LSB Industries, Inc.

Greetings and welcome to LSB Industries' fourth quarter 2020 earnings conference call. At 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. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Christy Carver, Senior Vice President and Treasurer. Thank you. You may begin.

Good morning, everyone. Joining me today on the call are Mark Bearman, our Chief Executive Officer, and Cheryl McGuire, 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, lsbindustries.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. At this time, I'd like to go ahead and turn the call over to Mark for opening remarks.

Thank you, Christy, and good morning, everyone. We're glad that you could participate in our call this morning and appreciate your interest in LSB Industries. We have a lot to be excited about as we speak to you on the first conference call of 2021. From COVID vaccines being rolled out across the country to our strong operating performance in 2020 to the extremely favorable trends in the nitrogen chemical markets, there is much to be optimistic about for the year. I want to thank our entire team for the success we had last year in achieving a record safety performance and setting several new production and sales volume records, all despite the impact of the pandemic. We're particularly proud of our record safety performance. LSB has undergone a fundamental change in the way our team thinks about safety and operations, striving for excellence and committed to best-in-class performance. Our total recordable injury rate for the full year of 2020 was a record low 1.06, with our prior facility and the Baytown facility we operate for a partner having operated without a recordable safety incident for the entire year. Our employees are dedicated to our Goal Zero initiative and have embraced the cultural change that has enabled us to produce these results. Our team should not only take great pride in our record safety performance, but also in the byproduct of such performance, which is our improved operational results, as evidenced by the record production and sales volumes we generated in 2020. The strong safety and operational performance is particularly impressive when considering the added complications associated with COVID-19. As the pandemic drags on, our entire organization continues to strictly follow the protocols we've put in place almost a year ago, prevent the virus from spreading within our manufacturing facilities and corporate offices and to the homes and families of our employees. While there seems to be a light at the end of the tunnel with the introduction and distribution of vaccines, we have been planning as if we'll need to operate in a COVID environment at least through the end of this year. We generated significant increases in sales volumes compared to the fourth quarter of 2019. The year-over-year volume growth represents a return on the investments we've made in plant reliability and product upgrading capabilities over the last several years, as well as our focus on continuous improvement in our manufacturing operations. We also benefited from the absence of turnarounds in the 2020 fourth quarter. While selling prices, particularly for our ag products, remain below last year's already depressed levels and, as anticipated, Demand and prices for our industrial and mining products continued to be suppressed due to the impacts of COVID-19. We did a good job focusing on the aspects of our business within our control, particularly with respect to the performance of our manufacturing facilities, rationalizing our operating costs, and optimizing our product balance. By focusing on what we can control, we believe we are well positioned to capitalize on the increase in fertilizer prices that we've experienced over the last six weeks and the recovery of industrial demand and pricing to pre-pandemic levels, which has been unfolding since the second quarter of 2020. Slide five provides an update on the state of our agricultural end market and the evolving trends and drivers for commodity pricing and demand. We've seen a significant increase in commodity prices since the fall, and this includes the price of corn, which has risen nearly 50% from a year ago. Fueling the strength has been a collection of factors, including a surge in Chinese demand, and a weather disruption in South America that is impacting crop yields from that region and reducing its exports into the global market. Approximately 91 million acres of corn were planted in the U.S. during 2020, which was a slight increase over 2019. USDA's most recent forecast is for approximately 92 million acres, which is a robust enough level to drive very healthy demand for fertilizers. Turning to slide six, with respect to our industrial and mining business, Most of our end markets have seen meaningful recovery since last spring. One of the primary end markets for the nitric acid we produce is the auto industry, which was forced to cease production at the onset of the pandemic in mid-March. As of the end of January, U.S. light vehicle sales have rebounded from last April's lows by more than 90%. Nitric acid is also a major input into a variety of home building products. As of the end of January, U.S. housing starts and building permit applications have rebounded to near pre-pandemic levels. With respect to the products we manufacture for mining applications, primarily low-density ammonium nitrate, favorable indicators have been emerging from the sizable North American copper market, where prices for this metal have risen to the highest levels in almost 10 years. This could drive an increase in copper mining activity in the foreseeable future, particularly given relatively new and growing copper demand drivers, such as the mass production of electric vehicles. Collectively, we view the current demand trends we're seeing across the aforementioned key end markets as pointing towards continued increases in sales and prices of our industrial and mining products over the course of 2021 and thereafter, to the extent that the COVID-19 vaccination rollout continues to accelerate, and new case rates continue to drop. Over the last several weeks, many areas of the country experienced unprecedented severe cold weather impacting many people and businesses. The extreme cold temperatures affected much of the natural gas production from Texas to Oklahoma to points north, as natural gas producers found their wells frozen, resulting in very limited availability for natural gas. On top of that, in Oklahoma and Texas, where wind is a significant supplier to the electrical grid, many wind turbines froze up, forcing electrical utilities to switch to natural gas to produce power, increasing the overall demand for natural gas. And, of course, with severely cold temperatures comes much higher than normal demand for fuel, predominantly natural gas in our region, in order to heat homes and commercial buildings. These factors resulted in a shortage of natural gas causing prices for the commodity to rise significantly and industrial users to be severely curtailed on their requirements. Many nitrogen producers were forced to or elected to idle their plants. With the supply of nitrogen products in the U.S. tight prior to the cold weather, we believe that these recent widespread production disruptions could substantially reduce available supply of nitrogen to the U.S. market in the coming weeks and further boost the already strong pricing outlook for 2021. Before I hand the call over to Cheryl, I'd like to provide an update on the litigation that we've brought against Leidos, the general contractor of our Eldorado Ammonia Plant Expansion Project. As the pandemic has caused many trials to be rescheduled, ours was not immune. We now believe that the trial will occur in the fall of this year. We are looking forward to having our case heard by the jury, and while we can't guarantee any outcome in litigation, we believe our case has serious merits. Now Cheryl will go into more detail about our Q4 financial results. Cheryl?