Outstanding Operational Performance in the
Quarter and the Year
Highest Quarterly Sales Volume in Company's
History
Long-term Debt Reduced by $1.1 Billion
CF Industries Holdings, Inc. (NYSE: CF), the global leader in
nitrogen products manufacturing and distribution, today announced
results for its fourth quarter ended December 31, 2017.
Fourth Quarter Highlights
- Net earnings of $465 million, or $1.98
per diluted share, which includes a net income tax benefit of
$491 million, or $2.09 per diluted share, as a result of the
U.S. Tax Cuts and Jobs Act
- Adjusted net loss(1) of $3 million or
$0.02 per diluted share(1)
- EBITDA(2) of $224 million; adjusted
EBITDA(2) of $260 million
- Sales volume of approximately 5.3
million tons, five percent higher than previous quarterly
record
- Reduced long-term debt by $1.1 billion,
lowering annualized interest payments by $76 million
Full Year Highlights
- Net earnings of $358 million, or $1.53
per diluted share, which includes a net income tax benefit of
$491 million, or $2.10 per diluted share, as a result of the
U.S. Tax Cuts and Jobs Act
- Adjusted net loss(1) of $59 million or
$0.25 per diluted share(1)
- EBITDA(2) of $856 million; adjusted
EBITDA(2) of $969 million
- Year-end 12-month rolling average
recordable incident rate at lowest level in company’s history
- Record production volume of 10.3
million tons of gross ammonia
- Record sales volumes of approximately
20 million product tons
Impact of U.S. Tax Cuts and Jobs Act
As a result of the Tax Cuts and Jobs Act of 2017, the company's
fourth quarter 2017 net earnings of $1.98 per diluted share
included a $2.09 per share net income tax benefit and for the full
year 2017 net earnings of $1.53 per diluted share included a $2.10
per share net income tax benefit. The net income tax benefit is
primarily comprised of a $552 million income tax benefit from a
revaluation of the company's deferred taxes as a result of the new
lower corporate tax rate and a $57 million income tax provision
related to the transition tax on deferred foreign earnings. This is
a one-time item that affects the comparability of results between
periods, and accordingly has been excluded from adjusted net
earnings per diluted share and adjusted EBITDA.
_________________________________________________________________________
(1) See reconciliations of 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) 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.
Overview of Results
CF Industries Holdings, Inc., today announced fourth quarter
2017 net earnings attributable to common stockholders of
$465 million, or $1.98 per diluted share, and adjusted net
loss of $3 million, or $0.02 per diluted share. Fourth quarter 2017
EBITDA was $224 million, and adjusted EBITDA was $260 million.
These results compare to fourth quarter 2016 net loss attributable
to common stockholders of $320 million, or $1.38 per diluted share;
adjusted net loss for the fourth quarter 2016 of $90 million, or
$0.39 per diluted share; EBITDA loss of $135 million; and adjusted
EBITDA of $133 million. Fourth quarter 2017 results include a
realized loss on natural gas hedges of $13 million, compared to a
realized loss on natural gas hedges of $5 million for the fourth
quarter of 2016.
For the full year 2017, net earnings attributable to common
stockholders was $358 million, or $1.53 per diluted share, and
adjusted net loss was $59 million, or $0.25 per diluted share. Full
year 2017 EBITDA was $856 million, and adjusted EBITDA was $969
million. These results compare to full year 2016 net loss
attributable to common stockholders of $277 million, or $1.19 per
diluted share; adjusted net earnings for full year 2016 of $109
million, or $0.47 per diluted share; EBITDA of $395 million; and
adjusted EBITDA of $858 million. Full year 2017 results include a
realized loss on natural gas hedges of $26 million, compared to a
realized loss on natural gas hedges of $133 million for full
year 2016.
“Outstanding execution by the team in 2017 produced records for
safe operations, production and sales volumes," said Tony Will,
president and chief executive officer, CF Industries Holdings, Inc.
"In addition, we paid down $1.1 billion in debt during the quarter
and recently exercised our right to purchase all of the publicly
traded common units of Terra Nitrogen Company, L.P. We estimate
that full ownership of TNCLP would have added approximately $45
million to EBITDA, including anticipated cost reductions and
network optimization benefits. Additionally, we estimate that full
ownership of TNCLP and the debt reduction would have resulted in
$110 million of additional free cash flow.”
Manufacturing Operations
CF Industries' manufacturing network continued its focus on
safety and operated efficiently during the fourth quarter of 2017.
As of December 31, 2017, CF Industries' 12-month rolling
average recordable incident rate was 0.67 incidents per 200,000
work hours, well below industry averages.
Gross ammonia production during the fourth quarter of 2017 was
more than 2.6 million tons, the second highest volume for a
quarter in the company's history.
Sales Overview
Net sales in the fourth quarter of 2017 increased to
$1,099 million from $867 million in the same period last year
due to higher sales volumes across most segments and higher average
selling prices across all segments.
Total sales volumes for the quarter were significantly higher
compared to the fourth quarter of 2016 as the company's production
increased at the Donaldsonville and Port Neal Nitrogen
Complexes.
Average selling prices for the quarter were higher
year-over-year across all segments due largely to a tighter global
nitrogen supply and demand balance. Additionally, average ammonia
selling prices benefited from the commencement of delivery under a
long-term supply agreement.
The company's average selling price for ammonia was $285 per ton
in the fourth quarter of 2017 compared to $277 per ton in the
fourth quarter of 2016. The average selling price for urea was $244
per ton in the fourth quarter of 2017 compared to $214 per ton in
the fourth quarter of 2016, and the average selling price for UAN
was $150 per ton in the fourth quarter of 2017 compared to $149 per
ton in the fourth quarter of 2016.
Cost of sales per ton increased 10 percent in the fourth quarter
of 2017 compared to the fourth quarter of 2016 primarily driven by
increased gas consumption to support the higher production and
sales volumes and increased 11 percent for the full year 2017
compared to the full year 2016 for the same volume reasons.
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 8 percent per ton,(3) in the fourth
quarter of 2017 compared to 2016, and 14 percent per ton,(3) in the
full year 2017, as a result of cost reduction initiatives and
production efficiencies.
In the fourth quarter of 2017, the average cost of natural gas
reflected in the company's cost of sales was $3.24 per MMBtu, which
includes a realized loss of $0.13 per MMBtu on natural gas hedges
totaling $13 million. This compares to the average cost of natural
gas in cost of sales of $3.24 per MMBtu for the fourth quarter of
2016, which included a realized loss of $0.06 per MMBtu on natural
gas hedges totaling $5 million. During the fourth quarter of 2017,
the average price of natural gas at Henry Hub in North America was
$2.87 per MMBtu, and the average price of natural gas at the
National Balancing Point in the United Kingdom was $6.92 per
MMBtu.
Additionally, the company recorded an unrealized net
mark-to-market gain on natural gas derivatives of $3 million in the
fourth quarter of 2017 compared to an unrealized net mark-to-market
gain on natural gas derivatives of $91 million in the fourth
quarter of 2016. The company did not enter into any additional
natural gas derivatives in the fourth 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
CF management expects the combination of: a somewhat weaker U.S.
dollar; higher energy costs in key producing regions; reduced
production in China; higher oil and freight costs; and steady
global demand to support nitrogen prices during the first half of
2018 at levels higher than the same period in 2017.
The U.S. dollar is expected to remain lower against currencies
in key nitrogen producing regions through at least the first half
of the year, pushing up the cost of nitrogen fertilizer exports in
U.S. dollar terms. From the beginning of July 2017 to the beginning
of February 2018, the RMB strengthened against the dollar from
approximately 6.8 to 6.3 and the Russian Ruble strengthened against
the dollar from approximately 60 to 57.
Additionally, energy prices since the middle of 2017 have
increased significantly for marginal producers in Eastern Europe
and China. From the beginning of July 2017 to the beginning of
February 2018, the price of natural gas per MMBtu at TTF in Europe
has increased approximately 25 percent and the cost of anthracite
coal per metric ton in China has increased 29 percent. Over the
same period, the price per MMBtu of natural gas at Henry Hub has
increased less than three percent.
Ocean freight costs have risen as well, adding cost to globally
traded nitrogen. At the beginning of February, ocean freight to
ship urea from the Arab Gulf to the Gulf of Mexico was 15 percent
per ton higher than the year before and nearly 30 percent per ton
higher than at the beginning of July 2017.
These factors have accelerated the transformation of China's
role in the global urea market. According to official government
data, Chinese urea exports have declined approximately 65 percent
in two years, from over 13 million metric tons in 2015 to
approximately 4.7 million metric tons in 2017. Industry observers
expect marginal producers in China to face continued pressures
during 2018, not only from higher coal costs and currency impacts,
but also from the effect of environmental regulation enforcement.
These challenges are likely to further reduce Chinese net urea
exports in 2018.
India and Brazil will remain key countries for urea demand this
year. Published reports and CF analysis suggest that India may
require 500,000-1,000,000 metric tons of urea to be imported before
the end of March to meet that country’s fertilizer needs for 2018.
Additionally, Brazil has emerged in recent years as the second
largest importer of urea in the world, with imports of
approximately 5.4 million metric tons in 2017, 15 percent higher
than 2016 and 64 percent higher than 2012. Countries such as
Australia, Mexico and Turkey have also significantly increased
imports of urea in recent years.
Imports of nitrogen will continue to be necessary to meet
expected demand in North America in 2018 with the company
projecting that approximately 91 million acres of corn will be
planted in the United States. For much of 2017, nitrogen prices in
the region discouraged imports. Urea barge prices at New Orleans
averaged approximately $25 below international parity during the
fourth quarter and only rose above international parity for one
week in all of 2017. As a result, imports of urea and UAN from July
through December declined 37 percent and 24 percent, respectively,
compared to the same period in 2016. Given steady demand and higher
netbacks available in other regions, nitrogen prices in North
America will likely have to rise to attract the imports necessary
to meet expected demand.
Capital Expenditures
Capital expenditures in 2017 totaled $473 million. Of this
amount, approximately $350 million was for new activities in 2017
and the remainder was for activities performed in 2016 but paid for
in 2017. As of September 30, 2017, the company had $158 million in
costs accrued but unpaid for work completed in 2016 related to
capacity expansion projects. At December 31, 2017, these costs are
no longer the subject of disputes and the company's capital
expenditures for 2017 reflect all payments associated with these
formerly disputed costs.
Capital expenditures in 2018 for new activity are estimated to
be in the range of approximately $400 to $450 million, which takes
into account a higher number of plant turnarounds than in 2017.
Liquidity
As of December 31, 2017, the company had cash and cash
equivalents of $835 million 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 December 1, 2017, the company completed the redemption of all
of the $800 million outstanding principal amount of its 6.875%
Senior Notes due May 2018. Additionally, on December 26, 2017, the
company purchased $300 million aggregate principal amount of its
7.125% Senior Notes due 2020 pursuant to a tender offer. As a
result, the aggregate principal amount of CF Industries Holdings,
Inc.'s outstanding long-term indebtedness was approximately $4.75
billion at the end of 2017, compared to $5.85 billion at the end of
2016. At this level of gross debt, interest expense for 2018 would
be approximately $230 million, or $76 million lower than 2017 on an
annualized basis.
Exercise of Right to Purchase All Publicly Traded Units of
Terra Nitrogen Company, L.P.
The company announced on February 7, 2018, that its wholly owned
subsidiary Terra Nitrogen GP Inc. has elected to exercise its right
to purchase all of the publicly traded common units of Terra
Nitrogen Company, L.P. on April 2, 2018, for a cash purchase price
of $84.033 per unit in accordance with the terms of TNCLP’s
partnership agreement. The purchase price of all of the publicly
traded common units of TNCLP is approximately $390 million. The
company intends to fund the purchase with cash on hand. As of the
April 2, 2018, purchase date, all rights of the holders of the
units will terminate, with the exception of the right to receive
payment of the purchase price.
CHS Inc. Distribution
On January 31, 2018, the Board of Managers of CF Industries
Nitrogen, LLC (CFN) approved a semi-annual distribution payment to
CHS Inc. (CHS) of $49 million for the distribution period ended
December 31, 2017. The distribution was paid on January 31,
2018. The total distribution to CHS pertaining to 2017 was
approximately $108 million.
Consolidated Results
Three months ended Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in millions,
except per share
and per MMBtu amounts)
Net sales $ 1,099 $ 867 $ 4,130 $ 3,685 Cost of sales 956
773 3,700 2,845 Gross margin $ 143 $ 94
$ 430 $ 840 Gross margin percentage
13.0 % 10.8 % 10.4 % 22.8 % Net earnings (loss) attributable
to common stockholders $ 465 $ (320 ) $ 358 $ (277 ) Adjusted net
(loss) earnings(1) $ (3 ) $ (90 ) $ (59 ) $ 109 Net earnings
(loss) per diluted share $ 1.98 $ (1.38 ) $ 1.53 $ (1.19 ) Adjusted
net (loss) earnings per diluted share(1) $ (0.02 ) $ (0.39 ) $
(0.25 ) $ 0.47 EBITDA(1) $ 224 $ (135 ) $ 856 $ 395 Adjusted
EBITDA(1) $ 260 $ 133 $ 969 $ 858 Tons of product sold
(000s) 5,284 4,683 19,952 16,957 Supplemental data (per
MMBtu): Natural gas costs in cost of sales(2) $ 3.11 $ 3.18 $ 3.33
$ 2.61 Realized derivatives loss in cost of sales(3) 0.13
0.06 0.07 0.46 Cost of natural gas in cost of
sales $ 3.24 $ 3.24 $ 3.40 $ 3.07 Average daily market price
of natural gas (per MMBtu): Henry Hub $ 2.87 $ 2.99 $ 2.96 $ 2.48
National Balancing Point UK $ 6.92 $ 5.69 $ 5.80 $ 4.66
Unrealized net mark-to-market (gain) loss on natural gas
derivatives $ (3 ) $ (91 ) $ 61 $ (260 ) Depreciation and
amortization $ 235 $ 203 $ 883 $ 678 Capital expenditures $ 183 $
392 $ 473 $ 2,211 Production volume by product tons (000s):
Ammonia(4) 2,642 2,326 10,295 8,307 Granular urea 1,122 914 4,451
3,368 UAN (32%) 1,892 1,795 6,914 6,698 AN 555 553 2,127 1,845
_______________________________________________________________________________
(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 months and year ended December 31, 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 December 31, 2017 and
2016, we reported net earnings (loss) attributable to common
stockholders of $465 million and $(320) million,
respectively. During the year ended December 31, 2017 and
2016, we reported net earnings (loss) attributable to common
stockholders of $358 million and $(277) million,
respectively.
Three months ended Year ended
December 31, December 31, 2017
2016 2017 2016 Pre-Tax
After-Tax Pre-Tax After-Tax
Pre-Tax After-Tax Pre-Tax
After-Tax (in millions) Impact of U.S. Tax Cuts and
Jobs Act(1) $ (491 ) $ (491 ) $ — $ — $ (491 )
$ (491 ) $ — $ — Depreciation and amortization(2) 235 151
203 128 883 558 678 426 Unrealized net mark-to-market (gain) loss
on natural gas derivatives(3) (3 ) (1 ) (91 ) (57 ) 61 39 (260 )
(163 ) (Gain) loss on foreign currency transactions including
intercompany loans(4)(5) — (1 ) 7 8 2 1 93 93 Equity method
investment tax contingency accrual(6)(7) — — — — 7 7 — — Strategic
venture with CHS: Noncontrolling interest(8) 33 33 26 26 73 73 93
93 Loss on embedded derivative(4)(9) — 1 1 1 4 3 23 14 Loss on debt
extinguishment 53 33 167 105 53 33 167 105 Debt and revolver
amendment fees(10) — — 14 8 — — 18 11 Capacity expansion project
expenses(4) — — 14 9 — — 73 46 Start-up costs Donaldsonville / Port
Neal expansion plants(3) — — 34 21 — — 52 32 Transaction costs and
termination agreement with OCI: Transaction costs(11) — — — — — —
179 96 Financing costs related to bridge loan commitment fee(12) —
— — — — — 28 18 Impairment of equity method investment in PLNL(7) —
— 134 134 — — 134 134 Gain on sale of equity method investment(7)
(14 ) (9 ) — — (14 ) (9 ) — —
Total
Impact of Significant Items $ (187 ) $ (284 ) $ 509 $
383 $ 578 $ 214 $ 1,278 $ 905
_______________________________________________________________________________
(1) Included in income tax benefit in our consolidated
statements of operations. (2) Included primarily in cost of sales
and selling, general and administrative expenses in our
consolidated statements of operations. (3) Included in cost of
sales in our consolidated statements of operations. (4) Included in
other operating—net in our consolidated statements of operations.
(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. (7) Included in equity in earnings
(losses) of operating affiliates in our consolidated statements of
operations. (8) Included in net earnings attributable to
noncontrolling interests in our consolidated statements of
operations. (9) Represents the loss on the embedded derivative
included within the terms of the company's strategic venture with
CHS. (10) Included primarily in interest expense in our
consolidated statements of operations. (11) Transaction costs
relate to costs of various consulting and legal services associated
with the company's proposed combination with certain businesses of
OCI N.V. (OCI) and the company's strategic venture with CHS. (12)
Included in interest expense in our consolidated statements of
operations.
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 Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in
millions,
except per ton amounts)
Net sales $ 344 $ 211 $ 1,209 $ 981 Cost of sales 300 210
1,071 715 Gross margin $ 44 $ 1
$ 138 $ 266 Gross margin percentage 12.8 % 0.5
% 11.4 % 27.1 % Sales volume by product tons (000s) 1,207
762 4,105 2,874 Sales volume by nutrient tons (000s)(1) 991 626
3,367 2,358 Average selling price per product ton $ 285 $
277 $ 295 $ 341 Average selling price per nutrient ton(1) 347 337
359 416 Gross margin per product ton $ 36 $ 1 $ 34 $ 93
Gross margin per nutrient ton(1) 44 2 41 113 Adjusted gross
margin(2): Gross margin $ 44 $ 1 $ 138 $ 266 Depreciation and
amortization 53 37 183 96 Unrealized net mark-to-market (gain) loss
on natural gas derivatives — (30 ) 20 (85 ) Adjusted
gross margin $ 97 $ 8 $ 341 $ 277
Adjusted gross margin as a percent of net sales 28.2 % 3.8 % 28.2 %
28.2 %
_______________________________________________________________________________
(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 fourth quarter periods:
- Ammonia sales volume increased for the
fourth quarter of 2017 compared to the fourth quarter of 2016 due
to additional production volume from the company's Donaldsonville
and Port Neal Nitrogen Complexes and increased demand for fall
agricultural applications.
- Ammonia average selling prices
increased primarily due to the impact of a tighter global nitrogen
supply and demand balance. Additionally, ammonia selling prices
benefited from the commencement of delivery under a long-term
supply agreement.
- Ammonia gross margin per ton increased
in the fourth quarter of 2017 compared to the fourth quarter of
2016 due to the absence of start-up expenses incurred in the fourth
quarter of 2016 associated with the new Port Neal ammonia plant,
production efficiencies due to increased volumes and higher average
selling prices. These were partially offset by a $30 million lower
unrealized mark-to-market gain on natural gas derivatives compared
to the prior year period and an increase in realized natural gas
costs.
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 Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in
millions,
except per ton amounts)
Net sales $ 246 $ 189 $ 971 $ 831 Cost of sales 188 139
856 584 Gross margin $ 58 $ 50 $
115 $ 247 Gross margin percentage 23.6 % 26.5
% 11.8 % 29.7 % Sales volume by product tons (000s) 1,008
883 4,357 3,597 Sales volume by nutrient tons (000s)(1) 463 406
2,004 1,654 Average selling price per product ton $ 244 $
214 $ 223 $ 231 Average selling price per nutrient ton(1) 531 466
485 502 Gross margin per product ton $ 58 $ 57 $ 26 $ 69
Gross margin per nutrient ton(1) 125 123 57 149 Adjusted
gross margin(2): Gross margin $ 58 $ 50 $ 115 $ 247 Depreciation
and amortization 59 37 246 112 Unrealized net mark-to-market (gain)
loss on natural gas derivatives (1 ) (23 ) 16 (67 ) Adjusted
gross margin $ 116 $ 64 $ 377 $ 292
Adjusted gross margin as a percent of net sales 47.2 % 33.9 % 38.8
% 35.1 %
_______________________________________________________________________________
(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
(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 fourth quarter periods:
- Granular urea sales volume increased
for the quarter primarily due to additional production volume from
the company's Port Neal Nitrogen Complex.
- Granular urea average selling price per
ton increased primarily due to the impact of a tighter global
nitrogen supply and demand balance.
- Granular urea gross margin per ton was
relatively unchanged as higher average selling prices and
production efficiencies due to increased volumes were partially
offset by a $1 million unrealized net mark-to-market gain on
natural gas derivatives compared to a $23 million gain in the prior
year period; an increase in depreciation primarily associated with
the new Port Neal urea plant; and, to a lesser extent, higher
realized natural gas costs.
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 Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in
millions,
except per ton amounts)
Net sales $ 288 $ 305 $ 1,134 $ 1,196 Cost of sales 272 274
1,055 920 Gross margin $ 16 $ 31
$ 79 $ 276 Gross margin percentage 5.6 % 10.2
% 7.0 % 23.1 % Sales volume by product tons (000s) 1,920
2,047 7,093 6,681 Sales volume by nutrient tons (000s)(1) 606 648
2,242 2,109 Average selling price per product ton $ 150 $
149 $ 160 $ 179 Average selling price per nutrient ton(1) 475 471
506 567 Gross margin per product ton $ 8 $ 15 $ 11 $ 41
Gross margin per nutrient ton(1) 26 48 35 131 Adjusted gross
margin(2): Gross margin $ 16 $ 31 $ 79 $ 276 Depreciation and
amortization 73 72 265 247 Unrealized net mark-to-market (gain)
loss on natural gas derivatives — (29 ) 19 (81 )
Adjusted gross margin $ 89 $ 74 $ 363 $ 442
Adjusted gross margin as a percent of net sales 30.9 % 24.3
% 32.0 % 37.0 %
_______________________________________________________________________________
(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 fourth quarter periods:
- UAN sales volume decreased in the
fourth quarter of 2017 due to lower export sales than in the prior
year period.
- UAN average selling price per ton was
relatively unchanged.
- UAN gross margin per ton decreased in
the fourth quarter of 2017 compared to the fourth quarter of 2016
due to a $29 million lower unrealized net mark-to-market gain
compared to the prior year period and, to a lesser extent, an
increase in realized natural gas costs partially offset by cost
reduction initiatives.
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 Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in
millions,
except per ton amounts)
Net sales $ 125 $ 93 $ 497 $ 411 Cost of sales 115 93
446 409 Gross margin $ 10 $ — $ 51
$ 2 Gross margin percentage 8.0 % — % 10.3 %
0.5 % Sales volume by product tons (000s) 576 541 2,353
2,151 Sales volume by nutrient tons (000s)(1) 194 181 793 726
Average selling price per product ton $ 217 $ 172 $ 211 $
191 Average selling price per nutrient ton(1) 644 514 627 566
Gross margin per product ton $ 17 $ — $ 22 $ 1 Gross margin
per nutrient ton(1) 52 — 64 3 Adjusted gross margin(2):
Gross margin $ 10 $ — $ 51 $ 2 Depreciation and amortization 21 21
85 93 Unrealized net mark-to-market (gain) loss on natural gas
derivatives (1 ) (3 ) 2 (10 ) Adjusted gross margin $ 30
$ 18 $ 138 $ 85 Adjusted gross margin
as a percent of net sales 24.0 % 19.4 % 27.8 % 20.7 %
_______________________________________________________________________________
(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 fourth quarter periods:
- AN sales volume increased in the fourth
quarter of 2017 compared to the fourth quarter of 2016 due to
increased demand for both agricultural and industrial
applications.
- AN average selling price per ton
increased in the fourth quarter of 2017 compared to the fourth
quarter of 2016 due to the impact of a tighter global nitrogen
supply and demand balance and the effect of a long-term AN supply
agreement that commenced in 2017.
- AN gross margin per ton increased due
to higher average selling prices partially offset by a $1 million
unrealized mark-to-market gain on natural gas derivatives compared
to a $3 million mark-to-market gain on natural gas derivatives in
the prior year period and 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 Year ended
December 31, December 31, 2017
2016 2017 2016 (dollars in
millions,
except per ton amounts)
Net sales $ 96 $ 69 $ 319 $ 266 Cost of sales 81 57
272 217 Gross margin $ 15 $ 12 $ 47
$ 49 Gross margin percentage 15.6 % 17.4 %
14.7 % 18.4 % Sales volume by product tons (000s) 573 450
2,044 1,654 Sales volume by nutrient tons (000s)(1) 112 87 397 317
Average selling price per product ton $ 168 $ 153 $ 156 $
161 Average selling price per nutrient ton(1) 857 793 804 839
Gross margin per product ton $ 26 $ 27 $ 23 $ 30 Gross
margin per nutrient ton(1) 134 138 118 155 Adjusted gross
margin(2): Gross margin $ 15 $ 12 $ 47 $ 49 Depreciation and
amortization 17 12 57 46 Unrealized net mark-to-market (gain) loss
on natural gas derivatives (1 ) (6 ) 4 (17 ) Adjusted gross
margin $ 31 $ 18 $ 108 $ 78 Adjusted
gross margin as a percent of net sales 32.3 % 26.1 % 33.9 % 29.3 %
_______________________________________________________________________________
(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 fourth quarter periods:
- Other segment volume increased in the
fourth 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 increased primarily due to the impact of a tighter global
nitrogen supply and demand balance.
- Other segment gross margin per ton was
relatively unchanged as higher average selling prices were
partially offset by a $1 million unrealized mark-to-market gain on
natural gas derivatives compared to a $6 million mark-to-market
gain on natural gas derivatives in the prior year period, higher
depreciation related to the new DEF unit at Donaldsonville and an
increase in realized natural gas costs.
Dividend Payment
On February 7, 2018, CF Industries’ Board of Directors
declared a quarterly dividend of $0.30 per common share. The
dividend will be paid on February 28, 2018 to stockholders of
record as of February 16, 2018.
Conference Call
CF Industries will hold a conference call to discuss its fourth
quarter 2017 results at 9:00 a.m. ET on Thursday, February 15,
2018. 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 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 Year ended
December 31, December 31, 2017
2016 2017 2016 (in millions, except
per share amounts) Net sales $ 1,099 $ 867 $ 4,130 $ 3,685 Cost
of sales 956 773 3,700 2,845 Gross
margin 143 94 430 840 Selling, general
and administrative expenses 52 33 192 174 Transaction costs — — —
179 Other operating—net 4 27 18 208
Total other operating costs and expenses 56 60 210 561 Equity in
earnings (losses) of operating affiliates 17 (134 ) 9
(145 ) Operating earnings (loss) 104 (100 ) 229 134 Interest
expense 74 70 315 200 Interest income (4 ) (1 ) (12 ) (5 ) Loss on
debt extinguishment 53 167 53 167 Other non-operating—net (2 ) (1 )
(2 ) (2 ) Loss before income taxes (17 ) (335 ) (125 ) (226 )
Income tax benefit (520 ) (47 ) (575 ) (68 ) Net earnings (loss)
503 (288 ) 450 (158 ) Less: Net earnings attributable to
noncontrolling interests 38 32 92 119
Net earnings (loss) attributable to common stockholders $ 465
$ (320 ) $ 358 $ (277 ) Net earnings (loss)
per share attributable to common stockholders: Basic $ 1.99
$ (1.38 ) $ 1.53 $ (1.19 ) Diluted $ 1.98 $ (1.38 ) $
1.53 $ (1.19 ) Weighted-average common shares outstanding:
Basic 233.5 233.1 233.5 233.1 Diluted
234.1 233.1 233.9 233.1
CF
INDUSTRIES HOLDINGS, INC. SELECTED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, December 31, 2017 2016
(in millions) Assets Current assets: Cash and cash
equivalents $ 835 $ 1,164 Restricted cash — 5 Accounts
receivable—net 307 236 Inventories 275 339 Prepaid income taxes 33
841 Other current assets 15 70 Total current assets 1,465 2,655
Property, plant and equipment—net 9,175 9,652 Investments in
affiliates 108 139 Goodwill 2,371 2,345 Other assets 344 340
Total assets $ 13,463 $ 15,131
Liabilities and
Equity Current liabilities: Accounts payable and accrued
expenses $ 472 $ 638 Income taxes payable 2 1 Customer advances 89
42 Other current liabilities 17 5 Total current liabilities 580 686
Long-term debt 4,692 5,778 Deferred income taxes 1,047 1,630 Other
liabilities 460 545 Equity: Stockholders' equity 3,579 3,348
Noncontrolling interests 3,105 3,144 Total equity 6,684 6,492
Total liabilities and equity $ 13,463 $ 15,131
CF
INDUSTRIES HOLDINGS, INC. SELECTED FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS Three
months ended Year ended December 31,
December 31, 2017 2016 2017
2016 (in millions) Operating
Activities: Net earnings (loss) $ 503 $ (288 ) $ 450 $ (158 )
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities: Depreciation and amortization 235 203 883
678 Deferred income taxes (547 ) 9 (601 ) 739 Stock-based
compensation expense 4 4 17 19 Unrealized net (gain) loss on
natural gas derivatives (3 ) (91 ) 61 (260 ) Loss on embedded
derivative — 1 4 23 Impairment of equity method investment in PLNL
— 134 — 134 Gain on sale of equity method investment (14 ) — (14 )
— Loss on debt extinguishment 53 167 53 167 Loss on disposal of
property, plant and equipment — 2 3 10 Undistributed (earnings)
losses of affiliates—net of taxes (4 ) 9 3 9 Changes in: Accounts
receivable—net (28 ) (37 ) (57 ) 18 Inventories 28 (3 ) 40 (7 )
Accrued and prepaid income taxes 5 (11 ) 809 (676 ) Accounts
payable and accrued expenses (6 ) (11 ) (1 ) (18 ) Customer
advances (3 ) (45 ) 48 (120 ) Other—net 7 (17 ) (67 ) 59
Net cash provided by operating activities 230 26
1,631 617
Investing Activities:
Additions to property, plant and equipment (183 ) (392 ) (473 )
(2,211 ) Proceeds from sale of property, plant and equipment 7 6 20
14 Distributions received from unconsolidated affiliates 2 — 14 —
Proceeds from sale of auction rate securities — — 9 — Proceeds from
sale of equity method investment 16 — 16 — Withdrawals from
restricted cash funds — 2 5 18 Other—net 1 (2 ) 1 2
Net cash used in investing activities (157 ) (386 ) (408 )
(2,177 )
Financing Activities: Proceeds from long-term
borrowings — 1,244 — 1,244 Payments of long-term borrowings (1,148
) (1,170 ) (1,148 ) (1,170 ) Proceeds from short-term borrowings —
— — 150 Payments of short-term borrowings — — — (150 ) Payment to
CHS related to credit provision (5 ) (5 ) (5 ) (5 ) Financing fees
— (20 ) (1 ) (31 ) Dividends paid on common stock (70 ) (71 ) (280
) (280 ) Issuance of noncontrolling interest in CFN — — — 2,800
Distributions to noncontrolling interests (6 ) (8 ) (131 ) (119 )
Issuances of common stock under employee stock plans — —
1 — Net cash (used in) provided by financing
activities (1,229 ) (30 ) (1,564 ) 2,439 Effect of exchange
rate changes on cash and cash equivalents (1 ) — 12
(1 ) (Decrease) increase in cash and cash equivalents (1,157 ) (390
) (329 ) 878 Cash and cash equivalents at beginning of period 1,992
1,554 1,164 286
Cash and cash
equivalents at end of period $ 835 $ 1,164 $ 835
$ 1,164
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS
Reconciliation of net earnings (loss), net earnings (loss)
per ton and net earnings (loss) 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 earnings (loss) 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 Year ended
December 31, December 31, 2017
2016 2017 2016 (in millions) Net
earnings (loss) attributable to common stockholders $ 465 $ (320 )
$ 358 $ (277 ) Interest expense—net 70 69 303 195 Income tax
benefit (520 ) (47 ) (575 ) (68 ) Depreciation and amortization 235
203 883 678 Less other adjustments: Depreciation and amortization
in noncontrolling interests (23 ) (23 ) (101 ) (78 ) Loan fee
amortization(1) (3 ) (17 ) (12 ) (55 ) EBITDA 224 (135 ) 856
395 Unrealized net mark-to-market (gain) loss on
natural gas derivatives (3 ) (91 ) 61 (260 ) Loss on foreign
currency transactions including intercompany loans(2) — 7 2 93
Equity method investment tax contingency accrual(3) — — 7 — Loss on
embedded derivative(4) — 1 4 23 Loss on debt extinguishment 53 167
53 167 Private Senior Notes amendment arrangement fees — — — 2
Capacity expansion project expenses — 14 — 73 Start-up costs
Donaldsonville ammonia — — — 18 Start-up costs Port Neal ammonia
and urea — 34 — 34 Loss on foreign currency derivatives — 2 — —
Transaction costs(5) — — — 179 Impairment of equity method
investment in PLNL — 134 — 134 Gain on sale of equity method
investment (14 ) — (14 ) — Total adjustments 36
268 113 463 Adjusted EBITDA $ 260
$ 133 $ 969 $ 858 Net sales $
1,099 $ 867 $ 4,130 $ 3,685 Tons of product sold (000s) 5,284 4,683
19,952 16,957 Net earnings (loss) as a percent of net sales
42.3 % (36.9 )% 8.7 % (7.5 )% Net earnings (loss) per ton $ 88.00 $
(68.33 ) $ 17.94 $ (16.34 ) EBITDA as a percent of net sales 20.4 %
(15.6 )% 20.7 % 10.7 % EBITDA per ton $ 42.39 $ (28.83 ) $ 42.90 $
23.29 Adjusted EBITDA as a percent of net sales 23.7 % 15.3 % 23.5
% 23.3 % Adjusted EBITDA per ton $ 49.21 $ 28.40 $ 48.57 $ 50.60
_______________________________________________________________________________
(1) Loan fee amortization is included in both interest
expense-net and depreciation and amortization. (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 loss on the embedded derivative included within the
terms of the company's strategic venture with CHS. (5) 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.
Reconciliation of net earnings (loss) attributable to common
stockholders and net earnings (loss) 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 earnings (loss)
attributable to common stockholders adjusted with the impacts of
the selected items included in net earnings (loss) 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 Year ended
December 31, December 31, 2017
2016 2017 2016 (in millions) Net
earnings (loss) attributable to common stockholders $ 465 $ (320 )
$ 358 $ (277 ) Impact of U.S. Tax Cuts and Jobs Act (491 ) — (491 )
— Unrealized net mark-to-market (gain) loss on natural gas
derivatives (3 ) (91 ) 61 (260 ) Loss on foreign currency
transactions including intercompany loans(1) — 7 2 93 Equity method
investment tax contingency accrual(2) — — 7 — Loss on embedded
derivative(3) — 1 4 23 Loss on debt extinguishment 53 167 53 167
Financing costs related to Private Senior Notes and Senior Secured
Notes(4) — 10 — 10 Revolver amendment fees(4) — 4 — 6 Private
Senior Notes amendment arrangement fees — — — 2 Capacity expansion
project expenses — 14 — 73 Start-up costs Donaldsonville ammonia —
— — 18 Start-up costs Port Neal ammonia and urea — 34 — 34 Loss on
foreign currency derivatives — 2 — — Transaction costs(5) — — — 179
Financing costs related to bridge loan commitment fee(4) — — — 28
Impairment of equity method investment in PLNL — 134 — 134 Gain on
sale of equity method investment (14 ) — (14 ) — Income tax
adjustments(6) (13 ) (52 ) (39 ) (121 ) Total adjustments (468 )
230 (417 ) 386 Adjusted net (loss) earnings $ (3 ) $
(90 ) $ (59 ) $ 109
Three months ended
Year ended December 31, December 31,
2017 2016 2017 2016 Net
earnings (loss) per diluted share attributable to common
stockholders $ 1.98 $ (1.38 ) $ 1.53 $ (1.19 ) Impact of U.S. Tax
Cuts and Jobs Act (2.09 ) — (2.10 ) — Unrealized net mark-to-market
(gain) loss on natural gas derivatives (0.01 ) (0.39 ) 0.26 (1.12 )
Loss on foreign currency transactions including intercompany
loans(1) — 0.03 0.01 0.40 Equity method investment tax contingency
accrual(2) — — 0.03 — Loss on embedded derivative(3) — — 0.02 0.10
Loss on debt extinguishment 0.23 0.72 0.23 0.72 Financing costs
related to Private Senior Notes and Senior Secured Notes(4) — 0.04
— 0.04 Revolver amendment fees(4) — 0.02 — 0.03 Private Senior
Notes amendment arrangement fees — — — 0.01 Capacity expansion
project expenses — 0.06 — 0.31 Start-up costs Donaldsonville
ammonia — — — 0.08 Start-up costs Port Neal ammonia and urea — 0.14
— 0.14 Loss on foreign currency derivatives — 0.01 — — Transaction
costs(5) — — — 0.77 Financing costs related to bridge loan
commitment fee(4) — — — 0.12 Impairment of equity method investment
in PLNL — 0.57 — 0.57 Gain on sale of equity method investment
(0.06 ) — (0.06 ) — Income tax adjustments(6) (0.07 ) (0.21 ) (0.17
) (0.51 ) Total adjustments (2.00 ) 0.99 (1.78 ) 1.66
Adjusted net (loss) earnings per diluted share $ (0.02 ) $ (0.39 )
$ (0.25 ) $ 0.47
_______________________________________________________________________________
(1) 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. (2)
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 earnings (losses) of operating affiliates in our
consolidated statements of operations.
(3) Represents the loss on the embedded derivative included within
the terms of the company's strategic venture with CHS. (4) Not
included in the calculation of EBITDA. (5) 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. (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 and
Port Neal ammonia and urea plants. 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 Year ended
December 31, December 31, 2017
2016 2017 2016 (in millions)
Cost of sales $ 956 $ 773 $ 3,700 $ 2,845 Natural gas costs(1) 309
246 1,194 761 Realized net losses on natural gas derivatives(2) 13
5 26 133 Unrealized net mark-to-market (gain) loss on natural gas
derivatives (3 ) (91 ) 61 (260 ) Depreciation and amortization 223
181 836 597 Start-up costs Donaldsonville ammonia — — — 18 Start-up
costs Port Neal ammonia and urea — 34 — 34
Total adjustments 542 375 2,117 1,283
Controllable cost of sales $ 414 $ 398 $ 1,583
$ 1,562 Tons of product sold (000s) 5,284
4,683 19,952 16,957 Cost of sales per ton $ 180.92 $ 165.07
$ 185.45 $ 167.78 Increase in cost of sales per ton 10 % 11 %
Controllable cost of sales per ton $ 78.35 $ 84.99 $ 79.34 $ 92.12
Decrease in controllable cost of sales per ton (8 )% (14 )%
_______________________________________________________________________________
(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/20180214006364/en/
CF Industries Holdings, Inc.MediaChris CloseDirector,
Corporate Communications847-405-2542 -
cclose@cfindustries.comorInvestorsMartin JarosickVice
President, Investor Relations847-405-2045 -
mjarosick@cfindustries.com
CF Industries (NYSE:CF)
Historical Stock Chart
From Aug 2024 to Sep 2024
CF Industries (NYSE:CF)
Historical Stock Chart
From Sep 2023 to Sep 2024