Good day, ladies and gentlemen, and welcome to your LSB Industries Second Quarter 2022 Earnings Call. All lines have been placed in a listen-only mode, and the floor will be opened for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Fred Buonocore, President of Investor Relations. Sir, the floor is yours.

Good morning, everyone. Joining me today 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 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 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.

Thank you, Fred. We're happy to have the opportunity to speak to you today about our 2022 second quarter results and our outlook for the balance of the year. But first, I'd like to take a moment to acknowledge our Founder and former Chairman and CEO, Jack Golsen, who passed away this past April. Jack's first priority was always his family, but after that, LSB was his creation and its fourth child. He was a highly successful entrepreneur, but more importantly, Jack touched many lives and was a very generous person. Recently, Jack told me he was very happy to see our team turn LSB around and prosper, and he believed that we had a bright future. Our goal every day is to make his belief a reality and we are grateful to have the opportunity to be a part of Jack's legacy. Turning to our 2022 second quarter as summarized on page three of our presentation. We had an eventful quarter and once again delivered record top and bottom line performance. The strong results were driven by the favorable pricing environment for our products that we capitalized on with solid execution. I'd like to thank our employees for making this another excellent quarter and for their strong commitment to improving and growing our business and doing it safely. As a reflection of their hard work and contributions, our market capitalization is now much higher than it was at this time last year. And as a result, in late June, we were pleased to be added to the Russell 3000 and 2000 Indexes. On page four of our presentation, we provide an overview of our end markets. In spite of poor weather conditions this spring, continued volatility of natural gas and recent pressure on corn prices, we maintain a favorable…

Thanks, Mark, and good morning. Turning to page five, you'll see a summary of our results for the Second Quarter of 2022. Our strong performance relative to 2021 reflects the increased pricing for our products across all our businesses. Our second quarter adjusted EBITDA of $158 million is a company record. Additionally, we generated adjusted EPS of $1.22 per share in the quarter. Our strong profitability has contributed to our greatly improved liquidity situation. We currently have more than $500 million of total liquidity, including approximately $460 million in cash and short-term investments. Notably in the second quarter, we generated cash flow from operations of $135 million and had capital expenditures of $8 million, translating into free cash flow of $127 million, the highest free cash flow in our company's history. We ended the second quarter with a leverage ratio of below one time trailing 12-month EBITDA and we expect that to decline further during the second half of 2022. As I have mentioned before, our target leverage ratio is now less than 2.5 times in a mid-market or normalized pricing environment. On May 16th, our Board authorized a $50 million share repurchase program as we believed our stock was undervalued and buying back our shares at these levels would be a return of capital to our shareholders. To date and up until we went into our quarterly blackout period, we repurchased approximately $13 million of our stock at a volume-weighted average price of slightly less than $18 per share. We expect to continue with our stock buyback program, now that we are out of our blackout period. We view this buyback as just one part in a multifaceted approach to using our strong balance sheet to deliver value to shareholders. Mark will discuss some of our other initiatives later…

Thank you, Cheryl. Natural gas prices continue to play a major role in elevated selling prices for our products. Page eight illustrates how the spread between US and European natural gas prices widened over the course of 2021 and continue to be volatile through the first half of 2022. Historically high European gas costs, which are currently over $65 an MMBtu, I have seen a number of facilities taken down over the last several months. At these levels of natural gas that puts ammonia production costs over $2,000 per ton. If these prices remain at current levels, then we would anticipate additional production closures. This supply disruption is exacerbating what is already a global shortage of ammonia and other nitrogen products in the face of rising demand. As a result of this dynamic, we expect ammonia prices to remain well above multiyear averages for the balance of 2022 and for the full year of 2023, even if European gas cost decline in the coming months. This natural gas arbitrage and result in lower cost of ammonia production represents a significant advantage to US based nitrogen producers. We intend to capitalize on the strong pricing environment to generate significant free cash flow, allowing us to pursue opportunities to grow our business and create additional value for our shareholders. On page nine, we show a summary of our key growth priorities. Employee safety is our primary focus every single day, followed by the reliability of our facilities. We continue to make improvements on both fronts and have significant opportunities for further improvement. As Cheryl mentioned, this summer we are performing turnarounds at our El Dorado and Pryor facilities. We expect the work we are performing at both locations to advance both our safety and reliability initiatives and move us closer to our…

Thank you. The floor is now open for your questions. [Operator Instructions] And we do go into our first question from Rob McGuire with Granite Research. Please go ahead.

Good morning and congratulations on your quarter.

Thanks, Rob. How are you?

Very good. Thank you. Hey, have you witnessed pricing degradation taking place? And are we past that, or are there still some pockets where pricing degradation is having an impact on sales?

I would say that we're in a kind of a choppy market, right? I mean, this is the time of the year where there is the lowest demand on the fertilizer side. So there's always kind of a, I'd say, a bit of a standoff between producers and then folks who are buying fertilizer. So, I think we're seeing pricing certainly stabilize, and I think over the last week to 10 days we've seen ammonia move up, as I mentioned earlier, there is a shortage around the world and export opportunities from the US -- US Gulf prices and Tampa Ammonia prices moved up. With respect to urea, we've seen urea start to move up over the last week to 10 days. So, I guess, to sum it up, I don't think we're seeing much price degradation, but we're not seeing significant increases either.

Thank you. And can you discuss if there are products in addition to ammonia that has experienced significant uptick in inventory? And if so, what are those drivers?

Well, I think, Cheryl pointed out. So, we're probably carrying a little bit more ammonia inventory coming out of the planting season than we would normally have. However, we're going to take advantage of the higher Tampa Ammonia prices. So it turned out to be a really good thing. Probably high density ammonium nitrate probably have a little bit more inventory than we would normally have as well. And I think a lot of that has to do with the weather, first being wet and then being really dry, as well as cattle prices as high density ammonium nitrate is used on pasture land.

Thank you. And then just shifting gears, and lastly over the Pryor green ammonia project. Will the green ammonia replace existing ammonia capacity or will you continue to have that green ammonia capacity on the site in case you want to ramp your production there?

Yes. So the way we're thinking about it in the way we’ve asked [indiscernible] to look at it is, we want to install 30 megawatts of electrolyzer capacity to produce approximately 30,000 tons of -- metric tons of green ammonia. But what we're designing will have the ability to switch from green where we'll run the electrolyzers to gray, where we'll just feed natural gas into the plant. So in theory, if somehow renewable energy prices went upside down and we didn't want to produce green, we could just switch over and produce the traditional way that we produce today.

Thank you. That answers all my questions.

Thanks, Rob.

At this time there are no further questions. We turn to Mark Behrman for closing remarks.

Well, I want to thank everyone for joining our call today. I’m really proud of the team and the job that they've done to produce a record quarter. I think we have a lot of exciting things going on that will add a lot of value on a go-forward basis. And we aim to talk about them over the next couple of quarters as we make further progress on those initiatives. Thank you and have a great day.

Thank you. This concludes today's teleconference. We thank you for your participation. You may disconnect your lines at this time.