financing standpoint.

As I mentioned in my comments and Cheryl reiterated.

We've been Levered for a number of years and we've worked really hard to Delever. The company. So we're not looking to go back and leverage up for an M&A activity.

We would consider going above the four times leverage.

If we can see a clear line of sight that we can utilize free cash flow within 18 to 24 months after closing on a transaction to get below four times and then of course the balance would be.

Financed with equity.

But it would have to be accretive would have to make a lot of sense for us.

So we're not looking to get bigger just for bigger sake.

No value to that.

So I hope that gave you some some color.

Thank you.

UAS.

Can you put some color around your uhm production in the quarter and how we should think about uhm volumes going forward.

Sure, Rob So I mean, yes.

And volumes were down this quarter versus the same quarter last year from a sales perspective that was of course the turnaround at Cherokee probably accounted for 30 to 35000 tons of lower UAS production and then sales were also impacted this quarter.

Compared to last quarter simply from timing, we sold more in the second quarter. This year.

Whereas last year, we kind of carried and an additional 2000 25000 tons into the third quarter and we were able to move that volume last year.

We're just running lower on inventory.

Overall, a lot of that is still from that winter freeze we had it in we're carrying less inventory in the chain. So some of that caught up with us in the third quarter.

Looking forward to the fourth quarter really thinking UA and sales volumes are probably going to be in line with last year.

Thank you that's all my questions.

Thanks, Rob.

Thank you. Our next question is from Steve <unk> with Sidoti <unk> Company. Please proceed with your question.

Good morning, Mark Good morning, Cheryl.

Wanted to ask about a little bit about the guidance in terms of you have a pretty good I'm sure you have a pretty good handle on natural gas prices given.

Given your hedging in terms of pre selling.

Hum and fertilizer volume, how much you're doing that and how tricky. It is right now given the fact that prices are going up some dramatically.

Different from in past years, we wouldnt expect prices moving as much as Connie.

Yes, it's a great question.

And sort of the great.

Struggle every day for US right now forward to sell ahead versus.

Hold back with prices moving so quickly.

So and I would tell you that we.

We're not selling as far ahead.

As we might have in the past, but particularly at this time of the year.

Where a lot of.

So forward happens.

But we still have to run facilities right and we still produced product and we want to make sure that we can sell it. So I think it's a happy balance.

Having said that I think we're trying to be prudent about.

Moving.

<unk> prices up as the industry is moving prices up so we'll hold back on.

Some quantities of sale that we might have historically sold at this point in the year.

Take advantage of maybe higher spot prices.

Okay.

The flip side would be how far ahead are customers trying to buy.

Well.

I think there was a.

If you go back two or three months I think there was a little bit of a standoff where prices were moving up and customers.

We are holding off on buying expecting that prices will come.

Come back down to more normalized levels.

With prices continuing to move up we are seeing.

A lot of customers now.

Now bye.

Buying forward.

For the spring to try and lock in prices.

Because I think they're a little nervous that we could see continued price appreciation.

Throughout the rest of this year and the early part of next year. The other thing I would say is when you look at nitrogen prices.

In nitrogen equivalent.

Pricing.

As a comparison to whether UA in urea and ammonia.

Ammonia is trading at.

24, 36% discount.

And in urea.

And so I think what we're seeing and starting to see is some pretty significant demand for fall ammonia application.

Because if I'm a farmer.

Probably from a cost perspective will put down more ammonia in the fall and get more nitrogen in the ground given its lower competitive pricing in the hopes that maybe I can put a little less nitrogen in the spring.

So.

With the harvest.

On average.

Rich.

More than 50% done with.

Corn harvest more than 50% done at this point.

We're starting to see some real demand for fall ammonia application.

Okay.

The industrial contracts.

<unk> seen a slowdown on the automotive front, but certainly as we get through this earnings season, we're seeing a lot of industries getting hit by the supply chain issues, we might see some production coming down how.

How much do your contracts product protect you on the volume front and does that mean the mix shifts over the next couple of quarters, knowing that we were going to not have excess.

Supply and meet the strong AG demand.

While the products I mean, the industrial contracts generally.

Our requirements contracts do not take or pay although we do have some significant take or pay contracts.

So.

No.

Volume could shift.

Having said all of that and despite auto pulling back a little bit.

Some of the other uses of let's say nitric acid.

Have some really strong demand.

So I can tell you that we don't have enough product to meet all the demand that we have so we're not going to see a drop off in that market.

Great.

Last one for me just on Blue and Green.

Pretty.

Quick timeline in terms of moving forward.

So you've already done a ton of work.

In terms of.

Moving forward how much of that is a mix of what you're hearing from potential partners versus customers versus the DC climate.

Well look I in my opinion, and I think our position as a company is unlike a lot of.

Previous green waves that have come and gone.

This is really here to stay.

There's a lot of momentum globally Theres, a lot of government intervention and support a lot of private capital that.

We are involved.

In de Carbonization.

And of course, the consumer most consumers understand.

The need to really.

Reduce our carbon emissions around the globe so.

This is we don't believe this is going away and so we're very committed to it.

We are.

Had been working on this for a while.

We tend to.

Not announce.

We'll put out announcements of who we're talking to.

So I think we'll put out an announcement when we have some meaningful movement on our position.

But we're looking as I mentioned that both carbon capture and the production of Green ammonia because we think both are important in the efforts to decarbonize.

Great. Thanks, a lot mark.

Sure.

Thank you. Our next question is from Richard <unk> with Jefferies. Please proceed with your question.

Hey, guys. Thanks for taking my questions. So I'm just curious do you have a sense of what percent of the industry is offline right now as a result of some of the higher cost that they're experiencing.

Okay.

Well most of it most of the.

Production offline that we're talking about is throughout Europe.

So there've been a number of announcements I mean I don't have.

Our percent I've heard as much as 4 million.

Tons of ammonia production.

Is offline.

Okay. Okay.

And then.

There's obviously a lot of noise about some of the environmental policies that are.

Taking place over in China how.

How do you think that ends up impacting nitrogen supply here over the medium term.

Well I think China is really tried to control their exports of product and use the product domestically.

I think I think a lot of that has to do with this.

In fact that they've shut down some.

Very costly and polluted nitrogen manufacturing.

Our manufacturing facilities.

So I think the impact will be less product exported from China, and therefore less supply in the marketplace.

Right Okay.

And then just on some of this green Blue ammonia do you guys have a sense of I know you are very very early in this process here, but like how do you think about the amount of capital that you would look to invest in that type of an opportunity over the medium term can you kind of maybe frame that up for us give us some goalpost to think about.

Yes, so I will talk about blue first.

Since I think it's more immediate term so as I mentioned there are there is currently a tax program called 45 Q.

You can get a tax credit of $35 a ton for.

Sure.

Taking that cotwo and using it for enhanced oil recovery.

Which is done every day.

Or you can earn as much as $50 a ton.

<unk> permanently sequestering it in the ground.

So when you look at economics of investing capital so for us will be carbon capture equipment and of course it needs to be a pipeline.

To either a pipeline or direct to to a well if we're sequestering it.

So.

The investment of capital can go a number of different ways. We can invest we potentially could invest no capital and just bring in a partner that wants to own the carbon capture the pipeline and the well and would pay us for the <unk> and leave us with blue ammonia to sellers blue ammonia or or an upgraded product a derivative of that.

Or we can invest some dollars in the carbon capture and own it with a partner or own the whole carbon capture.

Ourselves it's really.

An economic model and a return.

So we're not far enough along to determine which.

Which scenario, we'd like to go down I think we will have a number of different options.

That will be able to evaluate and then make a decision.

When it comes to Green.

Ammonia.

There will be an investment of capital.

We will have to.

Retrofit the front end of our ammonia plant whichever when we decide to put green ammonia and.

We will have to buy electric <unk>.

And then there is obviously engineering designed to do that.

But I think.

In order for us to invest those dollars.

Not only obviously, we want to sign a long term power purchase agreement for renewable energy at cost effective rates, but.

But we'd also like to underwrite the project by having.

At least 60 or 70% of the production.

Spoken for with an off take agreement. So I think we'll look to do that.

And there's been a lot of conversations with some really.

An exciting partners that.

Are really willing to partner with us so that we can all point to.

When opportunity.

And our lives situation where.

Green Green ammonia is being produced.

So we're really excited about a lot of the conversations that we're having this is really a lot of interest in partnering with us to really execute on either blue or green ammonia.

That's great.

Yes, I would say probably closer to $15 million got.

Got it.

Alright, thanks, very much guys.

Great. Thanks rich.

Yeah.

Thank you. Our next question comes from Brian <unk> with Baird. Please proceed with your question.

Good morning, do you have any sense.

How much lower imports were especially for UAS this year versus last year.

Brian if I could give you that in a follow up call I don't have that in front of me now.

Okay.

Safe to say, it's probably material for this year correct.

Yes.

Okay.

And just turnarounds in for next year are we looking at two or just one.

Now we're looking at too.

We have one at Pryor will actually we have one at El Dorado that will start.

Mid to late summer.

And then followed by prior that will be late summer.

Cannot early fall.

And just remind me are we still on his acquired Thats still on the two year schedule.

Sure.

Are you trying to move that to three.

I forget there was one of the three.

Two year schedule.

So it had been on a two year schedule, having said that.

We bypass last year.

Turnaround at Pryor during the pandemic during the height of the pandemic.

And pushed it off to this year. So this will be three years, and we will have to make a determination.

As we are doing the planning for this upcoming turnaround that we go into the plant and look at.

The condition of the plant because you always find some things whether we think we can stay on a three year. We'll go back to a two year. The key at Pryor is I want to make sure that we're doing.

The right upgrades and the right maintenance and replacement of equipment or rebuild.

So that we can really run reliably.

Yeah.

Got it.

And then just the Cheryl the almost $8 million add back on turnarounds to your adjusted EBITDA was that the actual cash cost and lost EBITDA.

Just trying to get a slight much of that was cash.

No I mean, the lost EBITDA is the production that I, just alluded to which was $15 million. The 8 million is.

Basically the maintenance cost contractors that sort of thing so yes, all in cash.

On just those two items youre looking at over $20 million.

Okay, Great and then just finally.

Lighthouse lawsuit just any updates there in terms of timing.

I wish I really had.

Good news on that front I mean, we still feel.

I feel strongly that we've got a great case.

I think we've got some loose.

Dates on the docket.

To get in front of the judge.

<unk>.

So for a couple of dates or blocks of time in 2022, and then early 2023.

But the judge has instructed all the parties to get really focused on finishing up all the depositions in our work. So that's a positive.

Development, they're so focused on finishing it up and then when.

When we can.

Having the trial.

Alright, great I appreciate the thoughts thank you.

Thanks.

Thank you there are no further questions at this time I would like to turn the floor back over to Mark Behrman for any closing comments.

Thanks, Ed and thank you everyone for your interest in LSP industries, and hopefully you see that we continue to make good progress. If there's any follow up questions feel free to call Cheryl or myself, thanks and have a great day.

Okay.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Q3 2021 LSB Industries Inc Earnings Call

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