LSB Industries, Inc. Reports Operating Results for the 2016 Third Quarter

LSB Industries, Inc. (NYSE: LXU) (“LSB” or the “Company”) today
announced results from continuing operations of the chemical business
for the third quarter ended September 30, 2016.

Third Quarter Highlights

• Net sales from continuing operations of $80.3 million
• EBITDA loss from continuing operations of $31.0 million; adjusted
  EBITDA loss from continuing operations of $26.5 million
• Operating loss from continuing operations of $45.9 million; adjusted
  operating loss from continuing operations of $43.9 million
• Net loss from continuing operations applicable to common shareholders
  of $61.0 million, or $2.25 loss per diluted share; adjusted net loss
  from continuing operations applicable to common shareholders of $57.3
  million, or $2.12 loss per diluted share
• Completed plant turnarounds at Cherokee and Pryor during the quarter

“As we previously announced, our third quarter 2016 results were
impacted by a combination of planned and unplanned maintenance
activities at our three primary chemical facilities and the softening
environment for our agricultural products,” stated Daniel Greenwell,
LSB’s President and CEO.

“Although our results for the third quarter were not what we had
initially anticipated heading in to the period, we utilized the downtime
at our three facilities to conduct additional inspections, repairs and
upgrades that we expect to improve facility performance going forward.
More specifically, we are expecting that our ammonia plants at our three
facilities will operate at an average on-stream rate of 95% in 2017 as a
result of the work we’ve done over the past year. During the quarter we
surpassed our initial goal of reducing SG&A by identifying approximately
$6 million in savings annually, which we should benefit from for the
full year of 2017. Finally, as we discussed at the end of the second
quarter, we deployed proceeds from the July 2016 sale of our Climate
Control Business to enhance our capital structure, reducing our total
debt by $100 million, and redeeming $80 million of preferred stock
(inclusive of accrued dividends). We anticipate that this strengthening
of our balance sheet will lower our annual interest expense by
approximately $7 million, reduce our dividends on preferred stock by $10
million annually and add to our overall financial flexibility.
Collectively, we expect these plant improvements and cost reduction
actions to yield meaningful improvement in revenue and EBITDA in 2017
translating into greater value for our shareholders.”

“Our El Dorado Facility’s new ammonia plant was down for the second half
of July due to a lightning strike, and then after returning to service,
we took it down at other points during the quarter for repairs and
upgrades aimed at improving safety and reliability. Our Cherokee and
Pryor Facilities both underwent scheduled Turnarounds in the quarter
during which we also identified opportunities to improve our existing
preventative maintenance programs, which we expect to enhance future
performance of these operations. In short, while our third quarter
results were below our forecast headed into the period, we believe that
we have made investments that will deliver favorable returns in 2017.”

“With respect to our markets, the soft selling price environment for our
agricultural products persisted during the period, and we expect modest
change, other than perhaps short-term seasonal uplifts, for the next
several quarters. We believe that the primary factor weighing on pricing
is the additional ammonia and upgraded product capacity expected to come
online over the next few quarters at several of our competitors’
facilities. Ultimately, we expect the domestic market and the market for
exports to absorb this incremental production and for pricing to reflect
that; however, in the near-term it remains an overhang.”

“The outlook for our industrial end markets remains consistent with
recent quarters, as continued modest, gradual improvement of the U.S.
economy is supporting steady demand for the nitric acid and ammonia we
produce. Demand for our mining products, predominantly low density
ammonium nitrate (LDAN) and ammonium nitrate (AN) solution, is likely to
remain low for the foreseeable future due to a combination of regulatory
headwinds and soft pricing. While LDAN will remain an important market
for us, albeit smaller than in past years, we continue to work on
shifting some of our capacity at El Dorado previously used to make LDAN
towards high density ammonium nitrate (HDAN) for agricultural use in
order to fully leverage our new ammonia plant at that facility.”

Comparison of 2016 to 2015 periods:

• Net sales of agricultural products decreased, driven by a decline of
  approximately 36% in the selling prices of our key products, as
  indicated in the table below. Offsetting some of the reduction in
  selling prices were increases in sales volumes for UAN and HDAN, which
  were higher by 11% and 67%, respectively. Our UAN sales volumes were
  higher due to improved production rates providing additional product
  for sale at our Pryor Facility, while HDAN sales volumes were higher
  due to stronger demand and favorable weather conditions in the markets
  we sell into. Industrial acids and other chemical products sales
  increased primarily as a result of higher sales volumes of ammonia
  produced at our El Dorado Facility offset by lower product selling
  prices.
• Excluding the one-time $39.7 million charge related to the impairment
  of the Company’s natural gas properties in 2015, operating loss and
  EBITDA loss increased as compared to the prior year primarily as a
  result of the aforementioned lower sales of agricultural products
  coupled with lost fixed cost absorption and increased repair expenses
  associated with the planned and unplanned downtime at our Pryor,
  Cherokee and El Dorado Facilities. Partially offsetting these factors
  were the benefits of the initial ammonia production of our El Dorado
  Facility, which translated into reduced feedstock costs and higher
  ammonia sales volumes during the period. Additionally, operating
  losses were higher in the third quarter of 2016 due to increased
  depreciation related to the expansion of the El Dorado Facility
  completed in the second quarter of 2016.

The following tables provide key sales metrics for our Agricultural
products:

(A) Average selling prices represent “net back” prices which are
calculated as sales less freight expenses divided by product sales
volume in tons

With respect to sales of Industrial, Mining and Other Chemical Products,
the following table indicates the volumes sold of our major products:

Financial Position and Capital Additions

As of September 30, 2016, our total cash was $183.0 million, including
approximately $107 million segregated for the redemption of Senior
Secured Notes.

Total long-term debt, including the current portion was $519.6 million
at September 30, 2016 compared to $520.4 million at December 31, 2015.
In July 2016, we received net cash proceeds of approximately $349
million from the sale of the Climate Control Business (an additional $7
million of proceeds was received in October 2016). In September 2016,
holders of our Senior Secured Notes agreed to allow us to redeem a
portion of the Series E Redeemable Preferred and to redeem a portion of
the Senior Secured Notes and all of the 12% Senior Secured Notes. In
September 2016, we used $80 million to redeem a portion of the Series E
Redeemable Preferred (including accumulated dividends and participation
rights value). The aggregate liquidation value of the Series E
Redeemable Preferred was $156.4 million, inclusive of accrued dividends
at September 30, 2016 of $16.6 million.

In October 2016, we used approximately $107 million to redeem $50
million of the 7.75% Senior Secured Notes and all $50 million of the 12%
Senior Secured Notes (including accrued interest and the redemption
prices). Currently we have $375 million of Senior Secured Notes at 8.5%
and approximately $57 million of other debt outstanding. We expect
annual interest going forward, on the current level of debt to be
approximately $35 million.

Our Working Capital Revolver Loan was undrawn at September 30, 2016.
Borrowing availability, which is tied to eligible accounts receivable
and inventories, was approximately $23 million at September 30, 2016. In
addition to normal low seasonal demand for nitrogen fertilizer products
in the third quarter, several of our chemical facilities had planned and
unplanned downtime during the quarter. The normal low seasonal demand
combined with planned and unplanned downtime resulted in lower eligible
collateral, such as accounts receivable and inventory, for our borrowing
base availability during the quarter. Interest expense, net of
capitalized interest, for the third quarter of 2016 was $13.3 million
compared to $0.9 million for the same period in 2015. The capitalization
of interest related to investments in the El Dorado ammonia plant ceased
when the plant went into service in May 2016, resulting in an increase
in interest expense during the quarter.

Capital additions were approximately $12 million in the third quarter of
2016. Planned capital additions for the remainder of 2016, in the
aggregate, are estimated to be approximately $14 million. For the full
year of 2017, maintenance capital additions related to maintaining and
enhancing safety and reliability at our facilities is expected to be
between $30 million and $35 million. With the finalization of the El
Dorado expansion and the sale of the Climate Control Business, we expect
consolidated depreciation and amortization to be $70 million to $75
million in 2017.

Revised Volume Outlook

The Company’s outlook for sales volumes for the fourth quarter and full
year of 2016 are as follows:

Exploration of Strategic Alternatives

As announced in a separate press release today, the LSB Board of
Directors has initiated a process to explore and evaluate a broad range
of potential strategic alternatives for the Company. LSB has retained
Morgan Stanley & Co. LLC as its financial advisor to assist with the
strategic review process.

LSB noted that there can be no assurance that this strategic review
process will result in a transaction. LSB does not intend to discuss or
disclose developments with respect to the Board’s process unless and
until the Board has approved a specific course of action. The press
release can be found in the investor section of the LSB website at http://investors.lsbindustries.com.

Conference Call

LSB’s management will host a conference call covering the third quarter
results on Friday, November 4, 2016 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, including our Cherokee and Pryor
Facilities after turnarounds; our projections of trends in the
fertilizer market; improvement of our financial and operational
performance; reduction of our overall cost of capital; our planned
capital additions for 2016; reduction of SG&A expenses; and volume
outlook.

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, 2015 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 and forward-looking statement to reflect events, new
information or circumstances occurring after the date of this press
release except as required by applicable law.

See Accompanying Tables

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 plus interest expense, depreciation,
depletion and amortization of property plant and equipment (which
includes amortization of other assets and excludes interest included in
amortization), 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
to EBITDA for the periods indicated.

LSB Industries, Inc.
Non-GAAP Reconciliation (continued)

Adjusted Operating Loss, Adjusted EBITDA,
Adjusted Net Income (Loss) from continuing operations applicable to
Common Stock and Adjusted Income (Loss) from continuing operations per
Diluted Share

Adjusted operating loss, adjusted EBITDA, adjusted net income (loss)
from continuing operations applicable to common stock and adjusted
income (loss) from continuing operations per diluted share are reported
to show the impact of a one-time consulting fee, start-up/commissioning
costs, certain fair market value adjustments, severance, non-cash stock
based compensation, non-cash loss on disposal of property, plant, and
equipment, Delaware unclaimed property liability, and life insurance
recovery. We believe that the inclusion of supplementary adjustments to
operating loss, EBITDA, net loss from continuing operations applicable
to common stock and diluted income per common share from continuing
operations, are appropriate to provide additional information to
investors about certain items. The following tables provide
reconciliations of operating loss, EBITDA, net loss from continuing
operations applicable to common stock and diluted loss from continuing
operations per common share excluding the impact of the supplementary
adjustments.

LSB Industries, Inc.
Non-GAAP Reconciliation (continued)

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 back” sales which is calculated as sales less freight
expenses. We believe this provides a relevant industry comparison among
our peer group.

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