Earnings Call Transcript - LXU Q4 2020

Operator, Operator

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. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Kristy Carver, Senior Vice President and Treasurer. Thank you. You may begin.

Kristy Carver, Senior Vice President and Treasurer

Good morning, everyone. Joining me today on the call 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 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.

Mark Behrman, CEO

Thank you, Kristy, 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 of 1.06, with our Pryor 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 a 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 by-product 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 to prevent the virus from spreading within our manufacturing facilities and corporate offices into 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, remained 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 5 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 6. 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 homebuilding 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 brought against Leidos, the general contractor of our El Dorado 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 Maguire, CFO

Thanks, Mark, and good morning. Page 8 bridges our adjusted EBITDA for the fourth quarter 2020 of $10.4 million to adjusted EBITDA for the fourth quarter 2019 of $7.2 million. The improvement was due to continued progress in year-over-year production and sales volumes. The absence of any turnarounds this year, combined with better overall operating performance, allowed us to generate company records for both ammonia and UAN production, outcomes that are directly attributable to the investments we have made in our facilities over the last several years. Partially offsetting our operating performance improvement was the impact of pricing headwinds that we fought throughout 2020. Lower net selling prices negatively impacted fourth quarter adjusted EBITDA by approximately $9.6 million. However, with corn prices hovering around $5.25 per bushel, an anticipated increase in farmer income is expected to drive higher sales volumes and prices for fertilizers as growers seek to maximize yields. In fact, over the last month, we have seen pricing for our products significantly improve, and that makes us very optimistic for the year. Turning to Page 9. This chart illustrates the earnings power of our business. For comparative purposes, we have normalized for both selling prices and natural gas prices to match those we experienced in 2019 and also added back sales volumes we estimate were lost as a result of the COVID-19 pandemic-related economic slowdown. We think that this analysis illustrates the true underlying operating improvements we've made to the business. With these adjustments, adjusted EBITDA would have been approximately $22 million in the fourth quarter of 2020, approximately 200% higher than 2019 fourth quarter adjusted EBITDA of $7.2 million. Though headwinds on fertilizer pricing and weakness in industrial and mining demand impacted the quarter by almost $12 million, as mentioned earlier, we have reason to believe we are well positioned to capitalize on the positive pricing momentum we are seeing in the market today. Turning to Page 10, we have outlined our adjusted gross profit margins for the past three years, which we believe represents the underlying cash margins of our business. As you can see from this slide, despite the significant drop in the average annual Tampa Ammonia Benchmark price since 2018, we had been able to maintain consistent margins with higher production and sales volumes, lower natural gas costs, and reduced fixed costs, resulting in a lower fixed cost per ton of product. With the production improvements made to date, coupled with further upgrading of margins and continued pricing recovery in our agricultural markets, we would expect consolidated adjusted gross margin to increase to the low to mid 30% range. Page 11 outlines our capital structure. We ended the quarter with approximately $16 million of cash and $58 million of total liquidity. As stated on previous calls, we are actively seeking ways to improve our capital structure and lower our overall cost of capital. We believe that operating improvements made to date, combined with an improved pricing environment for our fertilizer products and continued recovery in our industrial and mining end markets, will be a benefit in achieving those efforts. Additionally, credit markets over the last several months have been what we would call issuer friendly, a trend that we will continue to monitor. Today, our senior notes are callable at 107%. However, in May of 2021, the call premium declines to 103.6%. We continue to evaluate several avenues to lower our cost of capital and look forward to discussing these with you in coming months. On Slides 12 and 13, we provide an outlook to how we're thinking about the year ahead. On Slide 12, you can see our expected ammonia production and sales volumes for the full year of 2021. As a result of continued improvement in operating rates, we expect year-over-year improvement in ammonia production despite the loss of approximately 15,000 tons of ammonia, resulting from a 30-day turnaround at our Cherokee facility, which is planned for the third quarter of 2021. It is important to note that the turnaround at Cherokee will also lower downstream production and sales for UAN and other industrial products during this period. Turnaround expenses are expected to be approximately $10 million for 2021, and additionally, we have total planned CapEx across the three sites of approximately $30 million, which includes approximately $25 million in EH&S and maintenance CapEx and $5 million related to margin enhancement projects. Additionally, we continue our focus to upgrade more ammonia into higher-value downstream production. And in 2021, we expect to begin the ramp-up of nitric acid as a result of a new 7-year offtake agreement that began this first quarter. We also expect new contract awards, coupled with further recovery from COVID-related impact, to result in higher volumes of industrial and mining sales volumes in 2021. Please keep in mind, this sales volume outlook is representative of our current view, which will continue to evolve as we seek to optimize our product balance across agricultural, industrial and mining end markets. Slide 13 covers a range of variable and fixed plant expenses as well as SG&A for 2021. One important thing to note is that SG&A includes approximately $4 million of legal fees leading up to our trial against Leidos, which, Mark mentioned; we expect to occur in the fall. As we think about the first quarter and the first half of 2021, there are a couple of key trends underway. Pricing has moved up dramatically over the past month, and we expect that pricing to be reflected in our sales in the latter part of Q1 and into Q2. Please keep in mind that January and February orders for UAN, HDAN, and ammonia were taken back in Q4 and, therefore, will be reflective of Q4 pricing. The historically cold weather across many parts of the U.S. earlier this month caused disruption to production for us as well as many others across our industry. As temperatures have normalized and gas curtailments were fully lifted, we are at full production for ammonia at El Dorado and expect to be at full production at our Pryor facility over the next couple of days. Natural gas trends, excluding the recent unusual spike from the recent weather event, has seen pricing rebound off lows experienced back in early 2020. And we expect the cost of gas feedstocks to remain higher in 2021 versus 2020. Excluding the impact of the recent weather-related event, natural gas has averaged approximately $0.80 to $1 higher per MMBTu, thus far, in Q1 2021, as compared to the first quarter of 2020. Putting all of these data points together, despite the recent weather events, we expect EBITDA in the first half of 2021 to be approximately 30% to 35% higher than the first half of 2020. Before I turn the call back to Mark, I'd like to point out that we've included an alternative view of our EBITDA sensitivity grid in our Appendix on Slide 22. The grid illustrates the earnings power of the company at different selling prices for Tampa ammonia and UAN and assumes a $3 per MMBtu natural gas price. We feel this is more reflective of our current business, given that the relationship between Tampa ammonia prices and UAN prices has proven to not be highly correlated. And now I'll turn it back over to Mark to wrap up.

Mark Behrman, CEO

Thank you, Cheryl. The pandemic impact on demand has eased somewhat over the past two quarters, but still had an impact on our fourth quarter financial results, and we expect it to continue to have an impact on our 2021 first quarter. What has been a greater pressure on our financial results for a sustained period of time, however, has been the impact of historically weak fertilizer pricing. I said on the third quarter call, back in October, that I believe that there was reason for optimism regarding the outlook for fertilizer prices in 2021, and this has proven to be true. As I mentioned earlier, current and future corn prices are the highest they've been since 2013, and that should result in approximately 92 million acres of corn planted this spring, which will likely prompt growers to have significant demand for fertilizers as they seek to maximize yields, particularly if corn prices remain at levels indicated by the futures market. Additionally, recent data we have been seeing points to a downward trend in imports from several countries that were shipping a meaningful quantity of product to the U.S. over the past year, which will reduce the overall supply of product in our domestic market. One particular dynamic that we remain focused on, though, is the historical relationship between urea and UAN. As you can see on Slide 14, over the past 10 years, UAN has typically traded at or above the price of urea on a nitrogen equivalent basis. However, since mid-2019, UAN began selling at a discount to urea for most of the period. Over the last month, both products have seen product selling prices increase sharply, with the UAN-to-urea discount narrowing, which we believe represents a reversion to the historical relationship. Additionally, in recent quarters, I've discussed the effect of natural gas prices on the nitrogen market. While they benefit our gross margins, they also encourage less efficient marginal nitrogen chemical producers around the world to run facilities that they might not otherwise run, which leads to product oversupply and increased imports into the U.S., while pressuring product selling prices. However, with natural gas prices higher in the U.S. and around the world, as you can see on Slide 15, we have seen marginal producers reduce production, including Western European and Asian producers who tend to sit at the high end of the cost curve, and that has helped improve product selling prices. We're very excited about the progress we've made over the course of 2020, which positions us to improve our financial performance in 2021. First and foremost is the progress we've made in our operating performance. Our team operated our plants well throughout the past year, and in fact, company-wide, we had record production volumes for both ammonia and UAN for the year, as reflected on Slide 16. While we've still got room for improvement, we were pleased with the increased production volume we delivered in 2020. We expect to continue with strong production volume over the course of 2021. Along with further improvement of the performance of our manufacturing operations, we have numerous other initiatives that we are focused on that we expect to help us continue to improve our financial performance, several of which are summarized on Slide 17. Finally, as mentioned on Slide 18, consistent with the global focus on reducing carbon emissions, we are currently working on developing a strategy to enter the clean energy market for the production of green ammonia. We view this as a growth platform for our business and believe that current ammonia producers are best positioned to be leaders in this market as it develops due to our ability to leverage our existing knowledge in ammonia manufacturing, handling, storage, and logistics. 2020 will go down as one of the most challenging years in recent history. But thanks to the disciplined focus and commitment of our team, we thrived in many ways, as our strong full-year production and sales records clearly show. We're very optimistic about 2021 as demand and pricing trends for the global nitrogen markets are the most positive we've seen since 2014 and believe that will translate into improved financial results. That concludes our prepared remarks, and we will now be happy to take your questions. Thank you.

Operator, Operator

At this time, we will be conducting a question-and-answer session. Our first question comes from Travis Edwards with Goldman Sachs. Please proceed with your question.

Travis Edwards, Analyst

Hey, good morning. Thanks for the color, and I appreciate the detail this morning. Just first was on some of the detail you provided around the disruptions you shared earlier last week, just on Pryor and EDC in 1Q, just wanted to confirm any details regarding the impact to EBITDA. And then, on a related note, were you able to get ahead maybe on any maintenance work there that normally would have been saved for a later date?

Mark Behrman, CEO

Good morning, Travis. Yes, I would say, as we've mentioned in the press releases about the unplanned downtime from the weather event, I don't think it will have a significant impact. We were unhedged on gas and didn't have to be concerned about a spike in gas prices. Ultimately, we experienced curtailment on gas at both locations. Therefore, considering that downtime along with the gas we sold back that we had previously purchased, I think the impact will be minor.

Travis Edwards, Analyst

Got it. So selling back of that gas should more or less offset whatever loss of it, otherwise, from some disruption?

Mark Behrman, CEO

Yes. I don't know if it's going to completely offset that, but, again, I think the impact for the first six months will be minimal.

Travis Edwards, Analyst

I understand. That's informative. As we consider the planned outages for later this year, I recall that in the past, there was sometimes a tendency to modify the timing or duration of those outages due to favorable agricultural market conditions. I'm curious, with the pricing looking better early in the year, regarding the Cherokee outage in the third quarter, should we anticipate any changes in the timing or length of that outage? Is there a possibility that you might adjust the timing if agricultural market conditions continue to be as strong as they have been?

Mark Behrman, CEO

If we look back at last quarter's earnings call, we mentioned that we would have two outages this year, one at Cherokee and one at Pryor. We have actually moved the Pryor outage to next year. Now all our facilities are on three-year cycles. I don't think we would push the Cherokee turnaround that's scheduled for this year, as it is their third year. It's essential to maintain the facilities for optimal performance, so I don't foresee any changes at this point.

Travis Edwards, Analyst

That's good to know the total color. I have one more question. I appreciate the information you've shared about refinancing. Moving forward, should we expect that, assuming conditions remain stable, you will reach the $100 million EBITDA threshold that you've mentioned before, and that this could actually occur in 2021? Also, is there any scenario where, if you enter the market, you would increase the size in order to pay off a significant amount of those preferred shares?

Mark Behrman, CEO

I think the conditions are quite favorable for refinancing right now. In May, the call premium will decrease to just over 103%, making refinancing more advantageous and cost-effective for us. We are definitely considering this option and analyzing it further. I believe we can improve on both the rate and terms, which is essential. Regarding the possibility of upsizing, we need to evaluate that carefully. Our main focus is to reduce our leverage rather than increase it. Although the preferred shares are costly and we would like to address that, we want to avoid becoming over-leveraged again. We are exploring different strategies to collaborate with our preferred holder to either repay some of that debt or reduce it, and possibly discuss the terms. In summary, while we might contemplate a slight increase in size, we are cautious about avoiding an over-leveraged situation as the markets improve and our financial performance picks up.

Operator, Operator

Our next question comes from Steve Ferazani with Sidoti. Please proceed with your question.

Steve Ferazani, Analyst

I would like your assessment of the early weeks of the nitric acid contract and how that might influence your pursuit of more cost-plus contracts, especially considering the rise in fertilizer prices. I know you aim to balance spot and contract pricing, so how might recent developments affect your approach to future cost-plus contracts?

Mark Behrman, CEO

Yes, the contract that Cheryl mentioned has started, but that particular customer in the Gulf region has experienced some disruptions with their plants. In these first few weeks, it has been a bit uncertain. We expect to ramp up our sales to that customer once their plant is back online, which they anticipate should be no more than a couple of weeks, hopefully sooner. Regarding industrial and mining versus agricultural sales, we have a collection of assets, including three integrated facilities, similar to what our competitors have discussed. This gives us flexibility within those manufacturing assets. Overall, while we have a positive outlook on the industrial and mining business, we are focused on maximizing our production and profitability. We will continue to adapt based on market pricing, but we appreciate the stability and downside protection that the industrial and mining sector provides us.

Steve Ferazani, Analyst

And then you commented on the improvement in UAN pricing and the slow recovery from that discount. Are you confident now that, that can return to historic levels? Because for a while there, it looked like almost it was becoming a more permanent repricing. What's your take on UAN right now?

Mark Behrman, CEO

Yes. I don't know that I would say I'm confident. I would say that the discount has narrowed some. I don't know that we're going to get back to the full historical relationship, where it trades at a premium. A lot of that has to do with the amount of domestic production that we have in UAN right now, and that, that market based on supply/demand dynamics is fairly balanced. But I do think we can expect that UAN will not trade as much at a discount as it has over the last year and a half or so.

Steve Ferazani, Analyst

Okay. And then just one last quick one on the guidance. I'm assuming that given the pricing improvement and the fact that Q2 is generally higher volume, I'm assuming there's a significant ramp to that guidance? Or would you match it up Q1 to Q2? Essentially, would you expect more of a percentage improvement Q2 versus Q2 compared to Q1 versus Q1?

Cheryl Maguire, CFO

Yes, Steve, that's correct. As we mentioned earlier, we expect a 30% to 35% improvement in EBITDA in the first half of the year. Regarding pricing, I noted that January and February orders were taken back in Q4. Therefore, I believe you'll see most of the upside in Q2.

Operator, Operator

Our next question comes from JP Geygan with Global Value Investment Corporation. Please proceed with your question.

JP Geygan, Analyst

Good morning. I appreciate your time. Your 2021 guidance for AN, nitric acid and other at 410 is about 105,000 tons higher than your 2020 actual production. Assume that's attributable to your nitric acid and L-band contracts, but can you remind us of the economics of those contracts? And then along the same line, in your prepared comments, you mentioned anticipating new contract awards in 2021 in industrial and mining products. Can you elaborate on which products you might expect new contracts in, or maybe where you have additional capacity?

Mark Behrman, CEO

Yes, good morning, JP. You're correct that we are experiencing substantial growth in non-Ag products. A significant part of this growth is due to the new contract award we received, but we've also expanded our customer base and acquired new clients, especially in nitric acid. We see opportunities for growth in nitric acid and AN solution, where we have excess capacity. I believe we've done an excellent job in utilizing most of our production capacity, so the focus now is on optimization and adapting to market pricing. While there are fixed terms and conditions in our non-fertilizer contracts that limit our flexibility, we feel we have enough leeway to respond quickly to price changes.

JP Geygan, Analyst

Will your growth in industrial and mining volumes materially affect your adjusted gross margins for those markets, or what we've seen historically?

Mark Behrman, CEO

No, I don't believe so.

JP Geygan, Analyst

Okay. Turning to your 2021 guidance on cost, your fixed cost guidance has come down a little bit versus 2020. I'm curious if you see additional room for cost savings on either fixed or variable costs?

Cheryl Maguire, CFO

Yes. Good morning, JP. Mark and I have discussed the $5 million in savings from fixed costs that we've been focusing on throughout 2020 and into 2021. You're seeing that reflected in the guidance we've shared. We're also exploring a few other areas where we believe we can optimize costs. However, we are encountering some challenges with rising insurance costs, which is impacting some of the additional improvements we are aiming for. That said, I think there are still further opportunities we are considering.

JP Geygan, Analyst

Your response to Travis' question about your capital structure was informative. I'm curious if I might ask one more question around that. As you consider a recapitalization, will the proceeds be entirely used to retire debt or preferred stock? Or do you see opportunities to borrow additional funds to support growth initiatives, keeping in mind that your goal is to reduce leverage?

Mark Behrman, CEO

Well, I think capital allocation is clearly an important aspect of how we operate the company, right? I mean, for a number of years, I think we've operated at significant leverage, and it would be nice to start to bring that down. So if we had projects that had really great returns, I think we'll look at that all the time. Generally speaking, we've been able to fund those projects, either from additional debt that we took on a couple of years ago to fund a few of those projects. But otherwise, it's really within cash flow because they're not tremendous dollar projects. So I think, first and foremost, though, we'd probably like to look to deleverage. I think that's extremely important for us. But keeping an eye on certainly capital projects that could provide appropriate returns, we absolutely would consider those.

JP Geygan, Analyst

Okay. And finally, as you think about green ammonia, can you provide any sort of additional information about the nature of investments, the dollar amount of investment, or the timeframe over which we might expect that to take shape?

Mark Behrman, CEO

I cannot provide a specific dollar amount at this time. One of our team's key priorities is to engage in and capitalize on what we believe will be a highly profitable and emerging market in green ammonia. By the end of this year, at the latest, I anticipate that we will be ready to discuss our strategy for entering that market, potential locations, and some financial commitments, but we are not prepared to share those details yet.

Operator, Operator

Our next question comes from Brian DiRubbio with Baird. Please proceed with your question.

Brian DiRubbio, Analyst

Good morning. Starting with the insurance cost, I saw that you mentioned the $1.2 million headwind on Slide 8. Should we anticipate that headwind to continue throughout 2021 on a quarterly basis?

Cheryl Maguire, CFO

Yes, we renewed our insurance in November 2020, which led to an increase of approximately $3 million in insurance costs year-over-year. However, we have managed to offset some of these costs in 2021 with the $5 million in savings we've mentioned. Overall, I would say that fixed costs should be lower compared to last year, as reflected in our guidance.

Brian DiRubbio, Analyst

And then how should we think about expenses for the Leidos litigation as you come up to that trial? What range should we think about? I know you take that out of adjusted EBITDA, but I'm just trying to reconcile it to actual cash.

Cheryl Maguire, CFO

Yes. The trial is scheduled for the fall, and we anticipate spending $4 million over the next six months.

Mark Behrman, CEO

Yes, look, I mean we haven't spent anything really this first quarter. You'll see some spend in the latter part of the second quarter, with most of that spend being in the third quarter.

Brian DiRubbio, Analyst

Got it. Understood. And then just remind me; with Pryor getting pushed off to 2022, you're going to have then El Dorado and Pryor in turnarounds next year. Is that correct?

Mark Behrman, CEO

I think that's on the drawing board right now. I think we'll sit and discuss whether it makes sense. Or can we possibly move El Dorado to the next year so that we actually would be on a schedule one every year as opposed to doubling up in the year.

Brian DiRubbio, Analyst

Okay. And then just finally, I'm going through the map of a potential refinance situation. Say, when you think about the coal pricing fees, you probably have to borrow at least $460 million, maybe $465 million. What kind of coupon are you guys looking for in order to make this attractive? Because even though the 8% coupon, given the higher principal amount, it would only save you about $5 million a year?

Mark Behrman, CEO

I no longer do that for a living. We have had numerous discussions with various investment banks regarding potential terms for issuance, and we are definitely interested in monitoring the markets and current pricing. There could be savings of around 200 to 250 basis points. As we approach this, there isn't a specific date or deadline for us to finalize anything. We will position ourselves to launch a refinancing if the right opportunity arises and it makes sense for us.

Operator, Operator

We have reached the end of the question-and-answer session. I would now like to turn the call back over to Mark Behrman for closing comments.

Mark Behrman, CEO

Well, I want to thank everyone for their interest in LSB Industries. We appreciate all the questions. And if anyone has any further questions, feel free to reach out to us. Thank you so much.

Operator, Operator

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.