Strong Operational Performance in Strengthening Global Price
Environment
Second Highest Quarterly Sales Volume in Company's History
$2.0 Billion Cash on Balance Sheet
DEERFIELD, Ill.--(BUSINESS WIRE)--
CF Industries Holdings, Inc. (NYSE: CF), the global leader in nitrogen
products manufacturing and distribution, today announced results for its
third quarter ended September 30, 2017.
Highlights
-
Net loss of $87 million, or $0.37 per diluted share; adjusted net loss(1)
of $90 million or $0.39 per diluted share(1)
-
EBITDA(2) of $139 million; adjusted EBITDA(2) of
$134 million
-
Highest sales volume for a third quarter in company's history
- $2.0 billion of cash on balance sheet
-
Company to redeem Senior Notes due May 2018 on December 1, 2017
Overview of Results
CF Industries Holdings, Inc., today announced third quarter 2017 net
loss attributable to common stockholders of $87 million, or $0.37 per
diluted share, and adjusted net loss of $90 million, or $0.39 per
diluted share. Third quarter 2017 EBITDA was $139 million, and adjusted
EBITDA was $134 million. These results compare to third quarter 2016 net
loss attributable to common stockholders of $30 million, or $0.13 per
diluted share; adjusted net earnings for the third quarter 2016 of $30
million, or $0.13 per diluted share; EBITDA loss of $6 million; and
adjusted EBITDA of $83 million. Third quarter 2017 results include a
realized loss on natural gas hedges of $10 million, compared to a
realized loss on natural gas hedges of $11 million for the third quarter
of 2016.
“The CF team delivered strong results in what is typically the quarter
with the lowest demand in North America," said Tony Will, president and
chief executive officer, CF Industries Holdings, Inc. "We ran our plants
safely and at high utilization rates, leveraged our North American
distribution platform and increased our global customer base. Together,
these enabled our company to benefit from the strengthening global price
environment that developed during the third quarter."
_________________________________________________________________________
| (1) |
|
See reconciliations of adjusted net loss and adjusted net loss per
diluted share to the most directly comparable GAAP measures in the
tables accompanying this release.
|
| (2) | |
EBITDA is defined as net earnings (loss) attributable to common
stockholders plus interest expense-net, income taxes, and
depreciation and amortization. See reconciliations of EBITDA and
adjusted EBITDA to the most directly comparable GAAP measures in the
tables accompanying this release.
|
| |
|
Manufacturing Operations
CF Industries' manufacturing network operated efficiently and continued
its focus on safety during the third quarter of 2017. As of
September 30, 2017, CF Industries' 12-month rolling average recordable
incident rate was 0.85 incidents per 200,000 work hours, well below
industry averages.
Gross ammonia production during the third quarter of 2017 was
2.5 million tons, the third highest volume for a quarter in the
company's history.
Sales Overview
Net sales in the third quarter of 2017 increased to $870 million from
$680 million in the same period last year as higher sales volumes more
than offset lower average selling prices across most segments.
Sales volumes for the quarter were significantly higher compared to the
third quarter of 2016 as the company's production increased at the
Donaldsonville and Port Neal Nitrogen Complexes.
Average selling prices were lower year-over-year across most segments
due to increased global nitrogen supply. Prices in North America traded
at a discount to international parity due to seasonal low demand during
the quarter and continued buyer reluctance in the region to take
substantial positions. Additionally, CF's sales in the quarter compared
to the prior year included a higher proportion of sales originating near
the Gulf of Mexico, including a substantial level of ammonia, urea and
urea ammonium nitrate (UAN) export sales.
The company's average selling price for ammonia was $235 per ton in the
third quarter of 2017 compared to $287 per ton in the third quarter of
2016. The average selling price for urea was $195 per ton in the third
quarter of 2017 compared to $203 per ton in the third quarter of 2016,
and the average selling price for UAN was $144 per ton in the third
quarter of 2017 compared to $157 per ton in the third quarter of 2016.
Cost of sales per ton decreased 5 percent in the third quarter of 2017
compared to the third quarter of 2016, primarily driven by production
efficiencies due to increased volume, capacity expansion costs in the
third quarter of 2016, and an unrealized net mark-to-market gain on
natural gas derivatives in the third quarter of 2017 compared to a loss
in the third quarter of 2016, partially offset by higher realized
natural gas costs and higher depreciation and amortization.
Cost of sales per ton increased 11 percent for the first nine months of
2017 compared to the first nine months of 2016, due to the impact of an
unrealized net mark-to-market loss on natural gas derivatives in the
first nine months of 2017 compared to a gain in the first nine months of
2016, higher realized natural gas costs and increased depreciation and
amortization.
Controllable cost of sales, defined as non-gas cash costs (maintenance,
labor, electricity, other raw materials, transportation and
distribution, and other plant costs), which excludes the impact of
natural gas, derivatives and depreciation and amortization, decreased 13
percent per ton,(3) in the third quarter of 2017 compared to
2016, and 16 percent per ton,(3) in the first nine months of
2017, as a result of the company's targeted cost reduction initiatives
and production cost efficiencies due to increased volume.
In the third quarter of 2017, the average cost of natural gas reflected
in cost of sales for the company was $3.35 per MMBtu, which includes a
realized loss of $0.13 per MMBtu on natural gas hedges totaling $10
million. This compares to the average cost of natural gas in cost of
sales of $2.87 per MMBtu for the third quarter of 2016, which included a
realized loss of $0.17 per MMBtu on natural gas hedges totaling $11
million. During the third quarter of 2017, the average price of natural
gas at Henry Hub in North America was $2.93 per MMBtu, and the average
price of natural gas at the National Balancing Point in the United
Kingdom was $5.46 per MMBtu.
Additionally, the company recorded an unrealized net mark-to-market gain
on natural gas derivatives of $7 million in the third quarter of 2017
compared to an unrealized net mark-to-market loss on natural gas
derivatives of $21 million in the third quarter of 2016. The company did
not enter into any additional natural gas hedges in the third quarter of
2017.
_________________________________________________________________________
| (3) |
|
See reconciliation of controllable cost of sales and controllable
cost of sales per ton to the most directly comparable GAAP measures
in the tables accompanying this release.
|
| |
|
Market Overview
The third quarter of 2017 saw an unexpectedly rapid rise in the global
price of urea from the unsustainable lows of the second quarter of 2017.
The strengthening price environment was driven by significantly lower
Chinese exports; higher energy and production costs in parts of the
world, including higher natural gas costs in Europe and higher coal
costs in China; a weaker U.S. dollar; and strong global demand. As a
result, urea barge prices at New Orleans increased from approximately
$160 per ton at the start of the quarter to approximately $245 per ton
at the end of the quarter.
CF management expects lower Chinese urea export volumes, which were down
51 percent year-over-year through August, to continue. Higher production
costs - driven by increased anthracite coal costs in China, which have
risen 25 percent since June - and the impact of environmental protection
and enforcement have pressured marginal producers in the country.
Additionally, strong urea prices within China have reduced the incentive
to export.
Global demand during the quarter was strong. Brazil continued to be a
major purchaser of nitrogen, with imports through August up
approximately 50 percent year-over-year. India issued three tenders
during the quarter, resulting in the purchase of 1.4 million metric tons
of urea.
Urea prices in North America during the third quarter traded at a
significant discount to international parity due to seasonally low
demand and buyer reluctance to take positions. Consequently, urea barge
prices in New Orleans averaged $20 per ton below international parity.
This significant discount discouraged imports to the region, with
imports in the third quarter of 2017 of urea and UAN to North America
down 30 percent and 40 percent year-over-year, respectively.
CF management believes that nitrogen price volatility in the global
market will continue through 2018 as global tradeflows adjust to
increased global capacity. After 2018, the rate of net new capacity
growth is expected to fall below the long-term annual nitrogen demand
growth rate of approximately two percent, helping to tighten the global
supply and demand balance going forward.
Capital Expenditures
New capital expenditures for 2017 are estimated to be approximately $375
million. Additionally, as of September 30, 2017, the company had
approximately $158 million in costs accrued but yet unpaid for work
completed in 2016 related to the capacity expansion projects. Most of
this unpaid amount is the subject of disputes between the company and
certain contractors and vendors. Actual cash expenditures for 2017 will
reflect any payments for these capacity expansion project amounts if or
when they are made.
Liquidity
As of September 30, 2017, the company had cash and cash equivalents of
$2.0 billion on the balance sheet, had no borrowings outstanding under
its $750 million revolving credit facility and was in compliance with
all applicable covenant requirements under its debt instruments.
On October 30, 2017, the company announced that its wholly owned
subsidiary CF Industries, Inc. has elected to redeem in full the entire
outstanding $800 million principal amount of its 6.875 percent Senior
Notes (the “Notes”) due May 2018, in accordance with the optional
redemption provisions provided in the indenture governing the Notes. The
Notes will be redeemed on December 1, 2017. Based on market interest
rates on October 30, 2017, the company estimates that the total amount
for the redemption of the Notes will be approximately $817 million.
CHS Inc. Distribution
CHS Inc. (CHS) is entitled to semi-annual distributions resulting from
its minority equity investment in CF Industries Nitrogen, LLC (CFN). The
estimate of the partnership distribution earned by CHS, but not yet
declared, for the third quarter of 2017 is approximately $17 million.
Consolidated Results
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per share and per MMBtu amounts) |
|
Net sales
| |
$
|
870
| | |
$
|
680
| | |
$
|
3,031
| | |
$
|
2,818
| |
|
Cost of sales
| |
861
|
| |
678
|
| |
2,744
|
| |
2,072
|
|
|
Gross margin
| |
$
|
9
|
| |
$
|
2
|
| |
$
|
287
|
| |
$
|
746
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
1.0
|
%
| |
0.3
|
%
| |
9.5
|
%
| |
26.5
|
%
|
| | | | | | | |
|
|
Net (loss) earnings attributable to common stockholders
| |
$
|
(87
|
)
| |
$
|
(30
|
)
| |
$
|
(107
|
)
| |
$
|
43
| |
|
Adjusted net (loss) earnings(1) | |
$
|
(90
|
)
| |
$
|
30
| | |
$
|
(56
|
)
| |
$
|
199
| |
| | | | | | | |
|
|
Net (loss) earnings per diluted share
| |
$
|
(0.37
|
)
| |
$
|
(0.13
|
)
| |
$
|
(0.46
|
)
| |
$
|
0.19
| |
|
Adjusted net (loss) earnings per diluted share(1) | |
$
|
(0.39
|
)
| |
$
|
0.13
| | |
$
|
(0.24
|
)
| |
$
|
0.85
| |
| | | | | | | |
|
|
EBITDA(1) | |
$
|
139
| | |
$
|
(6
|
)
| |
$
|
632
| | |
$
|
530
| |
|
Adjusted EBITDA(1) | |
$
|
134
| | |
$
|
83
| | |
$
|
709
| | |
$
|
725
| |
| | | | | | | |
|
|
Tons of product sold (000s)
| |
4,877
| | |
3,666
| | |
14,668
| | |
12,274
| |
| | | | | | | |
|
|
Supplemental data (per MMBtu):
| | | | | | | | |
|
Natural gas costs in cost of sales(2) | |
$
|
3.22
| | |
$
|
2.70
| | |
$
|
3.41
| | |
$
|
2.41
| |
|
Realized derivatives loss in cost of sales(3) | |
0.13
|
| |
0.17
|
| |
0.05
|
| |
0.60
|
|
|
Cost of natural gas in cost of sales
| |
$
|
3.35
| | |
$
|
2.87
| | |
$
|
3.46
| | |
$
|
3.01
| |
| | | | | | | |
|
|
Average daily market price of natural gas (per MMBtu):
| | | | | | | | |
| Henry Hub | |
$
|
2.93
| | |
$
|
2.84
| | |
$
|
2.99
| | |
$
|
2.31
| |
|
National Balancing Point UK | |
$
|
5.46
| | |
$
|
4.08
| | |
$
|
5.43
| | |
$
|
4.31
| |
| | | | | | | |
|
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
$
|
(7
|
)
| |
$
|
21
| | |
$
|
64
| | |
$
|
(169
|
)
|
| | | | | | | |
|
|
Depreciation and amortization
| |
$
|
226
| | |
$
|
148
| | |
$
|
648
| | |
$
|
475
| |
|
Capital expenditures
| |
$
|
105
| | |
$
|
440
| | |
$
|
290
| | |
$
|
1,819
| |
| | | | | | | |
|
|
Production volume by product tons (000s):
| | | | | | | | |
|
Ammonia(4) | |
2,489
| | |
1,987
| | |
7,653
| | |
5,981
| |
|
Granular urea
| |
1,091
| | |
827
| | |
3,329
| | |
2,454
| |
|
UAN (32%)
| |
1,483
| | |
1,614
| | |
5,022
| | |
4,903
| |
|
AN
| |
571
| | |
475
| | |
1,572
| | |
1,292
| |
_______________________________________________________________________________
| (1) |
|
See reconciliations of EBITDA, adjusted EBITDA, adjusted net
(loss) earnings and adjusted net (loss) earnings per diluted share
to the most directly comparable GAAP measures in the tables
accompanying this release.
|
| (2) | |
Includes the cost of natural gas that is included in cost of sales
during the period under the first-in, first-out inventory cost
method.
|
| (3) | |
Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
|
| (4) | |
Gross ammonia production including amounts subsequently upgraded
into other products.
|
| |
|
During the three and nine months ended September 30, 2017 and 2016,
certain significant items impacted our financial results. The following
table outlines these significant items and how they impacted the
comparability of our financial results during these periods. During the
three months ended September 30, 2017 and 2016, we reported net loss
attributable to common stockholders of $(87) million and $(30) million,
respectively. During the nine months ended September 30, 2017 and 2016,
we reported net (loss) earnings attributable to common stockholders of
$(107) million and $43 million, respectively.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 |
| 2017 |
| 2016 |
| | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax | | Pre-Tax |
| After-Tax |
| | (in millions) |
|
Depreciation and amortization(1) | |
$
|
226
| |
$
|
142
| | |
$
|
148
|
|
$
|
93
| | |
$
|
648
|
|
$
|
407
| | |
$
|
475
| |
$
|
298
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives(2) | |
(7
|
)
|
(4
|
)
| |
21
| |
13
| | |
64
| |
40
| | |
(169
|
)
|
(106
|
)
|
|
Capacity expansion project expenses(3) | |
—
| |
—
| | |
24
| |
15
| | |
—
| |
—
| | |
59
| |
37
| |
| Start-up costs Donaldsonville ammonia(2) | |
—
| |
—
| | |
18
| |
11
| | |
—
| |
—
| | |
18
| |
11
| |
|
Transaction costs(4) | |
—
| |
—
| | |
—
| |
—
| | |
—
| |
—
| | |
179
| |
96
| |
|
Loss on foreign currency transactions including intercompany loans(3)(5) | |
1
| |
1
| | |
3
| |
4
| | |
2
| |
2
| | |
86
| |
85
| |
|
Equity method investment tax contingency accrual(6) | |
—
| |
—
| | |
—
| |
—
| | |
7
| |
7
| | |
—
| |
—
| |
|
Financing costs related to bridge loan commitment fee(7) | |
—
| |
—
| | |
—
| |
—
| | |
—
| |
—
| | |
28
| |
18
| |
| Strategic Venture with CHS: | | | | | | | | | | | | | | | | |
|
Noncontrolling interest(8) | |
17
| |
17
| | |
27
| |
27
| | |
40
| |
40
| | |
67
| |
67
| |
|
Loss on embedded derivative(3)(9) | |
1
|
|
—
|
| |
22
|
|
14
|
| |
4
|
|
2
|
| |
22
|
|
14
|
|
| Total Impact of Significant Items | |
$
|
238
|
|
$
|
156
|
| |
$
|
263
|
|
$
|
177
|
| |
$
|
765
|
|
$
|
498
|
| |
$
|
765
|
|
$
|
520
|
|
_______________________________________________________________________________
| (1) |
|
Included primarily in cost of sales and selling, general and
administrative expenses in our consolidated statements of operations.
|
| (2) | |
Included in cost of sales in our consolidated statements of
operations.
|
| (3) | |
Included in other operating—net in our consolidated statements of
operations.
|
| (4) | |
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
| (5) | |
Primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
| (6) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
| (7) | |
Included in interest expense in our consolidated statements of
operations.
|
| (8) | |
Included in net earnings attributable to noncontrolling interests in
our consolidated statements of operations.
|
| (9) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
| |
|
Segment Results
Ammonia Segment
CF Industries’ ammonia segment produces anhydrous ammonia (ammonia),
which is the company’s most concentrated form of nitrogen, containing 82
percent nitrogen. The results of the ammonia segment consist of sales of
ammonia to external customers. In addition, ammonia is the “basic”
nitrogen form that the company upgrades into other nitrogen products
such as urea, UAN and AN.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
194
| | |
$
|
145
| | |
$
|
865
| | |
$
|
770
| |
|
Cost of sales
| |
204
|
| |
149
|
| |
771
|
| |
505
|
|
|
Gross margin
| |
$
|
(10
|
)
| |
$
|
(4
|
)
| |
$
|
94
|
| |
$
|
265
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
(5.2
|
)%
| |
(2.8
|
)%
| |
10.9
|
%
| |
34.4
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
826
| | |
505
| | |
2,898
| | |
2,112
| |
|
Sales volume by nutrient tons (000s)(1) | |
677
| | |
414
| | |
2,376
| | |
1,732
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
235
| | |
$
|
287
| | |
$
|
298
| | |
$
|
365
| |
|
Average selling price per nutrient ton(1) | |
287
| | |
350
| | |
364
| | |
445
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
(12
|
)
| |
$
|
(8
|
)
| |
$
|
32
| | |
$
|
125
| |
|
Gross margin per nutrient ton(1) | |
(15
|
)
| |
(10
|
)
| |
40
| | |
153
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
(10
|
)
| |
$
|
(4
|
)
| |
$
|
94
| | |
$
|
265
| |
|
Depreciation and amortization
| |
37
| | |
19
| | |
130
| | |
59
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(3
|
)
| |
7
|
| |
20
|
| |
(55
|
)
|
|
Adjusted gross margin
| |
$
|
24
|
| |
$
|
22
|
| |
$
|
244
|
| |
$
|
269
|
|
|
Adjusted gross margin as a percent of net sales
| |
12.4
|
%
| |
15.2
|
%
| |
28.2
|
%
| |
34.9
|
%
|
_______________________________________________________________________________
| (1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
| (2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
| |
|
Comparison of 2017 to 2016 third quarter periods:
-
Ammonia sales volume increased for the third quarter of 2017 compared
to the third quarter of 2016 due to additional production volume from
the new capacity expansions at the company's Donaldsonville and Port
Neal Nitrogen Complexes.
-
Ammonia average selling prices decreased primarily due to greater
global nitrogen supply.
-
Ammonia gross margin per ton decreased in the third quarter of 2017
compared to the third quarter of 2016 due to lower average selling
prices, an increase in realized natural gas costs and an increase in
depreciation primarily related to the new Donaldsonville and Port Neal
ammonia plants. These were partially offset by the effects of
increased volumes, a $3 million unrealized net mark-to-market gain on
natural gas derivatives compared to a $7 million unrealized net
mark-to-market loss in the prior year period and no recurrence of
start-up costs incurred in the third quarter of 2016 associated with
the new Donaldsonville ammonia plant.
Granular Urea Segment
CF Industries’ granular urea segment produces granular urea, which
contains 46 percent nitrogen. Produced from ammonia and carbon dioxide,
it has the highest nitrogen content of any of the company’s solid
nitrogen products.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
228
| | |
$
|
167
| | |
$
|
725
| | |
$
|
642
| |
|
Cost of sales
| |
220
|
| |
152
|
| |
668
|
| |
445
|
|
|
Gross margin
| |
$
|
8
|
| |
$
|
15
|
| |
$
|
57
|
| |
$
|
197
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
3.5
|
%
| |
9.0
|
%
| |
7.9
|
%
| |
30.7
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
1,170
| | |
823
| | |
3,349
| | |
2,714
| |
|
Sales volume by nutrient tons (000s)(1) | |
539
| | |
378
| | |
1,541
| | |
1,248
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
195
| | |
$
|
203
| | |
$
|
216
| | |
$
|
237
| |
|
Average selling price per nutrient ton(1) | |
423
| | |
442
| | |
470
| | |
514
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
7
| | |
$
|
18
| | |
$
|
17
| | |
$
|
73
| |
|
Gross margin per nutrient ton(1) | |
15
| | |
40
| | |
37
| | |
158
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
8
| | |
$
|
15
| | |
$
|
57
| | |
$
|
197
| |
|
Depreciation and amortization
| |
67
| | |
25
| | |
187
| | |
75
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(2
|
)
| |
5
|
| |
17
|
| |
(44
|
)
|
|
Adjusted gross margin
| |
$
|
73
|
| |
$
|
45
|
| |
$
|
261
|
| |
$
|
228
|
|
|
Adjusted gross margin as a percent of net sales
| |
32.0
|
%
| |
26.9
|
%
| |
36.0
|
%
| |
35.5
|
%
|
_______________________________________________________________________________
| (1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
| (2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
| |
|
Comparison of 2017 to 2016 third quarter periods:
-
Granular urea sales volume increased for the quarter primarily due to
additional production volume from the new capacity expansion at the
company's Port Neal Nitrogen Complex.
-
Granular urea average selling price per ton decreased due to greater
global nitrogen supply.
-
Granular urea gross margin per ton decreased due to lower average
selling prices, an increase in depreciation primarily associated with
the new Port Neal urea plant, and an increase in realized natural gas
costs. These were partially offset by production efficiencies due to
increased volumes and a $2 million unrealized net mark-to-market gain
on natural gas derivatives compared to a $5 million loss in the prior
year period.
UAN Segment
CF Industries’ UAN segment produces urea ammonium nitrate solution
(UAN). UAN is a liquid product with nitrogen content that typically
ranges from 28 percent to 32 percent and is produced by combining urea
and ammonium nitrate in solution.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
243
| | |
$
|
212
| | |
$
|
846
| | |
$
|
891
| |
|
Cost of sales
| |
253
|
| |
218
|
| |
783
|
| |
646
|
|
|
Gross margin
| |
$
|
(10
|
)
| |
$
|
(6
|
)
| |
$
|
63
|
| |
$
|
245
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
(4.1
|
)%
| |
(2.8
|
)%
| |
7.4
|
%
| |
27.5
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
1,693
| | |
1,350
| | |
5,173
| | |
4,634
| |
|
Sales volume by nutrient tons (000s)(1) | |
536
| | |
427
| | |
1,636
| | |
1,461
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
144
| | |
$
|
157
| | |
$
|
164
| | |
$
|
192
| |
|
Average selling price per nutrient ton(1) | |
453
| | |
496
| | |
517
| | |
610
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
(6
|
)
| |
$
|
(4
|
)
| |
$
|
12
| | |
$
|
53
| |
|
Gross margin per nutrient ton(1) | |
(19
|
)
| |
(14
|
)
| |
39
| | |
168
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
(10
|
)
| |
$
|
(6
|
)
| |
$
|
63
| | |
$
|
245
| |
|
Depreciation and amortization
| |
71
| | |
58
| | |
192
| | |
175
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(2
|
)
| |
7
|
| |
19
|
| |
(52
|
)
|
|
Adjusted gross margin
| |
$
|
59
|
| |
$
|
59
|
| |
$
|
274
|
| |
$
|
368
|
|
|
Adjusted gross margin as a percent of net sales
| |
24.3
|
%
| |
27.8
|
%
| |
32.4
|
%
| |
41.3
|
%
|
_______________________________________________________________________________
| (1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
| (2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market (gain) loss on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
| |
|
Comparison of 2017 to 2016 third quarter periods:
-
UAN sales volume increased in the third quarter of 2017 due to greater
customer participation in the company's summer UAN fill program
compared to the prior year period.
-
UAN average selling price per ton decreased due to greater global
nitrogen supply.
-
UAN gross margin per ton decreased in the third quarter of 2017
compared to the third quarter of 2016 due to lower average selling
prices and an increase in realized natural gas costs. These were
partially offset by production efficiencies due to increased volumes
and a $2 million unrealized net mark-to-market gain on natural gas
derivatives compared to a $7 million unrealized net mark-to-market
loss in the prior year period.
AN Segment
CF Industries' AN segment produces ammonium nitrate (AN). AN is used as
a nitrogen fertilizer with nitrogen content between 29 percent to 35
percent, and also is used by industrial customers for commercial
explosives and blasting systems. AN is produced at the company's Yazoo
City, Mississippi; Billingham, United Kingdom; and Ince, United Kingdom,
complexes.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
135
| | |
$
|
103
| | |
$
|
372
| | |
$
|
318
| |
|
Cost of sales
| |
123
|
| |
114
|
| |
331
|
| |
316
|
|
|
Gross margin
| |
$
|
12
|
| |
$
|
(11
|
)
| |
$
|
41
|
| |
$
|
2
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
8.9
|
%
| |
(10.7
|
)%
| |
11.0
|
%
| |
0.6
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
670
| | |
599
| | |
1,777
| | |
1,610
| |
|
Sales volume by nutrient tons (000s)(1) | |
225
| | |
203
| | |
599
| | |
545
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
201
| | |
$
|
172
| | |
$
|
209
| | |
$
|
198
| |
|
Average selling price per nutrient ton(1) | |
600
| | |
507
| | |
621
| | |
583
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
18
| | |
$
|
(18
|
)
| |
$
|
23
| | |
$
|
1
| |
|
Gross margin per nutrient ton(1) | |
53
| | |
(54
|
)
| |
68
| | |
4
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
12
| | |
$
|
(11
|
)
| |
$
|
41
| | |
$
|
2
| |
|
Depreciation and amortization
| |
24
| | |
22
| | |
64
| | |
72
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
—
|
| |
1
|
| |
3
|
| |
(7
|
)
|
|
Adjusted gross margin
| |
$
|
36
|
| |
$
|
12
|
| |
$
|
108
|
| |
$
|
67
|
|
|
Adjusted gross margin as a percent of net sales
| |
26.7
|
%
| |
11.7
|
%
| |
29.0
|
%
| |
21.1
|
%
|
_______________________________________________________________________________
(1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
(2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market loss (gain) on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
| |
|
Comparison of 2017 to 2016 third quarter periods:
-
AN sales volume increased in the third quarter of 2017 compared to the
third quarter of 2016 due to increased demand from all major end uses
of the product.
-
AN average selling price per ton increased in the third quarter of
2017 compared to the third quarter of 2016 due to the effects of
higher global AN prices and of a long-term AN supply agreement that
commenced in 2017.
-
AN gross margin per ton increased due to higher average selling prices
and production efficiencies due to increased volumes partially offset
by an increase in realized natural gas costs.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid (DEF), urea
liquor, nitric acid and compound fertilizer products (NPKs).
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (dollars in millions, except per ton amounts) |
|
Net sales
| |
$
|
70
| | |
$
|
53
| | |
$
|
223
| | |
$
|
197
| |
|
Cost of sales
| |
61
|
| |
45
|
| |
191
|
| |
160
|
|
|
Gross margin
| |
$
|
9
|
| |
$
|
8
|
| |
$
|
32
|
| |
$
|
37
|
|
| | | | | | | |
|
|
Gross margin percentage
| |
12.9
|
%
| |
15.1
|
%
| |
14.3
|
%
| |
18.8
|
%
|
| | | | | | | |
|
|
Sales volume by product tons (000s)
| |
518
| | |
389
| | |
1,471
| | |
1,204
| |
|
Sales volume by nutrient tons (000s)(1) | |
97
| | |
73
| | |
285
| | |
230
| |
| | | | | | | |
|
|
Average selling price per product ton
| |
$
|
135
| | |
$
|
136
| | |
$
|
152
| | |
$
|
164
| |
|
Average selling price per nutrient ton(1) | |
722
| | |
726
| | |
782
| | |
857
| |
| | | | | | | |
|
|
Gross margin per product ton
| |
$
|
17
| | |
$
|
21
| | |
$
|
22
| | |
$
|
31
| |
|
Gross margin per nutrient ton(1) | |
93
| | |
110
| | |
112
| | |
161
| |
| | | | | | | |
|
|
Adjusted gross margin(2):
| | | | | | | | |
|
Gross margin
| |
$
|
9
| | |
$
|
8
| | |
$
|
32
| | |
$
|
37
| |
|
Depreciation and amortization
| |
15
| | |
12
| | |
40
| | |
34
| |
|
Unrealized net mark-to-market loss (gain) on natural gas derivatives
| |
—
|
| |
1
|
| |
5
|
| |
(11
|
)
|
|
Adjusted gross margin
| |
$
|
24
|
| |
$
|
21
|
| |
$
|
77
|
| |
$
|
60
|
|
|
Adjusted gross margin as a percent of net sales
| |
34.3
|
%
| |
39.6
|
%
| |
34.5
|
%
| |
30.5
|
%
|
_______________________________________________________________________________
| (1) |
|
Nutrient tons represent the tons of nitrogen within the product tons.
|
| (2) | |
Adjusted gross margin and adjusted gross margin as a percent of net
sales are non-GAAP financial measures. Adjusted gross margin is
defined as gross margin excluding depreciation and amortization and
unrealized net mark-to-market loss (gain) on natural gas
derivatives. The company has presented adjusted gross margin and
adjusted gross margin as a percent of net sales because management
uses these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance. A reconciliation of adjusted gross margin and adjusted
gross margin as a percent of net sales to gross margin, the most
directly comparable GAAP measure, is provided in the table above.
See "Note Regarding Non-GAAP Financial Measures" in this release.
|
| |
|
Comparison of 2017 to 2016 third quarter periods:
-
Other segment volume increased in the third quarter of 2017 due
primarily to higher year-over-year sales of DEF as the company
continues to grow its North American DEF business.
-
Other segment average selling price per ton decreased due primarily to
greater global nitrogen supply.
-
Other segment gross margin per ton decreased due to lower average
selling prices and an increase in realized natural gas costs.
Dividend Payment
On October 10, 2017, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be paid
on November 30, 2017 to stockholders of record as of November 15, 2017.
Conference Call
CF Industries will hold a conference call to discuss its third quarter
2017 results at 9:00 a.m. ET on Thursday, November 2, 2017. This
conference call will include discussion of CF Industries' business
environment and outlook. Investors can access the call and find dial-in
information on the Investor Relations section of the company’s website
at www.cfindustries.com.
About CF Industries Holdings, Inc.
CF Industries Holdings, Inc., headquartered in Deerfield, Illinois,
through its subsidiaries is a global leader in the manufacturing and
distribution of nitrogen products, serving both agricultural and
industrial customers. CF Industries operates world-class nitrogen
manufacturing complexes in Canada, the United Kingdom and the United
States, and distributes plant nutrients through a system of terminals,
warehouses, and associated transportation equipment located primarily in
the Midwestern United States. The company also owns a 50 percent
interest in an ammonia facility in The Republic of Trinidad and Tobago.
CF Industries routinely posts investor announcements and additional
information on the company’s website at www.cfindustries.com and
encourages those interested in the company to check there frequently.
Note Regarding Non-GAAP Financial Measures
The company reports its financial results in accordance with U.S.
generally accepted accounting principles (GAAP). Management believes
that EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton, adjusted EBITDA as a percent of net
sales, adjusted net (loss) earnings, adjusted net (loss) earnings per
diluted share, controllable cost of sales, and controllable cost of
sales per ton, and, on a segment basis, adjusted gross margin and
adjusted gross margin as a percent of net sales, which are non-GAAP
financial measures, provide additional meaningful information regarding
the company's performance and financial strength. Non-GAAP financial
measures should be viewed in addition to, and not as an alternative for,
the company's reported results prepared in accordance with GAAP. In
addition, because not all companies use identical calculations, EBITDA,
EBITDA per ton, EBITDA as a percent of net sales, adjusted EBITDA,
adjusted EBITDA per ton, adjusted EBITDA as a percent of net sales,
adjusted net (loss) earnings, adjusted net (loss) earnings per diluted
share, adjusted gross margin, adjusted gross margin as a percent of net
sales, controllable cost of sales and controllable cost of sales per
ton, included in this release may not be comparable to similarly titled
measures of other companies. Reconciliations of EBITDA, EBITDA per ton,
EBITDA as a percent of net sales, adjusted EBITDA, adjusted EBITDA per
ton, adjusted EBITDA as a percent of net sales, adjusted net (loss)
earnings, adjusted net (loss) earnings per diluted share, controllable
cost of sales, and controllable cost of sales per ton to the most
directly comparable GAAP measures are provided in the tables
accompanying this release under “CF Industries Holdings, Inc.-Selected
Financial Information-Non-GAAP Disclosure Items.” Reconciliations of
adjusted gross margin and adjusted gross margin as a percent of net
sales to the most directly comparable GAAP measures are provided in the
segment tables included in this release.
Safe Harbor Statement
All statements in this communication by CF Industries Holdings, Inc.
(together with its subsidiaries, the “Company”), other than those
relating to historical facts, are forward-looking statements.
Forward-looking statements can generally be identified by their use of
terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “predict,” “project,” “will” or “would” and
similar terms and phrases, including references to assumptions.
Forward-looking statements are not guarantees of future performance and
are subject to a number of assumptions, risks and uncertainties, many of
which are beyond the Company’s control, which could cause actual results
to differ materially from such statements. These statements may include,
but are not limited to, statements about strategic plans and statements
about future financial and operating results.
Important factors that could cause actual results to differ materially
from those in the forward-looking statements include, among others, the
cyclical nature of the Company’s business and the agricultural sector;
the global commodity nature of the Company’s fertilizer products, the
impact of global supply and demand on the Company’s selling prices, and
the intense global competition from other fertilizer producers;
conditions in the U.S. and European agricultural industry; the
volatility of natural gas prices in North America and Europe;
difficulties in securing the supply and delivery of raw materials,
increases in their costs or delays or interruptions in their delivery;
reliance on third party providers of transportation services and
equipment; the significant risks and hazards involved in producing and
handling the Company’s products against which the Company may not be
fully insured; the Company’s ability to manage its indebtedness;
operating and financial restrictions imposed on the Company by the
agreements governing the Company's senior secured indebtedness; risks
associated with the Company’s incurrence of additional indebtedness; the
Company's ability to maintain compliance with covenants under the
agreements governing its indebtedness; downgrades of the Company’s
credit ratings; risks associated with cyber security; weather
conditions; risks associated with the Company’s ability to utilize its
tax net operating losses and other tax assets, including the risk that
the use of such tax benefits is limited by an “ownership change” (as
defined under the Internal Revenue Code and related Internal Revenue
Service pronouncements); risks associated with changes in tax laws and
disagreements with taxing authorities; risks associated with expansions
of the Company’s business, including unanticipated adverse consequences
and the significant resources that could be required; potential
liabilities and expenditures related to environmental, health and safety
laws and regulations and permitting requirements; future regulatory
restrictions and requirements related to greenhouse gas emissions; the
seasonality of the fertilizer business; the impact of changing market
conditions on the Company’s forward sales programs; risks involving
derivatives and the effectiveness of the Company’s risk measurement and
hedging activities; the Company’s reliance on a limited number of key
facilities; risks associated with the operation or management of the
strategic venture with CHS Inc. (the "CHS Strategic Venture"), risks and
uncertainties relating to the market prices of the fertilizer products
that are the subject of the supply agreement with CHS Inc. over the life
of the supply agreement, and the risk that any challenges related to the
CHS Strategic Venture will harm the Company's other business
relationships; risks associated with the Company’s Point Lisas Nitrogen
Limited joint venture; acts of terrorism and regulations to combat
terrorism; risks associated with international operations; and
deterioration of global market and economic conditions.
More detailed information about factors that may affect the Company’s
performance and could cause actual results to differ materially from
those in any forward-looking statements may be found in CF Industries
Holdings, Inc.’s filings with the Securities and Exchange Commission,
including CF Industries Holdings, Inc.’s most recent annual and
quarterly reports on Form 10-K and Form 10-Q, which are available in the
Investor Relations section of the Company’s web site. Forward-looking
statements are given only as of the date of this communication and the
Company disclaims any obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.
|
|
| CF INDUSTRIES HOLDINGS, INC. |
| SELECTED FINANCIAL INFORMATION |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| (unaudited) |
|
|
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions, except per share amounts) |
|
Net sales
| |
$
|
870
| | |
$
|
680
| | |
$
|
3,031
| | |
$
|
2,818
| |
|
Cost of sales
| |
861
|
| |
678
|
| |
2,744
|
| |
2,072
|
|
|
Gross margin
| |
9
|
| |
2
|
| |
287
|
| |
746
|
|
|
Selling, general and administrative expenses
| |
45
| | |
44
| | |
140
| | |
141
| |
|
Transaction costs
| |
—
| | |
—
| | |
—
| | |
179
| |
|
Other operating—net
| |
(2
|
)
| |
57
|
| |
14
|
| |
181
|
|
|
Total other operating costs and expenses
| |
43
| | |
101
| | |
154
| | |
501
| |
|
Equity in losses of operating affiliates
| |
(5
|
)
| |
(2
|
)
| |
(8
|
)
| |
(11
|
)
|
|
Operating (loss) earnings
| |
(39
|
)
| |
(101
|
)
| |
125
| | |
234
| |
|
Interest expense
| |
81
| | |
31
| | |
241
| | |
130
| |
|
Interest income
| |
(5
|
)
| |
(2
|
)
| |
(8
|
)
| |
(4
|
)
|
|
Other non-operating—net
| |
—
|
| |
1
|
| |
—
|
| |
(1
|
)
|
|
(Loss) earnings before income taxes
| |
(115
|
)
| |
(131
|
)
| |
(108
|
)
| |
109
| |
|
Income tax benefit
| |
(47
|
)
| |
(131
|
)
| |
(55
|
)
| |
(21
|
)
|
|
Net (loss) earnings
| |
(68
|
)
| |
—
| | |
(53
|
)
| |
130
| |
|
Less: Net earnings attributable to noncontrolling interests
| |
19
|
| |
30
|
| |
54
|
| |
87
|
|
|
Net (loss) earnings attributable to common stockholders
| |
$
|
(87
|
)
| |
$
|
(30
|
)
| |
$
|
(107
|
)
| |
$
|
43
|
|
| | | | | | | |
|
|
Net (loss) earnings per share attributable to common stockholders:
| | | | | | | | |
|
Basic
| |
$
|
(0.37
|
)
| |
$
|
(0.13
|
)
| |
$
|
(0.46
|
)
| |
$
|
0.19
|
|
|
Diluted
| |
$
|
(0.37
|
)
| |
$
|
(0.13
|
)
| |
$
|
(0.46
|
)
| |
$
|
0.19
|
|
|
Weighted-average common shares outstanding:
| | | | | | | | |
|
Basic
| |
233.2
|
| |
233.1
|
| |
233.2
|
| |
233.2
|
|
|
Diluted
| |
233.2
|
| |
233.1
|
| |
233.2
|
| |
233.5
|
|
|
|
| CF INDUSTRIES HOLDINGS, INC. |
| SELECTED FINANCIAL INFORMATION |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
| (unaudited) |
| |
| | September 30,
2017 | | December 31,
2016 |
| | (in millions) |
| Assets | | | | |
|
Current assets:
| | | | |
|
Cash and cash equivalents
| |
$
|
1,992
| | |
$
|
1,164
|
|
Restricted cash
| |
—
| | |
5
|
|
Accounts receivable—net
| |
279
| | |
236
|
|
Inventories
| |
316
| | |
339
|
|
Prepaid income taxes
| |
42
| | |
841
|
|
Other current assets
| |
22
|
| |
70
|
|
Total current assets
| |
2,651
| | |
2,655
|
|
Property, plant and equipment—net
| |
9,372
| | |
9,652
|
|
Investments in affiliates
| |
109
| | |
139
|
| Goodwill | |
2,369
| | |
2,345
|
|
Other assets
| |
356
|
| |
340
|
| Total assets | |
$
|
14,857
|
| |
$
|
15,131
|
| | | |
|
| Liabilities and Equity | | | | |
|
Current liabilities:
| | | | |
|
Accounts payable and accrued expenses
| |
$
|
635
| | |
$
|
638
|
|
Income taxes payable
| |
7
| | |
1
|
|
Customer advances
| |
92
| | |
42
|
|
Current portion of long-term debt
| |
798
| | |
—
|
|
Other current liabilities
| |
19
|
| |
5
|
|
Total current liabilities
| |
1,551
|
| |
686
|
|
Long-term debt
| |
4,988
| | |
5,778
|
|
Deferred income taxes
| |
1,592
| | |
1,630
|
|
Other liabilities
| |
486
| | |
545
|
|
Equity:
| | | | |
|
Stockholders' equity
| |
3,167
| | |
3,348
|
|
Noncontrolling interests
| |
3,073
|
| |
3,144
|
|
Total equity
| |
6,240
|
| |
6,492
|
| Total liabilities and equity | |
$
|
14,857
|
| |
$
|
15,131
|
|
|
| CF INDUSTRIES HOLDINGS, INC. |
| SELECTED FINANCIAL INFORMATION |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (unaudited) |
|
|
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
| Operating Activities: | | | | | | | | |
|
Net (loss) earnings
| |
$
|
(68
|
)
| |
$
|
—
| | |
$
|
(53
|
)
| |
$
|
130
| |
|
Adjustments to reconcile net (loss) earnings to net cash provided by
operating activities:
| | | | | | | | |
|
Depreciation and amortization
| |
226
| | |
148
| | |
648
| | |
475
| |
|
Deferred income taxes
| |
(46
|
)
| |
(145
|
)
| |
(54
|
)
| |
730
| |
|
Stock-based compensation expense
| |
5
| | |
6
| | |
13
| | |
15
| |
|
Unrealized net (gain) loss on natural gas and foreign currency
derivatives
| |
(7
|
)
| |
20
| | |
64
| | |
(169
|
)
|
|
Unrealized loss on embedded derivative
| |
1
| | |
22
| | |
4
| | |
22
| |
|
Loss on disposal of property, plant and equipment
| |
2
| | |
4
| | |
3
| | |
8
| |
|
Undistributed losses of affiliates—net of taxes
| |
1
| | |
(1
|
)
| |
7
| | |
—
| |
|
Changes in:
| | | | | | | | |
|
Accounts receivable—net
| |
6
| | |
31
| | |
(29
|
)
| |
55
| |
|
Inventories
| |
2
| | |
(85
|
)
| |
12
| | |
(4
|
)
|
|
Accrued and prepaid income taxes
| |
(2
|
)
| |
8
| | |
804
| | |
(665
|
)
|
|
Accounts payable and accrued expenses
| |
17
| | |
60
| | |
5
| | |
(7
|
)
|
|
Customer advances
| |
88
| | |
74
| | |
51
| | |
(75
|
)
|
|
Other—net
| |
(11
|
)
| |
3
|
| |
(74
|
)
| |
76
|
|
|
Net cash provided by operating activities
| |
214
|
| |
145
|
| |
1,401
|
| |
591
|
|
| Investing Activities: | | | | | | | | |
|
Additions to property, plant and equipment
| |
(105
|
)
| |
(440
|
)
| |
(290
|
)
| |
(1,819
|
)
|
|
Proceeds from sale of property, plant and equipment
| |
1
| | |
6
| | |
13
| | |
8
| |
|
Distributions received from unconsolidated affiliates
| |
6
| | |
—
| | |
12
| | |
—
| |
|
Proceeds from sale of auction rate securities
| |
—
| | |
—
| | |
9
| | |
—
| |
|
Withdrawals from restricted cash funds
| |
4
| | |
—
| | |
5
| | |
16
| |
|
Other—net
| |
—
|
| |
1
|
| |
—
|
| |
4
|
|
|
Net cash used in investing activities
| |
(94
|
)
| |
(433
|
)
| |
(251
|
)
| |
(1,791
|
)
|
| Financing Activities: | | | | | | | | |
|
Proceeds from short-term borrowings
| |
—
| | |
—
| | |
—
| | |
150
| |
|
Payments of short-term borrowings
| |
—
| | |
—
| | |
—
| | |
(150
|
)
|
|
Financing fees
| |
(1
|
)
| |
(6
|
)
| |
(1
|
)
| |
(11
|
)
|
|
Dividends paid on common stock
| |
(70
|
)
| |
(69
|
)
| |
(210
|
)
| |
(209
|
)
|
|
Issuance of noncontrolling interest in CFN
| |
—
| | |
—
| | |
—
| | |
2,800
| |
|
Distributions to noncontrolling interests
| |
(66
|
)
| |
(91
|
)
| |
(125
|
)
| |
(111
|
)
|
|
Issuances of common stock under employee stock plans
| |
1
|
| |
—
|
| |
1
|
| |
—
|
|
|
Net cash (used in) provided by financing activities
| |
(136
|
)
| |
(166
|
)
| |
(335
|
)
| |
2,469
|
|
|
Effect of exchange rate changes on cash and cash equivalents
| |
7
|
| |
—
|
| |
13
|
| |
(1
|
)
|
|
(Decrease) increase in cash and cash equivalents
| |
(9
|
)
| |
(454
|
)
| |
828
| | |
1,268
| |
|
Cash and cash equivalents at beginning of period
| |
2,001
|
| |
2,008
|
| |
1,164
|
| |
286
|
|
| Cash and cash equivalents at end of period | |
$
|
1,992
|
| |
$
|
1,554
|
| |
$
|
1,992
|
| |
$
|
1,554
|
|
| | | | | | | | | | | | | | | |
|
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION
NON-GAAP DISCLOSURE ITEMS
Reconciliation of net (loss) earnings, net (loss) earnings per ton
and net (loss) earnings as a percent of net sales (GAAP measures) to
EBITDA, EBITDA per ton, EBITDA as a percent of net sales, adjusted
EBITDA, adjusted EBITDA per ton and adjusted EBITDA as a percent of net
sales (non-GAAP measures), as applicable:
EBITDA is defined as net (loss) earnings attributable to common
stockholders plus interest expense—net, income taxes, and depreciation
and amortization. Other adjustments include the elimination of loan fee
amortization that is included in both interest and amortization, and the
portion of depreciation that is included in noncontrolling interests.
The company has presented EBITDA, EBITDA per ton and EBITDA as a percent
of net sales because management uses these measures to track performance
and believes that they are frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in
the industry.
Adjusted EBITDA is defined as EBITDA adjusted with the selected items
included in EBITDA as summarized in the table below. The company has
presented adjusted EBITDA, adjusted EBITDA per ton and adjusted EBITDA
as a percent of net sales because management uses these measures, and
believes they are useful to investors, as supplemental financial
measures in the comparison of year-over-year performance.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Net (loss) earnings attributable to common stockholders
| |
$
|
(87
|
)
| |
$
|
(30
|
)
| |
$
|
(107
|
)
| |
$
|
43
| |
|
Interest expense—net
| |
76
| | |
29
| | |
233
| | |
126
| |
|
Income tax benefit
| |
(47
|
)
| |
(131
|
)
| |
(55
|
)
| |
(21
|
)
|
|
Depreciation and amortization
| |
226
| | |
148
| | |
648
| | |
475
| |
|
Less: other adjustments
| |
(29
|
)
| |
(22
|
)
| |
(87
|
)
| |
(93
|
)
|
|
EBITDA
| |
139
|
| |
(6
|
)
| |
632
|
| |
530
|
|
| Start-up costs Donaldsonville ammonia
| |
—
| | |
18
| | |
—
| | |
18
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(7
|
)
| |
21
| | |
64
| | |
(169
|
)
|
|
Transaction costs(1) | |
—
| | |
—
| | |
—
| | |
179
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
1
| | |
3
| | |
2
| | |
86
| |
|
Capacity expansion project expenses
| |
—
| | |
24
| | |
—
| | |
59
| |
|
Equity method investment tax contingency accrual(3) | |
—
| | |
—
| | |
7
| | |
—
| |
|
Loss on embedded derivative(4) | |
1
| | |
22
| | |
4
| | |
22
| |
|
Gain on foreign currency derivatives
| |
—
| | |
(1
|
)
| |
—
| | |
(2
|
)
|
|
Private Senior Notes amendment arrangement fees
| |
—
|
| |
2
|
| |
—
|
| |
2
|
|
|
Total adjustments
| |
(5
|
)
| |
89
|
| |
77
|
| |
195
|
|
|
Adjusted EBITDA
| |
$
|
134
|
| |
$
|
83
|
| |
$
|
709
|
| |
$
|
725
|
|
| | | | | | | |
|
|
Net sales
| |
$
|
870
| | |
$
|
680
| | |
$
|
3,031
| | |
$
|
2,818
| |
|
Tons of product sold (000s)
| |
4,877
| | |
3,666
| | |
14,668
| | |
12,274
| |
| | | | | | | |
|
| Net (loss) earnings as a percent of net sales | | (10.0 | )% | | (4.4 | )% | | (3.5 | )% | | 1.5 | % |
| Net (loss) earnings per ton | | $ | (17.84 | ) | | $ | (8.18 | ) | | $ | (7.29 | ) | | $ | 3.50 | |
| EBITDA as a percent of net sales | | 16.0 | % | | (0.9 | )% | | 20.9 | % | | 18.8 | % |
| EBITDA per ton | | $ | 28.50 | | | $ | (1.64 | ) | | $ | 43.09 | | | $ | 43.18 | |
| Adjusted EBITDA as a percent of net sales | | 15.4 | % | | 12.2 | % | | 23.4 | % | | 25.7 | % |
| Adjusted EBITDA per ton | | $ | 27.48 | | | $ | 22.64 | | | $ | 48.34 | | | $ | 59.07 | |
_______________________________________________________________________________
| (1) |
|
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
| (2) | |
Loss on foreign currency transactions including intercompany loans
primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
| (3) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
| (4) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
| |
|
Reconciliation of net (loss) earnings attributable to common
stockholders and net (loss) earnings per diluted share attributable to
common stockholders (GAAP measures) to adjusted net (loss) earnings and
adjusted net (loss) earnings per diluted share (non-GAAP measures), as
applicable:
Adjusted net (loss) earnings is defined as net (loss) earnings
attributable to common stockholders adjusted with the impacts of the
selected items included in net (loss) earnings as summarized in the
table below. The company has presented adjusted net (loss) earnings and
adjusted net (loss) earnings per diluted share because management uses
these measures, and believes they are useful to investors, as
supplemental financial measures in the comparison of year-over-year
performance.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Net (loss) earnings attributable to common stockholders
| |
$
|
(87
|
)
| |
$
|
(30
|
)
| |
$
|
(107
|
)
| |
$
|
43
| |
| Start-up costs Donaldsonville ammonia
| |
—
| | |
18
| | |
—
| | |
18
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(7
|
)
| |
21
| | |
64
| | |
(169
|
)
|
|
Transaction costs(1) | |
—
| | |
—
| | |
—
| | |
179
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
1
| | |
3
| | |
2
| | |
86
| |
|
Capacity expansion project expenses
| |
—
| | |
24
| | |
—
| | |
59
| |
|
Equity method investment tax contingency accrual(3) | |
—
| | |
—
| | |
7
| | |
—
| |
|
Loss on embedded derivative(4) | |
1
| | |
22
| | |
4
| | |
22
| |
|
Gain on foreign currency derivatives
| |
—
| | |
(1
|
)
| |
—
| | |
(2
|
)
|
|
Revolver amendment fees(5) | |
—
| | |
2
| | |
—
| | |
2
| |
|
Private Senior Notes amendment arrangement fees
| |
—
| | |
2
| | |
—
| | |
2
| |
|
Financing costs related to bridge loan commitment fee(5) | |
—
| | |
—
| | |
—
| | |
28
| |
|
Income tax adjustments(6) | |
2
|
| |
(31
|
)
| |
(26
|
)
| |
(69
|
)
|
|
Total adjustments
| |
(3
|
)
| |
60
|
| |
51
|
| |
156
|
|
|
Adjusted net (loss) earnings
| |
$
|
(90
|
)
| |
$
|
30
|
| |
$
|
(56
|
)
| |
$
|
199
|
|
|
| |
| |
| | Three months ended
September 30, | | Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
|
Net (loss) earnings per diluted share attributable to common
stockholders
| |
$
|
(0.37
|
)
| |
$
|
(0.13
|
)
| |
$
|
(0.46
|
)
| |
$
|
0.19
| |
| Start-up costs Donaldsonville ammonia
| |
—
| | |
0.08
| | |
—
| | |
0.08
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(0.03
|
)
| |
0.09
| | |
0.27
| | |
(0.73
|
)
|
|
Transaction costs(1) | |
—
| | |
—
| | |
—
| | |
0.77
| |
|
Loss on foreign currency transactions including intercompany loans(2) | |
—
| | |
0.01
| | |
0.01
| | |
0.37
| |
|
Capacity expansion project expenses
| |
—
| | |
0.10
| | |
—
| | |
0.25
| |
|
Equity method investment tax contingency accrual(3) | |
—
| | |
—
| | |
0.03
| | |
—
| |
|
Loss on embedded derivative(4) | |
—
| | |
0.09
| | |
0.02
| | |
0.09
| |
|
Gain on foreign currency derivatives
| |
—
| | |
—
| | |
—
| | |
(0.01
|
)
|
|
Revolver amendment fees(5) | |
—
| | |
0.01
| | |
—
| | |
0.01
| |
|
Private Senior Notes amendment arrangement fees
| |
—
| | |
0.01
| | |
—
| | |
0.01
| |
|
Financing costs related to bridge loan commitment fee(5) | |
—
| | |
—
| | |
—
| | |
0.12
| |
|
Income tax adjustments(6) | |
0.01
|
| |
(0.13
|
)
| |
(0.11
|
)
| |
(0.30
|
)
|
|
Total adjustments
| |
(0.02
|
)
| |
0.26
|
| |
0.22
|
| |
0.66
|
|
|
Adjusted net (loss) earnings per diluted share
| |
$
|
(0.39
|
)
| |
$
|
0.13
|
| |
$
|
(0.24
|
)
| |
$
|
0.85
|
|
_______________________________________________________________________________
(1) |
|
Transaction costs relate to costs of various consulting and legal
services associated with the company's proposed combination with
certain businesses of OCI and the company's strategic venture with
CHS.
|
(2) | |
Loss on foreign currency transactions including intercompany loans
primarily relates to the unrealized foreign currency exchange rate
impact on intercompany debt that has not been permanently invested.
|
(3) | |
Represents an accrual on the books of Point Lisas Nitrogen Ltd.
(PLNL), the company's Trinidad joint venture, for a disputed tax
assessment. Amount reflects the company's 50 percent equity interest
in PLNL. This is included in equity in losses of operating
affiliates in our consolidated statements of operations.
|
(4) | |
Represents the change in fair value of the embedded derivative
included within the terms of the company's strategic venture with
CHS.
|
(5) | |
Not included in the calculation of EBITDA.
|
(6) | |
Represents the adjustment to the GAAP basis tax provision reflecting
the tax impact of the other non-GAAP adjustments.
|
| |
|
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL
INFORMATION
NON-GAAP DISCLOSURE ITEMS
Reconciliation of cost of sales and cost of sales per ton (GAAP
measures) to controllable cost of sales and controllable cost of sales
per ton (non-GAAP measures), as applicable:
Controllable cost of sales is defined as cost of sales adjusted for
natural gas costs, realized and unrealized losses (gains) on natural gas
derivatives, depreciation and amortization, and start-up costs related
to the company's Donaldsonville ammonia plant. The company has presented
controllable cost of sales and controllable cost of sales per ton
because management uses these measures, and believes they are useful to
investors, as supplemental financial measures in the comparison of
year-over-year performance.
|
| Three months ended
September 30, |
| Nine months ended
September 30, |
| | 2017 |
| 2016 | | 2017 |
| 2016 |
| | (in millions) |
|
Cost of sales
| |
$
|
861
| | |
$
|
678
| | |
$
|
2,744
| | |
$
|
2,072
| |
|
Natural gas costs(1) | |
270
| | |
169
| | |
885
| | |
515
| |
|
Realized net losses on natural gas derivatives(2) | |
10
| | |
11
| | |
13
| | |
127
| |
|
Unrealized net mark-to-market (gain) loss on natural gas derivatives
| |
(7
|
)
| |
21
| | |
64
| | |
(169
|
)
|
|
Depreciation and amortization
| |
215
| | |
135
| | |
613
| | |
415
| |
| Start-up costs Donaldsonville ammonia
| |
—
|
| |
18
|
| |
—
|
| |
18
|
|
|
Total adjustments
| |
488
|
| |
354
|
| |
1,575
|
| |
906
|
|
|
Controllable cost of sales
| |
$
|
373
|
| |
$
|
324
|
| |
$
|
1,169
|
| |
$
|
1,166
|
|
| | | | | | | |
|
|
Tons of product sold (000s)
| |
4,877
| | |
3,666
| | |
14,668
| | |
12,274
| |
| | | | | | | |
|
| Cost of sales per ton | | $ | 176.54 | | | $ | 184.94 | | | $ | 187.07 | | | $ | 168.81 | |
| (Decrease) increase in cost of sales per ton | | (5 | )% | | | | 11 | % | | |
| Controllable cost of sales per ton | | $ | 76.48 | | | $ | 88.38 | | | $ | 79.70 | | | $ | 95.00 | |
| Decrease in controllable cost of sales per ton | | (13 | )% | | | | (16 | )% | | |
_______________________________________________________________________________
(1) |
|
Includes the cost of natural gas that is included in cost of sales
during the period under the first-in, first-out inventory cost
method.
|
(2) | |
Includes realized gains and losses on natural gas derivatives
settled during the period. Excludes unrealized mark-to-market gains
and losses on natural gas derivatives.
|
| |
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20171101006718/en/
CF Industries Holdings, Inc.
Media
Chris Close
Director,
Corporate Communications
847-405-2542 - cclose@cfindustries.com
or
Investors
Martin
Jarosick
Vice President, Investor Relations
847-405-2045 - mjarosick@cfindustries.com
Source: CF Industries Holdings, Inc.