LSB Industries' Brochure

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Both of LSB’s

core businesses are leaders in their respective product lines with

dominant market share and technological leadership

History of top and bottom line growth –

strong EBITDA growth

Climate Control Business:

strong margins in core products

generating exceptional growth and backlogs

Chemical Business:

improving sales and margins

shift to industrial markets and non-seasonal cost-plus sales agreements

field of competitors narrowing

Premier customer lists and recurring business

Improving debt-to-equity ratio and net worth

Strong demand projected in LSB’s key markets

Significant positive cash flow from operations enhanced by NOLs

Company Highlights

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Climate

Control

45%

Engineered

Products

Chemical

53%

Two Core Businesses:

Climate Control Business

•

Technology and market share leader in

certain “niches”

of the heating

ventilation

and air conditioning (“HVAC”) industry

Chemical Business

•

Leading merchant marketer of nitric acid

in the U.S.

and producer of chemical

products

for the industrial acids, mining and agricultural

markets

Plus….Engineered Products and Services

•

Precision machine tools

and turn-key industrial

and chemical facilities

LSB Industries, Inc. is headquartered in Oklahoma City with six HVAC manufacturing

facilities in Oklahoma City, chemical plants in Texas, Arkansas and Alabama, and

engineered products distribution center in Oklahoma City. Approximately 1,700 total

employees.

LSB Industries Overview

2006 Sales

By Business Segment

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

283.6

317.0

364.0

397.1

492.0

111.9

147.4

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

2002

2003

2004

2005

2006

3 mo

Company Overview -

Background

History of Major Events

Year

Event

1961

Company Founded by Jack Golsen

1969

IPO

1970’s

Developed high-rise hydronic fan coils

1980’s

Entered water source heat pump (WSHP) market

Developed high-rise WSHP’s

Completed commercial WSHP product line

1984

Acquired Chemical Business from Monsanto

1985

Acquired ClimateMaster and merged with LSB’s

WSHP business

1990’s

Developed residential GEOTHERMAL WSHP product line

1999

Entered Multi-year agreement with BAYER CORP to

build, own, operate Baytown nitric acid plant

2000

Engineered and launched CUSTOM AIR HANDLER

business

Acquired Cherokee, Alabama chemical plant

2001

Entered Multi-year supply agreement with ORICA

2003

Introduced 3-tier commercial WSHP product line

Introduced modular chillers

2004

Introduced ultra-high efficiency TRANQUILITY 27™

geothermal WSHP’s

2006

Early payment of balance of $105.0 million

Senior Notes (due in 2007)

2006-07

Converted $17.0 million of debentures to common stock

2006-07 Exchanged

410,355 shares Class C Preferred stock (and

$9.7 million dividends in arrears) for common stock

Consistent Revenue Growth

($ in Millions)

•

2006 sales = $492 million

Up 24% from 2005

•

2007 first 3 mos. = $147.4 million

Up 32% from first 3 mos. of 2006

2006

2007

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Strong growth in both revenues and income

with operating leverage:

Calendar Year Ended 12-31-06

•

Sales = $221.2 million, + 41% over 2005

•

Operating Income = $25.4 million, + 80% over 2005

•

EBITDA = $28.1 million, +69% over 2005

Three Months Ended 3-31-07

•

Sales = $71.3 million, + 51% over 2006

•

Operating Income = $8.5 mil, + 53% over 2006

•

EBITDA = $9.2 million, + 48% over 2006

Backlog of $70.7 million at 3/31/07.

Strong gross margins in core products (approximately 30% in 2006)

Geothermal

heat

pumps,

water

source

heat

pumps,

and

hydronic

fan

coils

Dominant market share positions in core products

–

considered to be the

“leading specialist”

in these products

Huge installed base

(over 3 million units) –

hundreds of prestige buildings and

customer base including the elite of construction and real estate development

Leader in geothermal technology

which is a rapidly growing, ultra-high efficiency,

environmentally responsible form of renewable energy

Serves diversified markets with complementary cyclicality –

excellent

outlook for those markets, including both new construction and retrofit

Business Overview –

Climate Control

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

HVAC Industry has enjoyed continuous growth

•

Growth from $7.8 billion in 1994 to $12.1 billion in 2004

•

Estimated to grow to approximately $16.4 billion by 2014

•

Source: Freedonia Group, Inc. 2005 HVAC Industry Study

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Multi-Family

Education

Offices

Healthcare

Manufacturing

Lodging

Industry

Trends

Business Overview –

Climate Control

Construction Market Building Contract Activity

(Dollars in Billions)

Source: McGraw-Hill Construction Market Forecasting Service (1st Quarter 2007 Edition)

These construction sectors comprised approximately 72%

of Climate Control Business sales during 2006.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

ClimateMaster, Inc.

Geothermal and Water Source Heat Pumps

2006 Sales = $134 million, up 58% over 2005, 61% of CCB Sales

Leading Market Share

What are water source heat pumps?

Highly efficient compressorized cooling and

heating units which are connected to a central

system with cooling tower and small boiler

They have the ability to move heat from zone to

zone, reducing overall energy usage and costs

Used in commercial and residential buildings

Market share leader with 38%

(1)

•

Recognized as the industry leader

•

Broadest product offering in the industry

Developed high-rise water source heat pump

Developed ultra-high efficiency, award

winning TRANQUILITY 27™

GEOTHERMAL

WSHP

Extensive distribution network

Requirements contract to private brand for

Carrier™

FHP

14%

LSB

38%

Trane

20%

McQuay

11%

Others

Mammoth

WFI

(1) LSB share According to Air Conditioning and

Refrigeration Institute as of December 2006.

Market shares of competitors are estimates.

Business Overview –

Climate Control

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

A Geothermal system is an

ALTERNATIVE

FORM OF RENEWABLE ENERGY.

The Earth absorbs approximately 50% of all solar

energy and remains at nearly a constant

temperature (50°-70°F) year round.

A ClimateMaster geothermal system uses an

underground sealed loop filled with water and a

geothermal heat pump to exchange energy

between the house or building and the earth.

In winter, water in the loop absorbs energy from

the earth and carries it to the geothermal heat

pump where it is converted (compressed) to a

higher temperature and sent as warm air into the

house or building.

In summer the system reverses, transferring heat

from the house or building into the earth.

Geothermal systems work year round in both

individual residences and large commercial

buildings, providing both conditioned air and

potable hot water.

Business Overview –

Climate Control

What is a Geothermal System and How Does it Work?

Geothermal Loop Installation

Typical

Residential

Geothermal

System

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Geothermal Benefits

Commercial

Energy Cost Reduction –

Geothermal is the

most energy efficient HVAC technology available

–

60%

more than conventional systems.

Geothermal is considered a form of alternative

renewable energy

ClimateMaster’s Ultra-high efficiency

Tranquility 27™

products use non-ozone

depleting EarthPure™

refrigerants

“Free”

Domestic Hot Water -

Provided as a bi-

product of a geothermal system

Noise free operation –

No noisy condensing unit.

Extremely long lived as compared to

conventional systems (50 year loops)

Environmentally responsible Geothermal

Heat Pumps transfer energy to or from the

earth, minimizing both energy usage and

greenhouse gas emissions.

Business Overview –

Climate Control

Residential

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Overview –

Climate Control

Geothermal

Economics

–

Geothermal vs. Conventional Systems

(3 Ton system –

1800 sq. ft. house)

Geothermal as compared to a Basic Conventional AC & Gas Furnace System:

•

$1,308 annual cost operating (energy) savings with a 4.3 year simple payback

•

$900

annual

positive

cash

flow

after

financing

cost

–

pre tax

•

$34,900 system lifetime savings (25 years)

* Life cycle costs for conventional systems include operating costs plus

replacement costs for condensing units and coils.

Geothermal

Basic

Hi Efficiency

Basic

Hi Efficiency

System

Conventional AC

Conventional

Vertical Loops

Gas Furn

System

Gas Furn

System

HP System

27 EER -

R410A

13 SEER -

R22

16 SEER -

R410A

13 SEER -

R22

16 SEER -

R410A

82% AFUE

93% AFUE

Installed Cost:

All equipment except loops

10,450

9,550

12,350

9,700

11,850

Loops and pump

4,700

Total Installed Costs

15,150

9,550

12,350

9,700

11,850

Geothermal Initial Cost Premium

5,600

2,800

5,450

3,300

Annual Operating Costs

668

1,976

1,772

1,396

1,273

Geothermal Annual Savings

1,308

1,104

728

605

Simple Payback -

Years

4.3

2.5

7.5

5.5

Life Cycle Cost (25 Years) *

16,700

51,600

48,100

38,550

37,625

Geothermal Lifetime Savings

34,900

31,400

21,850

20,925

Annual Cash Flow:

Loan pmt for GEO premium (6% -

30 Yr)

(408)

(204)

(396)

(240)

Annual Energy Cost Savings

1,308

1,104

728

605

Cash Flow Savings -

Pretax

900

332

365

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Overview –

Climate Control

10,000

20,000

30,000

40,000

50,000

60,000

70,000

The Geothermal Market –

A Growth Opportunity

Huge

Market

Potential

Over

7 million

units* per year

U.S. residential HVAC

market.

High Energy Costs

–

Long-term high

energy costs will continue to drive

geothermal demand.

Environmental Concerns

Geothermal

systems are “GREEN”

–

there is a market

trend to use environmentally responsible

products.

Diverse Applications

Geothermal heat

pumps are sold into most commercial and

residential construction, renovation and

replacement markets, in all climates.

Government Initiatives

U.S. Energy

Act and some state incentives promote

the use of energy efficient products.

*Source: Air Conditioning and Refrigeration Institute reported shipments of

central A/C units, air-source heat pumps, and geothermal heat pumps through

December 2006. Market share of LSB per A.R.I, December 2006.

Competitors’

market shares are estimates.

Industry

Shipments

(units)

WFI

32%

LSB

36%

FHP

18%

Trane

Others

Market Share*

Market Drivers

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

International Environmental Corp.

Hydronic Fan Coils

2006 Sales = $61 million, up 11% over 2005, 27% of CCB Sales.

Leading Market Share

What are fan coils?

•

Small

air

handling

units

including

cooling/heating, coils, blowers, valves and

controls

Typically used in large commercial buildings

Connected to a central system with a chiller and

boiler

Market share leader with 40%

(1)

•

Widely considered the leader within the HVAC

industry

•

Superior customer service

•

Broadest product offerings in the hydronic fan coil

market

Originated high-rise fan coils

•

Became the industry standard

Extensive distribution network

Requirements contract to private brand for

Carrier™

Trane

25%

First Co.

McQuay

Titus

ETI.

12%

LSB

40%

Others

Business Overview –

Climate Control

(1) LSB share according to Air Conditioning and

Refrigeration Institute as of December 2006.

Market shares of competitors are estimates.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Overview –

Climate Control

LSB pioneered Hi-Rise systems

Ours have become the standard of the

HVAC industry

Premier Commercial Fan Coil and

Water Source Heat Pump

Products

e.g. over 70,000 units sold in Las Vegas

Integrated System with Easy

Installation –

Reduces Total Cost

Built-in Pipe System, Ducts & Controls

Cabinet Becomes Part of Structure

Eliminates several jobsite trades and

reduces overall installed cost

Ease of Maintenance

Easy Access to Filter and All Internal

Components

WSHP’s have slide-out chassis

Extremely Quiet

Multiple Configurations

Worldwide Leader for Hi-Rise Fan Coils and WSHP’s

Typical hotel room with high-rise

unit installed behind wall in corner.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Strategy –

Climate Control

Growth Opportunities

Geothermal Water Source Heat Pumps

•

Huge residential market potential

•

Ultra-high energy efficiency and environmentally responsible technology

•

Stimulated by long-term high energy prices and environmental concerns

Commercial Water Source Heat Pumps

•

Strong commercial construction outlook

•

Energy efficient technology

Custom Air Handlers

•

Recent entry in $500 million market –

strong growth potential

•

Excellent product offering

Trison

Construction

–

Large Scale Geothermal Installations

•

Leader in military privatization projects

•

Growing backlog and huge potential project list

Chillers

•

Recent entry -

potential synergy with fan coils

•

Planning to add air-cooled products to expand offering

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Key Cost Reduction Initiatives:

Tube-in-fin

Air

Coils

for

ClimateMaster

(heat pumps)

Bringing production in-house during first half of 2007

Doubling production capacity

Tube-in-fin

Air

Coils

for

ClimateCraft

(air handlers)

Bring production in-house

Reduced

Motor

Costs

for

International

Environmental

(fan coils)

Phasing-in during first half of 2007

Business Strategy –

Climate Control

Manufacturing Expansion Initiatives:

ClimateMaster Expansion and Reconfiguration

New 46,000 sq. ft. building, assembly lines, fabrication equipment,

automated testing systems

New 100,000 sq. ft. distribution center

Phasing in during first half of 2007

ClimateCraft

Capacity

Increase

Doubled assembly floor space during 2006, added fabrication equipment

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Improving financial performance with positive cash flow

Calendar Year Ended 12-31-06

•

Sales = $260.6 million, +11.6% over 2005

•

Operating Income = $10.2 million, +32.4% over 2005

•

EBITDA = $19.3 million, +15.9% over 2005

Three Months Ended 3-31-07

•

Sales = $73.7 million, + 18% over 2006

•

Operating Income = $7.7 million, + 426% over 2006

•

EBITDA = $ 10.1 million, + 255% over 2006

65% of production sold pursuant to formula “cost-plus”

sales

agreements to major industrial and chemical companies

35% of production to agricultural market, especially vibrant in Q1 2007

U.S. leading merchant marketer of blended and concentrated

nitric acids

Major supplier of industrial grade ammonium nitrate

and nitrate

solutions to the surface mining industry

Industry consolidation with improved supply vs. demand relationship

LSB is one of two remaining U.S. producers of high density agricultural grade

ammonium nitrate

Business Overview –

Chemical

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Overview –

Chemical

Concentrated Nitric Acid

Production of specialty fibers, nitrocellulose, gaskets, crop chemicals, mining

Aqueous solution up to 99% concentration

products, metal treatment, and nitric acid commercial blends.

Nitric Acid Commercial Blends

Treatment of metal surfaces for semi-conductor industry, manufacture of nylon and

Aqueous solution up to 89% concentration

polyurethane

intermediates,

potassium

nitrate and other nitrate chemical

compounds, and manufacture of ammonium nitrate.

Sulfuric Acid

Pulp and Paper manufacturing, Alum, water treatment, metals processing,

98% and 93% concentrations, standard and low-iron grades

Vanadium processing and other misc. uses.

INDUSTRIAL PRODUCTS:

USES:

Mixed Acids

Diesel Fuel additives, arsenal, herbicides and pharmaceutical grade nitroglycerine.

Blends of concentrated nitric acid and sulfuric acid/oleum.

Fertilizer Blends and Special Chemicals

Special customer needs, soil testing and field application of products for farmers

Custom blends of diammonium phosphate, potash,

and agri-businesses.

sulfates, and micronutrients with ammonium nitrate

Specialty E2 High Density Ammonium Nitrate

Horticultural greenhouse chemicals, printer inks, propellants, conductivity

High purity solid pellets with excellent water solubility

enhancement

and

medical cold packs.

Low Density Ammonium Nitrate Prills (solids)

Blasting, surface mining, quarries and construction.

Solid pellets with good porosity and flowability

Anhydrous Ammonia

Power plant scrubber systems, water treatment, refrigerants, metals processing,

Commercial grade and high purity refrigeration/

and a wide variety of other industrial applications.

metallurgical grade ammonia

AGROCHEMICAL PRODUCTS USES:

E2 Ammonium Nitrate Prill (Solid)

Crops,

pastures,

forage

areas,

the

primary

nitrogen

component

in nitrogen/

High Nitrogen Content Fertilizer

phosphorus/potassium (NPK) fertilizer blends.

(UAN) Urea Ammonium Nitrate Solutions

High nitrogen content fertilizer-corn and other crops with high nitrogen demand.

Manufactured blends of urea and ammonium nitrate

Uses requiring longer nitrogen release-cotton, small grains, vegetables, and

solutions

orchards.

Ammonium Nitrate Solutions

Specialty emulsions for mining applications, and other misc. uses.

54% and 83% concentrations

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

El Dorado Nitrogen

•

Located

Bayer

MaterialScience

complex in Baytown, TX

•

465,000 ton/year nitric acid plant

•

Long term contract with Bayer through mid-2009 with

renewal provisions

•

Primary feedstock is anhydrous ammonia

El Dorado Chemical

•

Located on 100 acres of a 1,300 acre tract in El Dorado,

Arkansas

•

3 regular nitric acid plants, 1 concentrated nitric acid plant, 3

ammonium nitrate prilling plants, 1 sulfuric acid plant and 1

mixed acid plant

•

Primary feedstock is anhydrous ammonia

•

Located adjacent to an ammonia pipeline with delivery of

imported ammonia from the U.S. Gulf Coast

Cherokee Nitrogen

•

Located on 200 acres of a 1,500 acre tract, adjacent to the

Tennessee River in Cherokee, AL

•

ammonia

plant

–

converts natural gas to anhydrous

ammonia, 2 nitric acid plants, 1 urea plant and 1 ammonium

nitrate prilling plant

•

Primary feedstock is natural gas

Facilities

Business Overview –

Chemical

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Overview -

Chemical

Coal Production Projections

300

350

400

450

500

550

600

650

700

2002

2003

2004

2005

2006

2007

2008

2009

2010

Appalachia

West

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

2004

2005

2006

2007

2008

2009

2010

US Pulp & Paperboard Capacity

Industry

Trends –

Industrial & Agrochemicals

Source: Chemical Marketing Reporter

Source: Dept. Of Energy –

Energy

Information Agency

Source: American Forest & Paper Assoc.

Paper Products

–

Sulfuric acid is used for paper bleaching

and water treatment.

Coal

–

Ammonia Nitrate

(AN) and AN solution used for surface

mining. Ammonia used for NOX abatement at coal-fired power

plants.

Polyurethane

–

Baytown provides nitric acid used to produce

polyurethane intermediates. TDI is used for flexible foams. MDI

is used for construction and auto industries.

Agricultural Market Factors

•

Ethanol Industry demand growing

•

Long-term population growth & dietary improvements

•

Favorable global grain supply/demand balance

•

Seed technology improvements

•

Reduction in arable land requires higher yield/acre

•

Strong US farm commodity prices

•

FTC regulatory import protection for AN

Agriculture

–

Prilled

Ammonia Nitrate

(AN) and Urea

Ammonium Nitrate (UAN) are used to fertilize food crops and

pastureland.

500

1000

1500

2000

2500

3000

2002

2003

2004

2005

2006

2007

2008

2009

2010

Polyurethane Market Demand

TDI/DNT

MDI/aniline

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Business Strategy -

Chemical

Cost Reduction Initiatives:

Improved

Energy

Management

Systems

(installed

2006)

Upgraded

Preventive

Predictive

Maintenance

Program

(2006

2007 implementation)

Process Yield Improvements (ongoing)

Increased Sales and Capacity Initiatives:

Conversion of Emissions to Marketable Products

(2006 -

2008 implementation)

Process

De-bottlenecking

(2007

implementation)

Plant

Reliability

Improvements

–

increased

time

(ongoing)

Expansion

Baytown

Capacity

(installed

2006)

Expand

Sales

Into

New

Market

Areas

(planned

for

2007

2008)

New

Proprietary

Nitrogen

Products

(under

development)

Profit Improvement Opportunities

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Improving Financial Performance

($ in Millions,

Years Ended December 31,

Three months ended March 31)

Financial

Overview

Sales

EBITDA

Net Income

Operating Income

9.1

8.0

3.2

15.0

27.6

5.8

13.5

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2002

2003

2004

2005

2006

2007

20.9

20.2

23.7

28.8

41.0

8.7

16.9

2002

2003

2004

2005

2006

2007

0.1

2.9

1.4

5.1

15.9

3.0

10.8

2002

2003

2004

2005

2006

2007

283.6

317.0

364.0

397.1

492.0

111.9

147.4

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

2002

2003

2004

2005

2006

2007

Three month results ended March 31, 2006 & 2007 are unaudited.

Three Months

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Financial Overview

Statement of Operations

($ in millions)

Fiscal Year Ended December 31,

Three Months Ended

March 31, (Note)

2002

2003

2004

2005

2006

2007

Revenue

$283.6

$317.0

$364.0

$399.1

$492.0 $111.9

$147.4

Operating Income

9.1

8.0

3.2

15.0

27.6 5.8 13.5

Net Income

0.1

2.9

1.4

5.1

15.9 3.0 10.8

EBITDA

$ 20.9

$ 20.2

$ 23.7

$ 28.8

$ 41.0 $ 8.7 $ 16.9

Note: The results of operations for the three months ended March 31, 2006 and 2007 are unaudited

. The FASB issued FSP No. AUG AIR-1 which

mandates that, effective January 1, 2007, we adopt a

change in our method of accounting for Major Maintenance projects from the accrue in

advance method, which we have consistently used in our Chemical Business, to a preferred method. The adoption of the provisions of the

FSP is to be considered a change in accounting principle with retrospective application. The retrospective application of the FSB resulted in

increasing the operating income, net income and EBITDA $ 422,000 for the three months ended March 31, 2006.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Financial Overview

Summary Operating Results by Business Segment

($ in millions)

Calendar Year

Three Months

Ended 12/31

Ended 3/31

2005

2006

2007

Climate Control Business

Sales

156.9

221.2

47.4

71.3

Gross Profit

48.1

65.5

14.8

20.7

Gross Profit %

30.7%

29.6%

31.2%

29.0%

Segment Operating Income

14.1

25.4

5.6

8.5

EBITDA

16.6

28.1

6.2

9.2

Chemical Business

Sales

233.4

260.7

62.5

73.7

Gross Profit

16.4

22.4

4.7

10.5

Gross Profit %

7.0%

8.6%

7.5%

14.2%

Segment Operating Income

7.7

10.2

1.8

7.7

EBITDA

16.7

19.3

3.9

10.1

(unaudited)

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Financial Overview

EBITDA Reconciliation

($ in millions)

Notes: (1) Provision for losses related to MultiClima

option; $2.1 million.

(2) -a Cumulative effect of change in accounting related to MultiClima, $536,000.

(2) -b Provision for impairment of certain assets; $737,000.

Calendar Years Ended December 31,

Three Months

Ended March 31

2002

2003

2004

2005

2006

2007

Net income

0.1

2.9

1.4

5.1

15.9

3.0

10.8

Interest expense

8.2

6.1

7.4

11.4

11.9

2.9

2.6

Income taxes

0.1

0.9

0.3

EBIT

8.4

9.0

8.8

16.6

28.7

5.9

13.7

Depreciation and amortization

9.9

10.7

11.3

11.7

2.7

3.1

Discontinued operations

3.5

2.1

(1)

0.6

0.3

0.1

Non-cash provisions

(0.9)

0.5

1.2

(2)

0.2

0.3

Other

0.9

0.1

EBITDA

20.9

20.2

23.7

28.8

41.0

8.7

16.9

(Unaudited)

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Financial Overview

EBITDA Reconciliation –

Segment Information

($ in millions)

Three months ended

2005

2006

2007

Climate Control Business

Operating income

14.1

25.4

5.6

8.5

Plus:

Non-operating income

Equity in earnings of affiliate

0.7

0.8

0.2

Depreciation and amortization

1.8

1.9

0.5

2.5

2.7

0.7

EBITDA

16.6

28.1

6.2

9.2

Chemical Business

Operating income

7.7

10.2

1.8

7.7

Plus:

Non-operating income

0.4

0.3

Depreciation and amortization

8.6

8.8

2.1

2.3

9.0

9.1

2.1

2.3

EBITDA

16.7

19.3

3.9

10.0

Year ended

December 31,

March 31,

Note: Results for three months ended March 31, 2006 and 2007 are unaudited.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Both of LSB’s

core businesses are leaders in their respective industries with

dominant market share and technological leadership

History

top

and

bottom

line

growth

–

strong EBITDA growth

Climate Control Business:

strong margins in core products

generating exceptional growth and backlogs

Chemical Business:

improving sales and margins

shift to industrial markets and non-seasonal cost-plus sales agreements

field of competitors narrowing

Premier customer lists and recurring business

Improving debt-to-equity ratio and net worth

Strong demand projected in LSB’s key markets

Significant positive cash flow from operations enhanced by NOLs

Company Highlights

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

Forward Looking Statements

Certain

statements

contained

within

this

presentation

may

deemed

“Forward-Looking

Statements”

within

the

meaning

Section

27A

the

Securities

Act

1933,

amended,

and

Section

21E of the Securities Exchange Act of 1934, as amended. All statements in this

presentation other than statements of historical fact are Forward-Looking Statements that are subject to known and unknown risks,

uncertainties

and

other

factors

which

could

cause

actual

results

and performance of LSB to differ materially from such statements. The

words “expect”, “project”, “will”, and similar expressions identify Forward-Looking Statements. Forward-Looking Statements contained in

the presentation relate to, among other things,

•

strong demand projected in LSB’s

key markets,

•

the Chemical Business’s key strategies,

•

expectations for long-term profitable growth,

•

the strategy to convert to cost-plus supply contracts,

•

the ability to use our net operating losses,

•

growth opportunities in the Chemical Business,

•

excellent outlook for the Climate Control Business’s

•

profit improvement opportunities for the Chemical

diversified markets,

Business,

•

rapid growth in geothermal technology,

•

dominant market share for certain LSB products,

•

estimated growth of the HVAC industry,

•

leader in geothermal technology,

•

the market potential for geothermal and market drivers

•

markets have complementary cyclicalities,

for the geothermal market,

•

expectations regarding Climate Control life cycle costs,

•

the key strategies of our Climate Control Business,

•

growing backlog of orders for Climate Control products,

•

growth opportunities for the Climate Control Business,

•

potential synergy between air handlers and fan coils,

•

key cost reduction initiatives in both businesses,

•

plan to add air-cooled products to expand offering, and

•

industry trends affecting the Chemical Business,

•

improved supply-demand relationship in Chemical

Business.

While LSB believes the expectations reflected in such Forward-Looking Statements are reasonable, LSB can give no assurance such

expectations will prove to have been correct. There are a variety of factors which could cause future outcomes to differ materially from

those

described

this

presentation,

including,

but

not

limited

to, a decline in general economic conditions, increased competitive

pressures, material increases in equipment, maintenance, operating or labor costs not presently anticipated by LSB, the loss of any

significant customer or supplier, changes in operating strategy or development plans, an inability to fund the working capital and

expansion of our businesses, inability to obtain necessary raw materials, weather conditions, and other factors described under “Special

Note

Regarding

Forward-Looking

Statements”

contained

LSB’s

2006

Form 10-K and LSB’s

Form 10-Q for the quarter ended 3-31-07.

Given these uncertainties, all parties are cautioned not to place undue reliance on such Forward-Looking Statements. We disclaim any

obligation to update any such factors or to publicly announce the result of any revisions to any of the Forward-Looking Statements

contained herein to reflect future events or developments.

Building Blocks for Better Living

A Leading Manufacturer of Indoor Climate Control Equipment and Chemical Products

ALL INQUIRIES AND REQUESTS FOR INFORMATION SHOULD BE DIRECTED TO

THE CONTACTS BELOW :

Mark Behrman

Managing Director

Head of Investment Banking

Tel: 12.209.7677

mbehrman@jgiordano.com

IMPORTANT NOTICES TO RECIPIENTS OF THE SUMMARY INFORMATION

THIS SUMMARY INFORMATION RELATES TO THE POTENTIAL PRIVATE OFFERING AND SALE OF SUBORDINATED CONVERTIBLE

DEBENTURES

(THE

“SECURITIES”)

LSB

INDUSTRIES,

INC.

(THE

“COMPANY”

“LSB”).

GIORDANO SECURITIES GROUP

(“J

GIORDANO”) IS ADVISING LSB IN RELATION TO THIS PROPOSED OFFERING. THIS SUMMARY INFORMATION IS BEING PROVIDED

TO YOU PURSUANT TO THE NON-DISCLOSURE PREVIOUSLY EXECUTED BY YOU.

THIS SUMMARY INFORMATION IS BEING SUBMITTED CONFIDENTIALLY ONLY TO A LIMITED NUMBER OF QUALIFIED

INSTITUTIONAL

BUYERS

THAT

THEY

CAN

CONSIDER

WHETHER

THEY

WISH

DISCUSS A POSSIBLE PURCHASE OF THE

SECURITIES. ITS USE HAS NOT BEEN AUTHORIZED FOR ANY OTHER PURPOSE. THIS SUMMARY INFORMATION DOES NOT CONTAIN

ALL INFORMATION WHICH AN INVESTOR IN THE SECURITIES SHOULD KNOW BEFORE MAKING AN INVESTMENT AND SHOULD NOT

BE RELIED ON AS A BASIS FOR MAKING AN INVESTMENT DECISION TO PURCHASE THE SECURITIES OR ANY OTHER SECURITIES.

THIS

SUMMARY

INFORMATION

DOES

NOT

CONSTITUTE

OFFER

SELL

SOLICITATION OF AN OFFER TO BUY ANY

SECURITIES. ANY SUCH OFFER WILL ONLY BE MADE PURSUANT TO A CONFIDENTIAL OFFERING MEMORANDUM WHICH DESCRIBES

THE COMPANY, THE TERMS OF THE OFFERING, SECURITIES BEING OFFERED

AND THE RISKS OF INVESTING IN THE COMPANY AND

THE SECURITIES.

THIS

SUMMARY

INFORMATION

MAY

NOT

COPIED

REPRODUCED

WHOLE OR IN PART. IT MAY BE FURNISHED AND ITS

CONTENTS

DISCLOSED

ONLY

THE

PERSONS

ENTITIES

WHOM

PROVIDED. BY ACCEPTING DELIVERY OF THIS

SUMMARY INFORMATION, YOU AGREE TO THESE RESTRICTIONS. YOU ALSO AGREE TO RETURN PROMPTLY TO J GIORDANO THIS

SUMMARY INFORMATION AND ANY OTHER DOCUMENTS OR INFORMATION FURNISHED IF YOU FOR ANY REASON ELECT NOT TO

CONSIDER A POSSIBLE PURCHASE OF THE SECURITIES. IF YOU DETERMINE TO CONSIDER A PURCHASE OF THE SECURITIES, YOU

WILL BE PROVIDED WITH A COPY OF A CONFIDENTIAL OFFERING MEMORANDUM DESCRIBING THE OFFERING AND OTHER

INFORMATION ABOUT THE COMPANY.

IN DECIDING WHETHER TO DISCUSS A POSSIBLE PURCHASE OF THE SECURITIES, YOU SHOULD RELY ONLY ON THE INFORMATION

CONTAINED IN THE COMPANY’S PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) AND ANY

OFFERING MEMORANDUM THAT MAY BE FURNISHED TO YOU.

Gregg Woodie

Vice President

Investment Banking

Tel: 212.209.7691

gwoodie@jgiordano.com

Justin Figari

Analyst

Investment Banking

Tel: 212.209.7680

jfigari@jgiordano.com