Higher Year-Over-Year Prices for All Major
Products Support Increased Margins
Record First Half Ammonia Production and
Granular Urea Sales Volumes
Strong North American Nitrogen Demand Outlook
for 2020 and 2021
CF Industries Holdings, Inc. (NYSE: CF), a leading global
fertilizer and chemical company, today announced results for its
first half and second quarter ended June 30, 2019.
Highlights
- First half net earnings of $373 million(1), or $1.67 per
diluted share; EBITDA(2) of $973 million; adjusted EBITDA(2) of
$936 million
- Second quarter net earnings of $283 million(1), or $1.28 per
diluted share; EBITDA of $672 million; adjusted EBITDA of $631
million
- Trailing 12-month net cash from operating activities of $1.6
billion, free cash flow(3) of $995 million
- Record first half and quarterly gross ammonia production
- Record first half and quarterly granular urea sales volume;
record quarterly ammonia sales volumes
- Repurchased approximately 2.7 million shares during the
quarter
Overview of Results
CF Industries Holdings, Inc. today announced first half 2019 net
earnings attributable to common stockholders of $373 million, or
$1.67 per diluted share; EBITDA of $973 million; and adjusted
EBITDA of $936 million. These results compare to the first half of
2018 net earnings attributable to common stockholders of $211
million, or $0.90 per diluted share; EBITDA of $772 million; and
adjusted EBITDA of $763 million.
For the second quarter of 2019, net earnings attributable to
common stockholders were $283 million, or $1.28 per diluted share;
EBITDA was $672 million; and adjusted EBITDA was $631 million.
These results compare to second quarter 2018 net earnings
attributable to common stockholders of $148 million, or $0.63 per
diluted share; EBITDA of $470 million; and adjusted EBITDA of $467
million.
“The CF team operated exceptionally well during a challenging
spring season,” said Tony Will, president and chief executive
officer, CF Industries Holdings, Inc. “We shifted our production
mix, favoring urea over UAN to capture higher margin opportunities,
we leveraged our transportation flexibility to overcome the impact
of historic flooding and we reliably supplied our customers where
and when they needed product. As a result of our outstanding
execution and unparalleled production and logistics capabilities,
we delivered first half adjusted EBITDA 23 percent higher than in
2018 on similar product volumes. As the global nitrogen market has
strengthened over the last 12 months, CF generated nearly $1
billion in free cash flow. As we look forward, we believe strong
demand in North America, our position on the low end of the global
cost curve and the capabilities of CF’s people and systems will
continue to drive substantial cash generation.”
________________________________________________________________
(1)
First half and second quarter 2019 net earnings attributable to
common stockholders include an after-tax gain of $35 million on the
sale of the company’s Pine Bend dry bulk storage and logistics
facility in Minnesota. First half 2019 net earnings attributable to
common stockholders also includes a previously announced net
incentive tax credit of $30 million recognized in the first
quarter.
(2)
EBITDA is defined as net earnings 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.
(3)
Free cash flow is defined as net cash from operating activities
less capital expenditures and distributions to noncontrolling
interests. See reconciliation of free cash flow to the most
directly comparable GAAP measure in the table accompanying this
release.
Operations Overview
CF Industries continued operating safely and efficiently. As of
June 30, 2019, the company’s 12-month rolling average recordable
incident rate was 0.60 incidents per 200,000 work hours.
Gross ammonia production for the first half of 2019 was over 5.2
million tons, and for the second quarter was nearly 2.7 million
tons. The company expects gross ammonia production during the third
quarter to be somewhat lower due to scheduled maintenance
activity.
Sales Overview
Net sales in the first half and second quarter of 2019 were $2.5
billion and $1.5 billion, respectively, compared to $2.3 billion
and $1.3 billion, respectively, in the same periods of the prior
year due primarily to higher average selling prices across all
major products.
Total sales volumes for the first half of 2019 were similar to
the first half of 2018, reflecting the company’s ability to deal
with changes in the timing of fertilizer applications due to
weather and other developments. Total sales volumes for the second
quarter of 2019 were higher compared to the second quarter of 2018
as cold and wet weather in North America shifted fertilizer
shipments and applications out of the first quarter and into the
second quarter. Therefore, quarterly comparisons year-over-year are
less meaningful than the comparability of first half results.
Average selling prices for the first half and second quarter of
2019 were each higher year-over-year across all major products due
to a tighter global nitrogen supply and demand balance than the
prior year periods and logistical issues in North America that
limited supply at some inland locations.
Cost of sales in the first half of 2019 increased slightly
compared to the first half of 2018 primarily due to higher freight
and realized natural gas costs partially offset by lower plant
maintenance costs. Cost of sales in the second quarter of 2019
increased slightly compared to the second quarter of 2018 due
primarily to the impact of higher sales volumes and freight costs
partially offset by lower realized natural gas and plant
maintenance costs.
In the first half of 2019, the average cost of natural gas
reflected in the company’s cost of sales was $3.15 per MMBtu
compared to the average cost of natural gas in cost of sales of
$3.11 per MMBtu in the first half of 2018. The increase reflects
the impact of inventory sold during the first half of 2019 that was
produced in the fourth quarter of 2018 when realized natural gas
costs were higher. In the second quarter of 2019, the average cost
of natural gas reflected in the company’s cost of sales was $2.81
per MMBtu compared to the average cost of natural gas in cost of
sales of $2.95 per MMBtu in the second quarter of 2018.
Looking ahead, the company expects the cost of natural gas for
2019 to be well below 2018 levels. During the first half of 2019,
the average cost of natural gas at Henry Hub in North America was
$2.70 per MMBtu and the average cost of natural gas at the National
Balancing Point in the United Kingdom was $5.15 per MMBtu. This
compares to the average cost of natural gas at Henry Hub in North
America of $2.92 per MMBtu and the average cost of natural gas at
the National Balancing Point in the United Kingdom of $7.77 per
MMBtu in the first half of 2018. Through the end of 2019, Henry Hub
natural gas futures remain well below $3.00 per MMBtu, and below
2018 costs.
Market Overview
The company expects that nitrogen fertilizer industry
fundamentals will be positive over the near and longer term. In the
near-term, demand for nitrogen in North America should be strong
due to the impact of adverse planting and growing conditions in
many parts of the United States in 2019. Historic flooding is
expected to lead to a reduction in 2019 corn production due to
significantly lower planted acres and yields. This should create a
strong price incentive for growers in the United States to increase
planted corn acres significantly over the next two seasons.
Globally, the company expects demand for urea from India and
Brazil to remain strong over the next two years. Through the end of
June 2019, urea imports to India were 3.5 million metric tons, an
increase of 11 percent over the prior year period. Imports of urea
to Brazil for the full year 2019 are expected to increase.
The company expects that global demand growth for nitrogen over
the next four years will outpace net capacity additions given the
limited number of facilities currently under construction around
the world, none of which are in North America. The company also
expects Chinese coal-based nitrogen complexes to remain the global
marginal urea producer. Net Chinese-produced urea exports are
likely to be in a range of 1-3 million metric tons annually, with
higher nitrogen prices bidding in additional Chinese export tons at
times when urea supply is needed worldwide.
Capital Expenditures
Capital expenditures in 2019 are projected to be $400-$450
million.
Liquidity
As of June 30, 2019, the company had cash and cash equivalents
of $858 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.
The company is currently executing a $1 billion share repurchase
program that is authorized through 2021. During the second quarter
of 2019, the company repurchased approximately 2.7 million shares
for $118 million. Since the current authorization was announced in
February 2019, the company has repurchased approximately 4.2
million shares for $178 million.
During the first quarter of 2019, the company entered into an
agreement to sell its Pine Bend dry bulk storage and logistics
facility in Minnesota. In April of 2019, the sale closed and the
company received proceeds of $55 million.
CHS Inc. Distribution
On July 31, 2019, the Board of Managers of CF Industries
Nitrogen, LLC (CFN) approved a semi-annual distribution payment to
CHS Inc. (CHS) of $100 million for the distribution period ended
June 30, 2019. The distribution was paid on July 31, 2019.
Consolidated Results
Three months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions, except
per share
and per MMBtu amounts)
Net sales
$
1,502
$
1,300
$
2,503
$
2,257
Cost of sales
1,003
988
1,784
1,755
Gross margin
$
499
$
312
$
719
$
502
Gross margin percentage
33.2
%
24.0
%
28.7
%
22.2
%
Net earnings attributable to common
stockholders
$
283
$
148
$
373
$
211
Net earnings per diluted share
$
1.28
$
0.63
$
1.67
$
0.90
EBITDA(1)
$
672
$
470
$
973
$
772
Adjusted EBITDA(1)
$
631
$
467
$
936
$
763
Tons of product sold (000s)
5,716
5,538
9,803
9,841
Supplemental data (per MMBtu):
Natural gas costs in cost of sales(2)
$
2.81
$
2.92
$
3.16
$
3.08
Realized derivatives loss (gain) in cost
of sales(3)
—
0.03
(0.01
)
0.03
Cost of natural gas in cost of sales
$
2.81
$
2.95
$
3.15
$
3.11
Average daily market price of natural gas
(per MMBtu):
Henry Hub
$
2.51
$
2.82
$
2.70
$
2.92
National Balancing Point UK
$
4.07
$
7.34
$
5.15
$
7.77
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
$
(1
)
$
(5
)
$
1
$
(8
)
Depreciation and amortization
$
252
$
241
$
440
$
434
Capital expenditures
$
74
$
77
$
154
$
145
Production volume by product tons
(000s):
Ammonia(4)
2,661
2,460
5,228
4,968
Granular urea
1,324
1,228
2,630
2,379
UAN (32%)
1,589
1,557
3,226
3,362
AN
551
423
1,033
881
_______________________________________________________________________________
(1)
See reconciliations of EBITDA and adjusted
EBITDA to the most directly comparable GAAP measures in the tables
accompanying this release.
(2)
Includes the cost of natural gas and
related transportation 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.
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 June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
473
$
374
$
660
$
586
Cost of sales
300
272
466
460
Gross margin
$
173
$
102
$
194
$
126
Gross margin percentage
36.6
%
27.3
%
29.4
%
21.5
%
Sales volume by product tons (000s)
1,222
1,094
1,828
1,758
Sales volume by nutrient tons
(000s)(1)
1,002
898
1,499
1,442
Average selling price per product ton
$
387
$
342
$
361
$
333
Average selling price per nutrient
ton(1)
472
416
440
406
Adjusted gross margin(2):
Gross margin
$
173
$
102
$
194
$
126
Depreciation and amortization
53
52
82
77
Unrealized net mark-to-market gain on
natural gas derivatives
—
(1
)
—
(2
)
Adjusted gross margin
$
226
$
153
$
276
$
201
Adjusted gross margin as a percent of net
sales
47.8
%
40.9
%
41.8
%
34.3
%
Gross margin per product ton
$
142
$
93
$
106
$
72
Gross margin per nutrient ton(1)
173
114
129
87
Adjusted gross margin per product ton
185
140
151
114
Adjusted gross margin per nutrient
ton(1)
226
170
184
139
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton 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, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton 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 2019 to 2018 first half and second quarter
periods:
- Ammonia sales volume increased for the first half of 2019
compared to 2018 due to greater supply availability as a result of
increased production. Sales volume for the second quarter of 2019
increased compared to 2018 as cold and wet weather in North America
shifted fertilizer shipments and applications out of the first
quarter and into the second quarter.
- Ammonia average selling prices increased for the first half and
second quarter of 2019 compared to 2018 due to a tighter nitrogen
supply and demand balance than the prior year periods.
- Ammonia adjusted gross margin per ton increased for the first
half and second quarter of 2019 compared to 2018 due primarily to
higher average selling prices.
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 June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
433
$
360
$
776
$
624
Cost of sales
251
255
479
444
Gross margin
$
182
$
105
$
297
$
180
Gross margin percentage
42.0
%
29.2
%
38.3
%
28.8
%
Sales volume by product tons (000s)
1,496
1,434
2,680
2,416
Sales volume by nutrient tons
(000s)(1)
688
659
1,233
1,111
Average selling price per product ton
$
289
$
251
$
290
$
258
Average selling price per nutrient
ton(1)
629
546
629
562
Adjusted gross margin(2):
Gross margin
$
182
$
105
$
297
$
180
Depreciation and amortization
79
81
145
140
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
(1
)
1
(2
)
Adjusted gross margin
$
261
$
185
$
443
$
318
Adjusted gross margin as a percent of net
sales
60.3
%
51.4
%
57.1
%
51.0
%
Gross margin per product ton
$
122
$
73
$
111
$
75
Gross margin per nutrient ton(1)
265
159
241
162
Adjusted gross margin per product ton
174
129
165
132
Adjusted gross margin per nutrient
ton(1)
379
281
359
286
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton 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, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton 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 2019 to 2018 first half and second quarter
periods:
- Granular urea sales volume increased for the first half and
second quarter of 2019 compared to 2018 due to higher volumes of
product available for sale as the company chose to increase
granular urea production at the expense of UAN production.
- Urea average selling prices improved in the first half and
second quarter of 2019 compared to 2018 due to a tighter global
nitrogen supply and demand balance than the prior year periods and
logistical issues in North America that limited supply at some
inland locations.
- Granular urea adjusted gross margin per ton increased for the
first half and second quarter of 2019 compared to 2018 due
primarily to higher average selling prices.
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 June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
369
$
339
$
625
$
622
Cost of sales
277
258
472
488
Gross margin
$
92
$
81
$
153
$
134
Gross margin percentage
24.9
%
23.9
%
24.5
%
21.5
%
Sales volume by product tons (000s)
1,871
1,820
3,139
3,489
Sales volume by nutrient tons
(000s)(1)
591
575
987
1,102
Average selling price per product ton
$
197
$
186
$
199
$
178
Average selling price per nutrient
ton(1)
624
590
633
564
Adjusted gross margin(2):
Gross margin
$
92
$
81
$
153
$
134
Depreciation and amortization
71
72
117
135
Unrealized net mark-to-market gain on
natural gas derivatives
(1
)
(2
)
—
(3
)
Adjusted gross margin
$
162
$
151
$
270
$
266
Adjusted gross margin as a percent of net
sales
43.9
%
44.5
%
43.2
%
42.8
%
Gross margin per product ton
$
49
$
45
$
49
$
38
Gross margin per nutrient ton(1)
156
141
155
122
Adjusted gross margin per product ton
87
83
86
76
Adjusted gross margin per nutrient
ton(1)
274
263
274
241
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton 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, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton 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 2019 to 2018 first half and second quarter
periods:
- UAN sales volume for the first half of 2019 decreased compared
to 2018 due to lower supply availability from lower production as
the company chose to favor granular urea production over UAN as
well as the impact of late planting in North America that delayed
some fertilizer shipments and applications into the third quarter.
Sales volume for the second quarter of 2019 was similar to the
second quarter of 2018.
- UAN average selling prices improved in the first half and
second quarter of 2019 compared to 2018 due to a tighter nitrogen
supply and demand balance than the prior year periods and
logistical issues in North America that limited supply at some
inland locations.
- UAN adjusted gross margin per ton increased for the first half
and second quarter of 2019 compared to 2018 due primarily to higher
average selling prices.
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 June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
126
$
124
$
253
$
224
Cost of sales
94
117
208
191
Gross margin
$
32
$
7
$
45
$
33
Gross margin percentage
25.4
%
5.6
%
17.8
%
14.7
%
Sales volume by product tons (000s)
528
568
1,029
985
Sales volume by nutrient tons
(000s)(1)
179
193
345
333
Average selling price per product ton
$
239
$
218
$
246
$
227
Average selling price per nutrient
ton(1)
704
642
733
673
Adjusted gross margin(2):
Gross margin
$
32
$
7
$
45
$
33
Depreciation and amortization
21
14
43
32
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
—
—
—
—
Adjusted gross margin
$
53
$
21
$
88
$
65
Adjusted gross margin as a percent of net
sales
42.1
%
16.9
%
34.8
%
29.0
%
Gross margin per product ton
$
61
$
12
$
44
$
34
Gross margin per nutrient ton(1)
179
36
130
99
Adjusted gross margin per product ton
100
37
86
66
Adjusted gross margin per nutrient
ton(1)
296
109
255
195
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton 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, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton 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 2019 to 2018 first half and second quarter
periods:
- AN sales volume increased for the first half of 2019 compared
to 2018 due to strong demand for both agricultural and industrial
use. Sales volume for the second quarter of 2019 was lower compared
to 2018 due primarily to the timing of AN shipments in the United
Kingdom in the first half of the year.
- AN average selling prices improved for the first half and
second quarter of 2019 compared to 2018 due to a tighter global
nitrogen supply and demand balance than the prior year
periods.
- AN adjusted gross margin per ton was higher for the first half
and second quarter of 2019 compared to 2018 due primarily to higher
average selling prices and lower realized natural gas costs in the
United Kingdom.
Other Segment
CF Industries’ Other segment includes diesel exhaust fluid
(DEF), urea liquor, nitric acid and compound fertilizer products
(NPKs).
Three months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
(dollars in millions,
except per ton
amounts)
Net sales
$
101
$
103
$
189
$
201
Cost of sales
81
86
159
172
Gross margin
$
20
$
17
$
30
$
29
Gross margin percentage
19.8
%
16.5
%
15.9
%
14.4
%
Sales volume by product tons (000s)
599
622
1,127
1,193
Sales volume by nutrient tons
(000s)(1)
121
122
224
233
Average selling price per product ton
$
169
$
166
$
168
$
168
Average selling price per nutrient
ton(1)
835
844
844
863
Adjusted gross margin(2):
Gross margin
$
20
$
17
$
30
$
29
Depreciation and amortization
19
14
36
31
Unrealized net mark-to-market gain on
natural gas derivatives
—
(1
)
—
(1
)
Adjusted gross margin
$
39
$
30
$
66
$
59
Adjusted gross margin as a percent of net
sales
38.6
%
29.1
%
34.9
%
29.4
%
Gross margin per product ton
$
33
$
27
$
27
$
24
Gross margin per nutrient ton(1)
165
139
134
124
Adjusted gross margin per product ton
65
48
59
49
Adjusted gross margin per nutrient
ton(1)
322
246
295
253
_______________________________________________________________________________
(1)
Nutrient tons represent the tons of
nitrogen within the product tons.
(2)
Adjusted gross margin, adjusted gross
margin as a percent of net sales and adjusted gross margin per
product ton and per nutrient ton 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, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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. A reconciliation of
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton 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 2019 to 2018 first half and second quarter
periods:
- Other segment sales volumes decreased for the first half and
second quarter of 2019 compared to the prior year periods primarily
due to lower nitric acid and NPK sales partially offset by higher
sales of DEF.
- Other average selling prices in the first half and second
quarter of 2019 were essentially unchanged compared to the prior
year periods.
- Other segment adjusted gross margin per ton was higher for the
first half and second quarter of 2019 compared to 2018 primarily
due to lower realized natural gas costs partially offset by higher
freight costs.
Dividend Payment
On July 18, 2019, CF Industries’ Board of Directors declared a
quarterly dividend of $0.30 per common share. The dividend will be
paid on August 30, 2019 to stockholders of record as of August 15,
2019.
Conference Call
CF Industries will hold a conference call to discuss its second
quarter 2019 results at 11:00 a.m. ET on Thursday, August 1, 2019.
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 is a leading global fertilizer and chemical
company with outstanding operational capabilities and a
cost-advantaged production and distribution platform. Our 3,000
employees operate world-class manufacturing complexes in Canada,
the United Kingdom and the United States. We serve our customers in
North America through an unparalleled production, storage,
transportation and distribution network. We also reach a global
customer base with exports from our Donaldsonville, Louisiana,
plant, the world’s largest and most flexible nitrogen complex.
Additionally, we move product to international destinations from
our Verdigris, Oklahoma, facility; our Yazoo City, Mississippi,
facility; our Billingham and Ince facilities in the United Kingdom;
and a joint venture ammonia facility in the Republic of Trinidad
and Tobago in which we own a 50 percent interest. 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, free cash flow, and, on a segment basis,
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
ton, 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, free cash flow,
adjusted gross margin, adjusted gross margin as a percent of net
sales and adjusted gross margin per product ton and per nutrient
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,
and free cash flow 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,
adjusted gross margin as a percent of net sales and adjusted gross
margin per product ton and per nutrient ton 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
impact of global supply and demand on the Company’s selling prices;
the global commodity nature of the Company’s fertilizer products,
the conditions in the international market for nitrogen products,
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; the Company’s reliance on a limited number of key
facilities; 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; risks associated
with expansions of the Company’s business, including unanticipated
adverse consequences and the significant resources that could be
required; 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; risks associated with the
operation or management of the strategic venture with CHS (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 over the life of the supply agreement,
and the risk that any challenges related to the CHS Strategic
Venture will harm the Company’s other business relationships; risks
associated with the Company’s Point Lisas Nitrogen Limited joint
venture; acts of terrorism and regulations to combat terrorism;
risks associated with international operations; and deterioration
of global market and economic conditions.
More detailed information about factors that may affect the
Company’s performance and could cause actual results to differ
materially from those in any forward-looking statements may be
found in CF Industries Holdings, Inc.’s filings with the Securities
and Exchange Commission, including CF Industries Holdings, Inc.’s
most recent annual and quarterly reports on Form 10-K and Form
10-Q, which are available in the Investor Relations section of the
Company’s web site. Forward-looking statements are given only as of
the date of this communication and the Company disclaims any
obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
Three months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
(in millions, except per share
amounts)
Net sales
$
1,502
$
1,300
$
2,503
$
2,257
Cost of sales
1,003
988
1,784
1,755
Gross margin
499
312
719
502
Selling, general and administrative
expenses
62
53
120
110
Other operating—net
(37
)
3
(33
)
(18
)
Total other operating costs and
expenses
25
56
87
92
Equity in earnings of operating
affiliate
1
18
8
25
Operating earnings
475
274
640
435
Interest expense
59
61
119
121
Interest income
(4
)
(2
)
(8
)
(5
)
Other non-operating—net
(2
)
(3
)
(3
)
(4
)
Earnings before income taxes
422
218
532
323
Income tax provision
102
44
94
61
Net earnings
320
174
438
262
Less: Net earnings attributable to
noncontrolling interests
37
26
65
51
Net earnings attributable to common
stockholders
$
283
$
148
$
373
$
211
Net earnings per share attributable to
common stockholders:
Basic
$
1.28
$
0.63
$
1.68
$
0.90
Diluted
$
1.28
$
0.63
$
1.67
$
0.90
Weighted-average common shares
outstanding:
Basic
221.1
234.0
222.2
233.9
Diluted
222.3
234.9
223.4
234.8
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited)
June 30, 2019
December 31, 2018
(in millions)
Assets
Current assets:
Cash and cash equivalents
$
858
$
682
Accounts receivable—net
313
235
Inventories
290
309
Prepaid income taxes
1
28
Other current assets
26
20
Total current assets
1,488
1,274
Property, plant and equipment—net
8,336
8,623
Investment in affiliate
101
93
Goodwill
2,353
2,353
Operating lease right-of-use assets
281
—
Other assets
304
318
Total assets
$
12,863
$
12,661
Liabilities and Equity
Current liabilities:
Accounts payable and accrued expenses
$
416
$
545
Income taxes payable
13
5
Customer advances
21
149
Current operating lease liabilities
89
—
Current maturities of long-term debt
498
—
Other current liabilities
5
6
Total current liabilities
1,042
705
Long-term debt, net of current
maturities
4,203
4,698
Deferred income taxes
1,207
1,117
Operating lease liabilities
197
—
Other liabilities
396
410
Equity:
Stockholders’ equity
3,066
2,958
Noncontrolling interest
2,752
2,773
Total equity
5,818
5,731
Total liabilities and equity
$
12,863
$
12,661
CF INDUSTRIES HOLDINGS,
INC.
SELECTED FINANCIAL
INFORMATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
Three months ended June
30,
Six months ended June
30,
2019
2018
2019
2018
(in millions)
Operating Activities:
Net earnings
$
320
$
174
$
438
$
262
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
252
241
440
434
Deferred income taxes
71
(27
)
85
2
Stock-based compensation expense
11
5
17
11
Unrealized net (gain) loss on natural gas
derivatives
(1
)
(5
)
1
(8
)
Unrealized loss on embedded derivative
1
1
2
1
Gain on disposal of property, plant and
equipment
(46
)
—
(45
)
—
Undistributed earnings of affiliate—net of
taxes
(2
)
—
(10
)
(3
)
Changes in:
Accounts receivable—net
(50
)
(95
)
(78
)
(34
)
Inventories
122
118
21
21
Accrued and prepaid income taxes
11
66
35
52
Accounts payable and accrued expenses
(29
)
(22
)
(94
)
(46
)
Customer advances
(280
)
(133
)
(128
)
(68
)
Other—net
7
(7
)
9
(26
)
Net cash provided by operating
activities
387
316
693
598
Investing Activities:
Additions to property, plant and
equipment
(74
)
(77
)
(154
)
(145
)
Proceeds from sale of property, plant and
equipment
58
8
63
16
Distributions received from unconsolidated
affiliate
—
6
—
10
Other—net
—
—
—
1
Net cash used in investing activities
(16
)
(63
)
(91
)
(118
)
Financing Activities:
Financing fees
—
—
—
1
Dividends paid on common stock
(66
)
(70
)
(133
)
(140
)
Acquisition of noncontrolling interests in
TNCLP
—
(388
)
—
(388
)
Distributions to noncontrolling
interests
—
—
(86
)
(59
)
Purchases of treasury stock
(122
)
—
(209
)
—
Issuances of common stock under employee
stock plans
4
2
6
4
Shares withheld for taxes
—
—
(4
)
(1
)
Net cash used in financing activities
(184
)
(456
)
(426
)
(583
)
Effect of exchange rate changes on cash
and cash equivalents
—
(5
)
—
(4
)
Increase (decrease) in cash and cash
equivalents
187
(208
)
176
(107
)
Cash and cash equivalents at beginning of
period
671
936
682
835
Cash and cash equivalents at end of
period
$
858
$
728
$
858
$
728
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS
Reconciliation of net earnings attributable to common
stockholders, net earnings attributable to common stockholders per
ton and net earnings attributable to common stockholders 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 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 June
30,
Six months ended June
30,
2019
2018
2019
2018
(in millions)
Net earnings
$
320
$
174
$
438
$
262
Less: Net earnings attributable to
noncontrolling interests
(37
)
(26
)
(65
)
(51
)
Net earnings attributable to common
stockholders
283
148
373
211
Interest expense—net
55
59
111
116
Income tax provision
102
44
94
61
Depreciation and amortization
252
241
440
434
Less other adjustments:
Depreciation and amortization in
noncontrolling interests(1)
(18
)
(20
)
(41
)
(46
)
Loan fee amortization(2)
(2
)
(2
)
(4
)
(4
)
EBITDA
672
470
973
772
Unrealized net mark-to-market (gain) loss
on natural gas derivatives
(1
)
(5
)
1
(8
)
Loss (gain) on foreign currency
transactions including intercompany loans
5
2
7
(3
)
Gain on sale of Pine Bend facility
(45
)
—
(45
)
—
Costs related to acquisition of TNCLP
units
—
—
—
2
Total adjustments
(41
)
(3
)
(37
)
(9
)
Adjusted EBITDA
$
631
$
467
$
936
$
763
Net sales
$
1,502
$
1,300
$
2,503
$
2,257
Tons of product sold (000s)
5,716
5,538
9,803
9,841
Net earnings attributable to common
stockholders as a percent of net sales
18.8
%
11.4
%
14.9
%
9.3
%
Net earnings attributable to common
stockholders per ton
$
49.51
$
26.72
$
38.05
$
21.44
EBITDA as a percent of net sales
44.7
%
36.2
%
38.9
%
34.2
%
EBITDA per ton
$
117.56
$
84.87
$
99.26
$
78.45
Adjusted EBITDA as a percent of net
sales
42.0
%
35.9
%
37.4
%
33.8
%
Adjusted EBITDA per ton
$
110.39
$
84.33
$
95.48
$
77.53
_______________________________________________________________________________
(1)
For the three and six months ended June
30, 2019, and the three months ended June 30, 2018, amount relates
only to CFN, as we purchased the remaining publicly traded common
units of Terra Nitrogen Company, L.P. (TNCLP) on April 2, 2018. For
the six months ended June 30, 2018, amount includes $42 million
related to CFN and $4 million related to TNCLP.
(2)
Loan fee amortization is included in both
interest expense—net and depreciation and amortization.
CF INDUSTRIES HOLDINGS, INC. SELECTED
FINANCIAL INFORMATION NON-GAAP DISCLOSURE ITEMS (CONTINUED)
Reconciliation of net cash provided by operating activities
(GAAP measure) to free cash flow (non-GAAP measure):
Free cash flow is defined as net cash provided by operating
activities, as stated in the consolidated statements of cash flows,
reduced by capital expenditures and distributions to noncontrolling
interests. The company has presented free cash flow because
management uses this measure and believes it is useful to
investors, as an indication of the strength of the company and its
ability to generate cash and to evaluate the company’s cash
generation ability relative to its industry competitors.
Six months ended
Twelve months ended
June 30, 2019
June 30, 2019
Net cash provided by operating
activities
$
693
$
1,592
Capital expenditures
(154
)
(431
)
Distributions to noncontrolling
interests
(86
)
(166
)
Free cash flow
$
453
$
995
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005998/en/
Media Chris Close Director, Corporate Communications
847-405-2542 - cclose@cfindustries.com
Investors Martin Jarosick Vice President, Investor
Relations 847-405-2045 - mjarosick@cfindustries.com
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