LSB Industries, Inc.

Greetings and welcome to the LSB Industries third quarter 2021 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Fred Bonacore, Vice President of Investor Relations. Thank you, Fred. You may begin.

Good morning, everyone. Joining me today on the call are Mark Berman, our Chief Executive Officer, and Cheryl McGuire, our Chief Financial Officer. Please note that today's call will include forward-looking statements, and because the 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 investor 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.

Thank you, Fred, and welcome to the LSB 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 plans 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 led to 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, which 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 slide three, we summarized the key drivers for our agricultural end markets. Commodity prices continue to sit 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 percent from 2020 lows and up more than 30 percent from this point last year and continue 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, ethanol consumption and production currently sit at near pre-pandemic levels as U.S. miles driven continue 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 robust demand for fertilizers as farmers seek to maximize their yields, nitrogen prices have been driven to multi-year highs. These 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 Ida caused 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 increase that Europe has experienced. Over the last several months, natural gas prices in Europe rose to over $30 per MMBTU equivalent. While those prices have receded recently to approximately $24 an MMBTU 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 their Europe-based facilities offline as the economics of continuing to operate with such high feedstock costs are far from break even. 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-based, which gives us good visibility into our sales for upcoming quarters and insulates us from input cost inflation, particularly for natural gas, enabling us to maintain our favorable margins, which Cheryl will discuss shortly. During the third quarter, We continue 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 US. Overall, the demand and pricing trends we're 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 we'll turn over the call to Cheryl, who will discuss our third quarter results and our fourth quarter outlook. Cheryl?