UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 26, 2018
LSB INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 1-7677 | 73-1015226 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 16 South Pennsylvania Avenue, Oklahoma City, Oklahoma | 73107 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (405) 235-4546
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 26, 2018, LSB Industries, Inc. (the “Company”) issued a press release to report its financial results for the fourth quarter and year ended December 31, 2017. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On February 27, 2018, at 10:00 a.m. (Eastern time) / 9:00 a.m. (Central time), the Company will hold a conference call broadcast live over the Internet to discuss the financial results of the fourth quarter and year ended December 31, 2017.
The information contained in this Item 2.02 of this Form 8-K and the Exhibit 99.1 attached hereto are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Act of 1934 (as amended), or otherwise subject to the liabilities of such section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (as amended), except as shall be expressly set forth by specific reference to this Item 2.02 in such filing.
| Item 9.01 | Exhibits. |
(d) Exhibits.
| Exhibit Number |
Description | |
| 99.1 |
Press Release issued by LSB Industries, Inc. dated February 26, 2018, titled “LSB Industries, Inc. Reports Operating Results for the 2017 Fourth Quarter”. | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 26, 2018
| LSB INDUSTRIES, INC. | ||
| By: | /s/ Mark T. Behrman | |
| Name: | Mark T. Behrman | |
| Title: | Executive Vice President and Chief Financial Officer | |
3
Exhibit 99.1
FOR IMMEDIATE RELEASE
LSB INDUSTRIES, INC. REPORTS OPERATING RESULTS
FOR THE 2017 FOURTH QUARTER
Provides Outlook for 2018 Product Volumes
OKLAHOMA CITY, Oklahoma…February 26, 2018… LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today announced results for the fourth quarter and full year ended December 31, 2017.
Fourth Quarter Highlights
| • | Net sales of $88.9 million for the fourth quarter of 2017, up from $85.4 million for the fourth quarter of 2016 |
| • | Net loss from continuing operations of $0.2 million for the fourth quarter of 2017, compared to a loss of $25.2 million for the fourth quarter of 2016 |
| • | Adjusted EBITDA(1) from continuing operations of $0.3 million for the fourth quarter of 2017, compared to Adjusted EBITDA of $2.8 million for the fourth quarter of 2016 |
“Our sales increased while adjusted EBITDA declined modestly relative to the fourth quarter of last year as increased production from our El Dorado facility, higher product pricing and improved demand for mining products was offset by the impact of downtime at our Pryor facility,” stated Daniel Greenwell, LSB’s President and CEO.
“With respect to the operating performance of our facilities, Cherokee’s ammonia plant once again ran at a 99% on-stream rate for the quarter, which was its fifth consecutive quarter of running at this level. El Dorado had an ammonia plant on-stream rate of approximately 77% in the fourth quarter, which was an improvement over the fourth quarter of the previous year, but lower than the 90% rate it operated at through the first three quarters 2017 as a result of nineteen days of downtime necessary to address mechanical issues on a boiler and a heat exchanger as discussed on our third quarter call. Since returning to service in late October, El Dorado’s ammonia plant has been producing at a rate in excess of 1,300 tons per day with an on-stream rate from that point to date of 99%. As previously announced, Pryor resumed production in early December after being taken out of service towards the end of September to repair damage to electrical controls, wiring and piping that resulted from a minor fire at its ammonia plant. In addition to those repairs, we completed more extensive maintenance work during the downtime which we expect to allow Pryor to forgo a full turnaround later in 2018 and consistently operate at significantly higher on-stream rates, thus enabling us to better capitalize on the improving pricing environment for ammonia. While we were disappointed with how Pryor operated for the fourth quarter, we believe that the significant work that we have done during the third and fourth quarters of 2017 combined with the enhanced maintenance programs we are implementing, will allow us to operate at improved on-stream rates.”
Mr. Greenwell concluded, “So far in the first quarter of 2018, prices for several of the products we produce and sell, particularly ammonia, and high density ammonium nitrate (HDAN) have been strengthening and are currently above their levels from the first quarter of last year. Pricing in 2017 was negatively impacted by excess inventory in the distribution channel from new capacity brought online by several of our competitors. We believe the market has largely absorbed this excess capacity at this point and do not anticipate product
| (1) | This is a Non-GAAP measure. Refer to the Non-GAAP Reconciliation section. |
pricing to return to the trough levels we experienced in the second half of 2017 that depressed our full year 2017 results. Additionally, we are focused on the significant technological enhancements we are making to our company wide maintenance management system, which will improve our ability to proactively address potential downtime causing issues and improve the overall reliability of all our plants. We are on track to complete these enhancements by the end of our 2018 second quarter and should start to see the benefit in the second half of 2018. We expect that the improved maintenance system and practices, coupled with the higher selling prices for our products should result in materially improved financial results.”
| Three Months Ended December 31, | ||||||||||||||||||||
| 2017 | 2016 | |||||||||||||||||||
| (Dollars in millions) | ||||||||||||||||||||
| Sales by Market Sector |
Sales | Sector Mix |
Sales | Sector Mix |
% Change |
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| Agricultural |
$ | 32.4 | 36 | % | $ | 32.8 | 38 | % | (1 | )% | ||||||||||
| Industrial, Mining and Other |
56.5 | 64 | % | 52.6 | 62 | % | 7 | % | ||||||||||||
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| $88.9 | $85.4 | 4% | ||||||||||||||||||
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Comparison of 2017 to 2016 periods:
| • | Net sales of our agricultural products were essentially flat during the quarter relative to the prior year period. Stronger pricing for HDAN was offset by lower ammonia volumes resulting from downtime at our Pryor facility as well as weaker market pricing for ammonia. Urea ammonium nitrate (UAN) sales included approximately 32,955 tons purchased from third parties to meet customer obligations during the Pryor downtime. UAN selling prices were negatively impacted by forward orders taken during the summer months at lower selling prices. Net sales of industrial ammonia increased as a result of higher volumes from improved on-stream rates at El Dorado. Low density ammonium nitrate (LDAN) sales volumes for mining applications also increased as a result of our sales and marketing efforts and stronger overall demand from this market. Sales of nitric acid from the Baytown facility increased as a result of rising levels of industrial manufacturing throughout the U.S. |
| • | Adjusted EBITDA from continuing operations was lower compared to the prior year period primarily due to the aforementioned downtime at the Pryor facility, partially offset by improved on-stream rates and lower fixed costs at El Dorado as compared to the fourth quarter of 2016. |
The following tables provide key sales metrics for our Agricultural products:
| Three Months Ended December 31, | ||||||||||||
| Product (tons sold) |
2017 | 2016 | % Change | |||||||||
| UAN |
97,852 | 87,662 | 12 | % | ||||||||
| HDAN |
48,782 | 49,086 | (1 | )% | ||||||||
| Ammonia |
13,821 | 22,770 | (39 | )% | ||||||||
| Other |
4,801 | 4,264 | 13 | % | ||||||||
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| 165,256 | 163,782 | 1% | ||||||||||
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| Average Selling Prices (price per ton) (A) |
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| UAN |
$ | 124 | $ | 135 | (8 | )% | ||||||
| HDAN |
$ | 203 | $ | 168 | 21 | % | ||||||
| Ammonia |
$ | 215 | $ | 284 | (24 | )% | ||||||
| (A) | Average selling prices represent “net back” prices which are calculated as sales less freight expenses divided by product sales volume in tons. |
2
The following table indicates the volumes sold of our major Industrial and Other Chemical products:
| Three Months Ended December 31, | ||||||||||||
| Product (tons sold) |
2017 | 2016 | % Change | |||||||||
| Nitric acid – Baytown |
115,599 | 99,055 | 17 | % | ||||||||
| Nitric acid – All Other |
25,375 | 27,399 | (7 | )% | ||||||||
| AN solution |
4,498 | 8,272 | (46 | )% | ||||||||
| Ammonia |
51,572 | 43,876 | 18 | % | ||||||||
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| 197,044 | 178,602 | 10% | ||||||||||
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The following table indicates the volumes sold of our major Mining products:
| Three Months Ended December 31, | ||||||||||||
| Product (tons sold) |
2017 | 2016 | % Change | |||||||||
| LDAN/HDAN |
35,074 | 31,095 | 13 | % | ||||||||
| AN solution |
3,916 | 11,267 | (65 | )% | ||||||||
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| 38,990 | 42,362 | (8)% | ||||||||||
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| Input Costs |
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| Average natural gas cost/MMBtu |
$ | 3.00 | $ | 3.01 | - | % | ||||||
Financial Position and Capital Expenditures
As of December 31, 2017, our total cash position was $33.6 million. Additionally, we had approximately $41.2 million of borrowing availability under our Working Capital Revolver. There were no borrowings under the Working Capital Revolver at December 31, 2017.
Total long-term debt, including the current portion, was $409.4 million at December 31, 2017 compared to $420.2 million at December 31, 2016. The aggregate liquidation value of the Series E Redeemable Preferred at December 31, 2017, inclusive of accrued dividends of $45.5 million, was $185.2 million.
Interest expense, net of capitalized interest, for the fourth quarter of 2017 was $9.3 million compared to $9.8 million for the same period in 2016. For the full year of 2018, we expect interest expense to be approximately $35—$40 million.
Capital expenditures were approximately $10.3 million in the fourth quarter of 2017. For the full year of 2018, total capital expenditures, which are related to maintaining and enhancing safety and reliability at our facilities, are expected to be approximately $35 million.
3
Volume Outlook
Our outlook for sales volumes for the full year 2018 (including lost sales related to El Dorado and Cherokee turnarounds) and our actual sales volumes for the full year 2017 are as follows:
| Products |
Full Year 2018 Sales (tons) |
Full Year Actual 2017 Sales (tons) |
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| Agriculture: | ||||||||
| UAN |
480,000 – 490,000 | 489,000 | ||||||
| HDAN |
290,000 – 310,000 | 280,000 | ||||||
| Ammonia |
115,000 – 125,000 | 94,000 | ||||||
| Industrial, Mining and Other: |
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| Ammonia |
220,000 – 230,000 | 229,000 | ||||||
| LDAN/HDAN and AN solution |
180,000 – 190,000 | 166,000 | ||||||
| Nitric Acid and Other Mixed Acids |
90,000 – 100,000 | 101,000 | ||||||
| Sulfuric Acid |
120,000 – 130,000 | 133,000 | ||||||
| DEF |
15,000 – 20,000 | 15,000 | ||||||
Conference Call
LSB’s management will host a conference call covering the fourth quarter results on February 27, 2018 at 10:00 a.m. ET/9:00 a.m. CT to discuss these results and recent corporate developments. Participating in the call will be President and CEO, Daniel Greenwell, Executive Vice President and CFO, Mark Behrman and Executive Vice President, Chemical Manufacturing, John Diesch. Interested parties may participate in the call by dialing (201) 493-6739. Please call in 10 minutes before the conference is scheduled to begin and ask for the LSB conference call. To coincide with the conference call, LSB will post a slide presentation at www.lsbindustries.com on the webcast section of the Investor tab of our website.
To listen to a webcast of the call, please go to the Company’s website at www.lsbindustries.com at least 15 minutes prior to the conference call to download and install any necessary audio software. If you are unable to listen live, the conference call webcast will be archived on the Company’s website. We suggest listeners use Microsoft Explorer as their web browser.
LSB Industries, Inc.
LSB Industries, Inc., headquartered in Oklahoma City, Oklahoma, manufactures and sells chemical products for the agricultural, mining, and industrial markets. The Company owns and operates facilities in Cherokee, Alabama, El Dorado, Arkansas and Pryor, Oklahoma, and operates a facility for a global chemical company in Baytown, Texas. LSB’s products are sold through distributors and directly to end customers throughout the United States. Additional information about the Company can be found on its website at www.lsbindustries.com.
Forward-Looking Statements
This press release 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,” “project” or similar expressions, and include but are not limited to: financial performance improvement; view on sales to mining customers; estimates of consolidated depreciation and amortization and future turnaround expenses; our expectation of production consistency and enhanced reliability at our Facilities; our projections of trends in the fertilizer market; improvement of our financial and operational performance; our planned capital expenditures for 2018; reduction of SG&A expenses; volume outlook and our ability to complete plant repairs as anticipated.
4
Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve risk and uncertainties. Though we believe that expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectation will prove to be correct. Actual results may differ materially from the forward-looking statements as a result of various factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission (SEC), including those set forth under “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in our Form 10-K for the year ended December 31, 2017 and, if applicable, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. We expressly disclaim any obligation to update, amend or clarify any forward-looking statement to reflect events, new information or circumstances occurring after the date of this press release except as required by applicable law.
| Company Contact: Mark Behrman, Chief Financial Officer (405) 235-4546 |
Investor Relations Contact: The Equity Group Inc. Fred Buonocore, CFA (212) 836-9607 Kevin Towle (212) 836-9620 |
See Accompanying Tables
5
LSB Industries, Inc.
Financial Highlights
Three Months and Twelve Months Ended December 31,
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| (In Thousands, Except Per Share Amounts) | ||||||||||||||||
| Net sales |
$ | 88,917 | $ | 85,369 | $ | 427,504 | $ | 374,585 | ||||||||
| Cost of sales |
99,121 | 94,261 | 422,038 | 423,891 | ||||||||||||
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| Gross profit (loss) |
(10,204 | ) | (8,892 | ) | 5,466 | (49,306 | ) | |||||||||
| Selling, general and administrative expense |
8,238 | 8,438 | 34,990 | 40,168 | ||||||||||||
| Impairment of goodwill |
— | 1,621 | — | 1,621 | ||||||||||||
| Other expense (income), net |
2,309 | (852 | ) | 4,567 | (872 | ) | ||||||||||
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| Operating loss |
(20,751 | ) | (18,099 | ) | (34,091 | ) | (90,223 | ) | ||||||||
| Interest expense, net |
9,326 | 9,816 | 37,267 | 30,945 | ||||||||||||
| Loss on extinguishment of debt |
— | 8,703 | — | 8,703 | ||||||||||||
| Non-operating other expense (income), net |
103 | (219 | ) | (306 | ) | 218 | ||||||||||
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| Loss from continuing operations before benefit for income taxes |
(30,180 | ) | (36,399 | ) | (71,052 | ) | (130,089 | ) | ||||||||
| Benefit for income taxes |
(30,018 | ) | (11,209 | ) | (40,759 | ) | (41,956 | ) | ||||||||
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| Loss from continuing operations |
(162 | ) | (25,190 | ) | (30,293 | ) | (88,133 | ) | ||||||||
| Income from discontinued operations, net of taxes |
1,076 | 3,657 | 1,076 | 200,301 | ||||||||||||
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| Net income (loss) |
914 | (21,533 | ) | (29,217 | ) | 112,168 | ||||||||||
| Dividends on convertible preferred stocks |
75 | 75 | 300 | 300 | ||||||||||||
| Dividends on Series E redeemable preferred stock |
6,195 | 5,410 | 23,443 | 27,761 | ||||||||||||
| Accretion of Series E redeemable preferred stock |
1,635 | 1,636 | 6,487 | 18,256 | ||||||||||||
| Net income attributable to participating securities |
— | — | — | 1,091 | ||||||||||||
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| Net income (loss) attributable to common stockholders |
$ | (6,991 | ) | $ | (28,654 | ) | $ | (59,447 | ) | $ | 64,760 | |||||
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| Income (loss) per common share: |
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| Basic: |
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| Loss from continuing operations |
$ | (0.30 | ) | $ | (1.19 | ) | $ | (2.22 | ) | $ | (5.28 | ) | ||||
| Income from discontinued operations, net of taxes |
0.04 | 0.13 | 0.04 | 7.82 | ||||||||||||
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| Net income (loss) |
$ | (0.26 | ) | $ | (1.06 | ) | $ | (2.18 | ) | $ | 2.54 | |||||
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| Diluted: |
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| Loss from continuing operations |
$ | (0.30 | ) | $ | (1.19 | ) | $ | (2.22 | ) | $ | (5.28 | ) | ||||
| Income from discontinued operations, net of taxes |
0.04 | 0.13 | 0.04 | 7.82 | ||||||||||||
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| Net income (loss) |
$ | (0.26 | ) | $ | (1.06 | ) | $ | (2.18 | ) | $ | 2.54 | |||||
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6
LSB Industries, Inc.
Consolidated Balance Sheets
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (In Thousands)2 | ||||||||
| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 33,619 | $ | 60,017 | ||||
| Accounts receivable, net |
59,570 | 51,299 | ||||||
| Inventories |
21,856 | 22,939 | ||||||
| Supplies, prepaid items and other: |
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| Prepaid insurance |
10,535 | 11,217 | ||||||
| Precious metals |
7,411 | 8,648 | ||||||
| Supplies |
27,729 | 24,100 | ||||||
| Prepaid and refundable income taxes |
1,736 | 1,193 | ||||||
| Other |
1,284 | 1,733 | ||||||
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| Total supplies, prepaid items and other |
48,695 | 46,891 | ||||||
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| Total current assets |
163,740 | 181,146 | ||||||
| Property, plant and equipment, net |
1,014,038 | 1,078,958 | ||||||
| Intangible and other assets, net |
11,404 | 10,316 | ||||||
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| $1,189,182 | $1,270,420 | |||||||
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(Continued on following page)
7
LSB Industries, Inc.
Consolidated Balance Sheets (continued)
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (In Thousands) | ||||||||
| Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 55,992 | $ | 54,246 | ||||
| Short-term financing |
8,585 | 8,218 | ||||||
| Accrued and other liabilities |
35,573 | 44,037 | ||||||
| Current portion of long-term debt |
9,146 | 13,745 | ||||||
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| Total current liabilities |
109,296 | 120,246 | ||||||
| Long-term debt, net |
400,253 | 406,475 | ||||||
| Noncurrent accrued and other liabilities |
11,691 | 12,326 | ||||||
| Deferred income taxes |
54,787 | 93,831 | ||||||
| Commitments and contingencies |
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| Redeemable preferred stocks: |
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| Series E 14% cumulative, redeemable Class C preferred stock, no par value, 210,000 shares issued; 139,768 outstanding; aggregate liquidation preference of $185,231,000 ($161,788,000 at December 31, 2016) |
174,959 | 145,029 | ||||||
| Series F redeemable Class C preferred stock, no par value, 1 share issued and outstanding; aggregate liquidation preference of $100 |
— | — | ||||||
| Stockholders’ equity: |
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| Series B 12% cumulative, convertible preferred stock, $100 par value; 20,000 shares issued and outstanding |
2,000 | 2,000 | ||||||
| Series D 6% cumulative, convertible Class C preferred stock, no par value; 1,000,000 shares issued and outstanding |
1,000 | 1,000 | ||||||
| Common stock, $.10 par value; 75,000,000 shares authorized, 31,280,685 shares issued |
3,128 | 3,128 | ||||||
| Capital in excess of par value |
193,956 | 192,172 | ||||||
| Retained earnings |
256,214 | 314,301 | ||||||
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| 456,298 | 512,601 | |||||||
| Less treasury stock, at cost: |
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| Common stock, 2,662,027 shares (3,004,855 shares at December 31, 2016) |
18,102 | 20,088 | ||||||
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| Total stockholders’ equity |
438,196 | 492,513 | ||||||
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| $1,189,182 | $1,270,420 | |||||||
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8
LSB Industries, Inc.
Non-GAAP Reconciliation
This news release includes certain “non-GAAP financial measures” under the rules of the Securities and Exchange Commission, including Regulation G. These non-GAAP measures are calculated using GAAP amounts in our consolidated financial statements.
EBITDA Reconciliation
EBITDA is defined as net income (loss) plus interest expense, depreciation, depletion and amortization (DD&A) (which includes DD&A of property, plant and equipment and amortization of intangible and other assets), less benefit for income taxes and income from discontinued operations, net of taxes. We believe that certain investors consider EBITDA a useful means of measuring our ability to meet our debt service obligations and evaluating our financial performance. EBITDA has limitations and should not be considered in isolation or as a substitute for net income, operating income, cash flow from operations or other consolidated income or cash flow data prepared in accordance with GAAP. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to a similarly titled measure of other companies. The following table provides a reconciliation of net income (loss) to EBITDA for the periods indicated.
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| ($ in millions) | ||||||||||||||||
| LSB Consolidated |
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| Net income (loss) |
$ | 0.9 | ($ | 21.5 | ) | ($ | 29.2 | ) | $ | 112.2 | ||||||
| Plus: |
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| Interest expense |
9.3 | 9.8 | 37.3 | 30.9 | ||||||||||||
| Loss on extinguishment of debt |
— | 8.7 | — | 8.7 | ||||||||||||
| Provision for impairment |
— | 1.6 | — | 1.6 | ||||||||||||
| Depreciation, depletion and amortization |
17.3 | 18.4 | 69.2 | 61.3 | ||||||||||||
| Benefit for income taxes |
(30.0 | ) | (11.2 | ) | (40.8 | ) | (41.9 | ) | ||||||||
| Income from discontinued operations |
(1.1 | ) | (3.7 | ) | (1.1 | ) | (200.3 | ) | ||||||||
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| EBITDA |
($ | 3.6 | ) | $ | 2.1 | $ | 35.4 | ($ | 27.5 | ) | ||||||
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9
LSB Industries, Inc.
Non-GAAP Reconciliation (continued)
Adjusted EBITDA
Adjusted EBITDA is reported to show the impact of one time/non-cash items such as, loss on sale of a business and other property and equipment, one-time income or fees, start-up/commissioning costs, certain fair market value adjustments, non-cash stock-based compensation and severance costs. We believe that the inclusion of supplementary adjustments to EBITDA is appropriate to provide additional information to investors about certain items. The following tables provide reconciliations of EBITDA excluding the impact of the supplementary adjustments. Our policy is to adjust for non-cash or non-recurring items that are greater than $0.5 million quarterly or cumulatively.
| LSB Consolidated ($ in millions) |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| EBITDA: |
($ | 3.6 | ) | $ | 2.1 | $ | 35.4 | ($ | 27.5 | ) | ||||||
| Consulting fee—Negotiated property tax savings at El Dorado |
— | — | — | 12.1 | ||||||||||||
| Stock-based compensation |
1.3 | 0.8 | 5.2 | 4.0 | ||||||||||||
| Start-up/Commissioning costs at El Dorado |
— | — | — | 5.1 | ||||||||||||
| Severance costs |
— | 0.2 | — | 0.9 | ||||||||||||
| Derecognition of death benefit accrual |
— | — | (1.4 | ) | — | |||||||||||
| Loss on sale of a business and other property and equipment |
2.6 | (0.3 | ) | 7.0 | 0.3 | |||||||||||
| Fair market value adjustment on preferred stock embedded derivatives |
— | — | — | 1.0 | ||||||||||||
| Delaware unclaimed property liability |
— | — | — | 0.3 | ||||||||||||
| Life insurance recovery |
— | — | — | (0.7 | ) | |||||||||||
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| Adjusted EBITDA |
$ | 0.3 | $ | 2.8 | $ | 46.2 | ($ | 4.5 | ) | |||||||
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Agricultural Sales Price Reconciliation
The following table provides a reconciliation of total agricultural sales as reported under GAAP in our consolidated financial statement reconciled to “net” sales which is calculated as sales less freight expenses. We believe this provides a relevant industry comparison among our peer group.
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Agricultural sales ($ in millions) |
$ | 32.4 | $ | 32.8 | $ | 184.1 | $ | 166.2 | ||||||||
| Less freight: |
2.7 | 3.0 | 15.2 | 12.2 | ||||||||||||
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| Net sales |
$ | 29.7 | 29.8 | $ | 168.9 | $ | 154.0 | |||||||||
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