Capacity Expansion Projects Complete and
Generating Cash
Excess Global Nitrogen Supply Pressured Fourth
Quarter Results
Reduced Chinese Urea Exports, Improving Prices
Suggest Positive First Half of 2017
CF Industries Holdings, Inc. (NYSE: CF), the global leader in
nitrogen fertilizer manufacturing and distribution, today announced
results for its fourth quarter and full year ended
December 31, 2016.
Fourth Quarter Highlights
- Net loss of $320 million, or $1.38 per
diluted share; adjusted net loss(1) of $90 million, or $0.39
per diluted share(1)
- EBITDA(2) loss of $135 million;
adjusted EBITDA(2) of $133 million
- New ammonia and urea plants at Port
Neal Nitrogen Complex in operation
- Refinanced private placement notes
- Shipments of UAN in fourth quarter
exceeded two million tons, a company record
- Record fourth quarter exports above
500,000 tons
- Net loss includes $134 million non-cash
impairment charge related to Point Lisas Nitrogen Limited
(PLNL)
Full Year Highlights
- Net loss of $277 million, or $1.19 per
diluted share; adjusted net earnings(1) of $109 million or
$0.47 per diluted share(1)
- EBITDA(2) of $395 million; adjusted
EBITDA(2) of $858 million
- Accelerated tax depreciation on
capacity expansion projects driving estimated federal and state tax
refunds of approximately $800 million, expect to receive in third
quarter 2017
- Record exports of approximately 1.4
million tons in 2016, 110 percent increase over prior year
_________________________________________________________________________
(1) See reconciliations of adjusted net earnings and
adjusted net earnings per diluted share to the most directly
comparable GAAP measures in the tables accompanying this release.
(2) EBITDA is defined as net earnings attributable to common
stockholders plus interest expense (income)-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.
Overview of Results
CF Industries Holdings, Inc., today announced a fourth quarter
2016 net loss attributable to common stockholders of $320 million,
or $1.38 per diluted share, and adjusted net loss of $90 million,
or $0.39 per diluted share. Fourth quarter 2016 EBITDA loss was
$135 million, and adjusted EBITDA was $133 million. These
results compare to fourth quarter 2015 net earnings attributable to
common stockholders of $27 million, or $0.11 per diluted share;
adjusted net earnings of $168 million, or $0.72 per diluted share;
EBITDA of $254 million; and adjusted EBITDA of $445 million.
Fourth quarter 2016 results include a realized loss on natural gas
hedges of $5 million for the fourth quarter of 2016, compared to a
realized loss on natural gas hedges of $30 million for the fourth
quarter of 2015.
For the full year 2016, net loss attributable to common
stockholders was $277 million, or $1.19 per diluted share, and
adjusted net earnings was $109 million, or $0.47 per diluted share.
Full year 2016 EBITDA was $395 million, and adjusted EBITDA was
$858 million. These results compare to full year 2015 net earnings
attributable to common stockholders of $700 million, or $2.96 per
diluted share; adjusted net earnings for the full year 2015 of $896
million, or $3.79 per diluted share; EBITDA of $1.67 billion; and
adjusted EBITDA of $1.98 billion. Full year 2016 results include a
realized loss on natural gas hedges of $133 million, compared to a
realized loss on natural gas hedges of $70 million for the
full year 2015.
The company expects to receive tax refunds of approximately $800
million due to the carryback of certain federal and state tax
losses from the 2016 tax year to prior periods. These tax losses
are primarily related to accelerated tax depreciation of the
capacity expansion projects that were placed in service in 2016.
The cash refunds related to this tax loss carryback are expected to
be received in the third quarter of 2017.
During the fourth quarter, the company completed the issuance of
$1.25 billion of senior secured notes. The proceeds were used
primarily to fund the prepayment of the $1.0 billion principal
amount of CF Industries, Inc.'s senior notes due 2022, 2025 and
2027, plus a related make-whole amount of approximately $170
million.
CF Industries has completed a review of its equity method
investment in PLNL, the company's 50 percent interest in an ammonia
production joint venture located in the Republic of Trinidad and
Tobago. This review assessed the recoverability of the company's
carrying value of the investment. During the fourth quarter of
2016, the company recognized an impairment charge of $134 million
relating to its investment in PLNL due to projected longer-term
challenges with gas availability and potential price increases from
the government-controlled gas supplier.
Manufacturing Operations
CF Industries' manufacturing network operated safely and
efficiently during the fourth quarter of 2016. As of December 31,
2016, CF Industries' 12-month rolling average recordable incident
rate was 1.16 incidents per 200,000 work hours, well below industry
averages. Ammonia utilization rate during the quarter across the
manufacturing network was 99 percent.
During the fourth quarter, the company completed its capacity
expansion projects as the new ammonia and urea plants at the Port
Neal Nitrogen Complex were successfully commissioned and
started-up. Both new plants are producing on-spec product for
sale.
“Our expansion projects are complete, and the company's
production capacity is now 25 percent greater on a nutrient ton
basis than it was this time last year," said Tony Will, president
and chief executive officer, CF Industries Holdings, Inc. "With our
cash generation capability strengthened significantly as a result,
and the structural advantages of being the low cost producer in an
import-dependent region, we believe CF is the best-positioned
company to benefit both from the improving market in the first half
of 2017 and from the sustained recovery we see ahead for the sector
over the next several years."
Sales Overview
Net sales in the fourth quarter of 2016 decreased to
$867 million from $1,115 million in the same period last year
due to lower average selling prices across all segments. Excess
global nitrogen supply continued to pressure prices as it had
throughout 2016. The average selling price for ammonia was $277 per
ton in the fourth quarter of 2016 compared to $458 per ton in the
fourth quarter of 2015. Similarly, the average selling price for
urea was $214 per ton in the fourth quarter of 2016 compared to
$275 per ton in the fourth quarter of 2015, and the average selling
price for UAN was $149 per ton in the fourth quarter of 2016
compared to $230 per ton in the fourth quarter of 2015.
Sales volume for the quarter increased compared to the fourth
quarter of 2015, partially offsetting the decrease in average
prices. Greater volumes were available for sale due to the
company's completed capacity expansion projects. Additionally,
exports of UAN and ammonia were significantly higher year-over-year
as the company continues to develop a global portfolio of customers
in order to optimize the overall business.
Cost of sales decreased in the fourth quarter of 2016 compared
to the fourth quarter of 2015 due primarily to an unrealized net
mark-to-market gain on natural gas derivatives of $91 million in
the fourth quarter of 2016 compared to an unrealized net
mark-to-market loss on natural gas derivatives of $97 million
in the fourth quarter of 2015. This was partially offset by the
impact of higher volumes in 2016, $34 million in start-up costs
related to the new Port Neal ammonia and urea plants, and an
increase of $43 million in depreciation related to the capacity
expansion projects compared to the fourth quarter of 2015.
In the fourth quarter of 2016, the average cost of natural gas
reflected in cost of sales for the company was $3.24 per MMBtu,
which includes a realized loss of $0.06 per MMBtu on natural gas
hedges, totaling $5 million. This compares to the average cost
of natural gas in cost of sales of $3.23 per MMBtu for the fourth
quarter of 2015, which included a realized loss of $0.41 per MMBtu
on natural gas hedges totaling $30 million. During the fourth
quarter of 2016, the average price of natural gas at Henry Hub in
North America was $2.99 per MMBtu, and the average price of natural
gas at the National Balancing Point in the United Kingdom was $5.69
per MMBtu.
The company did not enter into any additional natural gas hedges
in the fourth quarter of 2016.
Outlook
Global nitrogen prices rose during the fourth quarter of 2016.
U.S. prices also increased, but remained below international
parity. The average U.S. Gulf urea barge price was approximately
$180 per ton at the start of the fourth quarter and increased to
approximately $240 per ton by the end of the quarter. The average
U.S. Gulf UAN barge price was approximately $130 per ton at the
start of the fourth quarter and increased to $153 per ton by the
end of the quarter.
A decline in Chinese urea exports, from more than one million
tonnes per month in the first quarter of 2016 to an average of
approximately 470,000 tonnes per month in the fourth quarter, has
been a key driver of increased global nitrogen prices. Rising costs
for marginal producers in China, including significantly higher
coal costs compared to the middle of 2016 along with reduced urea
subsidies, and concerns over pollution and air quality drove urea
operating rates, according to published reports, down to
approximately 50 percent in that country during the fourth quarter.
At these operating rates, Chinese demand for urea is expected to
exceed available domestic supply during the spring. Chinese
manufacturers will need to increase urea production, or purchasers
will need to import urea, in order to meet seasonal domestic needs.
As a result, CF expects global prices will be supported through the
first half of the year due to limited Chinese export availability.
For the full year 2017, Chinese urea exports are expected to
decline from 8.9 million tonnes in 2016 to an anticipated range of
approximately 5-6 million tonnes.
Higher hydrocarbon feedstock costs compared to the lows of early
and mid-2016 are also supporting higher nitrogen prices. Higher oil
prices have led to increased prices for contract gas in Europe. The
strengthened Russian ruble has led to higher U.S. dollar gas prices
in that country.
Import activity into North America during the fourth quarter of
2016 was lower than the fourth quarter of 2015 driven in part by
regional prices that were below international parity. Additionally,
the impact of the new North American capacity brought online during
2016 and expectations for the startup of additional new capacity in
the region lowered the perceived economic incentive for North
American purchasers to import product.
CF Industries expects North American demand for nitrogen in 2017
to be relatively unchanged compared to 2016. In the United States,
the company forecasts 89.5 million acres of corn planted and fewer
than 50 million acres of wheat planted, while in Canada lower grain
planting is anticipated to be largely offset by increased canola
plantings. As a result, total North American nitrogen fertilizer
demand is projected to be roughly 16 million nutrient tons for full
year 2017. Based on this, approximately 7 million nutrient tons of
imported nitrogen will be required to meet North American
agricultural and industrial demand for the full year 2017.
The company expects nitrogen prices in North America during the
first half of 2017 to continue to improve into the second quarter,
driven by the same factors currently supporting the higher global
prices. As additional nitrogen capacity comes online globally
during 2017, including a significant increase in North America,
market price uncertainty exists for the second half of the year
before a more sustained global nitrogen price recovery is expected
to begin in 2018.
Capital Expenditures
New capital expenditures for 2017 are estimated to be in the
range of approximately $400 to $450 million for sustaining and
other, a level that continues the company's commitment to safe,
reliable and compliant operations. Actual cash expenditures will
also reflect amounts accrued but not paid in 2016. At December 31,
2016, approximately $225 million was accrued related to activities
in 2016.
Liquidity
As of December 31, 2016, the company had a balance of cash
and cash equivalents of $1.16 billion, had no borrowings
outstanding under its revolving credit facility and was in
compliance with all applicable covenant requirements under its debt
instruments.
CHS Inc. Distribution
On January 31, 2017, the Board of Managers of CF Industries
Nitrogen, LLC approved a semi-annual distribution payment to CHS
Inc. of $48 million for the distribution period ended December 31,
2016. The distribution was paid on January 31, 2017. The total
distribution approved pertaining to 2016 was approximately $128
million.
Consolidated Results
Three months ended Twelve months ended
December 31, December 31, 2016
2015 2016 2015 (dollars in millions,
except per share
and per MMBtu amounts)
Net sales $ 867 $ 1,115 $ 3,685 $ 4,308 Cost of sales 773
835 2,845 2,761 Gross margin $ 94 $ 280
$ 840 $ 1,547 Gross margin percentage
10.8 % 25.1 % 22.8 % 35.9 % Net (loss) earnings attributable
to common stockholders $ (320 ) $ 27 $ (277 ) $ 700 Adjusted net
(loss) earnings (1) $ (90 ) $ 168 $ 109 $ 896 Net (loss)
earnings per diluted share $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.96
Adjusted net (loss) earnings per diluted share(1) $ (0.39 ) $ 0.72
$ 0.47 $ 3.79 EBITDA(1) $ (135 ) $ 254 $ 395 $ 1,666
Adjusted EBITDA(1) $ 133 $ 445 $ 858 $ 1,975 Tons of product
sold (000s) 4,683 3,982 16,957 13,718 Supplemental data (per
MMBtu): Natural gas costs in cost of sales(2) $ 3.18 $ 2.82 $ 2.61
$ 3.00 Realized derivatives loss in cost of sales(3) 0.06
0.41 0.46 0.28 Cost of natural gas in cost of
sales $ 3.24 $ 3.23 $ 3.07 $ 3.28 Average daily market price
of natural gas (per MMBtu): Henry Hub $ 2.99 $ 2.09 $ 2.48 $ 2.61
National Balancing Point UK $ 5.69 $ 5.58 $ 4.66 $ 6.53
Unrealized net mark-to-market (gain) loss on natural gas
derivatives $ (91 ) $ 97 $ (260 ) $ 176 Capital expenditures
$ 392 $ 678 $ 2,211 $ 2,469 Production volume by product
tons (000s): Ammonia(4) 2,326 2,098 8,307 7,673 Granular urea 914
758 3,368 2,520 UAN (32%) 1,795 1,602 6,698 5,888 AN 553 487 1,845
1,283
_______________________________________________________________________________
(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 the
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 years ended December 31, 2016 and 2015, 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. For
the quarter and year ended December 31, 2016, we reported a net
loss attributable to common stockholders of $320 million and
$277 million, respectively. For the quarter and year ended
December 31, 2015, we reported net earnings attributable to common
stockholders of $27 million and $700 million, respectively.
Positive amounts in the table below are costs or expenses incurred,
while negative amounts are income recognized in the periods
presented.
Three months ended Twelve months
ended December 31, December 31,
2016 2015 2016 2015
Pre-Tax After-Tax Pre-Tax
After-Tax Pre-Tax After-Tax
Pre-Tax After-Tax (in millions)
Capacity Expansion Projects: Expansion project depreciation
(1) $ 56 $ 35 $ 13 $ 8 $ 116 $ 73 $ 13
$ 8 Start-up costs - Donaldsonville / Port Neal expansion plants
(1) 34 21 — — 52 32 — — Expansion project expenses (2) 14 9 15 9 73
46 51 32 Loss on foreign currency derivatives (2) 2 1 3 2 — — 22 13
Strategic Venture with CHS: Noncontrolling interest (7) 26
26 — — 93 93 — — Loss on embedded derivative liability (2) 1 1 — —
23 14 — —
Debt Restructuring: Loss on debt extinguishment
167 105 — — 167 105 — — Debt and revolver amendment fees (3) 14 8 —
— 16 10 — — Private Senior Notes amendment arrangement fees (4) — —
— — 2 1 — —
CF Fertilisers UK Acquisition: Gain on
remeasurement of CF Fertilisers UK investment (5) — — — — — — (94 )
(94 )
Equity Method Investments: Impairment of equity method
investment in PLNL (6) 134 134 62 62 134 134 62 62 Loss on sale of
equity method investments (5) — — — — — — 43 31
Transaction
Costs and Termination of Agreement with OCI: Transaction costs
— — 20 12 179 96 57 37 Financing costs related to bridge loan
commitment fee (3) — — — — 28 18 6 4
Other items: Unrealized
net mark-to-market (gain) loss on natural gas derivatives (1) (91 )
(57 ) 97 61 (260 ) (163 ) 176 111 Loss (gain) on foreign currency
transactions including intercompany loans (2) 7
8 (6 ) (5 ) 93
93 (8 ) —
Total Impact of Significant Items $ 364 $ 291
$ 204 $ 149 $ 716 $ 552
$ 328 $ 204
_______________________________________________________________________________
(1) Included in cost of sales in our consolidated statements
of operations. (2) Included in other operating-net in our
consolidated statements of operations. (3) Included in interest
expense in our consolidated statements of operations. (4) Included
in selling, general and administrative expenses in our consolidated
statements of operations. (5) Included in equity in earnings of
non-operating affiliates in our consolidated statements of
operations. (6) Included in equity in (losses) earnings of
operating affiliates in our consolidated statements of operations.
(7) Included in net earnings attributable to noncontrolling
interests in our consolidated statements of operations.
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 Subtotals of
Amounts Above by Line Item in the Consolidated
Statements of Operations: Cost of sales $ (1 ) $ 110 $ (92 ) $
189 Selling, general and administrative expenses — — 2 —
Transaction costs — 20 179 57 Other operating—net 24 12 189 65
Equity in (losses) earnings of operating affiliates 134 62 134 62
Interest expense 14 — 44 6 Loss on debt extinguishment 167 — 167 —
Equity in earnings of non-operating affiliates—net of taxes — — —
(51 ) Net earnings attributable to noncontrolling interests 26
— 93 —
Total Impact of Significant
Items $ 364 $ 204 $ 716 $ 328
Segment Results
Ammonia Segment
CF Industries’ ammonia segment produces anhydrous ammonia
(ammonia), which is the company’s most concentrated nitrogen
fertilizer, 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 product that the
company upgrades into other nitrogen fertilizers such as urea, UAN,
and AN.
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (dollars in
millions,
except per ton amounts)
Net sales $ 211 $ 375 $ 981 $ 1,523 Cost of sales 210 249
715 884 Gross margin $ 1 $ 126 $
266 $ 639 Gross margin percentage 0.5 % 33.6 %
27.1 % 42.0 % Sales volume by product tons (000s) 762 819
2,874 2,995 Sales volume by nutrient tons (000s)(1) 626 671 2,358
2,456 Average selling price per product ton $ 277 $ 458 $
341 $ 509 Average selling price per nutrient ton(1) 337 560 416 620
Gross margin per product ton $ 1 $ 154 $ 93 $ 213 Gross
margin per nutrient ton(1) 2 188 113 260 Depreciation and
amortization $ 37 $ 20 $ 96 $ 95 Unrealized net
mark-to-market (gain) loss on natural gas derivatives $ (30 ) $ 22
$ (85 ) $ 40
_______________________________________________________________________________
(1) Nutrient tons represent the tons of nitrogen within the
product tons.
Comparison of 2016 to 2015 fourth quarter periods:
- Ammonia sales volume decreased for the
fourth quarter of 2016 compared to the fourth quarter of 2015 as
unfavorable weather and economic considerations, including
declining year-over-year farmer disposable income and futures
prices favoring soybeans over corn, led many farmers to delay
ammonia application and planting decisions until spring. The
decrease was partially offset by a significant increase in export
sales.
- Ammonia average selling prices
decreased primarily due to excess global nitrogen supply.
Additionally, the company's ammonia sales during the quarter
included a higher proportion of lower-priced industrial and export
sales compared to the prior year.
- Ammonia gross margin per ton decreased
in the fourth quarter of 2016 due to lower average selling prices,
$32 million of start-up costs associated with the new Port Neal
ammonia plant, and a $17 million increase in depreciation primarily
related to the new Donaldsonville and Port Neal ammonia plants. The
decrease was partially offset by a $30 million unrealized net
mark-to-market gain on natural gas derivatives in the fourth
quarter of 2016 compared to a $22 million unrealized net
mark-to-market loss on natural gas derivatives in the fourth
quarter of 2015.
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 fertilizers.
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (dollars in
millions,
except per ton amounts)
Net sales $ 189 $ 194 $ 831 $ 788 Cost of sales 139 145
584 469 Gross margin $ 50 $ 49 $
247 $ 319 Gross margin percentage 26.5 % 25.2
% 29.7 % 40.4 % Sales volume by product tons (000s) 883 705
3,597 2,460 Sales volume by nutrient tons (000s)(1) 406 325 1,654
1,132 Average selling price per product ton $ 214 $ 275 $
231 $ 320 Average selling price per nutrient ton(1) 466 597 502 696
Gross margin per product ton $ 57 $ 69 $ 69 $ 129 Gross
margin per nutrient ton(1) 123 150 149 281 Depreciation and
amortization $ 37 $ 20 $ 112 $ 51 Unrealized net
mark-to-market (gain) loss on natural gas derivatives $ (23 ) $ 26
$ (67 ) $ 47
_______________________________________________________________________________
(1) Nutrient tons represent the tons of nitrogen within the
product tons.
Comparison of 2016 to 2015 fourth quarter periods:
- Granular urea sales volume increased
for the quarter primarily due to additional volume available for
sale from the new urea capacity at the company's Donaldsonville
Nitrogen Complex.
- Granular urea average selling price per
ton decreased due to excess global nitrogen supply.
- Granular urea gross margin per ton
decreased due to lower average selling prices, a $17 million
increase in depreciation and amortization primarily associated with
the new Donaldsonville and Port Neal urea plants and $2 million in
start-up costs associated with the new Port Neal urea plant, offset
by a $23 million unrealized net mark-to-market gain on natural gas
derivatives in the fourth quarter of 2016 compared to a $26 million
unrealized net mark-to-market loss on natural gas derivatives in
the fourth quarter of 2015.
UAN Segment
CF Industries’ UAN segment produces urea ammonium nitrate
solution (UAN). UAN is a liquid fertilizer 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 Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (dollars in
millions,
except per ton amounts)
Net sales $ 305 $ 368 $ 1,196 $ 1,480 Cost of sales 274 277
920 955 Gross margin $ 31 $ 91 $
276 $ 525 Gross margin percentage 10.2 % 24.8
% 23.1 % 35.5 % Sales volume by product tons (000s) 2,047
1,599 6,681 5,865 Sales volume by nutrient tons (000s)(1) 648 507
2,109 1,854 Average selling price per product ton $ 149 $
230 $ 179 $ 252 Average selling price per nutrient ton(1) 471 724
567 798 Gross margin per product ton $ 15 $ 57 $ 41 $ 90
Gross margin per nutrient ton(1) 48 180 131 283 Depreciation
and amortization $ 72 $ 52 $ 247 $ 192 Unrealized net
mark-to-market (gain) loss on natural gas derivatives $ (29 ) $ 40
$ (81 ) $ 73
_______________________________________________________________________________
(1) Nutrient tons represent the tons of nitrogen within the
product tons.
Comparison of 2016 to 2015 fourth quarter periods:
- UAN sales volume increased in the
fourth quarter of 2016 due to additional volume available for sale
from the new UAN capacity at the company's Donaldsonville Nitrogen
Complex. During the quarter, customers built UAN inventories in
preparation for spring after having delayed purchases earlier in
the year. The company also exported a significant amount of UAN
during the quarter.
- UAN average selling price per ton
decreased due to excess global nitrogen supply. Additionally, the
company's UAN sales during the quarter included a higher proportion
of lower-priced export sales compared to the prior year.
- UAN gross margin per ton decreased due
to lower average selling prices and a $20 million increase in
depreciation and amortization primarily associated with the new
Donaldsonville UAN plant, partially offset by a $29 million
unrealized net mark-to-market gain on natural gas derivatives in
the fourth quarter of 2016 compared to a $40 million unrealized net
mark-to-market loss on natural gas derivatives in the fourth
quarter of 2015.
AN Segment
CF Industries' AN segment produces ammonium nitrate (AN). AN is
used as a nitrogen fertilizer with nitrogen content between 29% to
35%, 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 Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (dollars in
millions,
except per ton amounts)
Net sales $ 93 $ 115 $ 411 $ 294 Cost of sales 93 112
409 291 Gross margin $ — $ 3 $ 2
$ 3 Gross margin percentage — % 3.0 % 0.5 % 1.1 %
Sales volume by product tons (000s) 541 495 2,151 1,290
Sales volume by nutrient tons (000s)(1) 181 166 726 437
Average selling price per product ton $ 172 $ 233 $ 191 $ 228
Average selling price per nutrient ton(1) 514 693 566 673
Gross margin per product ton $ — $ 7 $ 1 $ 2 Gross margin per
nutrient ton(1) — 20 3 7 Depreciation and amortization $ 21
$ 22 $ 93 $ 66 Unrealized net mark-to-market (gain) loss on
natural gas derivatives $ (3 ) $ 9 $ (10 ) $ 16
_______________________________________________________________________________
(1) Nutrient tons represent the tons of nitrogen within the
product tons.
Comparison of 2016 to 2015 fourth quarter periods:
- AN sales volume was higher compared to
the fourth quarter of 2015. Agricultural AN sales in the United
Kingdom increased as farmers purchased AN early driven by lower
nitrogen prices, improving crop prices and higher European Union
support payments. AN sales volumes in North America also increased
due to additional production volume of industrial AN at the
company's Yazoo City Nitrogen Complex.
- AN average selling price per ton
decreased primarily due to excess global nitrogen supply.
- AN gross margin per ton decreased
primarily due to lower selling prices, which were partially offset
by a $3 million unrealized net mark-to-market gain on natural gas
derivatives in the fourth quarter of 2016 compared to a $9 million
unrealized net mark-to-market loss on natural gas derivatives in
the fourth quarter of 2015.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid
(DEF), urea liquor, nitric acid and compound fertilizer products
(NPKs).
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (dollars in
millions,
except per ton amounts)
Net sales $ 69 $ 63 $ 266 $ 223 Cost of sales 57 52
217 162 Gross margin $ 12 $ 11 $ 49
$ 61 Gross margin percentage 17.4 % 16.8 %
18.4 % 27.2 % Sales volume by product tons (000s) 450 364
1,654 1,108 Sales volume by nutrient tons (000s)(1) 87 71 317 215
Average selling price per product ton $ 153 $ 175 $ 161 $
202 Average selling price per nutrient ton(1) 793 899 839 1,040
Gross margin per product ton $ 27 $ 29 $ 30 $ 55 Gross
margin per nutrient ton(1) 138 151 155 283 Depreciation and
amortization $ 12 $ 9 $ 46 $ 35 Unrealized net
mark-to-market (gain) loss on natural gas derivatives $ (6 ) $ — $
(17 ) $ —
_______________________________________________________________________________
(1) Nutrient tons represent the tons of nitrogen within the
product tons.
Comparison of 2016 to 2015 fourth quarter periods:
- Other segment volume was higher 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 to excess global nitrogen supply.
- Other segment gross margin per ton
decreased primarily due to lower average selling prices partially
offset by a $6 million unrealized net mark-to-market gain on
natural gas derivatives in the fourth quarter of 2016.
Dividend Payment
On February 8, 2017, CF Industries’ Board of Directors
declared a quarterly dividend of $0.30 per common share. The
dividend will be paid on February 28, 2017 to stockholders of
record as of February 17, 2017.
Conference Call
CF Industries will hold a conference call to discuss its fourth
quarter 2016 results at 9:00 a.m. ET on Thursday, February 16,
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 the central United
States, Canada and the United Kingdom, 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, and adjusted
net (loss) earnings per diluted share, 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, and adjusted
net (loss) earnings per diluted share 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, and
adjusted net (loss) earnings per diluted share 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.”
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 and its subsidiaries by the
Company's senior secured revolving credit agreement; 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
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (in millions,
except per share amounts) Net sales $ 867 $ 1,115 $ 3,685 $
4,308 Cost of sales 773 835 2,845 2,761
Gross margin 94 280 840 1,547 Selling,
general and administrative expenses 33 50 174 170 Transaction costs
— 20 179 57 Other operating—net 27 18 208 92
Total other operating costs and expenses 60 88 561 319
Equity in (losses) earnings of operating affiliates (134 ) (55 )
(145 ) (35 ) Operating (loss) earnings (100 ) 137 134 1,193
Interest expense 70 40 200 133 Interest income (1 ) (1 ) (5 ) (2 )
Loss on debt extinguishment 167 — 167 — Other non-operating—net (1
) (1 ) (2 ) 4 (Loss) earnings before income taxes and equity
in earnings of non-operating affiliates (335 ) 99 (226 ) 1,058
Income tax (benefit) provision (47 ) 63 (68 ) 396 Equity in
earnings of non-operating affiliates—net of taxes — —
— 72 Net (loss) earnings (288 ) 36 (158 ) 734 Less:
Net earnings attributable to noncontrolling interests 32 9
119 34 Net (loss) earnings attributable to
common stockholders $ (320 ) $ 27 $ (277 ) $ 700
Net (loss) earnings per share attributable to common
stockholders: Basic $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.97
Diluted $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.96
Weighted-average common shares outstanding: Basic 233.1
233.1 233.1 235.3 Diluted 233.1 233.8
233.1 236.1
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
December 31, December 31,
2016 2015 (in millions) Assets Current
assets: Cash and cash equivalents $ 1,164 $ 286 Restricted cash 5
23 Accounts receivable—net 236 267 Inventories 339 321 Prepaid
income taxes 841 185 Other current assets 70 45 Total
current assets 2,655 1,127 Property, plant and equipment—net 9,652
8,539 Investments in affiliates 139 298 Goodwill 2,345 2,390 Other
assets 340 329
Total assets $ 15,131 $ 12,683
Liabilities and Equity Current liabilities: Accounts
payable and accrued expenses $ 638 $ 918 Income taxes payable 1 5
Customer advances 42 162 Other current liabilities 5 130
Total current liabilities 686 1,215 Long-term debt 5,778
5,537 Deferred income taxes 1,630 916 Other liabilities 545 628
Equity: Stockholders' equity 3,348 4,035 Noncontrolling interests
3,144 352 Total equity 6,492 4,387
Total
liabilities and equity $ 15,131 $ 12,683
CF INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Three months ended Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (in
millions) Operating Activities: Net (loss) earnings $
(288 ) $ 36 $ (158 ) $ 734 Adjustments to reconcile net (loss)
earnings to net cash provided by operating activities: Depreciation
and amortization 203 132 678 480 Deferred income taxes 9 84 739 78
Stock-based compensation expense 4 4 19 17 Unrealized net (gain)
loss on natural gas and foreign currency derivatives (91 ) 93 (260
) 163 Loss on embedded derivative 1 — 23 — Gain on re-measurement
of CF Fertilisers UK investment — — — (94 ) Impairment of equity
method investment in PLNL 134 62 134 62 Loss on sale of equity
method investments — — — 43 Loss on extinguishment of debt 167 —
167 — Loss on disposal of property, plant and equipment 2 3 10 21
Undistributed earnings of affiliates—net of taxes 9 (1 ) 9 (3 )
Changes in: Accounts receivable—net (37 ) (20 ) 18 (4 ) Inventories
(3 ) 1 (7 ) (71 ) Accrued and prepaid income taxes (11 ) (79 ) (676
) (148 ) Accounts payable and accrued expenses (11 ) 10 (18 ) 42
Customer advances (45 ) (220 ) (120 ) (164 ) Other—net (17 ) 28
59 51 Net cash provided by operating
activities 26 133 617 1,207
Investing Activities: Additions to property, plant and
equipment (392 ) (678 ) (2,211 ) (2,469 ) Proceeds from sale of
property, plant and equipment 6 3 14 12 Proceeds from sale of
equity method investment — — — 13 Purchase of CF Fertilisers UK,
net of cash acquired — 2 — (552 ) Withdrawals from restricted cash
funds 2 3 18 63 Other—net (2 ) (7 ) 2 (43 ) Net cash used in
investing activities (386 ) (677 ) (2,177 ) (2,976 )
Financing
Activities: Proceeds from long-term borrowings 1,244 — 1,244
1,000 Payments of long-term borrowings (1,170 ) — (1,170 ) —
Proceeds from short-term borrowings — — 150 367 Payments of
short-term borrowings — — (150 ) (367 ) Payment to CHS related to
credit provision (5 ) — (5 ) — Financing fees (20 ) (19 ) (31 ) (47
) Dividends paid on common stock (71 ) (70 ) (280 ) (282 ) Issuance
of noncontrolling interest in CFN — — 2,800 — Distributions to
noncontrolling interests (8 ) (13 ) (119 ) (45 ) Purchases of
treasury stock — — — (556 ) Issuances of common stock under
employee stock plans — — — 8 Shares withheld for taxes — —
— (1 ) Net cash (used in) provided by financing
activities (30 ) (102 ) 2,439 77 Effect of exchange
rate changes on cash and cash equivalents — (11 ) (1 ) (19 )
(Decrease) increase in cash and cash equivalents (390 ) (657 ) 878
(1,711 ) Cash and cash equivalents at beginning of period 1,554
943 286 1,997 Cash and cash equivalents
at end of period $ 1,164 $ 286 $ 1,164 $ 286
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 (income)-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 Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (in
millions) Tons of product sold (000s) 4,683 3,982 16,957 13,718
Net sales $ 867 $ 1,115 $ 3,685 $ 4,308 Net (loss) earnings
attributable to common stockholders $ (320 ) $ 27 $ (277 ) $ 700
Interest expense (income)—net 69 39 195 131 Income tax (benefit)
provision(1) (47 ) 63 (68 ) 385 Depreciation and amortization 203
132 678 480 Less: other adjustments (40 ) (7 ) (133 ) (30 ) EBITDA
(135 ) 254 395 1,666 Net (loss) earnings per
ton $ (68.33 ) $ 6.78 $ (16.34 ) $ 51.03 Net (loss) earnings as a
percent of net sales (36.9 )% 2.4 % (7.5 )% 16.2 % EBITDA per ton $
(28.83 ) $ 63.79 $ 23.29 $ 121.45 EBITDA as a percent of net sales
(15.6 )% 22.8 % 10.7 % 38.7 % Start-up costs Donaldsonville
ammonia — — 18 — Start-up costs Port Neal ammonia and urea 34 — 34
— Expansion project expenses 14 15 73 51 Loss on foreign currency
derivatives 2 3 — 22 Loss on debt extinguishment 167 — 167 —
Private Senior Notes amendment arrangement fees — — 2 — Gain on
remeasurement of CF Fertilisers UK investment — — — (94 )
Impairment of equity method investment in PLNL 134 62 134 62 Loss
on sale of equity method investments — — — 43 Transaction costs(2)
— 20 179 57 Unrealized net mark-to-market (gain) loss on natural
gas derivatives (91 ) 97 (260 ) 176 Loss on embedded derivative(3)
1 — 23 — Loss (gain) on foreign currency transactions(4) 7
(6 ) 93 (8 ) Total adjustments 268 191 463
309 Adjusted EBITDA $ 133 $ 445
$ 858 $ 1,975 Adjusted EBITDA per ton $ 28.40 $
111.75 $ 50.60 $ 143.97 Adjusted EBITDA as a percent of net sales
15.3 % 39.9 % 23.3 % 45.8 %
_______________________________________________________________________________
(1) Includes the tax benefit of $11 million on loss on sale
of non-operating equity method investment for the twelve months
ended December 31, 2015. (2) Transaction costs include the $150
million termination fee paid by the company to OCI in the second
quarter of 2016 as a result of the termination of the combination
agreement with OCI and 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. (3) Represents the loss in 2016 on the embedded derivative
included within the terms of the company's strategic venture with
CHS. (4) Loss (gain) on foreign currency transactions primarily
relates to the unrealized foreign currency exchange rate impact on
intercompany debt that has not been permanently invested.
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 Twelve months
ended December 31, December 31, 2016
2015 2016 2015 (in
millions) Net (loss) earnings attributable to common
stockholders $ (320 ) $ 27 $ (277 ) $ 700 Start-up costs
Donaldsonville ammonia — — 18 — Start-up costs Port Neal ammonia
and urea 34 — 34 — Expansion project expenses 14 15 73 51 Loss on
foreign currency derivatives 2 3 — 22 Loss on debt extinguishment
167 — 167 — Financing costs related to Private Senior Notes and
Senior Secured Notes(1) 10 — 10 — Revolver amendment fees(1) 4 — 6
— Private Senior Notes amendment arrangement fees — — 2 — Gain on
remeasurement of CF Fertilisers UK investment — — — (94 )
Impairment of equity method investment in PLNL 134 62 134 62 Loss
on sale of equity method investments — — — 43 Transaction costs(2)
— 20 179 57 Financing costs related to bridge loan commitment
fee(1) — — 28 6 Unrealized net mark-to-market (gain) loss on
natural gas derivatives (91 ) 97 (260 ) 176 Loss on embedded
derivative(3) 1 — 23 — Loss (gain) on foreign currency
transactions(4) 7 (6 ) 93 (8 ) Income tax adjustments(5) (52 ) (50
) (121 ) (119 ) Total adjustments 230 141 386
196 Adjusted net (loss) earnings $ (90 ) $ 168 $ 109
$ 896
Three months ended
Twelve months ended December 31, December 31,
2016 2015 2016 2015 Net
(loss) earnings per diluted share attributable to common
stockholders $ (1.38 ) $ 0.11 $ (1.19 ) $ 2.96 Start-up costs
Donaldsonville ammonia — — 0.08 — Start-up costs Port Neal ammonia
and urea 0.14 — 0.14 — Expansion project expenses 0.06 0.06 0.31
0.22 Loss on foreign currency derivatives 0.01 0.01 — 0.09 Loss on
debt extinguishment 0.72 — 0.72 — Financing costs related to
Private Senior Notes and Senior Secured Notes(1) 0.04 — 0.04 —
Revolver amendment fees(1) 0.02 — 0.03 — Private Senior Notes
amendment arrangement fees — — 0.01 — Gain on remeasurement of CF
Fertilisers UK investment — — — (0.40 ) Impairment of equity method
investment in PLNL 0.57 0.26 0.57 0.26 Loss on sale of equity
method investments — — — 0.18 Transaction costs(2) — 0.08 0.77 0.24
Financing costs related to bridge loan commitment fee(1) — — 0.12
0.02 Unrealized net mark-to-market (gain) loss on natural gas
derivatives (0.39 ) 0.42 (1.12 ) 0.75 Loss on embedded
derivative(3) — — 0.10 — Loss (gain) on foreign currency
transactions(4) 0.03 (0.02 ) 0.40 (0.03 ) Income tax adjustments(5)
(0.21 ) (0.20 ) (0.51 ) (0.50 ) Total adjustments 0.99 0.61
1.66 0.83 Adjusted net (loss) earnings per
diluted share $ (0.39 ) $ 0.72 $ 0.47 $ 3.79
_______________________________________________________________________________
(1) Not included in the calculation of EBITDA. (2)
Transaction costs include the $150 million termination fee paid by
CF Holdings to OCI in the second quarter of 2016 as a result of the
termination of the combination agreement with OCI and 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. (3) Represents the loss in
2016 on the embedded derivative included within the terms of the
company's strategic venture with CHS. (4) Loss (gain) on foreign
currency transactions primarily relates to the unrealized foreign
currency exchange rate impact on intercompany debt that has not
been permanently invested. (5) Represents the adjustment to the
GAAP basis tax provision reflecting the tax impact of the other
non-GAAP adjustments. The income tax adjustments for the twelve
months ended December 31, 2016 also include the tax impact of
certain transaction costs that were capitalized in prior tax
periods and that are now deductible as a result of the termination
of the combination agreement with OCI.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170215006322/en/
CF Industries Holdings, Inc.MediaChris
CloseDirector, Corporate
Communications847-405-2542cclose@cfindustries.comorInvestorsMartin
JarosickVice President, Investor
Relations847-405-2045mjarosick@cfindustries.com
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